China's investment in shale gas technology is a threat to U.S. innovation

While the United States is at the forefront of shale gas production, we are ignoring hidden challenges. It's a challenge fueled by heavily subsidized Chinese investment that is stifling the innovation that defines American excellence in this critical field.

President Biden's 2024 budget includes more than $210 billion in federal research and development, the largest pledge in history, with more than half of it going to foundations to correct market failures and foster innovation. and applied research. However, the impact of foreign investment on the U.S. economy, environment, security, and indeed innovation remains poorly understood.

The technology to extract shale gas was born during the Civil War and continued to advance over several decades. As the United States grapples with the challenge of maintaining its leadership in shale gas technology, we must address the worrying impact that Chinese investment in this area has on American innovation. These impacts go beyond economic considerations to include areas of national security, trade, employment, and environmental protection.

China, the world's largest energy consumer, has strategically targeted the U.S. shale gas sector for investment. Despite having more technically recoverable shale gas reserves than the United States, China's high extraction costs make the resource economically unrecoverable. Instead, the country relies on imports for about half of its consumption. Driven by various technological needs, the Chinese government has become the largest foreign investor in the U.S. shale gas sector, primarily for export to China.

My recent research, funded by NSF, analyzed the upstream, midstream, and downstream sectors of U.S. shale gas, using data for the pre-China (2000-2008) and post-China (2009-2018) investment periods. compared. I am committed to the impact this investment will have on green technologies, the resilience of U.S. small businesses as pioneers in energy innovation and major employers, and broader implications for U.S. national security, including energy independence and technological leadership. We considered the impact.

We found that Chinese-backed investors are abandoning more expensive and environmentally friendly technologies in favor of immediate and subsidized production using established technologies. The results were statistically significant for nearly all technologies that affect water, air, and land. This strategic shift changes the trajectory of technology and the premises of clean energy development. It's also contributing to increased methane pollution from shale gas and a decline in innovation by small businesses that have historically served as the backbone of American ingenuity.

Although many believe that Chinese investment will spur innovation in shale gas, data still shows that China is the primary beneficiary, not U.S. companies or communities. Many believe that the United States is leading shale gas innovation in green technology, in contrast to overwhelming evidence highlighting China's dominance. My research results show that the application ratio is overwhelmingly favorable to China's topography and import needs, highlighting that the advantages of green patent areas are changing significantly.

Additionally, the limited impact of tighter federal regulations on greenhouse gas emissions associated with Chinese investment is also a cause for concern. As geopolitical tensions rise between the United States and China, we must scrutinize the impact of foreign investments to protect our national interests, technological leadership, and promoting sustainable development in line with our energy goals. . The Security Exchange Board's new rules on the disclosure and management of consistent, comparable and reliable information on the financial impact of climate-related risks by companies fall short in this regard.

In the pursuit of energy security and innovation, we need to more effectively navigate the complexities of global partnerships. Policymakers need to consider the multifaceted impacts of foreign investment, particularly in critical areas such as shale gas. These impacts include national priorities and impacts on small and medium-sized businesses.

Self-reporting can provide misleading information over short periods of time when technology rarely evolves. Self-reporting here does not capture the impact of foreign investment on emissions and local communities over a 10-year period.

Decision makers should pursue a nuanced approach that balances economic partnership with the imperative to protect our nation's innovation, security, and sustainable energy development efforts. To irrevocably change that promised future, we need funding for innovation as well as policies that ensure that foreign interests do not undermine American innovation and security.

Usha Hailey W. Frank Barton is Distinguished Professor of International Business in the Kansas State Faculty of Excellence and Professor of Management in the Barton School of Business at Wichita State University. She is director of the Center for International Business Advancement and chair of the Wichita World Trade Council.