Trilemma for Supply Chain Restructuring in Clean Energy

This report discusses the challenges faced by developed countries in restructuring their supply chains within the clean energy sector, particularly in relation to China's growing influence. It outlines the strategic initiatives necessary to achieve de-carbonization while mitigating risks associated with reliance on China. The document details the phenomenon of 'deflation exports' from China, which has significantly impacted markets in various countries, notably Germany's auto sector. The report identifies a trilemma that governments face: they can either reduce dependence on China and achieve de-carbonization, reduce dependence while maintaining economic stability, or achieve both de-carbonization and economic stability while abandoning de-risking from China. Each option requires the abandonment of one of the three objectives. The report emphasizes the need for a balanced approach that includes accepting fiscal risks, cooperating with China where feasible, and delaying de-carbonization to ensure economic stability. It concludes with recommendations for Japan to adopt similar strategic initiatives for effective supply chain restructuring.