China: Green Power, Gray Reality

- Welcome to China Considered, a podcast that brings fresh insight and informed discussion to one of the most consequential issues of our time, how China's changing and changing the world. I'm Liz Economy, Hargrove Senior Fellow and co-director of the program on the us China, the World at the Hoover Institution at Stanford University. Today, we're gonna explore China's clean energy dominance and what it means for the rest of the world. It's a topic that's generated a lot of heat, no pun intended, because of its enormous trade and investment implications, and for its ramifications for addressing global climate change. To help us make sense of these issues, we're very fortunate to be joined by two renowned experts, Dr. Joanna Lewis and Dr. Scott Moore. Joanna Lewis has studied China's clean energy sector for over 20 years. Her most recent book is Cooperating for the Climate, which came out in 2023. And Scott's a professor of practiced the University of Pennsylvania. His most recent book is China's Next Act, how Sustainability and Technology are Reshaping China's Rise and the World's Future That was published in 2022. Welcome, Joanna and Scott. Great to be here.

- Likewise. Thank you, Liz.

- All right, so let me start with you, Joanna. We hear a lot about China's global dominance in the clean tech sector. You know, you've looked at this issue for, I don't know, 20 years. You wrote that great book on China's wind power. I think I might even have blurbed it or reviewed it or something. I remember reading it and just thinking, this is so terrific. But, but talk, I mean, so there's practically nobody who's probably followed this space for as, as long and as in depth as you have. So just start us off, what does that mean when we talk about China's dominance in clean tech? What does that look like?

- Yeah, I think dominance can be defined a couple of ways, right? I think it tends to refer to the technologies themselves. And of course, China, you know, holds a significant share of the world's manufacturing capacity for almost every kind of key clean energy technology that we think about. So they have, you know, at least 60% of manufacturing capacity for solar pv wind batteries, even higher for a lot of components. You know, they produce over 90% of solar modules, over 80% of wind turbines last year. So this is what creates this sort of situation where China's, you know, controlling a lot of these key supply chain components and is really dominant in the, in the production of these technologies. But another way, I think, to think about dominance is in terms of their domestic markets, right? And China has the largest domestic markets in the world for these products, right? So again, solar, wind, but also now batteries, EVs, and it's, you know, it's somewhat not surprising that because they have these massive now domestic markets that they've also opted to build up large manufacturing sectors, right? To meet this demand.

- So Scott, I guess you probably generally see it the, the same way, but what, what else? When you think about dominance and maybe China's dominance globally, what does that sort of suggest to you?

- Absolutely, and, and would certainly echo the endorsement of Joanna's book, which i, i I continue to teach in, in my classes. I think the only thing I would add is that in this has particularly attracted a lot of attention of late, including just over the last couple weeks with the rare earth export control regulations that China announced is the supply chain. So if we talk about kind of dominance, it's not only market share, but it's also kind of a dominant position that's held by Chinese firms in most segments of the supply chains for clean energy technology. So in, in addition to kind of the final technologies themselves and the market share that Chinese producers have in those technologies, it's also a dominant position in most of the upstream segments of those supply chains. And that's something that I think is attracting a growing degree of attention and concern from the private sector and from policymakers outside China.

- Yeah, I mean, you raise an important point. So let me just push you a little bit on that. I mean, I have to say, I wasn't surprised that China put the sort of export controls, the licensing restrictions on for, you know, exports to the United States. I was a little bit more surprised that they made this a global policy. Why, why? What do you think sort of impelled them to do this? It seemed like a, a really almost going nuclear kind of option.

- Well, maybe I can, I can start, and I'm sure Joanna will have some, some thoughts as well, but I, I just came back from China. I was there last week, and certainly this was kind of the main policy topic of conversation. Unsurprisingly, the regulations were announced shortly before I landed. And Chinese interlocutors were pretty, pretty clear that, as you kind of alluded to, this was a sort of unsurprising move to, in response to, to perceived kind of provocations from the US side, in particular during the trade, the trade talks, and in the lead up to the now seemingly postponed summit meeting or, or at least high level meeting between President Trump and Xi Jinping, that it was an attempt to gain leverage and to kind of signal China's determination to take a, a strong position in those talks. That being said, I agree with you that I think both the scope and the timing of the regulations seem to me to be kind of an kind of a bit of an own goal. I think, at least for now, this was probably China's strongest card when it comes to trade issues and certainly economic state craft. And I think playing it now was not particularly productive because as we've seen, it provoked a very strong US response. And frankly, a lot of concern and counteracting moves more globally. In fact, if anything, it seems to have least for now kind of galvanized a bit of a coalition around the world to, to try to mobilize new sources of production and support to reduce China's dominant position and, and at least certain rare earth, rare earth. So in that sense, I do think it seems to have, have not exactly had a beneficial effect, at least over the, over the medium term. But no doubt it's a, a strong card to play. And I can see why the appeal to the Chinese side of playing it was strong.

- Yeah, I mean, jta what do you think? I mean, why, why go global with this sort of, you know, set of controls and they're pretty severe controls?

- Yeah, I mean, I, I agree with what Scott just said, and I, and I think, I mean there's really, you know, I think China feels sort of under attack in many ways. Like, you know, where you have the United States and several, you know, in the EU as well and other sort of putting in place all these tariffs and, and other restrictions on foreign ownership, Chinese investment, right? And so there, as, as Scott said, I think they're sort of looking for leverage in these ongoing trade negotiations. And, you know, the clean energy technologies we're talking about are really front and center here. They're not the only industries at play, but, you know, really, I think China has staked a lot of their sort of future innovation and, and, you know, global market, you know, sort of dominance as we talked about on these technologies. And so the, it's gonna be interesting to see how different countries also position themselves sort of vis-a-vis China in the United States as we see sort of bifurcation across supply chains.

- Yeah. So lemme just take us one step back and ask Joanna, how you think China got to this position of dominance, you know, in the clean, in these sort of clean green technologies? Like what about China and its model and model enabled them over the past decades to arrive at this sort of position of supremacy? And I have to say, you know, it's been astonishing to me because as, as you both know, this is an issue sort of China's environment and clean energy is an issue, are issues that, that I also have been very interested in for, for many years. And so it's been, you know, funny to me to see how many people think that China just woke up one day and all of a sudden was this clean tech monster when actually, you know, it's the product of decades of investment in, you know, human and technological, you know, resources. So talk a little bit about the China model. Like how did China get here?

- Yeah, I mean, I think that you're right that this has been a long time coming and, you know, a really strategic concerted effort over really three decades now. You know, beginning with the wind industry, like I talked about in my first book, where, you know, there was this effort and this realization, I think among Chinese policy makers in some ways, sort of before other countries, that in order to support clean energy industries and, and to sort of garner political support for bringing in these technologies, which were sort of viewed at the time as sort of new untrusted, you know, more expensive in many cases at that point than the sort of traditional fossil energy technologies that you needed to build. You know, you needed domestic subsidies, you needed, you know, to create market share. And so you saw this sort of concerted effort to put policies in place across the board, both to build domestic markets for these technologies in China through subsidies and other policy mechanisms, you know, to build like large scale projects, but then notably to build the industries themselves, right? And this specific way that this was done does vary a bit industry to industry. You know, the earlier years of their move into clean energy, for example, in the wind industry, was really about encouraging foreign technology transfers, right? Because at that point you had firms in the United States and Europe that really did have the technological edge in these technologies. And, you know, the Chinese companies and the Chinese government sort of realized that this was a, this was gonna be a question of catch up at leapfrogging, right? And, and sort of how that could be done. So they encourage foreign tech transfers, they use them to build up domestic technological capacity, though, right? And that's key. They didn't wanna re remain reliant in the long term on foreign technology. And that was sort of always part of their plan, right? And of course, they've done this across numerous industries. This really allowed their firms to become more innovative. And, and now, you know, China produces globally state of the art wind turbine technology as an example. I think when you look at technologies that came later, you know, solar and then batteries, the model was somewhat different, right? There was no opportunity if we look at, you know, the lithium iron batteries, for example, no opportunity for tech transfer because they had actually already very quickly leapfrog the west in these technologies. And so, you know, they, they did though apply, you know, what I would say is like a tried and true industrial policy playbook, which they, you know, have done of course across energy industries and combined a variety of, again, of state support for these industries to develop as well as protecting domestic markets.

- Yeah. But that's led to some problems for them as well, right? So both at home, and Scott, let me ask you about this both at home in terms of this, you know, idea of involution, right? At this just extraordinary level of domestic competition, and then in terms of its exports, some pushback as countries talk about the export of China's over capacity in these areas. So Scott, maybe talk a little bit about sort of involution, right? And, you know, government is taking this on apparently as a very serious issue. So what's the, what's the challenge that it's facing now having sort of conquered the global, you know, marketplace with its clean tech? What's the problem that China's facing?

- Yeah, well, absolutely, and I think if there was like, you know, a word cloud for like the Chinese economy and like a word of the year as it pertains to China, it would certainly be Naja, which as you say is com commonly translated it's evolution. Although I confess my grasp of that is pretty tenuous in the English language before enough, before this. Fair enough. I started to read about it, I'm like, what, what is that exactly? I guess I missed out on, on some basic biology. But anyway, this is really a key kind of feature of certainly China's clean tech sector, but also, you know, as Joanna kind of alluded to more broadly in the Chinese manufacturing and industrial sector, where one way of interpreting it is that the industrial policies that China has used to support clean tech and other sectors have in some senses been too successful in producing a lot of excess capacity and markets that are frankly too competitive. And there are several reasons for that. But among them are that the way that policy and sort of the political economy is currently structured, China's domestic manufacturers can't scale quickly enough in the domestic market, and they can't basically consolidate fast enough. And so what you see are these vicious price price wars that basically shrink margins to, you know, near zero or in some cases negative as we've seen recently in the EV sector. So it's a real kind of challenge. And I think if we just sort of scope out, unless the kind of political economy changes within China for some of these sectors, what that means is that in order to scale, in order to kind of consolidate Chinese producers of EVs, wind, solar, they have to export, they have to seek growth in, in other markets. The problem is that because of geopolitics, China has been, in particular in the clean, clean energy sector, increasingly shut out of a lot of the, the most developed, most valuable markets, the us and in the case of EVs, some of Europe as well. And so that means that China has to seek that, that export led growth in the global south. And you really see that's where China's trade is, is booming. That's where China's exports are increasingly shifting to. But at present, those markets aren't quite valuable enough. They're not quite sort of developed enough to absorb all of that capacity and to kind of make up for the increasing restrictions that Chinese producers are seeing in the developed markets. And I might also just kind of add that there are, you know, I mean, it's been around for a little while, but we're kind of starting to see a few more cases in places like Turkey where there is, there does seem to be growing opposition to Chinese imports in, again, particularly sectors like Ev where they're otherwise very competitive. But we're kind of starting to see political opposition to some of that. And I think that's a real kind of warning sign for, for Chinese firms. And I think what all this adds up to is there is like a kind of geopolitical premium for China's clean, clean energy, clean tech sector that didn't exist, you know, five to 10 years ago. And that's increasingly, I think, a, a major challenge separate from just the, the, the, the basic economic challenges of translating Indu this massive industrial policy investment that Joanna was talking about into sustainable commercial, globally competitive success in these, in these sectors.

- Yeah, I think that's, you know, really well said. And the last point about sort of rising concern and resistance within, let's call them middle income economies, some of the bricks, economies like Brazil and India in addition to Turkey, Argentina, where they're, they have their own desire, right? To develop their own nascent clean tech industries, and they don't, you know, want to, you know, face this onslaught. They simply can't be competitive with China at this point. I think that does send an important message to the Chinese in a way that Europe and the us you know, that we don't because these are countries that China, you know, nominally likes to say that it's leading or it's their closest partners or whatever. It's used to framing a narrative that, you know, the United States is just trying to contain us, hence it's taking, you know, these actions, but it can't make that same kind of case with, you know, these other countries. And so I wouldn't be surprised if that isn't at least partially responsible, although I think the, what you've talked about in terms of the domestic situation is really the driver for Xi Jinping's, you know, thinking that they have to do something differently. And so, you know, Joanna, I don't know if you've seen any of the moves that Xi Jinping has been, you know, sort of talking about that the Chinese leadership has been discussing to try to address this issue of involution, like simply telling local governments, you know, don't all invest in these sectors. I mean, how effective do you think something like that or some of the other steps are likely to be?

- Well, I think there's sort of two sides to this, right? I mean, I think on the one hand, yes, you, you, you can't, you know, these companies can't survive sort of with the level of competition and you're gonna see major consolidation. I mean, in some cases that's just sort of the natural evolution of these industries, right? I mean, back in the early days of the wind industry, there were thousands of companies and you know, now there's a handful, right? And you know, and then you saw that in solar, you're gonna see that now with batteries and EVs as well. But as Scott said, I think, you know, this is happening of course against a landscape where it's harder and harder for them to go abroad, especially in, you know, more western markets. I mean, I was talking to a, a Chinese solar company representative the other day based in the United States, you know, who said that even with like all the geopolitics and all the pushback against Chinese investment, like they can still make money in, in these markets because the margins are just so tight, you know, domestically that anything they can do to get out of China and get into these markets is really to their advantage, at least for the time being, right? And we'll talk about kind of the changing policy landscape for foreign ownership. But, you know, I do think, as you said, I mean this is part of a broader shift we're seeing globally, where, you know, countries all over the world are employing this sort of green industrial policy, right? To build up their own industries, protect their own industries, right? So it's not just China in some ways it's, it's countries sort of taking the Chinese playbook and sort of modifying it right to their own domestic contexts. But I think, you know, this really does reflect, you know, what I've called sort of the unique political economy of, of these clean energy industry, right? Where if you have this need for state support for these technologies, especially in the early stages, right? Whether it's subsidies or r and d support for them to compete with the, you know, more traditional fossil fuel industries, the states also want the jobs, right? They want the local economic benefit, everything that comes along with it. And so, you know, for countries that are looking at their low carbon energy transition, they don't just wanna be trading, you know, being reliant on imported fossil fuels, you know, from the Middle East or wherever, you know, to being reliant on Chinese solar panels. And they want to be thinking strategically about what is in it for them, you know, and building up local economy, local jobs. And so I do think it's, that's gonna be the really interesting thing to watch with China, sort of as they go abroad, what are the models they're using? Are they transferring technology knowhow sort of local expertise to these countries, right? 'cause I think, you know, as Scott mentioned, like there's just sort of less appetite for Chinese investment that isn't sort of bringing these local benefits.

- Yeah. I mean, I'm just curious, have you seen evidence that China is transferring technology or have you seen countries that you think are not necessarily the next China, but are in fact adopting the China model? I mean, one could argue, frankly, and, and Scott also served for a bit in the, in the Biden administration that, that the Biden administration was adopting, you know, with the inflation reduction act, some elements of, of the China, of the China playbook. But, but do you see like the next China, you know, in any space, a a country that is really committed to developing its own, you know, clean tech, clean energy industry.

- I mean, you see it across the board in a lot of the emerging and developing countries. I mean, there was a study that just came out that showed a huge jump in overseas clean energy manufacturing investments by China. So again, this is sort of different from just like sales offices, right? But actually like setting up facilities. And then what's interesting is like, what's the ownership of those facilities? You know, are they essentially sort of Chinese shadow companies in Malaysia, or is there sort of real local capacity? And I think you do see a shift in how that is starting to be structured. But I, I take your point, you know, I do think that when you look at this sort of shift towards, you know, green industrial policy, this, the Inflation reduction Act was a, a ex, you know, perfect example of this, right? And you know it, but of course that was why it was so successful and, and was able to be passed on a bipartisan basis, you know, back in 2022. It included clean energy subsidies that were directly tied to US manufacturing, you know, in, you know, essentially forcing the localization of these technologies. You know, my fir my first book talks all about the local content requirements, you know, that push these technologies, there's differences, you know, I'm not gonna, I'm not gonna say that there aren't, you know, very different ways, right? That of course, the US goes about doing this than a country like China. But, you know, the idea was to bring these, either bring the, these manufacturing facilities back to the US from China, you know, in the case of wind and solar or invigorate, you know, new industries in the case of EV and batteries.

- So I wanna, I wanna talk about the state of, of clean tech in the United States today and our ability to compete in the future. But before I do that, Scott, I wanna tap into your expertise on, on China's sort of water situation, because of course, water is so important to the development exploitation of so many different kinds of energy. It just is essential. How is the water landscape in China's shaping sort of China's energy development these days?

- Yeah. Well thank, thank you, Liz, for, for the, the kind of invitation to say a little bit about that. And the way I would just sort of like water in China, especially in the context of this discussion, is that when you think about kind of climate policy and responses to the world's climate crisis, generally people sort of divide it in at, you know, two big categories. One is mitigation, trying to tackle the actual root cause of climate change, namely by reducing greenhouse gas emissions. And then there's basically just trying to deal with the climate change that is already happening. And that's sort of built into the system that's adaptation. And really a lot of China's investments in water resource management, I think can be usefully seen in that sort of climate adaptation lens. It is kind of worth noting that for China in particular and the sort of global climate agenda more broadly, it's really been shifting over the last five years or so increasingly towards adaptation. Partly, I think actually as a response to the fact that most of the world's big economies and emitters at this point do have long-term decarbonization commitments in place. Obviously lots of questions about how you get there, and we can maybe return to that in the case of China if it's interest, if it's you know, of interest. But, but regardless, you know, there are kind of long-term commitments in place for most of these economies. So there's kind of that, but also, of course, in the meantime, we're, we're seeing bigger and bigger climate impacts. And that's also true of China all the way, going back to when China first really entered into international climate diplomacy. One of the big talking points was that China is one of the countries that's most heavily impacted by climate change. And that as a developing country that's, that's really of special concern. Water has been a big focus of China's both concern and response to that actual impact of climate change. And there are lots of kind of interesting historical reasons for that. Also, kind of a weird percentage of China's senior leadership, most notably hut. Tao had a background in hydropower engineering or irrigation. Irrigation incidentally was like a, also a kind of weird fixation for Joe and la. But regardless, that kind of water has played like a big kind of outsized impact. And just very briefly, a couple of the things that, that we've seen in that space that's sort of relevant to adaptation and climate resilience. China's built a ton of big dams over the last 40 years, and those have lots of concerning local environmental and social implications, but they do generate a lot of electricity and actually hydropower, despite the, the enormous growth of wind and solar China hydropower actually accounts for the single largest share of non-fossil energy in China's energy system. So it's a very significant source of electricity, first of all, of, you know, very low carbon electricity for one thing. Secondly, that adds up to a lot of water storage capacity, and that's really helpful in times of water shortage or drought, the frequency of which is one of the, the manifestations of the climate impacts that, that China is seeing. So you kind of add all that up and it's, it's actually a really kind of interesting asset in some ways for adaptation capacity. One final thing I'll just mention is that China also is a little bit unique globally in the amount of effort that they've invested in doing what are called inner basin water transfers. And this is basically the idea of, you know, typically you have a, a river that has a sort of very large catchment and it all flows to the sea along basically the same path. Inter basin transfers link different basins so that you can transfer water artificially that wouldn't be, you know, wouldn't connect naturally. China has installed the world's largest inter basin transfer network, and that has actually had some really beneficial impacts. One meeting I had during my recent trip was about groundwater levels in Beijing used to be so low that people were really starting to be concerned that they would have to import water from elsewhere. But thanks to this inter basin transfer, the groundwater levels are now back up, and that's been really helpful for all sorts of ecological and, and economic uses of water. So just to say, kind of big investment and potentially a really big contribution or asset in terms of adaptation to climate impacts.

- That's, I mean, that's really interesting. I have to say, you know, my research, my work was much earlier than, than this. And so on these issues, and, you know, I remember when the sort of water shortages were a serious constraint on things like China's ability to do fracking, right? And so I, I still had in my head that somehow the limitations of China's, you know, access to water could be constraints on their energy development. But it seems to me you're saying they've largely solved most of these issues partially in response to what they perceived quite readily to be a very significant threat from climate change. Do I have that right?

- Well, I would say, I mean, there are still lots of, of, of challenges, particularly in, in, in parts of the country. So it does remain a constraint. Wa lack of water does remain a constraint for, for fracking in some areas. Availability of water for cooling is also a, a, a constraint in, in for power sector development in some places. But I think what you can say, or what I could say at least pretty in, in a pretty confident way is that China has of, of any large country, China has invested way more effort into thinking about how to manage and sort of allocate and govern its water resources more kind of in a more coherent manner than any other country. And I do think as we, you know, think about the acceleration of climate impacts, most of which I will point out do have to do in one way or another with the distribution and availability of water, that that's a, a really significant asset. And I do think it positions China, you know, kind of in some ways in a, a, a better position than a lot of other, a lot of other large countries that face similar challenges.

- Yeah. And if I could just jump in absolute, just one thought on this, Scott is of course the expert on water. But you know, one thing to keep in mind is that, you know, with, with climate change, you know, you're going to see more frequent droughts, right? And, and we did see in China, you know, prolonged droughts in 20 22, 20 23, right? In some of the hydropower rich regions forced, you know, essentially like emergency ramp ups of coal generation. And so I think that's gonna be an issue in the long term, right? Where if they're sort of reliant on hydropower as part of their, you know, so-called new energy mix or, you know, low carbon energy mix, looking for the sort of less climate affected technologies, right? Like wind and solar will be part of the overall shift away from coal.

- Absolutely. Okay. I wanna come climate in a minute, but let me ask, and let me leave this open to either one of you. I'll start with Joanna, but you know, whichever one of you feels like you wanna tackle it, what about the US Now, three of us are all kind of China, you know, specialists, but obviously, you know, we both care deeply about what takes place here in our own country, you know, where does sort of the clean energy, clean tech industry stand right now? We have President Trump who clearly places a lower priority on this to say the least, than on, you know, big return to fossil fuels. You know, what does that mean? Are we basically out of the clean tech race and space, or do we think companies are going continue to remain committed to, you know, moving forward because that is the direction in which the entire rest of the world is moving. What's your sense for, you know, do we basically say game over and walk away, or do we think about how we continue to compete, how our companies can position themselves still to be, you know, like if not leaders at least globally competitive? So Joanna, do you have some thoughts? And then Scott?

- Yeah, I, I mean, I think that, you know, it's not so much a question of the United States sort of giving up, right? But I do think that the US needs to rethink our industrial strategy. You know, I think first we really need to be more strategic about how we compete with China in this space and, you know, assuming we decide we want to, right? And then this is sort of the question right now here in Washington, but I think, you know, there are certain areas where US industries are not really well poised to compete, like mass producing crystal, and so crystal and silicon solar modules, right? Probably also not in lithium iron phosphate batteries. So I think, you know, we need to be smarter about looking for opportunities in emerging areas. There's a lot of conversations happening about that right now in Washington, including within the Trump administration, you know, about where, where do we, you know, potentially still have a technological edge or at least the sort of ability, you know, where should we be directing r and d and other investments. I think second the United States, just to

- Clarify, Julie, sorry, just to clarify, so, so I know that the administration is committed to being sort of like in AI in other sectors being competitive, you know, the whole, we're gonna promote our tech stack globally, you know, definitely have heard that message, but are you saying you think there's, there are still discussions within the Trump administration about where to be competitive in the clean energy space?

- I do, because particularly when you're talking about battery technology, there are many uses for this beyond just, you know, decarbonization climate change, right? Having battery storage technologies are gonna be really important in a variety of defense applications. And you know, also just for grid stability and a variety of other areas. So I think there's this belief that a strategic area where the US wants to be making batteries and, you know, you do see sort of the continued investment in these facilities, even as, as tax credits are shifting, you know, in the, the more recent bill, you know, you saw, you saw tax credits removed for wind and solar, but maintained in batteries in some other areas. So I think, you know, the other piece of this is how the US rethinks our strategy for partnering with foreign, including Chinese companies, right? And this is a little bit more sensitive, but again, you see partnerships now between Chinese and US EV companies, right? Auto companies continuing in the Trump administration that had been put on hold during the Biden administration, of course, the notable one being the Ford Cattle Partnership where cattle is licensing battery technology to Ford, you know, for use in domestically produced EVs here. You know, I believe that there are ways that we can structure these technology partnerships that, you know, directly benefit US companies, and in fact, I think are actually crucial and critical to the survival of our US auto industry. I don't think we can remain globally competitive if we don't leapfrog in EV technology. I think, again, regardless of what you or the Trump administration or anyone, you know, sort of the US public thinks about climate change, many people in the auto industry believe that EVs are just superior technologies. They're nicer to drive that, you know, that this is just the future of auto technology. And so, you know, we, I think we need to be much more open to how we think about these partnerships. You know, there's a lot of ongoing discussion about restrictions on foreign ownership and, you know, increasingly new policies mentioned, you know, every day it seems, whether it's, you know, coming out of treasury or defense or, you know, and sort of how we're thinking about Chinese companies investing here. And, and I don't wanna say that there aren't real security concerns that, you know, need to be considered, of course, but I do think that it's not one size fits all. You know, I think we can be very careful about how these partnerships are imagined or are, are structured and, and that there's not, you know, there are plenty of areas where it makes sense for this cooperation to continue, you know, and it's not just about the hardware, you know, the last thing I'll say, right? Like China is becoming so advanced on like battery swapping, battery recycling, you know, these are areas where it's not just about IP or Right. It's, it's about kind of learning best practices.

- Yeah, I mean, I have to say, I think, you know, early on I used to sometimes joke, well, not really joke, but just say when I was in the administration, you know, what we should do with China, what China did with us right back in the early 1990s, and have, I think you put it Joanna, as encourage technology transfer. I think some companies what might state it slightly differently, which is to say if you don't, you may not have market access, right? But I think Xi Jinping got way ahead of us on that one, you know, and there's not gonna be any technology transfer from cattle to anybody near as I can tell. In fact, I think I recall seeing she say something about cattle not being too ambitious about going global with its technology, maybe a year ago or so. But, but Scott, let me, let me ask you to weigh in on, on this, you know, particular issue.

- Yeah, well, thanks. I mean, yes, certainly like something that you can't help but, you know, compare and contrast China's approach with that of the us and I think the two big things that leap out at you when you sort of think about that comparison in, in, in a big picture sense, first of all, like it's, it's this, you know, the change of the administration has produced a very dramatic change in US energy policy, but that's also part of like a 30 year story in the US of seesawing dramatically in, in that policy, depending on which party holds the presidency. And that is, you know, crazy from all sorts of perspectives, not least of which is that the typical investment horizon you're, you're looking at for the power sector is at least 30 or 40 years. So having policy change every four to eight is, is really creates a very chaotic situation. And I think in contrast to that, you know, as, as we talked about and as, as Joanna is really an expert in, you know, China's kind of policy stance with respect to particularly wind and solar has been, you know, very clear and very consistent for, for at least 20 years. And that, that contrast, you know, I think explains some of, of, of why we've gotten to this current point in time. That being said, I mean, I do think it's also important to keep in mind that like, just given the relative levels of development that we're talking about, you know, the US energy system was really built out, you know, in a period of complete fossil fuel dominance. China's was built out in a period of, of much greater transition. And so, you know, and Joanna also talked about leapfrogging, that's another, if I could put like another phrase alongside, you know, involution, it would probably be that leapfrogging, because that's always been a really important part of China's kind of economic planning and, and strategy is this concept of we're, you know, we need to catch up, but in the process of catching up with the developed world, we can also leapfrog ahead. And that was really the, the underlying rationale for that investment and that policy consistent, that consistent commitment to development of, of clean energy sectors. So in that sense, like I think you can make some reasonable arguments that like what has worked, you know, for China may not necessarily work for the us and that in fact, you know, we may be better off thinking about the next leapfrog over wind and solar. And in that respect, you know, I do think in addition to nuclear, which has gotten a lot of attention, and I think rightly so as kind of an area that, that we're, we do still see a lot of us policy support enhanced geothermal is, is interesting. This is basically, you use kind of fracking style techniques to drill much deeper, therefore produce much more heat and much more energy from geothermal processes than has been possible in the past. Not price competitive now, probably won't be for some time, but it could be a really interesting solution for pretty big parts of the us. And again, that's an area in which, you know, you, the US tech, you know, firms do have a lot of the key ip, it's a, a set of technologies for fracking that we know very well that's already deployed. And in that sense, like I think you can make a reasonable argument that maybe it does make more sense to invest, you know, in that in terms of public policy support than in, you know, solar, which as Joanna said, you know, it's hard to imagine competing with Chinese firms on cost ever in Polysilicon. I guess the last maybe point though, trying to come full circle is that I think probably for any of us here, you know, you know, it, it, it, it doesn't seem like a great idea to just like give up on wind and solar and EVs though, because those are such foundational parts of, you know, the, the energy transition and what will, what will happen irrespective of what, you know, us executive decision making happens. So to kind of, you know, do things that are actively hostile to the growth of those sectors in the US seems really self-defeating.

- Yeah. Yeah, I think that's, I think that's a fair, very fair, very fair statement. So it will be interesting, and I, I appreciate your optimism, Joanna, about the sort of openness of the administration, at least on the battery technologies. And, you know, geothermal, I have to say, I'm on the board of my college Scott, which is close to Penn Swarthmore, and

- Yeah, working

- In geothermal,

- I, I've, I've seen it, yeah.

- A buy-in for a solar, you know, plant too, just an offset thing that we're doing. So, you know, it's very exciting. I mean, it's, it digs up a lot of ground, it makes a lot of mess, but in the end, you know, it just takes a little bit of strategic vision and a little bit of a sense of longer term planning. And I think you really do come out pretty far ahead, you know, over the long run. So, but, but you have to have that, that mindset, right, to think more than, you know, a year or two out. And I think that is what China, as you suggest, is what China has in spades. And, and we, with our electoral system, you know, it's, it's more difficult to maintain. All right, let's, let's go to climate change and sort of, Scott, you let us off by talking about the water issues in climate in China, but let's just take it from the position of China as both what we've already discussed this, you know, incredible machine manufacturing machine in the, in the clean energy space, and also, you know, in terms of its own deployment of clean energy domestically really doing, you know, something pretty phenomenal, but still the largest consumer of coal and largest contributor to global climate change. I'm not gonna say, how do you reconcile those two things? It's easy to see how they reconcile them, you know, they just do both. But, but what do you think this means? Like what do you see as the trajectory? China has put out some new, you know, target, you know, for, you know, carbon emissions. It wants to be seen as a leader in global climate change. Does it merit that title, you know, of, of leader in climate change? How do you think about China in that space today? Joanna, why don't we start with you?

- Sure. Well, you know, I, I think that this is a, a complex area and I, and I appreciate sort of the nuance, right, to bring to this question of is China climate leader, right? I think it's really easy to sort of say, well, you know, we know China's the largest emitter in the world. We know it's, it's still reliant on coal, but we also know, you know, China builds a lot of coal plants. It doesn't need, many of them are running at very low utilization rates. And, you know, more important is the overall demand trend trend, which does appear to be slowing down. There may even be an absolute decline in coal use this year. Most importantly, I think we're seeing a steady decline in the share of coal in electricity generation as renewables are now able to meet all new electricity demand. And that's new, you know, that's a new trend in China. And so that's only going to, you know, continue with the, the, the big targets that have been put forward on renewables. You know, I think we're also seeing somewhat of a shift in narrative among China's leadership. You know, you mentioned sort of recent language from Xi Jinping, you know, I think over the last few years there was a lot of concern in the climate community that there was this sort of return to coal happening on energy security grounds, right? In, in part, in response to some blackouts. And, but recently Xi Jinping stated that, you know, energy security depends on developing new energy. And this is, I think a again, is somewhat of a new narrative and a positive shift in, in the rhetoric, recognizing that of course, actually, you know, there is no more secure energy source than renewables. It's inherently domestic, right? And, you know, and I think when we talk about climate leadership from China, you know, it's a complex term, right? And there's more that China needs to do to reduce its overall emissions. But the role that China's playing, as we've already, you know, started to talk about in shaping the decarbonization pathways of the, you know, the global south, the emerging economies, developing world is arguably the most important signal of their climate leadership today. You know, not long ago, you know, I would argue China was sort of hiding behind other developing countries, right? Of course. Saying, you know, they had no obligation to reduce emissions. We've all followed this, right? And, and you know, now we really see them positioning themselves as a leader. You know, if not a global leader, definitely a leader of the global south South where from a climate perspective, this is where the majority of future emissions, you know, are gonna be coming from. So, you know, I think we saw, you know, over the last decade, China really using the Belt and Road initiative and other mechanisms to essentially build coal plants abroad, right? And this was a huge problem because you had China sort of signaling to the rest of the world, you know, do what we did and, and use a lot of coal. But now I think they're, they're sort of selling their more like clean energy roadmap, right? To the developing world. You know, I wrote in my last book like about how Denmark, you know, sort of sells their energy transition strategy as part of their, their climate diplomacy. Now you have China doing the same thing where, you know, you see this real change in, you know, and how they're, they are, you know, exporting to other countries. And, you know, even this is now I think starting to translate into shifts in domestic policy in these countries. Like there was a report that just came out showing that new coal plant proposals outside of China are at an all time low. There've been announcements of project cancellations in Thailand, Kenya, Uzbekistan, you know, other countries. And again, this isn't just because of, you know, what China's doing, but it, you know, they've played this really important role, right? In bringing down the cost of these technologies. As we talked about, you know, there is a, a calculation, which I, I've been sort of arguing for years, that China's clean energy technology exports last year alone reduce global emissions by 1%, right? So we have to look at both sides of what they're doing here, right? And, and so it's gonna be really important the role that China ends up playing in helping other emerging and developing countries, right, with their low carbon transition. I worry that the geopolitical tensions that we've been discussing, you know, particularly between the US and China and others, will have, you know, really detrimental effects on that sort of longer term trajectory, right? And, and particularly the impacts on developing countries being able to afford clean energy technologies, right? As, you know, something like the RA is trying to bring back, you know, manufacturing to the United States that will increase costs of these technologies globally, right? So we have to think of the global impacts of any industrial policy strategy in, in this country or elsewhere. I think,

- Yeah, I would just note I really important points. I, I do think there's a, a little bit of a chicken and egg on the, and the issue of the sort of cancellation of coal projects and, and China's, you know, pullback because of course, I think it was 20 22, 20 23, China said, okay, no more exporting coal fire power plants through the Belt and Road initiative. But actually if you look, you'll see that many countries prior to that, you know, that signal were already canceling the coal fire power plants. So a lot of the push I think came and the, and why China made that move was not only pressure from, you know, the US and others, but was actually because other countries were saying, we don't want Bangladesh. Actually Kenya was before right? Protest around a, a coalfire power plant that China was trying to build in a, with the Kenyan support, don't get me wrong, wasn't imposing the, the Coalfire power plant, but, but protest, you know, in a, I think it was either in or near a World Heritage site, you know? So I think that actually China got the signal from many emerging economies that they did not want coal fired power plants and that helped push Xi Jinping. Maybe he was already moving in that direction, but I think it helped push Xi

- Jinping. No, I think that's right. I mean, it was 2021 and, and I think that is right, but you know, with that said, right, like there, they, these countries were still building coal plants and there's sort of a variety of uses, right? Including like captive coal and other areas that are sort of being less addressed by this. But at the end of the day, right, it's about economics and there's just not a lot of economic rationale to invest in a 50 year coal plant, you know, given this, oh, Joanna,

- Aren't we doing it anyway? So I'm sure there must be,

- Except in the United States where of course we're trying, we're trying to revitalize this in important.

- Scott, you wanna add anything to China as a, as a climate leader?

- Well, you'll note how qualified the statement that I I'm gonna make is, but it's, it's something I've, I have repeated fairly often, so I I I think China has probably done more than any other, you know, large economy at a comparable stage of, of development to reduce the i it its impact on climate change. However, there are a couple of, you know, really important aspects of that to keep, keep in mind, number one, China is a very carbon intensive economy, even relative to other developing economies. So it's carbon intensity is twice that of the, the kind of average for a couple reasons. One, as Joanna mentioned, you know, and I mean, as, as, as you have documented extensively too, Liz China uses a ton of coal. Chi coal has been 60% of China's electricity consumption for decades. And in fact, probably the best news on climate that we've had in a long time is simply that that percentage has decreased from 60% to 55% in the last 18 months. That alone, you know, is probably the best climate news we've had in a long time. And that just goes to show you, you know, how significant China's emissions are and how significant coal is to China's total emissions. It's also true that because China kind of even getting back to the first part of our conversation, China has such a kind of dominant position in manufacturing and the most heavy industrial sectors. That also means that its carbon intensity is higher than most other countries. I think Poland and South Africa are, are among the only ones that compare at least among large economies and the, the carbon intensity. So it has a very kind of high carbon economic model, if you wanna think of it that way. And that is, that's very problematic, obviously. So if to the extent that China, you know, could be called a, a climate leader, it really has to do something about that. And I do think, you know, as we've talked about, the massive renewable capacity growth certainly gets you further to that goal, but it's pretty clear to me that China's energy policy is really an all of the above one. You know, you're gonna have a, an energy mix that includes fossil fuels, you know, well into the foreseeable future. Worth noting that China's long-term decarbonization net zero target is a, a net target and includes sinks like a forestation that, you know, we don't, we don't yet know exactly how net that, you know, that will be in 2060. So it kind of really depends how you define leadership. But certainly China has, you know, a long way to go to, to kind of do what it would need to do to keep us on track for our, our global climate goals. And maybe just to complete that statement, 'cause I do think it's significant, China did recently redu release, its intended nationally determined contribution. Joanna and I were at a meeting a few weeks ago where that was the topic of conversation. So we may wanna briefly, you know, kind of get into her perspective on, on it. But just very briefly, the, the headline from that, that commitment was that China will reduce its emissions by seven to 10% by 2035, economy wide, all greenhouse gases. That's actually the first time that China has pledged to specifically reduce its emissions. So a specific emissions reduction target that's really significant. It is not in line with our kind of, you know, overall climate targets certainly of, of limiting global average temperature increase to well below 1.5 degrees, but it is very significant from a policy standpoint. So it's again, the, the, on the one hand, on the other hand,

- Yeah, very important and really appreciate the nuance that both of you brought to answering that question. So we're almost out of time, unfortunately. So let me just ask you each to, to answer one question and that is, you know, if you had President Trump's ear and maybe one or both of you, you know, do have his ear, what what would you tell him to do in this space, either related to clean energy or climate or cooperation with China on climate? Like, what would be your number one, if you could just say, this is what you really should be doing, what would you suggest, Joanna?

- I don't pretend to have his ear, but I, I would be happy to suggest, I mean, I think there's sort of the lowest common denomin denominator piece, which is what Scott just mentioned, that, you know, we are really shooting ourselves in the foot by sort of removing any, any, you know, progress, any support, any, and, and reversing any progress that we've made in the clean energy sectors that are gonna be globally, you know, necessary not just for a low carbon transition, but they're gonna be the, you know, most economically competitive sources of energy in the coming decades. You know, the cancellation of wind projects is just goes sort of against, you know, we've tried so for so long to get any inroads into the offshore wind space, for example, where the United States is just so far behind any country in the world, you know, we, we should be looking not just to cancel these things, but to manage them, you know, if there are true environmental impacts or other concerns. And I will say again, you know, again, this, this may sound naive, but I do think that we are running outta time to keep the US auto industry globally competitive. And the best way to do this is through some kind of deal with China. You know, I do, I know there's been a lot of, you know, rhetoric, again from the highest levels about, you know, not allowing the sharing of sensitive technology and, and sort of, you know, blocking what Chinese firms are allowed to do. But again, this is all up for negotiation and this is all part of, you know, China's leverage right now in this space. You know, all the Chinese companies I've spoken to, they want access to the US market, and I think there are, there are deals to be made that could benefit both sides.

- Great. Scott,

- In the interest of being as quick as possible, make fusion work, there is no panacea to, you know, averting dangerous climate change, but the closest thing to it would be getting commercial fusion.

- And there are several US companies, small US startup companies with some pretty impressive people at the top of them who are working on this. So, all right, I think both excellent and positive recommendations to end our discussion. I really wanna thank both of you for sharing your, you know, deep, deep expertise and really thoughtful analysis. I've really enjoyed hearing both of your, your comments and your thinking.

- Likewise. Thanks Liz.

- Yeah. Thanks for the great conversation.

- So if you enjoyed this podcast and wanna hear more reason, discourse and debate on China, I encourage you to subscribe to China Considered via the Hoover Institution YouTube channel or podcast platform of your choice.