Latest / The Nation Podcasts / How China’s Renewable Push Upends Geopolitics | Tech Won't Save Us

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How China’s Renewable Push Upends Geopolitics | Tech Won't Save Us · The Nation Podcasts

0:00
[SPEAKER_02]: That's a huge existential crisis where Western car makers, you know, the Ford, the GM, the Volkswagen's, that have been in China, assuming that they'd be just buying on gas vehicles looking to come.
0:12
[SPEAKER_02]: That's not what's happening anymore because if the transportation sector is being rapidly transformed.
0:34
[SPEAKER_01]: Hello and welcome to Tech Won't Save Us Made in Partnership with the Nation Magazine, I'm your host Paris Marks, and this week my guests are Kate McKenzie and Tim Sahhe.
0:41
[SPEAKER_01]: Kate is an agent fellow at McQuarero University and has written for the Financial Times in Bloomberg Green.
0:46
[SPEAKER_01]: Tim is co-director of the NET-Zero Industrial Policy Lab at John Hopkins University.
0:50
[SPEAKER_01]: They're both the co-writer of the Polychristus newsletter from Phenomenal World.
0:54
[SPEAKER_01]: In recent months, we've been looking a lot at the geopolitics of technology.
0:58
[SPEAKER_01]: And, you know, this new world that we're headed into, where the United States is trying to restrict certain technologies that different countries can access, where China is obviously moving ahead and developing technologies that are competitive with the United States, if not even getting ahead of it in certain sectors.
1:15
[SPEAKER_01]: And that has much broader implications just beyond the United States and China or how particular countries are responding.
1:22
[SPEAKER_01]: So I wanted to have Kate and Tim on the show because they have been writing a lot about those broader repercussions.
1:28
[SPEAKER_01]: And in this conversation, we dig into the kind of model that China is building where it is electrifying its economy.
1:35
[SPEAKER_01]: potentially reducing its dependence on oil imports and what that means for not just the broader Chinese economy but a potential development model that other countries might be able to follow or at least take some lessons from as they seek to carve out their own kind of sovereignty independence reduced their dependency on say the United States or other countries.
1:55
[SPEAKER_01]: We also look at what the decisions of the United States in this moment are going to mean for its place in the world and its ability to actually properly compete with China, keep up with China and try to maintain its position in the world system and whether that is even going to be possible.
2:10
[SPEAKER_01]: And then kind of the broader question of what this means for many other parts of the world, right?
2:14
[SPEAKER_01]: Parts of the global south that are trying to keep up that are trying to grow their own economies.
2:20
[SPEAKER_01]: and whether the Chinese model now appears more appealing to them, and whether the West is still just kind of stuck behind this model that the United States has created, that they built their economies on over the past, number of decades century, whatever we want to say, and whether it can pivot too.
2:37
[SPEAKER_01]: I think that there is a really important point made in this conversation that China seems to be building a very different model based around electrification rather than on extracting fossil fuels and in particular oil and gas and kind of building its economy on top of that.
2:52
[SPEAKER_01]: And on the one hand, there's an obvious
2:54
[SPEAKER_01]: potential climate benefit of a model that China is building, but it's really not building that because it cares about reducing emissions of climate change and stuff necessarily, but because it is beneficial for it to do so as a country that does not want to be dependent on these resources that it doesn't have very much of.
3:12
[SPEAKER_01]: But on the flip side of that, there is the possibility that a model like this, if more countries are adopting it, could even if they're doing it for political reasons, actually have climate benefits down the road as you're having fewer countries and fewer parts of the industries of these countries were lying.
3:29
[SPEAKER_01]: on fossil fuels that are creating these emissions that are driving climate change.
3:33
[SPEAKER_01]: And to me, there is something potentially hopeful in that.
3:37
[SPEAKER_01]: And holding back that model is not only a bad idea for the species, if we want to think about the future of the world that we're creating, but if it is one that will actually allow countries to carve out more independence, you know, less dependence on the United States and on constant imports of
3:54
[SPEAKER_01]: fossil fuels, and obviously that seems like a good thing, right?
3:57
[SPEAKER_01]: Even if it's not necessarily in the interest of the United States itself.
4:01
[SPEAKER_01]: So I think it will be interesting to see how this continues to play out.
4:04
[SPEAKER_01]: And it's for that reason that I was really interested in having Kate and Tim come on the show to talk to me about this because I think the types of things that they're talking about could have very significant repercussions in the years to come and we're already starting to see aspects of that playing out today.
4:19
[SPEAKER_01]: So if you do enjoy this conversation, make sure to leave a five star review on your podcast platform at choice.
4:23
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4:27
[SPEAKER_01]: And if you do want to support the work that goes into making tech won't save us every single week, so I can keep having these critical in-depth conversations, looking at the ways that technology is affecting, not just the economy, but increasingly, you know, the global system.
4:39
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4:48
[SPEAKER_01]: Thanks so much and enjoy this week's conversation.
4:52
[SPEAKER_01]: Kate, welcome to Tech Won't Save Us.
4:53
[SPEAKER_00]: Thank you.
4:54
[SPEAKER_00]: Great to be here.
4:55
[SPEAKER_01]: And Tam, it's great to have you on the show as well.
4:57
[SPEAKER_01]: Thanks for having us.
4:58
[SPEAKER_01]: Now, I have been reading your Poly crisis newsletter and you know, there have been a lot of really fascinating essays in there.
5:04
[SPEAKER_01]: Of course, what you're writing about really resonates with me, but it also aligns with some of the topics that we have been talking about on the show lately, which is why I wanted to have you both on because
5:13
[SPEAKER_01]: It kind of broadens out some of the things that we have been talking about by looking, you know, with kind of a broader perspective here, right?
5:19
[SPEAKER_01]: And so in recent years, we've been hearing a lot about China's investments and advancements in various technologies, particularly with supposed green technologies like electric vehicles, batteries, and solar energy.
5:32
[SPEAKER_01]: So I wanted to start by asking, why has China so vigorously pursued those technologies in particular?
5:38
[SPEAKER_00]: Yeah, so there's a few different reasons why China's gone specifically after building such a big presence in clean tech.
5:46
[SPEAKER_00]: It's not necessarily about being a climate leader.
5:50
[SPEAKER_00]: There are a lot of other motivations there.
5:52
[SPEAKER_00]: And in fact, it's probably climate is fairly far down the list, although I think the Chinese
5:59
[SPEAKER_00]: Leadership does have a bit of an interest in being seen to be a good citizen on the international stage.
6:04
[SPEAKER_00]: A lot of it is really more about China's developmental strategy about it.
6:10
[SPEAKER_00]: It's overall growth and management of its own domestic economy and its growth on the world stage.
6:17
[SPEAKER_00]: and seeing where it had an opportunity.
6:21
[SPEAKER_00]: So, you know, what we now think of as older energy technologies, internal combustion engine cars, for example, we're already
6:30
[SPEAKER_00]: pretty advanced Japan, Germany, US, South Korea, you know, you had a lot of countries already excelling in that.
6:37
[SPEAKER_00]: So it was a little bit of a strategic opportunity, partly.
6:41
[SPEAKER_00]: There's also an element of it that comes from China not having much of its own crude oil supply.
6:48
[SPEAKER_00]: But I think, you know, you can kind of debate the weighting of that, but I think, you know, Tim and I would probably say the weightings more towards
6:56
[SPEAKER_00]: that Chinese central government seeing opportunity there to become a leader in something that wasn't quite established.
7:04
[SPEAKER_00]: That was emerging and was probably going to be a future.
7:08
[SPEAKER_02]: Yeah, I think that the things that Gates said about development, seeing itself as this is going to be a faster engine of its development and the second thing of what Gates said was
7:19
[SPEAKER_02]: space, right?
7:19
[SPEAKER_02]: Like if there's a contested space with the legacy stuff, there's a new green field to move towards green technology, which is relatively less contested.
7:29
[SPEAKER_02]: Looking at the world right now, it's a extraordinarily dominant position, right?
7:32
[SPEAKER_02]: It's like seventy eighty percent of all clean energy factories are in China.
7:37
[SPEAKER_02]: And if you were to stop the clock and rewind back to two thousand, it would be exactly the other way around, eighty percent of all
7:46
[SPEAKER_02]: clean energy factories were in US Europe in Japan.
7:50
[SPEAKER_02]: And so it is quite a shocking reversal.
7:53
[SPEAKER_02]: And you don't get a complete three, sixty degree kind of reversal like that without a barfled state putting in a lot of resources, which is money, which is capital, which is technology, which is learning, which is human capital,
8:09
[SPEAKER_02]: universities are indeed ecosystems like so.
8:12
[SPEAKER_02]: In that sense, that's what we mean by a full-fledged development model.
8:17
[SPEAKER_02]: You don't just narrowly think we're going to be good at green technology.
8:20
[SPEAKER_02]: You say, you know, we need to develop our societies and that's going to require us to pick some certain sectors and then, you know, put all of the factors of production behind it, capital and labor, human capital and knowledge, and then you bear the fruits of that.
8:35
[SPEAKER_01]: Yeah, I think that makes a lot of sense and Kate, you were saying, you know, obviously China composition itself as though it is doing a lot on climate as a result of this, even though that might not be the main driver, you know, we often see these kind of news stories and stuff talking about how China is investing just so much more in building out renewables than, you know, a lot of other countries and, you know, it gets a kind of good headlines as a result of that.
8:58
[SPEAKER_01]: But Tim, you know, you were talking about the
9:00
[SPEAKER_01]: you know how you see this across certain sectors and I feel like one that has really stood out is the electric vehicles right you know we have been talking about that for the past few years it's very significantly obviously the United States Canada and other countries have put tariffs against Chinese electric vehicles to try to limit them coming into their markets you know how does China's leadership on that technology in particular
9:25
[SPEAKER_01]: start to change supply chains, challenge the auto industry as it was established by the West and what does that show us about this broader model that China has been building?
9:34
[SPEAKER_00]: I think there's a degree of orchestration as well to think about a car industry.
9:40
[SPEAKER_00]: You can't just create a car industry out of a whole cloth that is going to be really successful if you don't have a whole kind of ecosystem around it.
9:48
[SPEAKER_00]: So there's that element of it.
9:51
[SPEAKER_00]: It leads to the east to point out here.
9:53
[SPEAKER_00]: People often think of China, I'd say people in the west, I should say what often think of China is having just
10:01
[SPEAKER_00]: appropriated western intellectual property that's a you know really kind of common trope that China
10:09
[SPEAKER_00]: steals technology or or somehow absorbs it rather than then developing its own.
10:14
[SPEAKER_00]: So I think you know it'd be point that we made in our bricks essay and love our other writing is that that's no longer the case that that really hasn't been the case for for a long time.
10:25
[SPEAKER_00]: It probably represents a bit of a misunderstanding about how technology does.
10:31
[SPEAKER_00]: transfer and evolve.
10:33
[SPEAKER_00]: So it was a combination of, I'd say, you know, it makes a different policy measures.
10:41
[SPEAKER_00]: I think something that's really important is that the Chinese central government sets up these competitive markets internally.
10:49
[SPEAKER_00]: So
10:51
[SPEAKER_00]: They don't just have one or two state champion auto companies.
10:57
[SPEAKER_00]: There's been as many as two hundred evey companies in China and the competitive landscape or the competitive market with in China is part of the reason why some of these Chinese car companies have become
11:12
[SPEAKER_00]: so good and being able to offer vehicles which are now increasingly recognized as being better on price and quality than almost anything else that's been produced anywhere else around the world.
11:26
[SPEAKER_01]: Kate, you're in Australia obviously, so quite distinct from Tim and I being here in the US and Canada, I guess, you're able to see these vehicles quite often on the streets down there, right?
11:37
[SPEAKER_00]: Yeah, I remember saying to Tim, I don't know, it was about eighteen months ago, Tim was probably more like two years ago, just mentioning casually, oh, you know, yeah, we see, I see BYD cars quite a bit now, I'm starting to see them fair bit and Tim was surprised and it's just something that we'd had and we realized, you know, for many countries around the world, this was already the case.
11:58
[SPEAKER_00]: I mean, today they're really commonplace.
12:01
[SPEAKER_00]: It was kind of interesting to both of us to realize that the U.S.
12:04
[SPEAKER_00]: has been
12:05
[SPEAKER_00]: You know, shielding themselves from or excluding themselves from.
12:09
[SPEAKER_01]: Yeah, things are very different here.
12:11
[SPEAKER_01]: The options are far more limited.
12:12
[SPEAKER_01]: I tried a few when I was in New Zealand earlier this year, actually.
12:16
[SPEAKER_01]: But Tim, sorry, go ahead.
12:17
[SPEAKER_02]: Yeah, I mean, just the whole idea about the EVs having a much larger market inside China.
12:22
[SPEAKER_02]: So it's like over a market of over twenty million cars in the US market sizes, about fifteen million cars and at this point more than half of the cars sold in China.
12:33
[SPEAKER_02]: electric and it's like hundred-plus brands as a severe price competition going on and it's this kind of creation of what the Chinese are very deliberately done is create a gym inside like a gym where you have to be lean and mean and competing with each other.
12:49
[SPEAKER_02]: And it's like the fitness kind of survive and when you have this five to ten year period of like massive competition then within that corner of the Chinese internet market like the sharpest cleanest firms survive the ones that have spent the most amount of money in innovation in R&D really squeezing costs
13:07
[SPEAKER_02]: getting a lot of innovations in and spending a lot of money trying to innovate in battery chemistry.
13:14
[SPEAKER_02]: And just if you just wanted like a really simple figure of that, well, what is an EV when it's mainly batteries, right?
13:19
[SPEAKER_02]: So, seventy percent of the cost of an EV's is batteries, well, what's battery?
13:22
[SPEAKER_02]: Well, that's just chemistry.
13:24
[SPEAKER_02]: And that just requires a shithon of metallurgists and chemists.
13:28
[SPEAKER_02]: And China is like, you know, over a hundred battery chemistry PhD programs.
13:33
[SPEAKER_02]: And so this is just as we were saying, like innovation and technology and requires a government to like really pick certain sectors and say, we need to develop the knowledge base.
13:43
[SPEAKER_02]: And that's why they're doing innovations that are getting the cost of an EBE as cheap as they are.
13:49
[SPEAKER_02]: It's not subsidies, it's learning by doing.
13:52
[SPEAKER_02]: It's in this dramatic kind of culture and of competition, it's chimed domestically.
13:56
[SPEAKER_02]: So when these firms succeed in that highly competitive domestic market, when they get out of the market and face two, nobody else can compete with them.
14:07
[SPEAKER_02]: And that's why you see exactly what you were saying.
14:09
[SPEAKER_02]: The protectionism and the worlds coming up particularly in countries that have existing internal combustion engine companies that are like wait a second.
14:19
[SPEAKER_02]: Like we don't know how to deal with the twenty thousand dollar car that is cool and sleek and sexy that our consumers want.
14:25
[SPEAKER_02]: Can you give us some time?
14:27
[SPEAKER_02]: That's been the most interesting response from countries that have domestic companies.
14:33
[SPEAKER_02]: Australia doesn't, does not have domestic car company, right?
14:37
[SPEAKER_02]: So like a lot of companies in a lot of countries that don't have that domestic auto industry, perfectly willing, you know, they were like, well, we were just buying a car anyway, might as well buy
14:46
[SPEAKER_02]: a ghoulously Chinese one, but that's not in the response in the US, that's not in the response in the EU or in many countries with existing car industries.
14:56
[SPEAKER_02]: They are performing a kind of negotiation with the Chinese.
14:59
[SPEAKER_02]: We let you in, but only if you set up a factory here and teachers had to make these school sexy machines and rather than just put them on a ship and us being condemned to be your export market.
15:11
[SPEAKER_00]: And that co-locational that having facilities in your country is the way that you start to adopt or transfer these less tangible kinds of technology.
15:23
[SPEAKER_00]: Because it's not just a few design files that you can send across or that are patentable.
15:29
[SPEAKER_00]: There's this concept of know-how that is transferred in a more gradual way by having people from your own country, your own workforce.
15:41
[SPEAKER_00]: working alongside the skilled people from elsewhere.
15:44
[SPEAKER_00]: I just want to add something about subsidies, which is the concept of direct subsidies is overblown with regard to Chinese companies, but China does create, although the central government has created
16:00
[SPEAKER_00]: a conducive environment.
16:02
[SPEAKER_00]: And so there are some supporting factors there.
16:06
[SPEAKER_00]: But it's not just cash injections to favored companies or champions.
16:12
[SPEAKER_00]: It's to disagree.
16:13
[SPEAKER_00]: It's like maybe a bit easier to access financing if you're in the particular industry that has been designated as one of the industries that's been designated as strategically important.
16:25
[SPEAKER_00]: cost of energy, again, if you're an important industry, maybe your cost of energy, your access to land, your access to finance, those barriers that might be faced by innovative companies or companies moving into new industries in a lot of other countries.
16:42
[SPEAKER_00]: Some of those barriers won't be so high in China because the central government has, you know,
16:48
[SPEAKER_00]: and made very clear from the top what it expects, the private sector and also the provincial governments to be supporting.
16:58
[SPEAKER_00]: And that ability to have that long-sightedness, you know, to be looking ten, fifteen years out to the future is something that differentiates China.
17:08
[SPEAKER_00]: I think from a lot of the countries that it's competing with now.
17:11
[SPEAKER_01]: I think that's a really key point, right?
17:13
[SPEAKER_01]: And I think that that example of how the EV market worked in China and the use of subsidies, not just to make a company like BYD, a national champion, but to encourage the creation of all these other companies that creates an incompatitive environment that then when they go international
17:28
[SPEAKER_01]: They are very lean.
17:29
[SPEAKER_01]: They are very agile.
17:30
[SPEAKER_01]: They know what they're doing.
17:31
[SPEAKER_01]: They have good products has really been successful.
17:34
[SPEAKER_01]: And before we pivot to kind of build on what you were saying there Kate about what we're seeing in other countries in relation to China, I just wanted to ask one final point before we start making those broader comparisons in that.
17:45
[SPEAKER_01]: You know, I have seen in a few publications now, I think the financial times seen China described as an electro state, you know, kind of going back to something that you were saying earlier on.
17:54
[SPEAKER_01]: It's investing in all these technologies that are reliant on electrifying the economy in part because it doesn't have so many of those domestic fossil fuel reserves, if we have seen in countries that have industrialized in the past.
18:08
[SPEAKER_01]: is China really trying to develop a model where it does not rely on fossil fuels so that it doesn't need to be reliant on this existing system set up by the United States.
18:17
[SPEAKER_01]: And is that a realistic expectation?
18:20
[SPEAKER_01]: Is it something that it can realistically potentially achieve?
18:24
[SPEAKER_00]: I think there's two parts to that.
18:27
[SPEAKER_00]: As I mentioned before, China doesn't have a lot of crude oil reserves or accessible crude oil reserves anyway, also doesn't have massive amounts of natural gas, which often goes alongside crude oil obviously.
18:41
[SPEAKER_00]: So to get away from dependence on those two fossil fuels is
18:47
[SPEAKER_00]: very important.
18:48
[SPEAKER_00]: China has, you know, for a very long time, the Chinese leadership has been concerned about its dependence on other countries full-stop, but, you know, especially for things like energy, which are energies, obviously, such a fundamental input to
19:03
[SPEAKER_00]: to almost everything in the economy or society.
19:07
[SPEAKER_00]: So getting off gas and oil are important goals.
19:13
[SPEAKER_00]: China does, however, like many countries have quite a lot of coal.
19:17
[SPEAKER_00]: So it's a little more complicated when it comes to coal.
19:20
[SPEAKER_00]: Part of the problem with coal, of course, is not just that it's a terrible climate destroying pollutant, but it's also extremely
19:29
[SPEAKER_00]: noxious and hazardous to be near in terms of coal, firepower plants and so forth.
19:37
[SPEAKER_00]: So there's also been a domestic motivation to reduce coal.
19:41
[SPEAKER_00]: But yeah, it's a little complicated.
19:43
[SPEAKER_00]: I think it is realistic for trying to massively reduce its dependence on oil imports and gas imports.
19:51
[SPEAKER_00]: And if you look at the composition of global oil markets,
19:55
[SPEAKER_00]: most of the growth in oil demand for many years now.
19:59
[SPEAKER_00]: I think possibly last decade, at least, possibly longer, has come from China.
20:05
[SPEAKER_00]: So if China cuts back on the amount of oil that it is importing, materially, and it doesn't even need to be huge amount, but potentially that then affects the overall price, the balance of supply and demand in the oil market.
20:20
[SPEAKER_00]: So even just by its significantly cutting back,
20:23
[SPEAKER_00]: It can put China in a more advantageous position because then you get prices falling and so forth.
20:30
[SPEAKER_00]: But yeah, in a more direct way, I think it's entirely feasible for China.
20:34
[SPEAKER_00]: I wouldn't want to bet exactly how long that would take.
20:37
[SPEAKER_02]: Yeah, I mean, on the electricity question, I think the question about firstly the electricity source and secondly, what do you use that electricity for in what sectors of the economy, how broadly?
20:47
[SPEAKER_02]: And then the first point, China is not just like the leader in green tech or whatever.
20:52
[SPEAKER_02]: It's like installing ninety percent of all of the wind and solar being installed on the planet, being installed in one country.
20:58
[SPEAKER_02]: So it's just like an extraordinarily fast rapid electricity production from low carbon.
21:05
[SPEAKER_02]: So low carbon would include hydro and nuclear on top of wind and solar.
21:09
[SPEAKER_02]: And then, because these things are getting cheaper in cheaper, you can combine wind and solar with batteries and that quickly starts to eat up, call and hydro.
21:19
[SPEAKER_02]: And so in that sense, electricity makes of China, it's like a fast-moving beast, right?
21:23
[SPEAKER_02]: So it's growing, electricity demand keeps growing.
21:26
[SPEAKER_02]: And for the first twenty years of the twenty-first century, as electricity demand grew, it was largely cold that was meeting that increase in electricity demand.
21:37
[SPEAKER_02]: And in the last five years, that's now being replaced more and more by renewables.
21:41
[SPEAKER_02]: So the big news out of China and the last couple of years is that it may have hit big core in terms of its share of electricity use and from now on it's going to be down, down, down.
21:52
[SPEAKER_02]: So that's point one.
21:53
[SPEAKER_02]: And then the second bit about what are you using this electricity for?
21:57
[SPEAKER_02]: And you're using it for vehicles, very clearly like this big EB push is being fed.
22:01
[SPEAKER_02]: So you're replacing oil burning petrol cars.
22:04
[SPEAKER_02]: Or for China is also a massive producer of internal combustion engines.
22:09
[SPEAKER_02]: And those are being rapidly phased out.
22:12
[SPEAKER_02]: And sales are falling very dramatically.
22:14
[SPEAKER_02]: And particularly the sales of Western automakers that were in China for the China market, making internal combustion engines, and they're like holifa.
22:22
[SPEAKER_02]: No, it's buying the shit anymore.
22:23
[SPEAKER_02]: And so that's a huge existential crisis where Western car makers, you know, the Ford, the GM, civil slogans that have been in China, assuming that they'd be just buying on gas vehicles, looking to come, that's not what's happening anymore, because if the transportation sector is being rapidly transformed.
22:42
[SPEAKER_02]: And then the interesting bit is, okay, but that's one part of the electrification story, you know, what about industries?
22:49
[SPEAKER_02]: Are you electrifying industries?
22:52
[SPEAKER_02]: And that's always been a tricky thing, because industries need cheap, reliable, base load power.
22:58
[SPEAKER_02]: That's why Cole was in the mix for so long.
23:00
[SPEAKER_02]: But industries can be electrified very rapidly, because there's a lot of processes within a factory that you could just speed with electricity.
23:09
[SPEAKER_02]: And their China's actually gone much faster ahead than industries in the West.
23:14
[SPEAKER_02]: So much faster electrification of the industrial sector has been going on in the last five to ten years, which is also a big dramatic news story.
23:23
[SPEAKER_02]: So the transportation sector and the industrial sector are due sort of dramatic news stories of this electrification.
23:30
[SPEAKER_02]: And that just enables you to become a state that is kind of rightly be described as moving towards
23:38
[SPEAKER_02]: an electric state and we talked about the motivations that just means the China would just be importing less oil and gas.
23:45
[SPEAKER_02]: And the United States is the world's largest oil and gas producer, the world's largest oil and gas consumer, the world's largest oil and gas exporter.
23:55
[SPEAKER_02]: We export more oil than crude oil and Saudi Arabia.
23:59
[SPEAKER_02]: we export more gas than Australia, or Qatar, that are number two and number three.
24:05
[SPEAKER_02]: So this is quite a dramatic difference between two types of states that I've made, two very different sort of choices about that future.
24:13
[SPEAKER_02]: Once sticking with the oil and gas, which have been the dominant energy sources for the last hundred and fifty years, and the other saying, hello, there's no way we can compete with the Americans on anything to do with oil and gas.
24:25
[SPEAKER_02]: Let's call about a whole new energy regime.
24:28
[SPEAKER_02]: And what Gaitan had been really writing about is, well, what does that do to each country's political economy?
24:33
[SPEAKER_02]: What does it do to the winners and losers geopolitically?
24:35
[SPEAKER_02]: What does it mean for country's development models if a country has giant as the US and China are making such completely divergent decisions?
24:46
[SPEAKER_01]: Yeah, so as you're saying, there are like two directions for our conversation based on that, right?
24:51
[SPEAKER_01]: You know, how is that affecting the rest of the world?
24:54
[SPEAKER_01]: And what does this mean for the relationship between the US and China and, you know, the US is positioned as it does try to, you know, remain competitive with what China is doing.
25:02
[SPEAKER_01]: And so I want to put a pin in the kind of rest of the world conversation for just a minute, and I want to pivot to the United States, right?
25:10
[SPEAKER_01]: Because, you know, as you've both been laying out, we're looking at the creation of this kind of different model in China for how to develop based on these green technologies, but also it's investing a lot in technology, generally, right?
25:22
[SPEAKER_01]: You know, of ones that we haven't been talking about as much, but we look at the digital technologies, the manufacturing technologies, all these sorts of things.
25:29
[SPEAKER_01]: China is really plowing ahead, defense technology's aerospace, all this kind of stuff in many different areas.
25:35
[SPEAKER_01]: So if we look today, we've been talking a lot about China, and I think your answer is started to move us in this direction, Tim.
25:42
[SPEAKER_01]: But how do we look at that kind of contrast between the United States and China?
25:46
[SPEAKER_01]: And as the United States tries to remain competitive, tries to keep up with what China is doing, is it actually being successful in really being able to do that?
25:55
[SPEAKER_02]: I mean, United States basically started to respond to this under the Biden administration, realizing that they were not only not number one, but quickly sliding down number two, number three.
26:06
[SPEAKER_02]: And they're like, we need to try and compete on some of these technologies of the future.
26:11
[SPEAKER_02]: And the Biden administration says, right, we're putting in a bet and AI.
26:14
[SPEAKER_02]: We're putting in a bet and green technologies.
26:16
[SPEAKER_02]: We're putting in, you know, basically copying the China playbook.
26:19
[SPEAKER_02]: If you want to put it brutally of picking a few sectors,
26:22
[SPEAKER_02]: Chucking a lot of money into R&D and universities, chucking a lot of money into producer subsidies, consumer subsidies to develop those industries, but really directed by the state sort of picking sectors that they feel they are going to be competitive in the future.
26:37
[SPEAKER_02]: To that extent, you know, it's did, and there was a very serious battery boom, EV boom, solar boom.
26:43
[SPEAKER_02]: inside the U.S.
26:44
[SPEAKER_02]: over the last five years, the subsidies coming from the IRA, the Biden administration sort of marquee climate builds.
26:52
[SPEAKER_02]: They were all sort of creating a domestic sort of boom in these new industries.
26:56
[SPEAKER_02]: And that included the AI, biotech, E.B., you know, the new energy industries and crucially oil and gas.
27:03
[SPEAKER_02]: They didn't press the break on oil and gas.
27:06
[SPEAKER_02]: They just said, all of the above, old energy, new energy, AI, biotech.
27:10
[SPEAKER_02]: And what we are basically seeing with the Trump administration is a huge rollback of the climate agenda.
27:19
[SPEAKER_02]: So it is the fossil fuel lobby within the country.
27:22
[SPEAKER_02]: Basically says, that's it.
27:24
[SPEAKER_02]: We put up with you a lot while you were just sort of like another industry.
27:27
[SPEAKER_02]: But now that you're directly eating into my oil and gas, share your out.
27:32
[SPEAKER_02]: And so there's this absolutely ferocious response from the
27:36
[SPEAKER_02]: Trump too, which we didn't see in Trump one, which was in all of the above kind of administration.
27:41
[SPEAKER_02]: Trump too is like, no, we need to kill the renewable industry.
27:44
[SPEAKER_02]: And it's been a very systematic rollback across the regulatory state, across the legislative bills, across stopping permitting so that, you know,
27:54
[SPEAKER_02]: new wind and solar just not going to get the permits to develop themselves on offshore land on offshore waters or on federal land and so on and so on.
28:02
[SPEAKER_02]: So that's a roadback agenda but what they do go all in on is the AI sector and you know we can we can talk about that and the second thing they go all in on is drill baby drill.
28:12
[SPEAKER_02]: So it is it is an administration that says we want
28:16
[SPEAKER_02]: to maximize oil and gas production, and we want to go all in on AI.
28:20
[SPEAKER_02]: So you could call that, you know, that is an industrial policy, right?
28:23
[SPEAKER_02]: It is, as we said, the China Playbook, it's just to Madagree roll back a lot of the R&D support that would be needed, and it's to Madagree roll back entire suites of that economy, right?
28:35
[SPEAKER_02]: Like no more biotech, no more clean energy.
28:39
[SPEAKER_02]: I'm just saying that out.
28:40
[SPEAKER_00]: I was going to make a point about trying to bring a lot more strategic with its AI and data center energy demand and just being a bit more a lot more coordinated and forward thinking again about that than other countries.
28:57
[SPEAKER_00]: I mean, there were reports
28:59
[SPEAKER_00]: recently of industrial companies like heavy industry companies in the US saying they're getting out big for energy capacity by data centers that's been used for AI, which is kind of a crazy situation to be in whereas again, China, with the benefit of having a bit more planning, a bit more policy capacity generally, they're actually expanding
29:25
[SPEAKER_00]: the electricity grid to facilitate that and not just the grid, not necessarily distributed, but ensuring that the energy supply is there.
29:35
[SPEAKER_00]: So, thinking about all of these things, doing these things together and not just leaving it up to each industry each company to kind of fight it out.
29:44
[SPEAKER_02]: So the AI boom, you know, skit was saying is extremely energy intensive, but it's also just extremely capitalistic intensive, right?
29:51
[SPEAKER_02]: So you just need to borrow in hundreds of billions of dollars into it if you're building a ton of data centers that require expensive chips and land and so on and so on.
30:01
[SPEAKER_02]: So, at this point, it's the two parallels between the US and China quite profound, like the US is having a macroeconomically significant chunk of its economy going into capital expenditures for new factories and data centers.
30:15
[SPEAKER_02]: It is at this point, like, a sector that is almost single-handedly holding the stock market afloat.
30:21
[SPEAKER_02]: So, the top, like, seven to ten companies are responsible for almost all of the stock markets kind of valuation.
30:28
[SPEAKER_02]: at the moment.
30:28
[SPEAKER_02]: So that's what I meant by it's like an all-in kind of bet on this one sector.
30:33
[SPEAKER_02]: They've put down about a hundred billion dollars on data centers in the last three months alone, a hundred billion dollars.
30:41
[SPEAKER_02]: If you add up the amount of cupcakes that is gone into data centers last year, that's more than the entire power electricity grid.
30:49
[SPEAKER_02]: It's just a gigantic bit of money, hundred hundred fifty billion dollars per year.
30:54
[SPEAKER_02]: You look at what Morgan Stanley is estimating about the amount of capital expenditures factories being stood up, data centers being stood up.
31:01
[SPEAKER_02]: They say the AI boom could exceed more than three trillion dollars.
31:06
[SPEAKER_02]: in the next three years.
31:07
[SPEAKER_02]: So by twenty thirty three trillion dollars, sorry, four years.
31:11
[SPEAKER_02]: So that's, you know, we're talking like really gigantic amounts of money, large amounts of cutbacks, large amounts of market capitalization, and they're driving, as you said, that this kind of economic kind of growth.
31:22
[SPEAKER_02]: And all of the things that we just said about the AI in the US are true.
31:27
[SPEAKER_02]: about the new three sectors in China.
31:29
[SPEAKER_02]: The new three EV solar battery, which is their term for the EV solar battery sectors in the new three, their macroeconomically significant.
31:36
[SPEAKER_02]: Lots of provinces of, you know, trucking freebies at the companies just come in and build these things.
31:43
[SPEAKER_02]: And that's a dynamic kind of state focus.
31:46
[SPEAKER_02]: This is these are things that we really need to dominate on in the future.
31:50
[SPEAKER_02]: And it just so happens that one of them is very clearly required for the clean energy transition and from preventing us from boiling alive.
31:58
[SPEAKER_02]: And the other one, you know, the AI bit
32:01
[SPEAKER_02]: for all sorts of reasons we could get into whether it's political, whether it's climate, whether it's geopolitical, is quite a, you could say, just a negative bet overall.
32:10
[SPEAKER_02]: But whatever it is, these are two big countries with big capital resources, big markets, and they're made, as we said, very different bets about the future.
32:20
[SPEAKER_01]: If we look at the decisions that the United States is making now, you know, obviously, we see that it has open very clear concerns about its ability to remain kind of a hedgemon or one of the dominant powers in the world.
32:33
[SPEAKER_01]: It's concerned about China's ability to kind of
32:35
[SPEAKER_01]: leapfrog it and take over.
32:37
[SPEAKER_01]: It seems that the decisions to basically pull back on that inflation reduction act, green spending, not to mention all these other cuts to say science, technology, education investment on the side of the government, not to mention this kind of inability to really plan for the long term that we see in China.
32:57
[SPEAKER_01]: It feels that that is really hampering the United States ability to
33:03
[SPEAKER_01]: kind of keep up here.
33:03
[SPEAKER_01]: Does that sound accurate?
33:05
[SPEAKER_00]: I mean, yeah, absolutely.
33:06
[SPEAKER_00]: It doesn't.
33:07
[SPEAKER_00]: It doesn't really vote well for the future.
33:09
[SPEAKER_00]: I mean, maybe Tim is probably being in the US a bit better place to speak about this, but I mean, it looks to me like it's a to the extent that there is a coherent strategy in what
33:24
[SPEAKER_00]: is happening or what's been undertaken by the US administration at the moment.
33:28
[SPEAKER_00]: It seems a bit on two things, a bit on US dollar for Germany and also for your particular oil and gas dominance and an ability to wield those energy sources in a dominant way, which I would say is much less stable, a much less safe bet than the power that can be wielded through the dollar.
33:52
[SPEAKER_00]: currency hit Germany and energy systems they're both very hard things to unwind or to shift but I think it's interesting that the US is going all in on its role as an explorer of well and gas when the threats to that the forces working against that are so are already looking so powerful and inevitable really.
34:14
[SPEAKER_01]: When I read about this and when I hear about it and I hear about said the United States being so dependent on fossil fuels and doubling down on fossil fuels regardless of whether it's a democratic administration or a Republican one as you were saying, Tim, you know, even under Biden and going back to Obama and I'm sure before that, there was still this big focus on extracting more oil and gas, burning more oil and gas.
34:38
[SPEAKER_01]: even if there were investments in clean energy alongside of it, right?
34:42
[SPEAKER_01]: If I'm looking at a model where we remain dependent on fossil fuels as someone concerned about the climate crisis and one where we get off of that even if it's for geopolitical reasons because we don't want to be reliant on oil imports and things like that, it feels to me as someone who is worried about the planet that that is ultimately the one that I'm going to want countries to adopt.
35:05
[SPEAKER_01]: rather than remaining dependent on fossil fuels because it's in the United States interest.
35:10
[SPEAKER_02]: I think it's worth specifying kind of what role oil and gas plays in an economy in the global economies countries like that don't have oil and gas reserves have to earn dollars in the global markets by selling something.
35:24
[SPEAKER_02]: So Brazil might decide to sell iron ore or soy beans to earn dollars.
35:29
[SPEAKER_02]: India might decide to sell like software services and tech services and consulting to own dollars.
35:34
[SPEAKER_02]: But you need a business model for your country that earns you dollars.
35:38
[SPEAKER_02]: You then turn around and swap those dollars and buy liquid energy that you pump into the bloodstreams of your economy, that you feed the vehicles for your people and you keep your economy kind of humming.
35:49
[SPEAKER_02]: So you require a way to own dollars.
35:53
[SPEAKER_02]: Only to then spend those cost dollars per chasing giant cups of energy.
35:58
[SPEAKER_02]: So you can't see where this is going, right?
36:00
[SPEAKER_02]: Like a bunch of countries can be like, wait a second.
36:03
[SPEAKER_02]: Why the hell should I spend suddenly like five times more money on oil and gas?
36:07
[SPEAKER_02]: Because I don't know, war broke out somewhere.
36:10
[SPEAKER_02]: Or I don't know what pandemic kind of happened and you get the supply chain beverages.
36:14
[SPEAKER_02]: And you're like, that's it with my budget.
36:16
[SPEAKER_02]: I guess I'm going to be spending, you know, four to five times more on
36:20
[SPEAKER_02]: buying an importing expensive hydro governance to keep my economy afloat.
36:25
[SPEAKER_02]: And so a lot of countries are kind of seeing this playout.
36:28
[SPEAKER_02]: These kind of supply chain shortages are a playout with expensive energy and just concluding that's it.
36:33
[SPEAKER_02]: We need a plan to get off.
36:35
[SPEAKER_02]: And you can see the Europeans doing that.
36:37
[SPEAKER_02]: You can obviously see the Chinese doing that.
36:39
[SPEAKER_02]: And a bunch of countries are just like, this combination of dollar dependence plus hydrocarbon dependence is not good for us.
36:47
[SPEAKER_02]: So can we get out?
36:48
[SPEAKER_02]: And the way to get out is to either make your green energy, you know, make those products that prevent you from burning on and gas, those EVs, it's batteries, it's solar panels, et cetera, et cetera, or just buy them.
37:00
[SPEAKER_02]: If you can't make them buy them.
37:02
[SPEAKER_02]: And once you buy these sheep,
37:04
[SPEAKER_02]: You know, solar EV batteries from China, then you wouldn't have to use your gas dollars to import oil and gas anymore.
37:10
[SPEAKER_02]: So that's kind of like this intersection of dollar dependence and hydrocarbon dependence.
37:15
[SPEAKER_02]: That's just like a double whammy for countries at certain points.
37:19
[SPEAKER_02]: And we've just, I think, just seen kind of like a clean break from that, particularly since the twenty-twenty-two Ukraine war began and really roiled countries, treasuries, deeper into debt, and deeper into dollar dependence and debt distress, et cetera, et cetera.
37:33
[SPEAKER_02]: And hence we have seen this extraordinarily rapid uptake from largely Europe and poorer developing countries.
37:40
[SPEAKER_02]: So just this is get out.
37:42
[SPEAKER_02]: This is by those EV soldiers and batteries and get out and break free in some sense.
37:46
[SPEAKER_01]: I feel like this has been obvious for quite some time that there are so many countries around the world that
37:53
[SPEAKER_01]: are dependent on oil and gas imports.
37:56
[SPEAKER_01]: And that ends up destroying their budgets because everything needs to go to importing these forms of energy and whatnot.
38:02
[SPEAKER_01]: But I feel like for a long time, even though they could rely more on renewables, we didn't see that kind of investment really taking hold, really happening.
38:13
[SPEAKER_01]: Are we finally starting to see that now or like what are the roadblocks to actually countries being able to make that shift or that transition?
38:21
[SPEAKER_00]: I think that that kind of self-reinforcing problem of dependence on imported fossil fuels and dependence on the dollar is such a vulnerability for a lot of countries.
38:32
[SPEAKER_00]: There's also the risk with fossil fuels that was evident in twenty twenty two that you might not even be able to
38:38
[SPEAKER_00]: import them at all.
38:39
[SPEAKER_00]: And that happened to Bangladesh and Pakistan.
38:42
[SPEAKER_00]: This is an incident that we refer to a few times over the last three years.
38:47
[SPEAKER_00]: In the polar crisis, there were blackouts in Pakistan and Bangladesh because shipments of LNG that they contracted were effectively outbed by European countries.
38:57
[SPEAKER_00]: And the shipments were diverted.
38:59
[SPEAKER_00]: It's not easy to change or energy system overnight.
39:02
[SPEAKER_00]: It's not possible to change overnight.
39:04
[SPEAKER_00]: to switch to a more renewable based system, or ultimately entirely clean energy based system.
39:11
[SPEAKER_00]: First, you need electrification, so you need to change the demand side as well as the supply side.
39:17
[SPEAKER_00]: So if you've still got a lot of internal combustion, cars, vehicles, motorcycles, then there's things like electricity grid infrastructure.
39:25
[SPEAKER_00]: Renewables actually can renewables and increasingly cheap storage can really help a lot to alleviate the burden on that, but it doesn't.
39:33
[SPEAKER_00]: completely remove energy distribution.
39:36
[SPEAKER_00]: Infrastructure is still something that countries ultimately need.
39:41
[SPEAKER_00]: A big barrier for developing countries in transforming their energy systems is really finance.
39:49
[SPEAKER_00]: The capital structure of investing in a clean energy system is different to that I was investing in
39:56
[SPEAKER_00]: a fossil fuel-based system, it's easier to get money still outside, easier to get money for fossil fuel facilities.
40:05
[SPEAKER_00]: The nature of the financing is different the availability and the providers you can obviously get some of that upfront capital from the fossil fuel companies themselves, for example, whereas with renewables,
40:16
[SPEAKER_00]: It's a much more diffused industry.
40:18
[SPEAKER_00]: There aren't those big sort of pools of upfront corporate capital that you can rely on.
40:23
[SPEAKER_00]: The savings are obviously incredible over time, but sometimes the upfront cost, the cost is front loaded and then that also affects the availability of capital, which then affects also the price of that capital.
40:35
[SPEAKER_00]: So really, I think finance and having that
40:39
[SPEAKER_00]: financial agency or latitude is a big barrier for many countries in the world.
40:46
[SPEAKER_00]: For the richer countries in the world, the barriers are tend to be more around the incumbent industries, not just the energy providers, energy extractors, distributors, but
40:56
[SPEAKER_00]: your demand side.
40:58
[SPEAKER_00]: And then there's heavy industry is somewhat more technically challenging.
41:03
[SPEAKER_00]: It's not impossible.
41:03
[SPEAKER_00]: There's cement factories in Pakistan that are switching to solar power.
41:09
[SPEAKER_00]: There are still some industrial uses that are hard.
41:12
[SPEAKER_00]: But that particular problem, I wouldn't say that's the first one.
41:15
[SPEAKER_00]: I think it's mostly access to finance and the political power of incumbent industries.
41:22
[SPEAKER_00]: which is something incidentally the China, the Chinese government has a lot more power to kind of overcome that, you know, if once the CCP decides to switch direction in terms of the economy composition, then it happens, that's not quite such an option for a lot of countries.
41:41
[SPEAKER_01]: Yeah, it's interesting to hear you say that on the energy system level, right?
41:44
[SPEAKER_01]: Like that you can get this support to get the fossil fuel one and even though it'll cost you more over time, you know, it's easier to do that even though the electric one will cost you more upfront.
41:54
[SPEAKER_01]: But what you'll have these long-term savings and it makes you think even about like on an individual level buying an electric vehicle, there's a similar trade-off where it's like, it's a lot easier to buy that fossil fuel car right now even though it's going to cost you more over time and you know, have these kind of climate impacting issues too, but Tim go ahead if you wanted to jump in on that.
42:11
[SPEAKER_02]: Oh, as a thing, I think all of that framing of this green stuff used to be expensive, and particularly the poorer the country and poorer you are on the income ladder.
42:21
[SPEAKER_02]: So if I were to go and buy an EV and the damn thing costs fifty thousand dollars, I don't have fifty thousand dollars in my bank account.
42:29
[SPEAKER_02]: But now imagine a word by your five years ten years into the transition, which is where we are, and the EV being sold in China is for fifteen thousand dollars.
42:37
[SPEAKER_02]: If you're sitting in Mexico, Brazil, you'd get that for fifteen thousand dollars.
42:41
[SPEAKER_02]: Then all of a sudden that cost premium is kind of flipped on its head.
42:44
[SPEAKER_02]: It's the EV bid that is cheaper than the fossil fuel car.
42:48
[SPEAKER_02]: And I think that's where you get this dramatic kind of momentum shift from it being an uphill battle to it being a much more downhill battle.
42:58
[SPEAKER_02]: And I think that's what's starting to happen to that example that Kate was saying about Pakistan and Bangladesh with blackouts.
43:04
[SPEAKER_02]: If a country has
43:05
[SPEAKER_02]: poor as Pakistan, very rapidly, becomes the world's fastest buyer of solar panels and do something like forty or fifty gigawatts of solar panel purchases in the last three years alone.
43:21
[SPEAKER_02]: So it's like all of their electricity that Pakistan had added up installed on its grid since independence over the last seven years.
43:28
[SPEAKER_02]: It managed to install that much of solar panels in the last three years.
43:32
[SPEAKER_02]: So this is an extraordinarily rapid boom and maybe it won't happen in other countries.
43:36
[SPEAKER_02]: But it gives you a sense of what happens when the lights go out is a bunch of people in a country
43:42
[SPEAKER_02]: both with money and without money end up saying that's it we need an alternative and so Pakistan was like okay we need an alternative and you got this massive bottom up pressure to get an import those Chinese solar panels and batteries and as we were just saying the Chinese firms are now going out in search of new markets so they just land up
44:01
[SPEAKER_02]: all over the world and I just like okay oh you need a few shipping panels of solar panels delivered every week but we can get them for you and so you get this rise of bottom-up business models a lot of like you know distribution companies crop top and Pakistan and you can it's kind of like the distribution model of say buying a coke right like you can go anywhere on the planet you know in the middle of basically nowhere and you can find a coke
44:26
[SPEAKER_02]: And imagine what happens when the distribution model of solar becomes like getting a coke can.
44:32
[SPEAKER_02]: There's just kind of like a very, so all of the stuff that we've been talking about of the friction and the difficulty offered and it's more expensive.
44:41
[SPEAKER_02]: That in my view was like the world of the last twenty-third years.
44:45
[SPEAKER_02]: The world of the next twenty-third years is solar panels and batteries ending up like coke models everywhere.
44:53
[SPEAKER_02]: easily accessible, cheap, and a lot of these frictions sort of end up being minimized.
44:58
[SPEAKER_02]: But I'm with the broader thing that politics matters, cost of finance matters, political and currency matters.
45:04
[SPEAKER_02]: You know, that's why the political economy of climate matters so much.
45:08
[SPEAKER_01]: Well, and on that point, I wanted to ask you about what you were writing in that piece where I think we've seen quite a bit of discussion in the past few years about whether the bricks and whether these more powerful kind of global south countries can actually come together to develop some sort of a model that is distinct or different from the one that the United States has promoted for the past number of decades, right?
45:30
[SPEAKER_01]: And we know that there have been limitations to what the BRICS has an institution and the institutions that these countries have set up have been able to do over the past number of years.
45:41
[SPEAKER_01]: And of course, BRICS being this organization that the name refers to Brazil, Russia, India, China, South Africa, but it has since expanded to include more countries in that as well.
45:51
[SPEAKER_01]: So it is actually realistic that
45:53
[SPEAKER_01]: They can actually put together a model that is going to promote a different form of development and our other countries around the world really going to be able to to buy into this model and to what degree does that kind of challenge the one that has been built up for these decades that was beneficial to the United States and the West and what does that kind of shift ultimately mean.
46:13
[SPEAKER_00]: I think there are new models emerging now for how countries can develop.
46:18
[SPEAKER_00]: I don't want to be too optimistic or confident about it.
46:23
[SPEAKER_00]: There's a lot of data and commentary indicating that some countries have gone backwards.
46:30
[SPEAKER_00]: Things are not looking great for development, for particularly the lower income countries.
46:35
[SPEAKER_00]: It's been tough and probably also important to note at this point that most countries cannot copy or replicate what China has done.
46:44
[SPEAKER_00]: There's a lot of useful things that can be learned from what China has done and is doing.
46:49
[SPEAKER_00]: I think picking strategies developing developmental approach that is complementary to what China is doing is wise.
46:57
[SPEAKER_00]: One of the ways of doing that is to take advantage of this proliferation of
47:02
[SPEAKER_00]: cheap TV, you know, cheap solar panels, cheap storage, cheap EVs, and other things that are being exported from China at low cost, you know, that's an easy or relatively easy decision to make, you know, don't keep tariffs up, you know, quite a few developing countries still have tariffs, so or other non-tarved barriers to importing
47:21
[SPEAKER_00]: to Chinese claim take just in the same way that we were discussing that the US and Canada do.
47:27
[SPEAKER_00]: I think some of those countries are starting to wind that down now, having seen the advantages that can come from buying and installing as much as you can.
47:37
[SPEAKER_02]: I can take up this whole question about like, is bricks going to be the leader of the green transition on the face of its hands mad, right?
47:44
[SPEAKER_02]: Like you have China as being the world's largest gold producer, Russia being like a petrostate with fucking neaks that is just like committed to buying oil and gas into being, you know, just a global South powerhouse that is like eighty percent coal.
47:58
[SPEAKER_02]: So what the hell are we even saying here, right?
48:00
[SPEAKER_02]: Like, and I think what we are saying here is that there's a shift.
48:04
[SPEAKER_02]: And that shift, obviously, within China, we've just discussed it.
48:06
[SPEAKER_02]: But there's a shift within the rest of the breaks, excluding, and this is kind of important, excluding Russia.
48:13
[SPEAKER_02]: Russia is just for its political leadership class, does not want to leverage its abundant green potential.
48:20
[SPEAKER_02]: It could, you know, that's all the metals you could possibly name.
48:22
[SPEAKER_02]: And there's one of the largest countries in the world, so it has a lot of win resources.
48:26
[SPEAKER_02]: It has solar resources, so it could turn towards renewables.
48:30
[SPEAKER_02]: But, you know, the putons
48:32
[SPEAKER_02]: a team has just put a stop to that.
48:34
[SPEAKER_02]: They've gone all in, as the United States currently is doing under Trump, all in, on all in gas.
48:40
[SPEAKER_02]: But the rest of the brick countries, their energy importing countries.
48:45
[SPEAKER_02]: And that goes back to the incentives for an energy importing countries that we just talked about.
48:50
[SPEAKER_02]: With energy imports come, daughter dependence, with energy imports comes like a constrained sense of what it is that you can do.
48:59
[SPEAKER_02]: You're always sort of subservient to broader geopolitical forces.
49:03
[SPEAKER_02]: And what you do have in the bricks is this massive desire for sovereignty.
49:08
[SPEAKER_02]: And sovereignty is the ability, you know, of people to exercise collective freedom.
49:12
[SPEAKER_02]: for people to exercise their own collective choices in the world.
49:17
[SPEAKER_02]: And if that's what a developing country, particularly the bigger, more powerful, more sort of mustly developing countries like your Brazil's and the South Africa's sort of want is that kind of freedom of maneuver.
49:31
[SPEAKER_02]: And so what the case that we are basically making is if you see the shift in the incentives of these countries, you see the shift, all of these countries, particularly Brazil, India, South Africa, have been moving towards a, you know, and there's like three of the five largest solar installations in the world have now come from the British countries.
49:49
[SPEAKER_02]: They used to be all-in, obviously, on coal, but now you see a shift in their electricity systems.
49:56
[SPEAKER_02]: And then the third most important thing is they want to learn how to make these green products.
50:01
[SPEAKER_02]: So they're passing green industrial policies to build factories to turn out those panels factories.
50:08
[SPEAKER_02]: And the untad report estimates that the new energy industries are going to be worth about ten trillion dollars by twenty-third.
50:17
[SPEAKER_02]: So that's about ten or fifteen of frontier green technologies.
50:21
[SPEAKER_02]: It's going to represent ten trillion dollars of value.
50:24
[SPEAKER_02]: So imagine you're a big powerful developing country.
50:26
[SPEAKER_02]: You want to slice of that pie.
50:28
[SPEAKER_02]: So what you've been doing with the last five to ten years is investing in those green sectors in that developmental history that China sort of does, which is you need knowledge, you need to invite leading foreign firms, you need to absorb it from them, you need to diffuse it over
50:44
[SPEAKER_02]: your country and get it into more and more and more sectors so that you can actually benefit from that clean energy.
50:50
[SPEAKER_02]: And that's what we're seeing.
50:51
[SPEAKER_02]: A shift in that above and models, a desire for sovereignty, a desire for autonomy in a contested world.
50:59
[SPEAKER_02]: And if the Americans come and breathe down their neck as they're currently doing with the Indians and the presidents and slapping tariffs on them,
51:06
[SPEAKER_02]: And saying, if you want to access the American market, it's a club.
51:10
[SPEAKER_02]: It's an exclusive club.
51:11
[SPEAKER_02]: Here's the access price for it.
51:13
[SPEAKER_02]: You need to front up the cash.
51:15
[SPEAKER_02]: Those countries are just going to say, that doesn't sound like a good deal.
51:18
[SPEAKER_02]: I would rather have more autonomy.
51:22
[SPEAKER_02]: And one way to get more autonomy is to press the accelerator
51:27
[SPEAKER_02]: on that green transition and the average of the ship that they've already sort of makes it made.
51:32
[SPEAKER_02]: I think I basically see both the industrial shift, the financing shift, the political desire shift, and so we really have to now think about bricks as a contested place.
51:44
[SPEAKER_02]: where each country's oil and gas and coal sector is competing with a nascent green sector.
51:49
[SPEAKER_02]: And the state sitting on top of this is making a strategic decision to shift towards these green sectors.
51:55
[SPEAKER_02]: And these are very, very promising science because these are after all the fastest growing countries in the world.
52:01
[SPEAKER_02]: Some of those hopeless countries in the world.
52:04
[SPEAKER_02]: And whatever we thought of sustainable development in the twenty-first century has to involve, you know, the Brazil's end is.
52:12
[SPEAKER_02]: said that for us, the T.O.P.A.
52:13
[SPEAKER_02]: is into me's is of the word.
52:15
[SPEAKER_01]: It's not surprising that countries would want to carve out more of that autonomy that sovereignty, what have you as you're saying.
52:21
[SPEAKER_01]: There's a ton more that I can ask you both about what's going on in the global south, but I just wanted to kind of pivot back to the west as we close off our conversation, which is, you know, where most of my listeners will be.
52:32
[SPEAKER_01]: And, you know, we're talking about this model that we're seeing rolling out in more
52:37
[SPEAKER_01]: global south countries and there's a lot of incentives for more of them to try to take advantage of that again as Kate was saying if they can find the financing and I wonder if some of these institutions that the bricks are setting up might be able to try to help with that further obviously we know about the Belt and Road initiative that China has been participating in for years but if we look at say you know Europe, Canada, Australia you know these kind of like traditional
53:01
[SPEAKER_01]: Western countries that have been allied with the United States.
53:04
[SPEAKER_01]: We could say South Korea and Japan as well, though I'm less familiar with their specific economic make-ups.
53:10
[SPEAKER_01]: Or they just kind of doomed to be tied to this model that is dependent on fossil fuels that is reliant on the United States where these countries need to kind of do what the United States wants them to do in perpetuity even if that's causing the United States and kind of the Western dominance as we know it to be kind of declining or other opportunities for them to
53:31
[SPEAKER_01]: actually pursue a different path, a path that does involve quite a different form of development than what they have pursued in the past.
53:39
[SPEAKER_01]: I wonder how you think about that as we close off our conversation.
53:42
[SPEAKER_00]: It's interesting that the US is trying to is using LMG as or trying to use LMG as a bargaining chip with countries like Japan, Korea.
53:55
[SPEAKER_00]: I haven't seen any actual concrete success in that attempt, so just to bring it down to what extent do other wealthy Western countries
54:06
[SPEAKER_00]: remain to the U.S.
54:09
[SPEAKER_00]: energy system and the U.S.
54:11
[SPEAKER_00]: currency system.
54:12
[SPEAKER_00]: There's some encouraging signs that of independence there or that things are a bit overstated on the U.S.
54:18
[SPEAKER_00]: side again.
54:20
[SPEAKER_00]: I think that exerting energy
54:23
[SPEAKER_00]: is a lot harder than currency dominance.
54:26
[SPEAKER_00]: It's difficult to talk about energy or monetary financial hegemony without also referring to security for those countries.
54:36
[SPEAKER_00]: And that's where it gets pretty complex.
54:39
[SPEAKER_00]: We've written a lot about countries that are economically very close to China, but want to keep a bit more of a distance in terms of security and remain closer to the US in that regard.
54:52
[SPEAKER_00]: Lots of countries in Asia are in that positioning, including Australia where I am.
54:57
[SPEAKER_00]: That's a very delicate and difficult pathway to predict, I guess, or future to predict for countries in that situation.
55:05
[SPEAKER_00]: You're not completely dissimilar either.
55:08
[SPEAKER_00]: A big constraint for these wealthy countries apart from their security relations with the US.
55:14
[SPEAKER_00]: is also their own domestic political economy.
55:18
[SPEAKER_00]: So we mentioned before their own local industries, you know, things get entrenched power builds around, you know, the incumbent.
55:27
[SPEAKER_00]: But another thing I think is just in many countries it's there.
55:33
[SPEAKER_00]: ideas about how much money they can invest, how they can invest, and what state measures, or what instruments the state can use.
55:43
[SPEAKER_00]: So it's not just that they're overly concerned about their budget balance the way Germany kind of famously has this very deep preoccupation with the fiscal rectitude of a sort of conservative approach, which has led to its own
55:59
[SPEAKER_00]: infrastructure being in actually not a great state at all.
56:03
[SPEAKER_00]: Like a lot of Western countries suffer from that conception or suffer from that, unnecessary constraint.
56:09
[SPEAKER_00]: But it's also, there are so many other creative innovative things that states can do to actually enable the transition and it's hard to say exactly what's stopping that.
56:20
[SPEAKER_00]: But some of it is just, these things are just rolling out now.
56:23
[SPEAKER_00]: So looking at examples from other countries, no, what are different
56:28
[SPEAKER_00]: instruments that the state can use, you know, de-risking the burden of administration, deployed a quite a number of innovative things around shifting emphasis from fossil fuel to the clean economy.
56:40
[SPEAKER_02]: I think this is actually a super interesting question about what the security means, security for form, right?
56:46
[SPEAKER_02]: So for example, think about Canada, right?
56:48
[SPEAKER_02]: The Canadians have basically said, we could weaponize our oil and gas exports and cock up the US economy, right?
56:55
[SPEAKER_02]: So if you mess with us, we might stop exporting your crude oil that you need to process in the refineries and feed Americans cheap gas.
57:03
[SPEAKER_02]: That's a very powerful counterweapon that the Canadians and only the Canadians possess because they are so dramatically tied in to Canada's oil exports, a process in American refineries.
57:14
[SPEAKER_02]: But that's not what we have seen.
57:16
[SPEAKER_02]: That's not the kind of threat.
57:17
[SPEAKER_02]: In fact, it's the only Canada and China that have threatened the United States with counter retaliations, Canada with its energy weapon and the Chinese with their rare earth weapon, which is just refused to give you a bunch of rare earths that you need to process all kinds of
57:31
[SPEAKER_02]: defense equipment, clean energy equipment, trip equipment.
57:34
[SPEAKER_02]: You just want to be able to make it if we stock this, you know, a few billion dollars, just a few billion dollars, and it's a chokehold in the entire global economy.
57:43
[SPEAKER_02]: So Canada and China have counter weapons.
57:46
[SPEAKER_02]: That's not what the Europeans have, and that's not what the East Asians have.
57:51
[SPEAKER_02]: Both of whom have basically, in some sense, succumbed to
57:55
[SPEAKER_02]: the Trumpist weapon of be refused to give you market access with slap tariffs on you unless you buy motion from us.
58:02
[SPEAKER_02]: What is it that we need you to buy from us?
58:04
[SPEAKER_02]: Energy and weapons.
58:05
[SPEAKER_02]: We buy our LNG and you buy our weapons, you know, you get a free pass.
58:09
[SPEAKER_02]: And both the Europeans and the Asians have come up with, they've kind of chickened out and sort of said fine, we'll do that.
58:15
[SPEAKER_02]: And Gatenab been calling these instead of the, what was called the Trump sort of taco teases, which was Trump always chickened out.
58:23
[SPEAKER_02]: We've sort of replaced it with the empenada thesis, everyone makes promises and no one does anything.
58:30
[SPEAKER_02]: And so that's basically what you see a bunch of hot air, a bunch of empty promises, a bunch of code and code deals written on pieces of paper.
58:39
[SPEAKER_02]: that no one ever actually has to pass through a parliament.
58:44
[SPEAKER_02]: It's just the European Commission guys, meet the Trump guys, they write a piece of papers, smile for the cameras, go back home, say we're going to buy hundreds of billions of dollars of BLNG, hundreds of billions of dollars of BL weapons, and then no one really checks the details Trump kind of loses interest moves on.
58:59
[SPEAKER_02]: So that's kind of there.
59:02
[SPEAKER_02]: planned right now, they just like sign some stuff don't really do much and continue on with our clean energy transition.
59:09
[SPEAKER_02]: And it's just not feasible for the European system buying three hundred and fifty billion dollars of energy.
59:15
[SPEAKER_02]: They currently buy about sixty or seventy billion dollars of hydrocarbons from America so you can't just quadriple that right?
59:22
[SPEAKER_02]: The Americans can't suddenly quadriple this apply like you just can't drill baby drill that could all that quickly with
59:29
[SPEAKER_02]: with highly capital intensive projects.
59:31
[SPEAKER_02]: So this is just from the energy experts point of view, just like hot airs are synampinada deal.
59:37
[SPEAKER_02]: And that's what we think is what's happening with the Europeans and the East Asians.
59:41
[SPEAKER_02]: And as we're saying, with Canada, it's a completely different story.
59:45
[SPEAKER_02]: And you know, as I'm sitting here in New York over the past two weeks, and the terrible, terrible wildfires in Canada, burning up billions of forests.
59:54
[SPEAKER_02]: And you know, all of us are now inhaling forests.
59:58
[SPEAKER_02]: And so it is just a reminder that our faiths are absolutely tied together.
1:00:03
[SPEAKER_02]: The Canadian and the US economy, the faiths are tied together.
1:00:07
[SPEAKER_02]: People's faiths are tied together and obviously our climate is all entangled up.
1:00:11
[SPEAKER_02]: And this is quite a buffer choice for countries to make is what we do about this future.
1:00:16
[SPEAKER_01]: I think that is a really perfect place to leave our conversation.
1:00:20
[SPEAKER_01]: I appreciate you both coming on to dig into these really big questions with me.
1:00:26
[SPEAKER_01]: And I certainly encourage people to go subscribe to the newsletter, the Poly crisis, which is on phenomenal world because it'll just allow them to get access to even more of these big ideas that you're often writing about, particularly in regard to
1:00:38
[SPEAKER_01]: climate change and climate policy and things like that, and how that relates to political economy.
1:00:43
[SPEAKER_01]: So thank you both for taking the time.
1:00:44
[SPEAKER_01]: I really appreciate it.
1:00:45
[SPEAKER_01]: Thank you.
1:00:46
[SPEAKER_01]: You're going to wait time.
1:00:47
[SPEAKER_01]: Thanks so much.
1:00:51
[SPEAKER_01]: Kate McKenzie and Tim Zai are the co-writers of the polychrysis newsletter from Phenomenal World.
1:00:55
[SPEAKER_01]: Tech won't save us as main in partnership with the nation magazine and is hosted by me, Paris Marks.
1:00:59
[SPEAKER_01]: Production is by Kyla Housin.
1:01:01
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1:01:06
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1:01:11
[SPEAKER_01]: Thanks for listening and make sure to come back next week.