China Invests In Future, The US Invests In Coal

There are two front page headlines in the NY Times today that are illustrative of two world powers heading in the opposite direction. One describes a forward-looking country that has no fear of large investments in its infrastructure and its people, investments both foreign and domestic, a growing economy, and plans for expanding its global reach. The other is an aging, inward-looking country that has lost faith in almost all investments in its own country, implementing policies to recapture a time long gone by, and apparently unable and seemingly unwilling to deal with the problems it faces.

China is already the largest producer and buyer of electric cars and, in this year alone, Chinese drivers will buy more electric cars than the rest of the world combined. The government has already announced that 20% of all cars sold must run on alternative fuels by 2025. That is a pretty ambitious goal considering that electric cars currently just account for between 4% and 5% of new car sales in China. For comparison, that number is less than 1% in the US and over 50% in Norway, the world’s leader in electric car use.

In addition, China is already preparing its population for the phase-out of internal combustion engines entirely. A Chinese official recently told a forum of automakers that the government is working on a timetable to end “production and sales of traditional energy vehicles”. That rumor is already effecting Chinese consumers as one recent car buyer declared, “I don’t plan to buy a gasoline car, since I heard they are going to be banned for sale.”

That plan is also having an effect on the world’s largest automakers. China is now the world’s largest car market and accounts for 30% of global sales. It is no coincidence that GM and Ford just announced they will be offering an expanded number of electric vehicle models. Volvo, now Chinese-owned, announced that it would only develop electric vehicles and hybrid models starting in 2019.

Part of China’s push is not so much about reducing the dangerous pollution in its major cities, especially as much of its electricity is still generated by coal-fired plants, but about becoming the leader in electric vehicle and battery technology. According to the NYT article, “Global manufacturers like G.M. and Volkswagen are also moving much of their research, development and production of electric cars to China. China in turn is pressuring them to share that technology with their Chinese partners”. The government has made clear that its industrial policy includes becoming leaders in these technologies.

The US was the original leader in solar panel technology. We have ceded that to China. US auto makers had the chance to be the world leaders in electric vehicles and we are still the leaders in battery technology. The question remains whether China’s industrial policy and our lack of one will allow them to become the global leaders in those technologies.

Meanwhile, here in the United States, Scott Pruitt was busy announcing that “the war on coal is over” and rolling back the Obama-era rules on carbon emissions. Pruitt’s action will replace Obama’s efforts to encourage states to convert to natural gas and renewable energy with smaller efforts to make existing coal plants more efficient in order to reduce carbon emissions. This effort goes hand in hand with Trump’s pledge to withdraw from the Paris Climate Agreement.

The reality is that the war on coal is effectively over simply because coal has lost. The use of natural gas and non-fossil fuels have both surpassed coal in electricity generation in this country. Natural gas and renewables are now cheaper alternatives and state-level regulations on carbon emissions will still constrain the use of coal. Even with this rollback, it is estimated that US carbon emissions will still be reduced by around 30% from 2005 levels by 2030, which was the original goal of Obama’s actions anyway. According to the NYT, “Gov. John Hickenlooper of Colorado, a Democrat, noted that his state planned to exceed the goals that had been set under the Clean Power Plan because the state was closing coal plants early and developing jobs in wind and other renewables.”

More importantly, industry leaders and reality-based politicians see the future and, in some states like California and New York, the present, and recognize that there will eventually be some kind of carbon tax or restriction on emissions. As the chairman of the Arkansas Public Service Commission says, “Even if they repeal the Clean Power Plan, or replace it with something that doesn’t require us to do very much, you still have to reckon with the fact that ultimately regulations on carbon are coming. So we need to develop options to deal with that other than sticking our heads in the sand and hoping we can just file lawsuits forever.” That doesn’t seem to be the approach of the present administration.

Pruitt and the Trump administration are also preparing to roll back the stricter emissions standards for cars and light trucks that were supposed to kick in in 2022. This will only increase the likelihood of China and Europe of leapfrogging the US in electric vehicle and battery technology. Again, state emission controls may minimize some of the negative impact. California is beginning to discuss a timetable of its own for phasing out internal combustion cars. But the leading edge technology will migrate to where it is demanded and that will not be the US.

In Pruitt and Trump, we see an aging, declining superpower spending its efforts protecting shrinking and dying, yet politically powerful, industries rather than investing in the future. In China, we see a country that is forward-looking, willing to make big investments in an attempt to become the world leaders in technologies that will drive the 21st century. That used to be what America did. This is not to say that China does not have serious problems and flaws, especially with human rights. But these stories expose the massive failures of our political class to effectively deal with the issues that will dominate our future.

Originally published at tidalsoundings.blogspot.com on October 10, 2017.