NYC Climate Week: Everything's Political

As activists, politicians, and even a few celebrities prepare to disperse across New York City for Climate Week, I’d like to narrow the topic a bit. In line with this year’s Climate Week theme, “It’s Time,” I think it’s time to talk about the two countries that matter more than all the others combined: the US and China.?

The good, the bad, and the interesting?

Some important numbers to consider are: 2 trillion, 40%, about 50%.?

2 trillion: That’s the weight in metric tons of the greenhouse gasses that persist in the atmosphere from combustion caused by people.?

40%: That’s the cumulative share of those gases burned by the US (25%) and China (15%).?

About 50%: That’s the share of each country’s existing emissions reduction target (give or take a few percentage points) for which there are current technologies and/or policies.?

In short, we have a very large problem for which two states are disproportionately responsible. The good news is both have developed a suite of policy instruments that will reduce by half the annual rate at which each exacerbates the problem. The bad news is that half of the flow problem (annual emissions) and nearly all of the stock problem (cumulative emissions) remain to be solved.?

The interesting news—which could turn out to be good, bad, or (probably) a mixed bag—is that the US and China have radically changed their approaches to climate change, as well as their posture toward each other’s approach, in ways that would have seemed like a mix of science and spy fiction less than a decade ago.??

How did we get here??

If you want proof, let’s recall a surprise so alien to our current environment that seems like it happened a million years ago—though the calendar insists it was only eight. The rest of the G20 was waiting with bated breath for the outcome of high-level talks between former President Barack Obama and President Xi Jinping. The fate of the Paris Agreement hung in the balance.??

The two men reached a deal on the eve of the G20 summit. The core promise from both was that climate change was an issue to be kept outside the realm of normal politics and geopolitics. There are valid criticisms of the Paris Agreement, but there are also very few other things the entire world has agreed to do together this century. The Obama/Xi “G2” communique was in that spirit.?

Fast forward to this spring: Obama’s vice president, now President Joe Biden, imposes 100% import tariffs on Chinese automobiles, as well as levies ranging from 25% to 50% on essential components of the clean energy transition. Casual observers can be forgiven for asking a basic question: What happened??

It’s not personal, it’s politics?

The answer, of course, is politics. Politics within both countries, and geopolitics between them and among the states that live downstream of the fluctuations in their bilateral relationship—that is, everybody else.?

In the absence of war, geopolitics is bounded by what the domestic politics of the most powerful states demand or allow. Those politics have been especially turbulent this century, creating an intense struggle for a new leadership consensus within powerful states. The era’s volatility is both the output of this uncertainty and a reinforcement of it. Climate change itself is, of course, a major cause of that volatility. As apprehension —and insufficient available remedies—grows among leaders, they vacillate between bold proclamations of transformative intentions and the taxing demands of real-world politics in an era when there’s no broad consensus to fall back on.?

More plainly, a lot of unusually important and unpredictable stuff has happened in the past couple of decades, and political leaders haven’t figured out how to deal with it. Here are three examples:?

Energy production in China?

China has a mind-bending amount of coal, and its dogged persistence is a counter to the country’s staggering progress on renewables, nuclear, and EVs.? But the reality is that Xi Jinping’s economic headaches are real and growing—he won’t add to them by dejobbing millions of miners and power workers.?

China is more likely to fire up its coal plants when gas prices spike—and re/sell it regionally for a tidy profit—than it is to use US-sourced LNG to replace them.?

China also conflated national economic security and climate change long before the US did, which means when coal is replaced its successor will not be a fossil fuel they cannot extract locally or acquire cheaply from a constrained ally.??

Personal vehicles in the US?

Today, the US isn’t even close to the largest market for passenger vehicles, and it’s not growing. The global growth market is China. Last year, Americans bought roughly 16 million vehicles, while China bought an eyewatering 27 million. China also passed Japan and Germany as the leading exporter of vehicles from a standing start in 12 years.?

The kicker: most of these Chinese vehicles are EVs or PHEVs.??

Keep in mind that on the US side, Ford recently pivoted their EV plans (costing them a hefty $1.9 billion) and kicked their can to the back half of the decade at the earliest.?

The multibillion-dollar question is whether the US market can and wants to sustain a completely different mode of private transport. And if so, for how long? Similarly, can Chinese EV-first OEMs sustain a global growth model absent the US market (and others who will surely follow the US’s new protectionism vogue)??

The same dynamic at work with coal in China will also play itself out with oil and gas in the US. Cheap fossil fuels and a large domestic industry that benefits from the status quo will be tacks under the tires of climate action in America.?

Oil and the end of the ICE Age?

In the 2010s, China was the global growth market for oil. In 2017, Chinese consumers were buying roughly 2 million vehicles a month, which were virtually all ICE-powered.? Now, China is purchasing about 1.5 million vehicles a month, half of which are EVs or PHEVs.??

There are plenty of other uses for oil, but that’s an almost guaranteed contraction in one-fifth of the commodity’s global demand with no obvious prospects for off-setting growth.?

The bottom line?

Decarbonization in the US and China will not materialize at the rate required by the hard sciences that predict and catalog the physical manifestations of climate change, nor will it be delivered with the maximum efficiency provided by the social science of economics. Rather, it seems clear that it will proceed at the pace of each country’s complex politics, with all the inherent messiness that entails—until external events gather in enough strength to blow either country off course or realign them. Or both.?

Competition over cooperation??

Is there a macro resolution here? Some sort of grand bargain to succeed the shaky Obama-Xi consensus? Is each country destined to fall short of its climate targets because of peculiar artifacts in their respective political cultures???

Since their policies are increasingly similar, I’d argue the possibility of a detente in the next five to seven years is greater than it looks. Once each achieves scale in their respective comparative advantages, perhaps leaders will gain the confidence required to see the complementarity between the US and China that’s so obvious in the data.?

The basecase is admittedly less positive. China and the US are more likely to see decarbonization as a theater for geopolitical competition than they are to rediscover the spirit of cooperation embodied in the Xi/Obama agreement eight years ago. The technologies, processes, and services developed in both countries are likely to harden into instruments of power projection and regional consolidation. In this respect, the global energy game will look a lot like the old.?

It’s going to be a fascinating and deeply consequential few years as this process matures.??