US President Donald Trump, notorious climate skeptic, ran his election campaign on the back of high-profile promises to bring back coal jobs and eliminate stringent fuel economy standards for automakers established during the Obama administration. Once in office, Trump made headlines by removing the US from the Paris climate accord and proposing a roll back of emissions requirements for coal plants and automakers. Despite his bombastic rhetoric, the amount of coal jobs created since Trump was elected remains statistically insignificant, and the coal industry is now outnumbered by solar energy in numbers of jobs. As renewable energy technology becomes cheaper, such behavior becomes more and more difficult to justify. Recently, the governors of 23 states have signed a pact to maintain the Obama era fuel economy standards, which predictably and reliably become more stringent with each year.
Battery technology has made huge leaps in the last decade, and the eventual electrification of the auto industry appears more inevitable with each passing year. Earlier this year, Volkswagen, the world's largest auto manufacturer by sales volume, pledged 80 billion euros (91 billion US dollars at the time of the announcement) to transition to battery electric vehicles (BEVs) by the second half of this century. Chinese company BYD, which is partially owned by Warren Buffett's Berkshire Hathaway, is among the leading electric bus and taxi companies and is emblematic of China's ambition in BEV technology. Last year, BYD helped equip the city of Shenzhen with an entirely electric fleet of buses and taxis. In the US, Tesla has revolutionized the auto industry but their sales numbers remain miniscule in comparison to the “Big Three” automakers (GM, Ford, and Fiat Chrysler). Two of the big three have no competitive BEVs on the market, and Fiat Chrysler was the lone dissenter in last month's letter by 17 automakers asking the President not to drop current fuel economy standards. The momentum behind these massive shifts is unignorable, but American companies are distracted by the short-term profits of truck and SUV sales and need a push from regulators to invest in future technology. Ultimately, if the US persists with these backwards-looking policies, they will be left in the dust of countries like China, which are investing unprecedented sums in developing the next generation of new energy vehicles and renewable energy infrastructure.
It goes without saying that China suffers from record pollution due to its incredibly rapid development over the past 40 years. This carefully managed development process helped turn China from an impoverished backwater into the world's second largest economy. Western companies have invested massively in the country, first to take advantage of the huge pool of cheap labor, and more recently to tap the massive market of over one billion consumers.
As a sign of China's modernization, lawsuits for intellectual property theft are finally being taken more seriously by Chinese courts, and Chinese President Xi Jinping made promises to tackle the issue, which were followed by the announcement of official punishments. In line with the country's continued development, the government announced an ambitious plan in 2015 to make China number one in ten different industries. The plan, called “Made in China 2025,” has been criticized by the United States as “unfair” protectionism and is thought to be the target of US sanctions. Amidst a heated trade war, the high-profile plan has been notably absent from Premier Li Keqiang's speeches since earlier this year. The plan is still believed to be in place, and China continues to move forward on their ambitious targets.
The plan includes New Energy Vehicles (NEVs - which include BEVs, plug-in hybrid vehicles, and fuel cell vehicles) as one of ten sectors where the companies are incentivized to invest in next generation technologies. The government is providing subsidies to national automakers to reduce their R&D costs with a goal to produce one million New Energy Vehicles by 2020 and tripling that number by 2025. Grants have helped to spur consumer demand for domestic BEVs but are gradually being phased out until 2021. Local governments in cities such as Shanghai have given preferential treatment for registration to NEVs for several years, and the so-called “green license plate” policy has now been rolled out nationwide. The Chinese government now requires all manufacturers (whether domestic or foreign) to fulfill an NEV quota in order to be able to sell cars in the country, and the results are starting to pay off. Last year, China sold nearly a million electric cars, which represents about 4.2% of the market. The US, in comparison, sold nearly 400,000 vehicles, or about 2% of the market.
Electric cars themselves are only as clean as the energy that they run on, so naturally Chinese plans include improving renewable energy infrastructure and investing in other non-carbon emitting alternatives like nuclear power. The 13th five-year plan of the Chinese Communist Party includes aims to reduce fossil fuel (mainly coal and gas) consumption for electricity from 91.4% in 2010 to 85% in 2020, with a continued drop afterward. The plan aims to increase the share of (increasingly cheaper) solar power and to improve the connectivity of the electric grid, which is currently linked on a mostly provincial level. Once existing wind farms in the north are better connected to the national grid, they will alleviate heavy power demand in the east, helped by novel solutions like pumped storage hydropower (PSH). PSH stores energy created by renewable sources by pumping water into an artificial lake and releasing the water at times when renewables are generating enough power to keep up with demand. These forward-thinking policies are supported by state-backed investment funds created to address the needs of Made in China 2025, such as the National Emerging Industry Venture Capital Investment Guidance Fund, which contributes an additional source of financial support domestic companies in addition to state subsidies.
While the US tends to favor private sector spending on scientific research, an MIT report from 2015 argues that the Federal Government isn't investing nearly enough in research in fields like batteries or robotics, where Asian countries have gained a head start. The Private sector has favored research that requires shorter term investment than is required for advanced sectors, which can take many years to bear fruit. Advanced technology such as batteries is crucial to maintaining US competitivity, which makes it an ideal candidate for government funding. The US was once on the forefront of environmentalism with the creation of the Environmental Protection Agency in the 1970s, but it has since lost its leadership role in the environmental movement. The US doesn't have to let China pass it by. In fact, healthy competition between the two superpowers could accelerate investment in research in development that would benefit all sides. Regardless, the writing is on the wall for fossil fuels. Carbon dioxide has hit unprecedented levels in our planet's atmosphere, and it is already wreaking havoc on our climate. The more we invest, the sooner renewables become the cheapest option for electricity generation. The US should take a lesson from China and start planning for the future. It's time to get serious about tackling climate change and stop using 19th century solutions for 21st century problems.
