How China’s Renewable Push Upends Geopolitics w/ Kate Mackenzie & Tim Sahay

0:00 That's a huge existential crisis for Western car makers, you know, the Fords, the GMs, the Volkswagens that have been in China, assuming that they'd be just buying oil and gas vehicles to Kingdom Come. That's not what's happening anymore because if the transportation sector is being rapidly transformed, hello and welcome to Tech Won's Save Us, made in partnership with the Nation magazine.

0:37 I'm your host, Paris Marks, and this week my guests are Kate McKenzie and Tim Sahe. Kate is an adjunct fellow at Macquarie University and has written for the Financial Times and Bloomberg Green. Tim is co-director of the Net Zero Industrial Policy Lab at Johns Hopkins University. They're both the co-writers of the polycrisis newsletter from Phenomenal World.

0:54 In recent months, we've been looking a lot at the geopolitics of technology 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 And that has much broader implications just beyond the United States and China or how particular countries are responding. So I wanted to have Kate and Tim on the show because they have been writing a lot about those broader repercussions. And in this conversation, we dig into the kind of model that China is building, where it is electrifying its economy, 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, reduce their dependency on, say, the United States

1:54 or other countries. 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 And then kind of the broader question of what this means for many other parts of the world, right? Parts of the global south that are trying to keep up, that are trying to grow their own economies, and whether the Chinese model now appears more appealing to them, and whether, you know, 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 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. And on the one hand, there's an obvious 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 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, you know, the industries of these countries reliant on fossil fuels that are creating these emissions that are driving climate change.

3:33 And to me, there is something potentially hopeful in that. 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 fossil fuels, then obviously that seems like a good thing, right?

3:57 Even if it's not necessarily in the interest of the United States itself. So I think it will be interesting to see how this continues to play out. 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.

4:16 And we're already starting to see aspects of that playing out today. So if you do enjoy this conversation, make sure to leave a five-star review on your podcast platform of choice. You can share the show on social media or with any friends or colleagues who you think would learn from it. And if you do want to support the work that goes into making TechWon'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, you can join supporters like Jukebox Hero, Kat, Monique from Switzerland, and Frida from Jordan by going to patreon.com slash TechWon't

4:46 Save Us, where you can become a supporter as well. Thanks so much and enjoy this week's conversation. Kate, welcome to Tech Won't Save Us.

4:53 Thank you. It's great to be here.

4:55 And Tim, it's great to have you on the show as well. Thanks for having us. Now, I have been reading your polycrisis newsletter, and you know, there have been a lot of really fascinating essays in there. 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 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 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. So I wanted to start by asking why has China so vigorously pursued those technologies in particular?

5:38 Yeah, so there's a few different reasons why China's gone specifically after building such a big presence in clean tech. It's not necessarily about being a climate leader. There are a lot of other motivations there. And in fact, it's probably climate is fairly far down the list. Although I think the Chinese uh leadership does have a bit of an interest in being seen to be a good citizen on the international stage.

6:04 A lot of it is really more about China's developmental strategy, about its overall growth and you know, management of its own domestic economy and its its growth on the on the world stage. And seeing where it had an opportunity. So, you know, what what we now think of as older energy technologies, internal combustion engine cars, for example, uh, were already pretty advanced.

6:30 You know, Japan, Germany, US, South Korea, you know, you had a lot of a lot of countries already excelling in that. So it was a little bit of a strategic opportunity, partly. There's also an element of it that comes from China not having much of its own crude oil supply. But I think, you know, you can you can kind of debate the weighting of that, but I think, you know, Tim and I would probably say the weighting is more towards the Chinese central government seeing opportunity there to become a leader in something that that wasn't quite established, that was, that was emerging and was and was probably going to be the future.

7:08 Yeah, I I think that the two things that Kate said about development, seeing itself as this is going to be a faster engine of its development. Then the second thing of what Kate said was space, right? Like there's a contested space with the legacy staff, there's a new green field to move towards green technology, which is relatively less contested.

7:28 But looking at the world right now, it's an extraordinarily dominant position, right? It's like 70, 80% of all clean energy factories are in China. And if you were to stop at the clock and rewind back to 2000, it would be exactly the other way around. 80% of all clean energy factories were in US, Europe, and Japan.

7:50 And so it is quite a shocking reversal. And you don't get a complete 360-degree kind of reversal like that without a powerful state putting in a lot of resources, which is money, which is capital, which is technology, which is learning, which is human capital, uh, universities, uh, RD ecosystems. Like so, in that sense, it that's what we mean by a full-fledged development model.

8:17 You don't just narrowly think we're going to be good at green technology. 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, land, labor, human capital, knowledge, and then you bear the fruits of that.

8:35 Yeah, I think that makes a lot of sense. And Kate, you were saying, you know, obviously China can position 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.

8:55 And, you know, it gets uh kind of good headlines as a result of that. But Tim, you know, you were talking about the, 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.

9:10 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 start to change supply chains, challenge the auto industry as it was established by the West?

9:29 And what does that show us about this broader model that China has been building?

9:34 I think there's a degree of like orchestration as well to think about. You know, like a car industry, you can't just create a car industry out of whole cloth that is going to be really successful if you don't have a whole kind of ecosystem around it. So there's that element of it. There's, I'd say, at least two things to point out here.

9:53 People often think of China, I'd say people in the West, I should say, would often think of China as having just appropriated Western intellectual property. That's a, you know, really kind of common trope that China steals technology or or somehow absorbs it rather than developing its own. So I think, you know, a a big point that we made in our BRICS essay and a lot of our other writing is that that's no longer the case.

10:22 That that really hasn't been the case for for a long time. It probably represents a bit of a misunderstanding about how technology does transfer and evolve. So it was a combination of, I'd say, you know, there's a there's yeah, mixture of different policy measures. I think something that's really important is that the Chinese central government sets up these competitive markets internally.

10:50 So they don't just have one or two state champion auto companies. There's been as many as 200 EV companies in China, and the competitive landscape or the competitive market within China is part of the reason why those uh why you know some of these Chinese car companies have become so good and been able to offer vehicles which are now increasingly recognized as being better on price and quality than almost anything else that that's being produced anywhere else around the world.

11:26 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 Yeah, I remember saying to Tim, I don't know, it was about 18 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 a fair bit. And uh and Tim was surprised. And I um it's just something that we'd had, and we realized, you know, yeah, most for many countries around the world, this was already the case.

11:58 I mean, today they're really commonplace. It was kind of interesting to both of us to realize that the US has been uh, you know, shielding themselves from or excluding themselves from.

12:08 Yeah, things things are very different here. Uh the the options are far more limited. I I tried a few when I was in New Zealand earlier this year, actually. But Tim, sorry, go ahead.

12:17 Yeah, I mean, just the whole idea about the EVs having a much larger market inside China. So it's like over a market of over 20 million cars. In the US, the market size is about 15 million cars. And at this point, more than half of the cars sold in China are electric. And it's like hundred plus brands, there's 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.

12:48 And it's like the fittest kind of survive, and when you have this five to ten year period of like massive competition, then within that cauldron of the Chinese internal market, like the sharpest, keenest firms survive, the ones that have spent the most amount of money in innovation and RD, really squeezing costs, getting a lot of innovations in and spending a lot of money uh trying to innovate in battery chemistry.

13:14 And just if we just wanted like a really simple figure of that, well, what is an EV? Well, it's mainly batteries, right? So 70% of the cost of an EV is just batteries. Well, what's a battery? Well, that's just chemistry. And that just requires a shit ton of metallurgists and chemists. And China is a grudge, it's like, you know, over a hundred battery chemistry PhD programs.

13:33 And so this is just as we were saying, like innovation and technology and kind of requires a government to like really pick certain sectors and say we need to develop the knowledge base. And that's why they're doing you know, innovations that is that are getting the cost of an EV as cheap as they are.

13:49 It's not subsidies, it's learning by doing. It's in this dramatic kind of cauldron of competition, this gym domestically. So when these firms succeed in that highly competitive domestic market, when they get out of the market in phase two, like nobody else can compete with them. And that's why you see exactly what you were saying: the protectionism and the walls coming up, particularly in countries that have existing internal combustion engine companies that are like, wait a second, like we don't know how to deal with a $20,000 car that is cool and sleek and sexy that our consumers want.

14:25 Can you give us some time? That's been the most interesting response from countries that have domestic car companies. Australia doesn't does not have a domestic car company, right? So, like a lot of company, a lot of countries that don't have that domestic auto industry are perfectly willing. You know, they were like, well, we were just buying a car anyway, might as well buy a cooler, sleeker Chinese one.

14:48 But that's not been the response in the US, that's not been the response in the EU, or in many countries with existing car industries. They are performing a kind of a negotiation with the Chinese. We let you in, but only if you set up a factory here and teach us how to make these cool sexy machines, and rather than just put them on a ship and uh us being condemned to be your export market.

15:11 And that uh co-location or that having facilities in your country is is a way that you start to adopt or transfer these less tangible kinds of technology, you know, because it's not it's not just you know a few design files that you can send across or that are patentable, you know, there's this concept of of know-how that is transferred in a more gradual way by having people from you know your own country, your own workforce working alongside the skilled people from elsewhere.

15:45 I just want to add something about subsidies, which is the concept of direct subsidies is overblown in with regard to Chinese companies. But China does create, although the central government has created a conducive environment. And so there are some supporting factors there, but it's it's not you know just cash injections to favored companies or or champions.

16:12 It's you know, to some degree, it's like maybe a bit easier to access financing if you're in the particular industry that has been designated as, or you know, one of the industries that's been designated as strategically important. It's 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, some of those barriers won't be so high in China because the central government has, you know, set out edits and made very clear from the top what it expects the private sector and also the provincial governments

16:57 to be supporting. And that ability to have that long-sightedness, you know, to be looking 10, 15 years out to the future is something that differentiates China, I think, from a lot of the countries that it's competing with now.

17:11 I think that's a really key point, right? And I and I think that 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 incompetitive environment that then when they go international, they are very lean, they are very agile, they know what they're doing, they have good products, has really been successful.

17:34 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. And that, you know, I have seen in a few publications now, I think the Financial Times seen China described as an electrostate, you know, kind of going back to something that you were saying earlier on.

17:54 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 as we have seen in countries that have industrialized in the past. 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 And is that a realistic expectation? Is it something that it can realistically potentially achieve?

18:24 I think there's two parts to that. 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 of crude oil, obviously. So to get away from dependence on those two fossil fuels is very important.

18:48 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 you know, energy is obviously such a fundamental input to um to almost everything in an economy or a society.

19:07 So getting off gas and oil are important goals. China does, however, like like many countries, have quite a lot of coal. So it's a little more complicated when it comes to coal. Part of the problem with coal, of course, is not just that it's a terrible climate destroying pollutant, but it's also um extremely noxious and and um hazardous to be near in terms of coal fired power plants and and so forth.

19:36 So there's also been a domestic motivation to reduce coal. But yeah, it's a little it's a little complicated. I think it is realistic for China to massively reduce its dependence on oil imports and gas imports. And if you look at the composition of global oil markets, most of the growth in oil demand for many years now, I can't, I I think possibly the last decade at least, possibly longer, has come from China.

20:05 So if China cuts back on the amount of oil that it is importing materially, and it doesn't, it doesn't even need to be huge amount, but potentially that then affects the overall price, the the balance of supply and demand in the oil market. So even just by significantly cutting back, it can put China in a in a more advantageous position because then you get prices falling and so forth.

20:30 But yeah, in a more direct way, I think it's entirely feasible for China. I wouldn't I wouldn't want to bet exactly how long that would take.

20:37 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? And on the first point, China is like not just like the leader in green tech or whatever, it's like installing 90% of all of the wind and solar being installed on the planet are being installed in one country.

20:58 So it's just like an extraordinarily fast, rapid electricity production from low carbon. So low carbon would include hydro and nuclear on top of wind and solar. And then because these things are getting cheaper and cheaper, you can combine wind and solar with batteries, and that quickly starts to eat up coal and hydro.

21:18 And so, in that sense, electricity mix of China is it's like a fast-moving base, right? So it's growing, electricity demand keeps growing. And for the first 20 years of the 201st century, as electricity demand grew, it was largely coal that was meeting that increase in electricity demand. And in the last five years, that's now being replaced more and more by renewables.

21:41 So the big news out of China in the last couple of years is it may have hit peak coal in terms of its share of electricity use. And from now on, it's going to be down, down, down. So that's point one. And then the second bit about what are you using this electricity for? And you're using it for vehicles very clearly, like this big easy.

22:00 Push is being fed. So you're replacing oil-burning petrol cars, of which China is also a massive producer of internal combustion engines. And those are being rapidly phased out. And sales are falling very dramatically. And particularly the sales of Western automakers that were in China for the China market making internal combustion engines.

22:20 And they're like, holy fuck, no one's buying this shit anymore. And so that's that's a huge existential crisis for Western car makers, you know, the Fords, the GMs, the Volkswagens that have been in China, assuming that they'd be just buying on gas vehicles till the kingdom come. That's not what's happening anymore.

22:38 Because if the transportation sector is being rapidly transformed. And then the interesting bit is okay, that's one part of the electrification story. You know, what about industries? Are you electrifying industries? And that's always been a trickier thing because industries need cheap, reliable baseload power.

22:57 That is what you know, that's why coal was in the mix for so long. But industries like actually can be electrified very rapidly because there's a lot of processes within a factory that you could just feed with electricity. And there, China's actually gone much faster ahead than industries in the West.

23:14 So a 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. So the transportation sector and the industrial sector are two sort of dramatic news stories of this electrification. And that like just enables you to become a state that is can rightly be described as moving towards an electrostate.

23:39 And and uh we talked about the motivations, that just means that China would just be importing less oil and gas. And the United States, you know, 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. You know, we export more oil than crude oil than Saudi Arabia.

23:59 We export more gas than Australia or Qatar, that are number two and number three. So this is quite a dramatic difference between two types of states that have made two very different sort of choices about their future. One sticking with the oil and gas, which have been the dominant energy sources for the last 150 years, and the other saying, hell no, there's no way we can compete with the Americans on anything to do with oil and gas.

24:25 Let's carve out a whole new energy regime. And what Kate and I have been really writing about is, well, what does that do to each country's political economy? What does it do to the winners and losers geopolitically? What does it mean for countries' development models if a country as giant as the US and China are making such completely divergent decisions?

24:46 Yeah. So as you're saying, there are like two directions for our conversation based on that, right? You know, how is that affecting the rest of the world? And what does this mean for the relationship between the US and China and, you know, the US's position as it does try to, you know, remain competitive with what China is doing.

25:02 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? 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 You know, 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. China is really plowing ahead, defense technologies, aerospace, all this kind of stuff in many different areas. So if we look today, you know, we've been talking a lot about China, and you know, I think your answers started to move us in this direction, Tim.

25:42 But how do we look at that kind of contrast between the United States and China? 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 I mean, the 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. And they're like, we need to try and compete on some of these technologies of the future. And the Biden administration says, right, we're putting in a bet on AI, we're putting in a bet on green technologies, we're putting in, you know, basically copying the China playbook, if you want to put it crudely, of picking a few sectors, chucking a lot of money into RD and universities, chucking a lot of money into producer subsidies, consumer subsidies to develop those industries, uh, but really directed by

26:32 the state, sort of picking sectors that they feel they are going to be competitive in the future. To that extent, the United States did, and there was a very serious battery boom, EV boom, solar boom inside the US over the last five years. The subsidies coming from the IRA, the Biden administration sort of marquee, climate bills, they were all sort of creating a domestic sort of boom in these new industries.

26:56 And that included AI, biotech, EVs, you know, the new energy industries, and crucially oil and gas. They didn't press the brake on oil and gas. It just said all of the above, old energy, new energy, AI, biotech. And what we're basically seeing with the Trump administration is a huge rollback off the climate agenda.

27:19 So it is the fossil fuel lobby within the country basically says, that's it, we put up with you a lot while you were just sort of like another industry. But now that you're directly eating into my oil and gas share, you're out. And so there's this absolutely ferocious response from the Trump II, which we didn't see in Trump one, which was in all of the above kind of administration.

27:41 Trump two is like, no, we need to kill the renewable industry. And it's been a very systematic rollback across the regulatory state, across the legislative bills, across stopping permitting, so that, you know, new wind and solar are 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 So that's a rollback 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. So it is, it is an administration that says we want to maximize oil and gas production, and we want to go all in on AI.

28:20 So you could call that, you know, that is an industrial policy, right? It is, as we said, the China playbook. It's just dramatically rolled back a lot of the RD support that would be needed, and it's dramatically rolled back entire suades of that economy, right? Like no more biotech, no more clean energy.

28:39 Um, we'll just yank that out.

28:41 I was gonna make a point about China being 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. I mean, there were reports recently of industrial companies like heavy industry companies in the US saying they were getting outbid for energy capacity by data centers being used for for AI, which is kind of a crazy situation to be in.

29:14 Whereas, you know, again in China, the with the benefit of having a bit more planning, a bit more policy capacity generally, you know, they're actually expanding the electricity grid to facilitate that, and not just the grid, you know, not necessarily distributed, but but you know, ensuring that that the energy supply is there.

29:35 So it's 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 So the AI boom, you know, as Kate was saying, is extremely energy intensive, but it's also just extremely capital intensive, right? So you just need to pour 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. So at this point, it's the two parallels between the US and China are quite profound.

30:06 Like the US is having a macroeconomically significant chunk of its economy going into capital expenditures for new factories and data centers. It is at this point like a sector that is almost single-handedly holding the stock market afloat. So the top like seven to ten companies are responsible for almost all of the stock market's kind of valuation at the moment.

30:28 So that's what I meant by it's like an all-in kind of bet on this one sector. They've put down about $100 billion on data centers in the last three months alone. Uh, $100 billion. If you add up the amount of capex that has gone into data centers last year, that's more than the entire power electricity grid.

30:49 It's just a gigantic bits of money, $100, $150 billion per year. You look at what Morgan Stanley is estimating about the amount of capital expenditures, factories being stood up, data centers being stood up. They say the AI boom could exceed more than $3 trillion in the next three years. So by 2030, $3 trillion.

31:10 Sorry, four years. So that's, you know, we're talking like really gigantic amounts of money, large amounts of capex, large amounts of market capitalization, and they're driving, as you said, this kind of economic kind of growth. And all of the things that we just said about the AI in the US are true about the new three sectors in China.

31:29 The new three EV solar battery, which is their term for the EV solar battery sector, is the new three. They are macroeconomically significant. Lots of pro provinces are, you know, chucking freebies at the companies, just come in and build these things. And that's a dynamic kind of state focus. This is, these are things that we really need to dominate on in the future.

31:50 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. And the other one, you know, their AI bet 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 But whatever it is, these are two big countries with big capital resources, uh, big markets, and they're made, as we said, very different bets about the future.

32:20 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 hegemon or one of the dominant powers in the world. It's concerned about China's ability to kind of leapfrog it and take over. 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, like it feels that that is really hampering the United States' ability to kind of keep up here.

33:03 Does that sound accurate?

33:05 I mean, yeah, absolutely. It doesn't, it doesn't really bode well for the future. I mean, maybe a team is probably being in the US a bit better placed 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 is happening or what's being undertaken by the US administration at the moment, you know, it seems a bet on two things: a bet on US dollar hegemony and fossil fuel, particularly 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 Currency hegemony and energy systems are 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 exporter of oil and gas when the threats to that, uh the forces working against that are so are already looking so powerful and inevitable, really.

34:14 When I read about this and when I hear about it, and I hear about, say, 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, even if there were investments in clean energy alongside of it, right?

34:42 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 like is worried about the planet that that is ultimately the one that I'm going to want countries to adopt rather than remaining dependent on fossil fuels because it's in the United States' interest.

35:10 I think it's it's worth like 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 market by selling something. So Brazil might decide to sell iron ore or soya beans to earn dollars.

35:29 India might decide to sell like software services and tech services and consulting to earn dollars. But you need a business model for your country that earns you dollars. 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 So you require a way to earn dollars only to then spend those scarce dollars purchasing giant gobs of energy. So you can't see where this is going, right? Like a bunch of countries can be like, wait a second, why the hell should I spend suddenly like five times more money on oil and gas? Because I don't know, a war broke out somewhere, or I don't know, a pandemic kind of happened and you got these supply chain droppages.

36:14 And you're like, that's it with my budget, I guess. I'm gonna be spending, you know, four to five times more on buying and importing expensive hydrocarbons to keep my economy afloat. And so a lot of countries are kind of seeing this play out, these kind of supply chain shortages uh play out with expensive energy, and just concluding that's it.

36:33 We need a plan to get off. And you can see the Europeans kind of doing that, you can obviously see the Chinese doing that, and a bunch of countries are just like this combination of dollar dependence plus hydrocarbon independence is not good for us. So can we can we get out? And the way to get out is to either make your green energy, you know, make those products that prevent you from burning oil and gas.

36:55 It's those EVs, it's those batteries, it's those solar panels, et cetera, et cetera, or just buy them. If you can't make them, buy them. And once you buy these cheap, you know, solar EV batteries from China, then you wouldn't have to use your scarce dollars to import oil and gas anymore. So that's kind of like this intersection of dollar dependence and hydrocarbon dependence.

37:15 That's just like a double whammy for countries at certain points. And we've just, I think, just seen kind of like a clean break from that, particularly since the 2022 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 And hence we have seen this extraordinarily rapid uptake from largely Europe and poorer developing countries to just get out. Let's just buy those EV solars and batteries and get out and break free in some sense.

37:46 I feel like this has been obvious for quite some time that there are so many countries around the world that are dependent on oil and gas imports, and that ends up destroying their budgets because everything needs to go to importing these forms of energy and whatnot. But I feel like for a long time, it even though they could rely more on renewables, we didn't see that kind of investment really taking hold, really happening.

38:12 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 or that transition?

38:21 I think the that 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. There's also the risk with fossil fuels that was evident in 2022 that you might not even be able to import them at all. And that happened to Bangladesh and Pakistan.

38:42 This is an incident that we referred to a few times over the last three years in the poly crisis. There were blackouts in Pakistan and Bangladesh because shipments of LNG that they contracted were effectively outbid by European countries and shipments were diverted. It's not easy to change your energy system overnight.

39:02 It's not possible to change it overnight. To switch to a more renewable-based system or an ultimately entirely clean energy-based system, first you need electrification. So you need to change the demand side as well as the supply side. Right. So if you've still got a lot of internal combustion cars, vehicles, motorcycles, then there's things like electricity grid infrastructure, renewables actually can, renewables and the increasingly cheap storage can really help a lot to alleviate the burden on that, but it doesn't completely remove it.

39:35 Energy distribution infrastructure is still something that countries ultimately need. A big barrier for developing countries in transforming their energy systems is really finance. The capital structure of investing in a clean energy system is different to that of investing in a fossil fuel-based system.

39:58 It's easier to get money still, I would say, easier to get money for fossil fuel facilities. 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, it's a much more diffuse industry.

40:18 There aren't those big sort of pools of upfront corporate capital that you can rely on. 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. So really, I think finance and having that financial agency or latitude is a big barrier for many countries in the world.

40:46 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 your demand side. But that particular problem, I wouldn't say that's the first one. I think it's it's mostly access to finance and the the political power of incumbent industries, which is something incidentally that 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.

41:38 That's not quite such an option for a lot of countries.

41:41 Yeah, it's interesting to hear you say that on the energy system level, right? 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 up front, but what you'll have these long-term savings.

41:55 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.

42:09 But Tim, go ahead if you wanted to jump in on that.

42:11 Oh, I was just saying, like, I think 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, right? So if I were to go and buy an EV and the damn thing costs $50,000, I don't have $50,000 in my bank account.

42:29 But now imagine a world where you're five years, 10 years into the transition, which is where we are, and the EV being sold in China is for $15,000. If you're sitting in Mexico or Brazil, you get that for $15,000. Then all of a sudden that cost premium is kind of flipped on its head. It's the EV bit that is cheaper than the fossil fuel car.

42:48 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. And I think that's what's starting to happen. So that example that Kate was saying about Pakistan and Bangladesh and with blackouts. If a country as poor as Pakistan can very rapidly become the world's fastest buyer of solar panels and do something like 40 or 50 gigawatts of solar panel purchases in the last three years alone.

43:20 So it's like all of the electricity that Pakistan had added up, installed on its grid since independence, so over the last 70 years, it managed to install that much of solar panels in the last three years. So this is an extraordinarily rapid boom. And maybe it won't happen in other countries, but it gives you a sense of what happens when the lights go out, is a bunch of people in a country, both with money and without money, end up saying, That's it, we need an alternative.

43:47 And so Pakistan was like, okay, we need an alternative. And you got this massive bottom up pressure to get and import those Chinese solar panels and batteries. And as we were just saying, those Chinese firms are now going out in search of new markets. So they just land up all over the world and are just like, okay, oh, you need a few shipping panels of solar panels delivered every week.

44:08 Well, 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 cropped up in Pakistan. And you can, it's 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 And imagine what happens when the distribution model of solar becomes like getting a Coke can. 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 of it, and it's more expensive. That, in my view, was like the world of the last 20, 30 years.

44:45 The world of the next 20, 30 years is solar panels and batteries ending up like coke bottles everywhere, easily accessible, cheap, and a lot of these frictions sort of end up being minimized. But I'm with the broader thing that politics matters, cost of finance matters, political incumbency matters. You know, that's why the political economy of climate matters so much.

45:08 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 BRICS 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 And we know that there have been limitations to what the BRICS as an institution and the institutions that these countries have set up have been able to do over the past number of years. 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 So is it actually realistic that they can actually put together a model that is going to promote a different form of development? And are other countries around the world really going to be able 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?

46:11 And what does that kind of shift ultimately mean?

46:13 I think there are new models emerging now for how countries can develop. I don't want to be too optimistic or confident about it. You know, there's a lot of data and commentary indicating that look, some countries have gone backwards, things are not looking great for development for particularly the lower income countries.

46:34 It's been tough. And probably also important to note at this point that most countries cannot copy or replicate what China has done. There's a lot of useful things that can be learned from what China has done and is doing. I think picking strategies, developing a developmental approach that is complementary to what China is doing is wise.

46:56 One of the ways of doing that is to take advantage of this proliferation of cheap PVs, 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 an easy or a relatively easy decision to make. You know, don't keep tariffs up.

47:16 You know, quite a few developing countries still have tariffs or or other um non-tariff barriers to importing cheap Chinese clean tech just in the same way that you know we were discussing that uh the US and Canada do. 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 as much as you can.

47:37 I can take up this whole question about like, is BRICS going to be the leader of the green transition? On the face of it, it sounds mad, right? Like you have China as being the world's largest coal producer, Russia being like a petrostate with fucking nukes that is just like committed to buying oil and gas, India being, you know, just a global south powerhouse that is like 80% coal.

47:58 So what the hell are we even saying here, right? Like, and I think what we are saying here is that there's a shift. And that shift, obviously, with within China, we've just discussed it, but there's a shift within the rest of the BRICS, excluding, and this is kind of important, excluding Russia. Russia is just for its political leadership class, does not want to leverage its abundant green potential.

48:20 It could, you know, it has all the metals you could possibly name. It is one of the largest countries in the world, so it has a lot of wind resources, it has solar resources, so it could turn towards renewables. But you know, the Putin's uh team has just like put a stop to that. They've gone all in, as the United States currently is doing under Trump, all in on oil and gas.

48:40 But the rest of the BRICS countries, they're energy importing countries. And that goes back to the incentives for an energy importing countries that we just talked about. With energy imports come dollar dependence, with energy imports comes like a constrained sense of what it is that you can do. You're always sort of subservient to broader geopolitical forces.

49:03 And what you do have in the BRICS is this massive desire for sovereignty. And sovereignty is the ability, you know, of people to exercise collective freedom, for people to exercise their own collective choices in the world. And if that's what a developing country, particularly the bigger, more powerful, more sort of muscly developing countries like your Brazil's India's South Africa's sort of want, is that kind of freedom of maneuver.

49:31 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 BRICS countries.

49:49 They used to be all in, obviously, on coal, but now you see a shift in their electricity systems. And then the third most important thing is they want to learn how to make these green products. So they are passing green industrial policies to build factories, to churn out those panels, batteries, and you know, the AncTAD report estimates that the new energy industries is going to be worth about $10 trillion by 2030.

50:17 So that's that's you know, it's about 10 or 15 frontier green technologies. It's gonna represent $10 trillion of value. So imagine you're a big powerful developing country, you want a slice of that pie. So what you've been doing over the last five to 10 years is investing in those green sectors in that developmentalist way 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 your country and get it into more and more and more sectors so that you can actually benefit from that clean energy.

50:50 And that's what we are seeing: a shift in their development models, a desire for sovereignty, a desire for autonomy in a contested world. And if the Americans come and breathe down their neck as they're currently doing with the Indians and the Brazilians and slapping tariffs on them and saying, if you want to access the American market, it's a club, it's an exclusive club.

51:11 Here's the access price for it. You need to front up the cash. Those countries are just going to say, that doesn't sound like a good deal. I would rather have more autonomy. And one way to get more autonomy is to press the accelerator on that green transition, which is a shift that they've already sort of made.

51:31 So I I kind of 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 BRICS as a contested place where each country's oil and gas and coal sector is competing with the nascent green sector. And the state sitting on top of this is making a strategic decision to shift towards these green sectors.

51:56 And these are very, very promising signs because these are, after all, the fastest growing countries in the world, some of the most populous countries in the world. And uh, whatever we thought of sustainable development in the 21st century, it has to involve, you know, the Brazil's India's, South Africa's Ethiopias, Indonesia's of the world.

52:15 It's not surprising that countries would want to carve out more of that autonomy, that sovereignty, what have you, as you're saying. 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 where most of my listeners will be.

52:32 And, you know, we're talking about this model that we're seeing rolling out in more 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 BRICS are setting up might be able to try to help with that further.

52:50 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 Western countries that have been allied with the United States, we could say South Korea and Japan as well, though I'm, you know, less familiar with their specific economic makeups, you know, are 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, you know, the Western dominance

53:26 as we know it to be kind of declining? Or are there opportunities for them to actually pursue a different path, a path that does involve quite a different form of development than what they have pursued in the past? I wonder how you how you think about that as we close off our conversation.

53:42 It's interesting that the US is trying to is using LNG as or trying to use LNG as a bargaining chip with countries like Japan, Korea, Europe. I haven't seen any actual concrete success in that attempt. So just to bring it down to to what extent do other wealthy Western countries remain yoked to the US energy system and the US currency system, there's some encouraging signs that of independence there or that things are a bit overstated on the US side.

54:19 Again, I think that exerting energy dominance is a lot harder than currency dominance. It's difficult to talk about energy or monetary financial hegemony without also referring to security for those countries. And that's, you know, that's where it gets pretty complex. 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 a bit closer to the US in that regard.

54:51 Uh lots of countries in Asia are in that position, including Australia where I am. That's a very delicate and difficult uh pathway to predict, I guess, or future to predict for countries in that situation. Europe not completely dissimilar either. A big constraint for these wealthier countries, uh apart from their security relations with the US, is also their own domestic political economy.

55:18 So we mentioned before their their own local industries, you know, things get entrenched, power builds around, you know, the the incumbents. But another thing I think is just in many countries, it's their ideas about how they uh how much money they can invest, you know, how they can invest and what state measures or what instruments the state can use.

55:43 So it's not just that they're overly concerned about their budget balance, the way Germany, I mean, Germany kind of famously is uh has this very deep preoccupation with fiscal rectitude, a very sort of conservative approach, uh, which has led to its own infrastructure being in actually like not a great state at all.

56:03 Like a lot of Western countries suffer from that conception or suffer from that uh unnecessary constraint. But it's also there are so many other creative, innovative things that states can do to actually enable the transition. And uh it's hard to say exactly what's stopping that, but some of it is just these things are just rolling out now.

56:23 So it's looking at examples from other countries, you know, what are different instruments that the state can use, you know, de-risking. The Biden administration deployed uh quite a number of innovative things around shifting emphasis from fossil fuel to the clean economy.

56:40 I think this is this is actually a super interesting question about what does security mean? Security for whom, right? So so for example, think about Canada, right? The Canadians have basically said we could weaponize our oil and gas exports and cock up the US economy, right? So if you mess with us, we might stop exporting you crude oil that you need to process in the refineries and feed Americans cheap gas.

57:04 That's a very powerful counterweapon that the Canadians and only the Canadians possess because they are so dramatically tied in. So Canada's oil exports are processed in American refineries. But that's not what we have seen. That's not the kind of threat. In fact, it's only Canada and China that have threatened the United States with counter-retaliations.

57:23 Canada with its energy weapon and the Chinese with their rare earth weapon, which is we just refuse to give you a bunch of rare earths that you need to process, all kinds of defense equipment, clean energy equipment, chip equipment. You just won't be able to make it if we stop this, you know, a few billion dollars, just a few billion dollars, and it's a chokehold in the entire global economy.

57:43 So Canada and China have counterweapons. That's not what the uh Europeans have, and that's not what the East Asians have, both of whom have basically, in some sense, succumbed to the Trumpist weapon of we refuse to give you market access, we'll slap tariffs on you unless you buy more shit from us. What is it that we need you to buy from us?

58:04 Energy and weapons. If you buy our LNG and you buy our weapons, you know, you get a free pass. And both the Europeans and the East Asians have come up with, they've kind of chickened out and sort of said, fine, we'll do that. And Kate and I have been calling these instead of the what was called the Trump sort of taco thesis, which was Trump always chickens out.

58:23 We've sort of replaced it with the empanada thesis. Everyone makes promises and no one does anything. And so that that's that's that's basically what you see: a bunch of hot air, a bunch of empty promises, a bunch of quote unquote deals written on pieces of paper that no one ever actually has to pass through a parliament.

58:43 It's just the European Commission guys, meet the Trump guys, they write a piece of paper, smile for the cameras, go back home, say we're gonna buy hundreds of billions of dollars of your LNG, hundreds of billions of dollars of your weapons, and then no one really checks the details. Trump kind of loses interest, moves on.

58:59 So that's kind of their plan right now. They just like sign some stuff, don't really do much, and continue on with our clean energy transition. And it's just just not feasible for the Europeans to start buying $350 billion of LNG. They currently buy about $60 or $70 billion of hydrocarbons from America.

59:20 So you can't just quadruple that, right? The Americans can't suddenly quadruple their supply. Like you just can't drill baby drill that all that quickly with highly capital-intensive projects. So this is just from the energy experts' point of view, just like hot air, it's just an empanada deal. And that's what we think is what's happening with the Europeans and the East Asians.

59:41 And as I was saying, with the with Canada, it's a completely different story. And, you know, as 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. And, you know, all of us are now inhaling forests. And so it is just a reminder that our fates are absolutely tied together.

1:00:03 The Canadian and the US economy's fates are tied together, people's fates are tied together, and obviously our climate is all entangled up. And this is quite a powerful choice for countries to make is what do we do about this future?

1:00:16 I think that is a really perfect place to leave our conversation. I appreciate you both coming on to dig into these really big questions with me. And I certainly encourage people to go subscribe to the newsletter, The Poly Crisis, which is on Phenomenal World, because you know 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 climate change and climate policy and things like that, and how that relates to uh political economy.

1:00:43 So thank you both for taking the time. I really appreciate it. Thank you. We had a great time.

1:00:47 Thanks so much.

1:00:50 Kate McKenzie and Tim Zhey are the co-writers of the polycrisis newsletter from Phenomenal World. Tech Won's Save Us is made in partnership with The Nation magazine and is hosted by me, Paris Marks. Production is by Kyla Hewson. Tech Won's Save Us relies on the support of listeners like you to keep providing critical perspectives on the tech industry.

1:01:05 You can join hundreds of other supporters by going to patreon.com slash tech won't save us and making a pledge of your own. Thanks for listening and make sure to come back next week.