What do China’s climate commitments mean for energy?

0:00It is kind of like admitting that, well, if the United States isn't there leading, I'm not under pressure. I'm just going to go with my simplest, most straightforward NDC and not overcommit myself, not stretch, not try to inspire others to come along the journey with me. In 2023, there were about 217 gigawatts of solar, new solar deployed in China. By way of reference, that is more solar than had ever been deployed in the history of the United States at the time. That's in 2023. In 2024, Chinese deployed 277 or so gigawatts of solar. And then this year, so far, 212 gigawatts of solar. There's now a little bit more than that in the United States.

0:43So the incremental additions in each of the past three years are more than exists in the United States. Let me say you know how to add drama to a podcast. That's very impressive. Welcome to today's show brought to you by Engie. Your business has enough challenges. Energy shouldn't be one of them. That's why Engie builds tailored energy solutions around real business needs to support growth, strengthen predictability and move businesses forward. Because real power comes from shared expertise and relationships that outlast the paperwork. Learn more at engieresources.com.

1:18Hello and welcome to The Energy Gang, a discussion show about the fast-moving world of energy from Wood Mackenzie. I'm Ed Crooks and welcome to a special edition of The Energy Gang which we're recording live in front of a class at NYU that's given by The Energy Gang's owner Amy Myers-Jaffe. Hi Amy, welcome to the show and thanks very much for hosting us here today. Welcome to Clean Technologies, Opportunities, Trends and Innovations. We have some great master's students here with you today. Some of them are specializing in cyber, terrorism, and policy. Some specializing on energy and environment.

1:56And then we have some who are in economic development and humanitarian systems. So we have a good smattering of expertise here with us today in our student participants. Fantastic. Well, as I say, thanks very much for hosting us and very much looking forward to a great discussion today. It's also a pleasure to welcome joining the discussion, two very eminent energy experts from outside NYU. First of all, we have David Sandalow, who is the inaugural fellow of the Center on Global Energy Policy at Columbia University. Hi, David. Welcome to the show. Ed, Amy, it is great to be here. I'm a huge fan of the energy gang.

2:31Oh, that's very kind of you to say so. Thank you. Just so people know a little bit about your background and the route that took you to Columbia, you've had a role in government service, various different places down the years. Do you want to talk a bit about the route that got you into energy and what you've done in that field? It's my great privilege to work for a number of years in the U.S. federal government. I worked for the White House, the State Department, the U.S. Department of Energy. Before that, I really worked on two things, on environmental and energy issues, that a strong passion for protecting the environment, and then on China issues.

3:04When I was young, just to go back, which was a long time ago, Americans literally could not travel to China. It was illegal. We didn't have diplomatic relations, and it was prohibited. And I was always fascinated by China as a child. And then when I was in college, diplomatic relations were restored between our two countries, and it started to be possible to travel there. And I managed to find my way onto one of the first exchange programs between the U.S. and China in the early 1980s. And that bred a lifelong fascination with the country. And that's now converged with my interest on particularly climate change issues because China is the number one greenhouse gas emitter in the world, more than 30 % of global greenhouse gas emissions.

3:43There's no solution to the climate change issue without China. Fantastic. Yeah, and that's what we're going to be talking about on the show today is China, its role in the global effort to address climate change, its role in the energy transition, and what that means for the rest of the world. But also then, to talk about this, we're joined by Joe Webster, who is a senior fellow at the Atlantic Council. Again, so do you want to talk a little bit about your interest in China? Listeners to the show may remember you were on a few months ago, talking about China's position in the energy transition and some of the issues around that in terms of essentially great power competition and geopolitics and some of the issues, again, that we're going to be exploring today.

4:22What's your route to following that issue at the Atlantic Council? Well, I just want to echo David's, you know, I think appreciation of the podcast. I've been a huge fan of the podcast for a long time. So wonderful to be here again with both of you and also be here with you, David, as well. My route to energy was so much circuitous. I originally started work right after college and as a defense contractor looking at China-related issues. And so that's what sparked my interest in China, broadly speaking, and then graduated over time. And so I started working more on Russia issues as well, so China and Russia issues.

4:51And energy is very important for the relations between the two countries, but also the systems within them. And so that's what really sparked my interest in China. And, again, really wonderful to be here with all three of you. I have not taken a single energy class in my life, but I've learned from all three people on stage. And so it's wonderful to be here. So thank you. Well, thank you. very kind of you and very good of you to join us. So there is an issue about this discussion we're about to have, which is that there's a kind of a crucial missing piece, Banquo's Ghost at the Feast, if you know the play Macbeth, which is the thing that we were expecting to be published during Climate Week, but has not yet appeared, is China's new NDC.

5:31It's a naturally determined contribution, which essentially is setting out China's plans for emissions reduction over the next decades to come. And this is something which all countries in the world essentially are meant to do in the run-up for COP30. Every country is supposed to come up with a new updated NDC, and we thought China's would come this week. It may still come this week, but we haven't seen it yet. David, start with you on this. in terms of your expectations for China's NDC, what do you think the country will be saying? You're quite right, Ed. This is a hugely important document. I think the most important document related to climate change that will be released by any government this year.

6:15China, as I've already said, is almost a third of greenhouse gas emissions. So its plan is absolutely central to the fight against climate change. I can tell you what I'll be looking for and will be most interested to see. So first, there's a kind of headline number here, which is the percentage reduction to 2035, which is the relevant time frame. And we've already had very high numbers put out by the European Union, by the United Kingdom, Japan, Brazil, Australia, in terms of their goals of reducing emissions. I think a lot of observers are hoping that the Chinese government will be somewhere in the 20 to 30 percent range in terms of reductions.

6:55But I think most observers are expecting the number to be significantly lower. We'll see. These are all rumors at this point. There are a couple of other important factors. One of them is the base year. That is the percentage reductions from what year. And there's a lot of interest in whether the Chinese government thinks that emissions have already peaked. If they pick 2025 as a base year, that's probably a sign that they think their emissions have already peaked. If they pick, say, 2030 as a base year, it may leave them opportunity for headroom. I'll also be looking at any sectoral targets that might be here.

7:30For example, are there targets for renewable energy deployment? Are there targets for reductions in the steel sector? And then there's kind of some subtleties of language also. So are they committing to reduce or are they striving to reduce or aiming to reduce? And then the people who speak both languages will be arguing about translation here. But these types of subtle verbs, shifts can have important differences when they come out of the Chinese leadership. So let me weigh in for a minute because they didn't announce their NDC yet. But Alibaba did announce that it has a$4 trillion plan to increase its spending on AI and data centers.

8:12And of course, as we'll discuss over the course of our discussion, there is this issue about whether or not I can commit to peaking carbon in my power sector, which the Chinese have put in a carbon market. I mean, it's not 100 percent. Got all the bugs out of it yet, but it exists. And there was the aspiration. But now that we're having to think about AI and how to provide the electricity for the AI, and you've got Alibaba saying$4 trillion of spending literally over the next five years, does that matter? Does that mean they can't retire coal? Is coal not suitable for AI training? Like, how does that look from the Chinese perspective?

8:57So I'll in here a bit. So regarding the NDCs, I'm not watching those as closely as I am some of the other technologies that China is developing. So, for instance, one is solid-state batteries. And so I personally have two minds about this. On the one hand, this could have major and major dramatic positive implications for decarbonization, especially in the transportation sector, but also in the power sector. So for solid-state batteries, those are potentially more suitable in extreme climates versus traditional lithium-ion batteries. And so that could have major implications for North China, for Inner Mongolia, potentially even for Mongolia.

9:28and that could have major implications for coal development and for coal use in the world. So China constitutes over half of all global coal consumption. And so I'm looking, that's one of the things I'll be looking for from the NDC is what sort of language is there. And as David mentions, you know, we're Chinese language folks are going to parse out what these specific word means, what that one doesn't. And so I'll be looking for that as well. But I'd also pay attention to not just what emerges from the NDC, but also what sort of technological developments will we see perhaps from next year. So as Amy mentioned, Alibaba came out today and they said, I think it was a lot of money, right?

9:59A lot of money is going to be spent globally for AI development. And so we can talk today about some of the how coal may or may not be helpful for training versus inference are obviously some key distinctions there. I think it's worth getting on the table the extraordinary clean energy deployment that's happening in China right now. I think people in the energy world are now more and more familiar with this, but it's still worth saying. So in 2023, there were about 217 gigawatts of solar, new solar deployed in China. By way of reference, that is more solar than had ever been deployed in the history of the United States at the time.

10:31That's in 2023. In 2024, Chinese deployed 277 or so gigawatts of solar. And then this year, so far, 212 gigawatts of solar. There's now a little bit more than that in the United States. So the incremental additions in each of the past three years are more than exist in the United States. And that's a tremendous impact on what Amy's talking about in terms of powering data centers and other things. I mean, I think today most of the electricity for data centers in China is coming from coal. But it's more and more will be coming from renewables. And in particular, the Chinese have something they call an Eastern Data Western Compute Initiative, which is all about moving data centers out to the West where there is more clean energy and where more of it will be provided by solar and wind.

11:19So I think to answer Amy's question, this is something certainly that Chinese energy planners are very attuned to. If we had someone from the current U.S. administration here, I think what they would say is, broadly speaking, the NDC is an empty document. Either, as you say, it's not making very significant commitments or it shouldn't be taken seriously to the extent that it is making significant commitments that would mean a change of direction in Chinese energy. And I think the crucial reason that people in the administration would say, don't look at the NDC, don't take it seriously, is precisely for the reason that Amy's talking about, which is that there is this huge investment going into new data centers, huge expansion of generation capacity, therefore, to support them, in part, not solely to do with AI, but definitely in part to do with China's push to develop AI capabilities as rapidly as possible.

12:19and they would probably say, well, yes, all right, there is absolutely more renewable generation going in. You're obviously right about that. There's more nuclear generation going in as well. But China is also adding significant amounts of new coal capacity. So when you talk about, David, you know, oh, is it possible that their emissions have already peaked? Some of the administration would say, no, it's highly unlikely they have done, in fact, that because they're adding this extra coal capacity. And it feels like we've been here There are a few times in the past where people have said, you know, maybe around sort of 2015 or so, maybe get around 2020.

12:52Oh, has China's coal consumption peaked? The answer was it never had. It kept on growing. Is there a possibility that we're here again now and that actually there'll be some sort of talk and nice warm words about capping the growth of coal? But in fact, it is just going to keep... Ed, there's a lot there. Let me start with your points on the NDC and then maybe talk about some of your other points. And with respect to the NDC, I'm going to maybe half agree, half disagree with the points you attributed to the administration. First, I take quite seriously the Chinese NDC. I think it's an important document.

13:23In general, the Chinese government does not make commitments in a public setting like this globally that it doesn't plan to meet. It is quite serious about these pledges. That doesn't mean they always meet every pledge, by the way. There is one notable pledge in this area they haven't met. They pledged a number of years ago to reduce the carbon intensity of their economy by 60 to 65 percent by 2030. They're not on track to do that right now. But by and large, when the Chinese government makes a pledge like this internationally, they orient their processes towards meeting this goal, and it's a serious pledge.

13:59That said, these NDCs are not policy drivers from the Chinese government. I don't think that the Chinese government starts with the NDC and then figures out what to do. They look at what's already happening, and then they define what the NDC is going to be. So there's some ambition that comes out of the NDCs, but by and large, I think, the Chinese government is not driving more ambition through its NDC. So what is driving policy then? A number of different factors, and I would point to the following. First, investment in strategic industries. And the Chinese government has for decades been committed to clean energy as a way of defining its economy for the 21st century.

14:37With electric vehicles dating back to the beginning of the century, I think the Chinese government looked at the Western internal combustion engine technology, decided that West had a 100-year head start on this. It was never going to fully catch up. And so the Chinese government decided to invest in electric vehicles, including the entire supply chain with batteries. And boy, are they ever seeing the results of that now. That worked pretty well. Unbelievable. I mean, if we did not have tariff barriers against Chinese electric vehicles in the United States, our streets would be filled with them.

15:05It's a huge issue in Europe, which has lower tariffs for electric vehicles, and there's more and more in the European market. I mean, I think it's astonishing for American consumers. I mean, you can go to China and buy a pretty good electric vehicle for$10 ,000 to$15 ,000, or even less, actually, in some cases. I mean, it's really quite cheap. And they've also had the same strategy for strategic industries in solar and have captured global markets there. We can talk more. There's a lot to say about that. We can come back to that. So I think capturing strategic industries is one important goal.

15:34A second goal is fighting local air pollution. And that has been a huge issue in China for many years. And particularly around 10 to 15 years ago, air pollution in China was off the charts horrible in many northern cities and across China and some southern cities as well. That air pollution has improved dramatically in China. And today, the dirtiest cities in the world typically are in India, not in China. And the data is actually quite clear, and the data from the U.S. embassy's rooftop in Beijing shows that over the course of the past 10 or 15 years, the principal measure of air pollution, PM 2.5, has gone down by about two-thirds.

16:09That is a result of switching from coal to natural gas, promoting renewables, promoting electric vehicles, and other factors. Another factor has been finding global warming. And I'm not aware of any climate deniers in the Chinese government. I have never seen any in the Chinese government contest the science of global warming. That doesn't mean it's the highest priority, but the Chinese government, I think, believes in the importance of decarbonization and is moving progressively in that direction. Joe, what do you think? Should the Chinese NDC be taken seriously? Oh, absolutely. So I would agree with everything David said.

16:42And just add another small point to that is when we think about the technologies China's invested in over the years, some of those bets have paid off, some of them have not. With what they call the three new solar batteries, these electric vehicles, those bets have paid off spectacularly well, candidly. And there are, importantly, some military applications to those bets. So with instance, for solar, it has lots of implications for artificial intelligence. You can site solar anywhere, you can build it very cheaply, very quickly. When we talk about speed to power, solar and batteries are the option.

17:11But also when it comes to batteries, there are all sorts of synergies with drones. So Ukraine is producing about 4.6 million first-person view drones, FPVs per year. Almost all those are battery powered. China can probably produce up to 10 times that. Some people say up to 100 million per year. That could have lots of military implications. But perhaps even more importantly are things like diesel electric submarines, which are powered with existing lithium ion batteries and lead acid batteries, which are less advanced chemistry. But as we move to more advanced chemistries like solid state, like lithium sulfur, the energy density gets much more favorable.

17:44You can pack more capability onto a submarine. you can also have greater endurance and less need for snorkeling. And so that could have huge implications for submarine options, especially in the unmanned arena, where you could have these really large unmanned autonomous vehicles, underwater operating, that could have a major implication. So all I have to say is I completely agree with David's points, but also too, there are going to be some military applications for some of the technologies that China has invested in. Whether that was strategic or not is another question, but the reality is that they are getting all sorts of strategic military benefits from these technologies.

18:14And just to add quickly to one point, to Joe's really important points about the security benefits of these clean energy technologies. One of the biggest strategic vulnerabilities that China has today is its reliance on oil imports. And that's been a big driver, I believe, in its investment in electric vehicles. Yeah, no question. And take it a step further, just comparing U.S. China. I think the Chinese became very acutely aware of how much their dependence on oil was going to go up, you know, after the mid 2000s. Right. And then that was about the time we started to crack the shale puzzle. And so all of a sudden the Chinese, you know, when you get to 2010, 2012, you're looking at the United States having, quote unquote, its own oil again, and lots and lots of natural gas and having China's natural gas and oil really faltering.

19:04And so there was a strategic disadvantage, which they tried to plug by at least going to electric cars and so forth in their domestic market. And I think it's panned out a lot better than maybe they might even have expected themselves. Because, Ed, when you talk about peak coal or peak emissions, I think they're still the jury out. But in terms of the impact of electric cars on China's oil use, And they've even shifted their trucks to LNG, a lot of trucking to LNG. So that is the one area that people feel pretty confident that their oil use actually in transportation could peak soon if it hasn't already.

19:47And it's an interesting question when you think about, you know, where are we going in modern warfare? here. So, you know, we can talk a little bit about the, you know, whose electricity systems better or worse in terms of supporting AI, but in terms of developing AVs, having really, as Joe's pointing out, having really critical performing battery technology for AVs, having the number of chips onboarded in the AVs. I understand that the Chinese AVs, the new ones coming out, have something like three or four times more chips than a Tesla, right? And so when you think about modern warfare, for us here in the United States to categorize something as clean in some polarized way, like they tried to almost ban the use of the word clean to go with technology, I mean, it's nonsensical because a lot of these technologies from just the strategic military point of view are critical technologies, and the United States can't afford to not participate in these technologies.

20:57I mean, unless we have some alternative technology, like we're going to hit fusion or something like that. I know there's some interest in those, you know, even further out technologies. But in the end, in the here and now, AVs, batteries, solar-assisted backup electricity, all these things are very important in even just the military race. Right. So let's talk about some of those strategic and national security and geopolitical issues as they relate to AI. Something you hear very often, again, from people in the administration, I heard Chris Wright talking about this the other day at the Council on Foreign Relations, is the idea that the US essentially, and maybe the West more broadly, is in an existential race against China to develop the most advanced capabilities in AI.

21:48And I heard Chris Wright using the analogy of the Manhattan Project in World War II. It's like the race against Nazi Germany to develop the atomic bomb, or you hear people talk about the space race against the Soviet Union in the 1950s and 60s. It's vitally important for civil reasons, but also for military reasons, to be the first to develop these most powerful types of AI. Joe, coming to you first on that, what do you think in terms of that kind of characterization you see from the administration about this great kind of global struggle? Do you think that's a fair way to look at it? So there are some different approaches to AI, and we'll call it AGI, artificial general intelligence, which we'll define here as intelligence equal to human being.

22:31That really is the crux of the U.S.-China AI competition, is how fast do we get there, and then what are the implications of getting to AGI. And so there's three different approaches to this, which we talked about a few months ago, but there's sprinters, marathoners, and then skeptics. So skeptics, as their name implies, they don't think that we're gonna get to AGI anytime soon, possibly never, and AI is probably gonna be a bubble with very significant implications. Marathoners, which is, I think it's fair to say, most folks in China think that we're gonna have a, AI is gonna be a powerful tool, but it's not gonna be as transformative as some suspect.

23:04So AI will be adopted on a sector-by-sector basis. We are unlikely to get to AGI before 2030, and we might not ever get there. And then finally, the sprinters are folks like Elon Musk, other U.S. tech CEOs especially, who think that we're going to get to AGI potentially the next year or two. And when we get there, it'll be a transformative technology. Those initial benefits will be self-reinforcing, such that the first person, the first country, the first company to get there will have astronomical amounts of power. And so that really informs it. I think most Chinese scholars would place themselves in the marathoner approach.

23:42There's potential for some sprinters in the U.S., but all that's to say is that we have this very, I'd say, incoherent approach in the U.S. where we at least notionally talk about this as an existential race with China. But at the same time, we are in many ways limiting our ability to get power to the grid quickly. On your show earlier today, you were talking about the power wall we potentially are reaching. and we're essentially restraining ourselves. We're self, we're imposing, we're handcuffing ourselves by not being able, by really in placing all these restrictions on solar, on wind. And these are the fastest resources we can get to the grid as quickly as possible.

24:16So all that's to say is that if we actually, if we do regard this as an existential race, we should be looking at all forms of energy and not just obviously coal, natural gas, et cetera. Amen. I can't agree more with what Joe just said. And I would add, there's a lot of intellectual imprecision and this notion of winning the AI race. And the notion is somehow we are going to get to AGI first. But what exactly AGI is, is not entirely clear. Some people adopt the definition Joe just had, which is being as smart as a human. But even that, it's not clear. As smart as a human, you could debate what that means exactly.

24:51I think the comparison with the race in World War II to get an atomic bomb is not that good for that reason. Either you had the atomic bomb or you didn't. And in this case, it's much less clear. And then even beyond that, it's not just having AI that matters. It's how you deploy AI in your society and, by the way, in your military also from a force structure standpoint. And so we could have the most advanced AI, but if we're not adopting it in our companies and our education process and more in our military, it won't matter. So I think this we're going to win the AI race frame is pretty problematic and needs a lot more rigorous thought than it's getting.