Specter of China cleantech hangs over U.S. election
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Whoever wins the White House next week will have to face a different China than his or her predecessors — one that is quickly becoming a world leader in the production and export of clean technologies.
While both Vice President Kamala Harris and former President Donald Trump are expected to continue hard lines on China trade and geopolitics, how each attacks climate change and cleantech will likely impact whether China dominates the electric vehicle, battery, solar, and wind industries worldwide in coming years or not.
Early battle lines will be drawn around Tesla TSLA 0.00%↑, which this week learned it fell behind Chinese EV giant BYD in global revenue for the first time last quarter. Trump will help his booster Elon Musk by erecting more tariffs while Harris will likely keep existing tariffs. Neither strategy will stop China and BYD from making inroads around the rest of the world, where other countries are more receptive.
China is making inroads in other technologies as well. The International Energy Agency said this week that, at the current pace, China will have cleantech exports of about $340 billion in 2035, roughly equal to the current output of oil and gas from Saudi Arabia and the UAE, and about 15% of all expected global green exports.
Earlier today in Europe, Volvo, which is owned by China’s Geely Holding Group, said it wants to buy struggling Swedish battery maker Northvolt out of a joint venture in Gothenburg, which would expand its battery technology capabilities on the continent. It becomes clearer by the week that China’s cleantech export plans are a key component of its own economic resurgence plan, and its foreign policy.
The next four years will be pivotal in the development in the U.S., Europe, India, or other countries of cleantech, and whether governments decide to compete with the Chinese or simply work with them, with all the risk that entails. It’s not a time for U.S. leadership to turn its back on cleantech, whoever is in charge. . . .
Don’t forget to contact me directly if you have suggestions or ideas dcallaway@callawayclimateinsights.com.
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The double-edged sword of naming names in sustainable funds
. . . . The Securities and Exchange Commission’s expanded Names Rule, designed to increase transparency in mutual funds and ETF marketing, is actually a double-edged sword, writes Mark Hulbert. When the SEC expanded the rule late last year to include sustainable funds it meant that funds with the name sustainable or ESG in their names needed to have 80% of their holdings in assets that fit those categories, i.e. no fossil fuel companies. The idea works for investors, but for companies it still means they can have one-fifth of their assets in non-environmental stocks, which is the double-edge sword, writes Hulbert. Also, companies might actually start going more vague in their marketing to escape punishment, which has already hit one fund company. . . .
Thursday’s subscriber insights
KKR, Energy Capital join data center/AI gold rush with $50 billion bet
. . . . Private equity giants KKR and Energy Capital Partners became the largest Wall Street titans to join the data center/AI gold rush this week, pledging $50 billion for investments in power projects.
Following BlackRock BLK 0.00%↑, Bain Capital, TPG and and a host of financial firms, KKR and ECP said they will commit up to a combined $50 billion to investing in power generation projects to release bottlenecks from the strained U.S. electric grids and send more power flowing to new data centers for AI research and production.
Many of the companies taking in the funds might already be owned by ECP, a prolific energy investor.
But the sudden rush brings an extra risk to the booming new revenue stream of AI, underscoring that demand is growing so fast that many of the tech and power giants building the centers will have to turn to fossil fuels instead of renewable energy.
Companies such as Microsoft MSFT 0.00%↑, Amazon AMZN 0.00%↑, and Google GOOGL 0.00%↑ have done deals to use all forms of renewable energy, including nuclear energy, to power their data centers. But while that is still years away, oil and gas — especially gas — are here right now and available to just turn on to source the power. KKR and ECP said in an interview with The Wall Street Journal, which broke their story of their commitment, that most of the energy they draw will come from gas plants.
That works against the central focus of the AI promise, that the new technology will create demands on power grids that will lead to more harmful emissions and pollution. Just like with the original California gold rush, the real money will be made in the tools to create AI, to the detriment of the surrounding environment.
On Wall Street for now, you’re nobody unless you have a data center play.
IEA highlights clean energy disparity between big and small countries ahead of COP29
. . . . How’s this for a scary Halloween climate statistic? Almost 40% of the world’s tree species are at risk from extinction in 192 countries, particularly island nations. That’s according to the International Union for the Conservation of Nature, which said its research shows 16,425 out of 47,282 species at risk. Now that’s existential risk.
But on the flip side, where there might be some hope, the International Energy Agency estimated in a report this week that the global market for clean technologies will almost triple in the next decade, from $700 million last year to more than $2 trillion in 2035, led by industries such as solar, wind batteries, and heat pumps.
China will be a huge beneficiary, as we noted above, as will India. The U.S. will grow despite who is in the White House the next four years. What is concerning, however, is the lack of growth estimates for the rest of the world. The IEA said it expects countries from Africa, Southeast Asia and Latin America “to account for less than 4% of the value generated from clean technologies.”
At this pace, the boom in clean energy will largely replicate the boom in oil and gas that came with the industrial revolution, benefiting big countries such as the U.S. and in Europe and leaving many others behind.
The disparity underscores the importance of coming meetings such as COP29 next month, where big and small countries can discuss funds for mitigation of climate change but also for production of green technologies. Despite the importance, IMF chief Kristalina Georgieva said this week she can’t attend COP29 in Azerbaijan because she’ll be at another economic conference in Latin America.
A discouraging but predictable start to the Baku summit, and one that makes our Halloween tree scenario all the more frightening. . . .
Editor’s picks: 2024 is the election ‘to win’; plus, who’s the best-looking bat?
Watch the video: Actor Leonardo DiCaprio endorsed Kamala Harris while slamming former President Donald Trump’s record on climate change. Bill Nye the Science Guy is among those backing Harris and argues that 2024 is the election “to win” if concerned about climate change and the future. Watch this report from CNN.
Move over, fat bears
There’s a new wildlife competition on social media: The Bureau of Land Management is asking Americans to vote for the best-looking bat. As of Thursday, it was down to finalists Hoary Potter, a hoary bat (above) and Lestat, a western small-footed bat. The Bat Beauty Contest, which you can read about and participate in on Facebook or Instagram, highlights Bat Week. All of the bats are part of wild populations that live on land managed by the public agency and are photographed by wildlife technicians. Bats often get a bad rap, but they are essential to pest control, pollinating plants and dispersing seeds. Recent studies estimate that bats eat enough pests to save more than $1 billion per year in crop damage and pesticide costs in the U.S. corn industry alone. Fun fact: Bats are the sole pollinator for the agave plant, a key ingredient in tequila, says the U.S. Fish & Wildlife Service.
Latest findings: New research, studies and projects
Climate investment: pouring in
Analyzing the importance of climate-related investment using a large economy-wide survey of UK firms, more than half expect climate change to have a positive impact on their investment in the medium term, with around a quarter expecting a large impact of over 10%. So say the authors of this NBER working paper titled Firm Climate Investment: A Glass Half-Full. From the abstract: Climate investments are expected mainly in switching to green energy sources and improving energy efficiency, and firms expect to finance these mainly using internal cash reserves. Overall, although firms are expecting to invest more resources in adapting to climate change, under reasonable assumptions, these investments are still not sufficient to meet the estimated targets implied by the UK Net Zero Pathway. Authors: Prachi Srivastava, University College Dublin; Nicholas Bloom, Stanford University - Department of Economics, National Bureau of Economic Research (NBER); Philip Bunn, Bank of England; Paul Mizen, King’s College London - King's Business School; Greg Thwaites, University of Nottingham; and Ivan Yotzov, Bank of England.
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Words to live by . . . .
“The ocean and nature can live without us, but humanity can’t live without nature.” — Gloria Fluxà Thienemann, chief sustainability officer, Iberostar Group.