Economics

-

September 12, 2024

Introduction

The EU Corporate Sustainability Reporting Directive (CSRD), many years in the making, is revolutionary. CSRD will replace the questionable smorgasbords of stand alone inserts on corporate sustainability profiles. It does so by requiring firms to provide detailed framed descriptions on integrating sustainability into all facets of corporate decision-making.

This includes Scope 3 considerations on suppliers and end-users.

Most important, CSRD will become an international gold standard since all firms with significant business in the EU most submit CSRD reports.

In total, CSRD obliges disclosures on 13 different areas.

With CSRD, sustainability will be at the forefront in recording past and planning future endeavours.

Because it is highly complex to systemize descriptions of sustainability for every aspect of company activities and decision-making, the reporting process will be phased in and will organically evolve.

Beyond doubt, CSRD is a radical departure from ESG, which, for many companies, has become a public relations exercise.

CSRD overview

The Corporate Sustainability Reporting Directive (CSRD) became effective January 5, 2023. It replaces the Non-Financial Reporting Directive (NFRD). EU Members States had until by July 2024 to integrate CSRD into their laws.

CSRD goes much beyond NFRD by requiring the integration of risks, targets opportunities and due diligence, relative to environment and people, in corporate strategies and business models. This includes global financial activities and short- and medium term data to guide decision making.

Consequently, CRSD assists investors, civil society organizations consumers and other stakeholders assess and compare the sustainability performance of firms, based on standardized reporting.

These common standards pre-empt adhering to multiple voluntary criteria common to ESG. The voluntary ESG boundless characteristics typically result in gaps in accountability. This is especially so since ESG offers little or nothing on comparing annual sustainability performances.

Firms falling under the umbrella of CSRD are large companies previously subject to the NFRD; other listed companies; listed small and medium size enterprises; large private European firms; and non-European corporations with significant business in the EU.

Companies outside the EU with significant business in the EU that must comply with CSRD stipulations are those having securities listed in a EU market; a huge EU subsidiary; and a large connection to an EU group such as a holding company, or a EU parent group.

CSRD reporting

The essential information must cover quantitative, qualitative descriptions on 1) sustainability themes such as climate change; pollution; biodiversity and ecosystems; water waste and marine resources; plus resources use and circular economy; 2) social challenges including working conditions of a firm’s own workforce and workers in the value-chain, diversity, consumers/end users and community impacts; and 3) governance related to human rights and business ethics, all integrating Scope 3.

The technical reporting rules known as the European Sustainability Reporting Standards (ESRS) became law in December 2023.

Apart from general disclosures, all ESRS standards necessitate a materiality assessment. Should such assessments not apply, an explanation must be provided. Also, some reporting components are voluntary.

The draft ESRS standards were originally conceived by the European Commission with the technical advice of the group previously known as the European Financial Reporting Advisory Group (EFRSG). The EFRSG was a multi-stakeholder independent body including investors, companies, auditors, civil society, trade unions, academics and national standard-setters.

A hefty multi-stage series of EFRSG consultations followed and terminated in June 2023 with a 4-week public consultation.

Refinements of the EFRSG became the blueprint point of departure for an organic continuing process for improvements and clarifications that, among other things, optimize interoperability with International Sustainability Standards Board (ISSB) standards and the Global Reporting Initiative. This facilitates matters for those companies that wish to comply with one and/or the other. The EU aims for a seamless global compatibility and comparability framework on sustainability reporting.

Accordingly, not only will the evaluation criteria become an evolving/living universal foundation for rating the sustainability of companies, but they will also guide firms on how to improve their practices and standings.

A company has the option of having its draft CSRD report audited by a third party. Material so collected must appear in annual reports and are subject to audit.

Penalties for non-compliance are determined by EU Member States.

Scope 3 inclusion sets CSRD apart

Scope 3 emissions dive into the entire value chain of a firm, from suppliers to end-users, typically representing the majority of emissions associated with a company.

The most flagrant example of the importance of including Scope 3 in corporate sustainability descriptions is that of fossil fuels, the dominant global warming sources. It is estimated that 75% of total emissions, and 90% of a fossil fuel firm’s emissions, are attributable to the burning of these fuels.

Across all categories of firms, Scope 3 represents an average of 70% of company-specific emissions.

By including Scope 3 in a firm’s sustainability statements, at the very least, creates an incentive for companies to put emissions reduction pressure on suppliers and/or change certain suppliers.

Year-by-year reporting comparisons helps guide corporate investment choices.

Phased-in start timelines

Recognizing that extensive sustainability reporting could be especially burdensome for firms with less than 750 employees, the ESRS makes way for a phased-in reporting process.

The first phase of CSRD reports will begin in 2025, based on 2024 corporate performances. This phase covers firms listed on an EU-regulated market that have more than 500 employees.

Large companies with less employees, listed as well as non-EU listed, must submit their first report in 2026, for the financial year 2025. Such companies must meet two of the following criteria: over 250 employees, €50 million ($55 million) in turnover, €25 million ($28 million) in total assets.

Listed and non-EU listed small and medium size enterprises (SMEs), along with small and non-complex credit institutions, and captive insurance undertakings, will have the obligation to submit their CSRD reports in 2027, with respect to the 2026 fiscal year. Plus they will have a 2-year opt-out option after that.

SME reporting standards are more supple and will be capped. Draft versions of these less demanding standards are underway.

For non-listed SMEs that may have to submit sustainability information to banks, investors, customers and other stakeholders, the EFRSG conceived a simpler voluntary guide.

Non-EU companies with net revenues over €150 million ($165 million) annually earned in the EU; have a branch with either a turnover exceeding €40 million ($44 million); or a subsidiary that is a large company or a listed SME, will have to report on the sustainability impacts at the group level of that non-EU company, starting with the financial year 2028. The first sustainability statement is to be published in 2029. There will be different standards for such cases.

For EU firms not listed, such as an EU subsidiary of a non-EU headquartered company, reporting is obligatory for firms having two of the following characteristics in their profiles for two consecutive fiscal years. These characteristics are 1) total assets €25 million ($28 million) as of December 2023; 2) net revenue €50 million ($55 million) as of December 2023; and an average of 250 employees.

The takeaway

The CSRD will be an effective international corporate sustainability crusader because it applies to all large companies and SMEs doing business in the EU. Since the overwhelming majority of multinational large firms and SMEs with international markets conduct significant business in the EU, the CSRD impacts are world-wide.

The thoroughness of the CSRD process lends credibility to corporate descriptions of sustainability progress to-date and influences on a broad sphere of decision-making. Without the CSRD portrait requirements on sustainability risks and opportunities, it is hard direct firms towards more sustainable practices.

The CSRD is much more than a compliance exercise with lofty ESG narrations.

COP29: China, Trump and the EU, each own way: Green vs. stranded fossil assets

By

-

November 11, 2024

China’s 2024 drop in annual emissions is anticipated to be about 7.2% or 8.2%.

World trade — Update Dec. 5, 2024 Chart of cargo containers with Chinese, US and European Union flags

For climate action, China has chosen long-term extraordinary innovation investments and scale to wean off fossil fuels.

The European Union (EU) is making progress for energy independence by 2027, though with some Chinese technologies.

Too, the UK and Brazil have set ambitious climate targets

The U.S., Trump administration will enhance paths towards stranded fossil fuel assets. The private sector will continue floundering on clean tech innovation and base performance on the short-term, quarterly reports.

Canada will emulate the U.S.

China

China spent $676 billion on clean tech in 2023, over double that of any other nation.

The good news is that China’s power emissions may peak by 2025, ahead of its 2030 target and the first annual decline since 2016. Should China succeed in plateauing emissions in 2025, the Paris Agreement target to halve emissions by 2030, could have been a possibility, if it weren’t from Trump.

This potential appears unimaginable since China accounted for 30% of global emissions in 2022, 11 billion tonnes.

The bad news are potential impacts on economies outside China regarding their clean tech manufacturers competing with much more affordable and more advanced Chinese exports.

There appears to be a pattern for China’s clean tech successes, high up front government support for research and development plus oversupplying the domestic Chinese market. This formula has had mixed consequences.

China’s oversupply of clean tech industry typically achieves excellent economies of scale for offering low prices, but often results in profit declines, or even losing money, due to fierce competition in the domestic market.

To make up for the domestic low margins, prices for Chinese export markets are set to be both profitable and affordable choices in these markets.

European Union

The European Union, post Russian invasion of Ukraine, like China, has an agenda to sever dependence on fossil fuels. The EU aims for energy independence via a green transition by 2027.

While there was a 911-like spike in LNG imports from the U.S. immediately after the invasion, thanks to intensive emphasis on renewables, heat pumps, efficiency and other measures, EU gas imports were down 20% in 2023 and anticipated to peak by 2025.

Electric vehicle (EV) sales trends indicate a displacement in European oil consumption of 3.3 million barrels/day by 2030.

U.S. and Canada

Trump promised to pull out of the Paris Agreement.

Though the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) have been outstanding in supporting the building of clean tech factories, EV purchases and the installation of home energy saving solutions, e.g. heat pumps, and solar panels, Trump wants to water down these milestone laws to suit his agenda.

Nonetheless, Trump will have to take into account that in 2023 the clean energy sector, including storage and EV charging, came in at 40% of U.S. energy jobs, with a 200% growth in that year.

The EV and battery projects announced and associated with the Inflation Reduction Act and Bipartisan Infrastructure Law will create of 201,900 jobs. This sector could generate another 931,000 jobs.

Still, since the U.S. innovation gap with China widened even with the original IRA and BIL in place, expect that gap to grow when Trump unbelievably dilutes the legislation.

Trump referred government backing of the green economy as a “green new scam.”

Further contributing to the innovation gap, emission standards across all sectors will become more lenient.

Most notably, the overriding energy themes will be in “drill, baby drill,” for increasing oil and gas production.

What will Trump do when global fossil fuel demand peaks and U.S. clean tech jobs outnumber oil industry employment?

Sadly, Canada will follow in U.S., as always, and continue to be a fossil fuel exporting nation. The next likely Prime Minister, Pierre Poiliève, will make sure of that.

UK and Brazil step up at COP29

At COP29, the UK pledged to reduce emissions by 81% by 2035 from 1990 levels and Brazil has prepared a comprehensive climate plan for a 59% to 67% GHG reduction by 2035 based on 2005 levels.

Electric Vehicles and batteries

China’s dominance in affordable electric vehicle (EV) and battery sectors are prominent examples of technological leadership and the Chinese oversupply business models.

At first glance, one might get the impression that China is an unlikely leader in these sectors.

Compared to Western economies, China has considerably fewer cars, vans, buses, freight and other trucks per 1,000 inhabitants at 231, very low compared to the U.S. 908; Canada 790; Germany 628; and U.K. 600.

In part, low vehicle ownership in China is a consequence of being the global leader public transit. China has 46,000 km of high-speed rail, 50 subway systems with over 10,000 km of track, substantial light rail and had 455,000 e-buses on its roads in 2022.

Yet, with EVs having reached 53% of the Chinese vehicle market in September 2024, China represented 69% of the global EV registrations in 2024, up until October. That’s because Chinese EVs are considerably more affordable than EVs in other countries.

China’s EV tech lead goes back to the 1990’s when China started to invest in EV research. Back then, China had realized Chinese manufacturers of internal combustion engine vehicle (ICEV) models could not compete in export markets that are too overcrowded with competitors.

Thereupon, China developed a complex compilation of measures that pushed manufacturers towards producing New Energy Vehicles (EVs), the consequences being manufacturing of ICEVs became more expensive to produce and EVs less expensive.

Today, additional more compelling contributing factors to Chinese affordable EVs and batteries include government support for quickly getting over the time hump to get a return on investment. Overall, China’s EV financing covers innovation, development, minimizing production costs and start-ups.

China’s holistic long term vision has been a key to reducing EV battery costs. China has invested more on battery research than all other nations combined and has a plethora of EV R & D programs.

Unimageable in Western economies, China’s CATL, the largest battery producer in the world, has 20,000 employees dedicated to R & D.

BYD, the largest EV manufacturer in China and second biggest battery producer, is a rare integrated EV and battery firm making most parts in-house. These achievements are thanks to its 900,000 employees, of which more than 110,000 are R & D staff.

By early 2022, China accounted for 80 percent of global battery production capacity and controls, 75% of battery cell manufacturing, 90% of anode and electrolyte production, 60% of battery component manufacturing, and refining for more than half of global lithium, cobalt and graphite.

The battery technology-related savings have manifested into 95% of Chinese made EVs equipped with the less costly lithium iron phosphate (LFP) batteries. LFP batteries are nearly exclusively manufactured in China.

Outside China, NMC batteries (lithium-nickel-manganese-cobalt-oxide) are typically used.

Compared to the NMC batteries, LFP batteries are cheaper to manufacture, have higher stability and are easier to recycle.

However, on performance, LFP batteries are not yet as good as lithium-ion ones. But technological advances are in the process of closing the performance gap.

CATL and BYD alone, have 90% of the LFP market.

The results are battery costs are about 18% less in China than elsewhere. This is critical for the pricing of an EV since the battery typically comes in at 40% of an EV’s cost.

However, until now, China’s LFP batteries have been destined for the more affordable entry level small low- to mid-cost models.

Hyundai is about to change all that, challenging China’s LFP cartel with an ultra-high capacity 300 Wh/kg LFP battery to be produced without Chinese components by end 2025. Average Chinese LFP battery capacity is 200 Wh/kg.

If Hyundai succeeds in its LFP development plan, it will have a LFP battery with longer range than the typical NMC battery and would be the first LFP battery for high performance EVs.

If all goes according to plan, Hyundai may be able to produce affordable EVs with LFP batteries for both entry level and performance models, with impressive range and not subject to tariff barriers.

Also in progress, BYD is constructing a factory for third generation batteries, sodium-ion batteries, for scooters and micro vehicles, for starters. BYD believes it could eventually produce sodium-ion batteries that will be less than the cost of LFP in the long term.

CATL is working on its improved new enhanced version of sodium-ion batteries for small and short range vehicles and China’s Chery will have a factory for the fourth generation, solid-state batteries.

As well, China’s EVs benefit from better economies of scale associated with oversupplying. Chinese EV manufacturers bet attractive pricing will create demand to meet supply. Oversupply may be an understatement as China’s 200 EV manufacturers will have launched about 110 EV models by end 2024. With all the competition, the average domestic profit margin is slim, averaging 5% in 2023, with some models sold below cost.

As indicated above, the profits are made on exports, while still maintaining a price advantage. The BYD lineup average price is $30,000.

While the U.S. and Canada have imposed 100% tariffs on Chinese EVs, BYD is entering a new foreign market nearly every week, launches about 10 new models/year, and has an operating manufacturing plant in Thailand, plus facility projects in Mexico, Hungary, Turkey, Brazil and Indonesia.

These are important considerations, since the revenues of legacy automakers depend on global markets, not North America alone.

Legacy EV and battery manufacturers outside Asia cannot compete with the scale, pace of innovation and/or vertical integration of their Asian competitors.

Legacy firms depend on a plethora of external suppliers.

All the more for making the future of Western legacy automakers uncertain.

Tariffs and other barriers to affordable EVs

The U.S. and Canada 100% tariffs on China’s EVs, batteries and components will boomerang regarding a growing innovation gap and legacy automakers’ competitivity in critical global markets.

Not bothered by the United States-Mexico-Canada Agreement on trade, Biden and Trump intend to keep Chinese EVs made in Mexico out of the U.S.

Since the U.S. also has a trade agreements with Morocco and South Korea, many Chinese EV components investors had been planning to build plants in these countries.

A Trump reworking of the Inflation Reduction Act and Bipartisan Infrastructure Law, upon which the Moroccan and South Korean projects are premised, may see the aforementioned investments put on pause.

The Biden administration has already implied that Chinese EVs manufactured elsewhere would not be eligible for $7,500 consumer credit applicable to North American built vehicles.

Trump may put the final nail on this escape route.

The Trump additional 25% import tariffs for all goods from Canada and Mexico might apply to Canadian EVs and batteries too.

Contrasting the U.S. an Canada, the European Union has manufacturer-specific trade barriers on Chinese EVs, the EU varying tariffs range from 8% to 35%, on top of an existing 10% duty. The highest tariff is aimed at SAIC Motor Corp, likely because the company is state-owned.

The EU doesn’t want to set the tariffs too high because the EU hopes to attract China’s manufacturers to invest in factories in the EU. Production of Chinese EVs in Europe would remove tariffs and many Chinese EV manufactures are doing just that.

In addition to the BYD EV plants planned for Hungary and Turkey, other Chinese EV stakeholders, such as Geely vehicles and CATL, are engaged in major investments in Europe.

Even with the EU tariffs, many Chinese EV imports will still be somewhat more affordable than their European competitors.

The European Commission (EC) concluded that the average Chinese EV battery electric vehicle (BEV) imports cost 32% less than European EVs in 2023.

The 2024 prognosis is that China’s EV imports will come in at 25% of the European EV market share.

A large portion of these imports are Tesla, Dacia and BMW EVs.

Legacy automakers

The China advantage spells trouble for EVs produced by legacy automakers.

Battery projects in Western economies may be outdated before production begins.

Better technology and better prices cannot be stifled by protectionism.

Many legacy automakers have not gotten over the hump for a return on investment.

In June 2024, Ford claimed it loses $100,000 for every EV sold, its EV division lost $4.7 billion in 2023 and expected losses to hit $5.5 billion in 2024. Thus, Ford plans to offer more of the more profitable plug-in hybrids.

Meanwhile, GM is mumbling about offering different battery chemistries and enlarging its plug-in hybrid lineup.

Volkswagen, the largest German employer with 10 factories in the country, is experiencing economic troubles too and looking to plug-in hybrids as the way forward.

In late October 2024, Volkswagen announced it will be shutting down 3 plants in Germany and cut wages by 10% for 140,000 employees.

Among other things, Volkswagen cited a drop in third quarter 2024 profit levels by 42% associated with lower then projected, or insufficient, EV sales, to recover the high EV transition costs; increased competition from European EV imports from China; and sharp declines in the Volkswagen market in China, where EV sales now exceed ICEVs.

Since traditionally 40% of Volkswagen sales have been in China, the deterioration of the Volkswagen market in China constitutes a heavy blow for the company.

Likewise, BMW and Mercedes Benz are dependent on the Chinese market, for 32% of global sales and 28% respectively.

This puts Volkswagen, Mercedes Benz and BMW in a conundrum.

Germany opposed EU tariffs on EV imports from China.

Oversupply in renewables

China is determined to reduce its dependence on fossil fuel imports while Trump aims to increase oil and gas production.

Accordingly, the China clean tech oversupply business model applies to the solar panel, and wind turbine sectors.

In the China’s wind sector, production overcapacity during 2022 and 2023 brought about low domestic market profit margins, while in the U.S. and Europe, the margins were 2 to 3 times higher.

Consequently, the Chinese turbines prices in Europe and the U.S. were lower than their European and U.S. competitors. Six of the 10 top windpower producers are Chinese.

For solar panels, despite China’s mindboggling increases in the annual solar installation rate, China’s solar manufacturers were caught with an oversupply having exceeded China’s storage and transmission capacity.

In the coming two years, the Chinese solar modules manufacturing capacity may actually double world demand.

As is the case with the Chinese EV sector, excessive renewables competition within China has led to unprofitably low domestic prices, compensated by exports of more profitable and affordable exports.

Trump’s proposed 20% tariffs on all solar and wind imports from China could affect the prices of renewables in the U.S.

The takeaway

China, the EU, the UK and Brazil will accelerate weaning off fossil fuels, leaving the U.S., and Canada too, to increase the production of these fuels as the market for these fuels dwindles.

China will persist in manufacturing more clean tech, solar, wind, EVs, batteries/storage, plus electrifying its industries at levels greater than the rest of the world combined.

For the U.S., action on climate change to compete with China, will take inconceivable huge hits with Trump, while fossil fuel production will be administered steroids. The U.S. clean tech private sector will continue to lag on innovation, constrained by an investment community which only understands quarterly reports. The U.S. will continue to lose ground on clean tech leadership.

Canada has much to lose, especially with Conservative Pierre Poiliève, the likely next Prime Minister, aligned with Trump on denial of climate change, increasing oil and gas production and many other issues.

The EU seeks win-win formulae with rational environmental and economic considerations. The EU may show the way forward.

China, the EU, UK and Brazil will stand out as global climate leaders.

China green shift global impact greater than COP

By

-

January 2, 2024

Expectations for COP29 in Azerbaijan, based COP28 in the United Arab Emirates?

The light getting in though the cracks is few countries are immune to competition with China’s sweeping expeditious green transition.

China’s brisk energy transition intentions are three-fold, decarbonization of its economy, domination of global clean tech manufacturing and reduced dependence on imported fossil fuels.

Renewables

The COP28 final statement calls for a tripling of renewables capacity by 2030. China had an objective to triple renewables capacity by 2030 too, but China will reach its 2030 renewables capacity target in 2025, 1,2 TW (terawatts). The country will continue to increase capacity sharply thereafter. By 2030, the forecast is for China is to hit 3.9 TW. The aforementioned COP28 global ambition was for 11 TW by the end of the decade.

According to the IEA, China now accounts for 60% of global renewables capacity installed in 2023 and this will carry over into 2024. The expansion of capacity is outpacing rising demand. For 2023, China investments in renewables will attain the summit of US$177 billion.

For 2023, BloombergNEF projected China solar capacity additions to reach 208 gigawatts (GW), twice the entire U.S. solar capacity.

China’s new wind and solar capacity installations for 2023 may amount to 300 GW, astronomical compared to the global capacity increase of 338 GW in 2022.

By September 2023, total installed wind and solar capacity was 400 GW and 520 GW, respectively. To put this in perspective, Hydro-Québec, one of the largest utility companies in North America, has a total production capacity of 47.5 GW.

All together, China is installing 20 GW of wind and solar per month.

By the third quarter of 2023, 53% of China’s power sources were wind, solar, hydro and nuclear. That’s a giant leap from 2011 when coal accounted for 80% of the country’s power supply.

The scale of some of the renewables projects is staggering. The Golmud Solar Park in Qinghai, the world’s largest solar park, has a capacity of 2.8 GW with 7 million solar panels spread over sands. Even that is just the beginning. The plan calls for expanding this park 6-fold in the next 5 years.

In 2022, plans were announced for 500 GW of onshore solar and offshore wind projects for Gobi Desert across Xinjiang, Inner Mongolia, and Gansu provinces.

To transport gargantuan new capacity, ultrahigh-voltage (UHV) lines projects are eye-popping. State Grid Corp of China, the country’s largest State-owned utility, has started construction on 13 UHV lines covering 30,000 km.

China catapults economy-wide electrification

China is electrifying its economy at a mind-boggling rate, with 1.1 million electric buses and trucks; two-thirds of the global market for light EVs; electric subways and light rail; and 42,000 km of electric high speed passenger and freight rail.

Consequently, China’s Sinopec, a large petroleum refiner and distributor, anticipates peak gasoline will occur in 2023.

Coal

China’s electric power carbon emissions will peak in 2023 or 2024, ahead of the 2030 target, plateau for a while, and then enter an exponential decline. This is attributable to mindboggling increases in renewables capacity, and an uptake in hydro capacity.

True, China has the world’s largest coal power plant fleet. Yet, the opening of 2 coal plants per week or 106 GW of new power plants in 2022, responds to peaking requirements only. While China reached 1,100 GW of coal power plants functioning in 2022, 775 GW of operational coal plants were shut down or were projects that never made it to construction.

Consequently, coal plants in China on average run 50% of the time. Carbon Tracker has divulged that 40% of China’s coal plants are losing money. The 5 major state-owned coal power plant companies are also experiencing heavy losses.

The capacity usage will fall further to 25% over the next two decades.

These contradictions are largely the result of provincial governments supporting their local coal enterprises and jobs.

A forthcoming plateau in infrastructure projects translates into less coal for cement production, a 2.7% reduction in 2023 and 61% reduction by 2036. Likewise, petrochemical and aluminium production drops will contribute to lower demand for coal.

These factors should result in a decline in coal demand by 2024, as alluded above. Not only many coal plants permitted up to 2023 will never get built, but also many existing coal plants will become stranded assets.

In China, likewise for Europe and India, 90% of coal plants will be uncompetitive by 2025.

EVs

The BloombergNEF Electric Vehicle Outlook 2023 reported that EV growth rates for 2022 were 62% world-wide and 95% in China.

In 2022, China had 600,000 electric buses on the road, at least 99% of the world total. That year, it manufactured 138,000 e-buses for the domestic market.

There were 400,000 electric trucks on China’s roads in 2022.

China’s rate of light-duty EV growth is 4 times that of the U.S. Total EVs sold in China are greater than in the rest of the world. For the end of 2023, it is projected plug-ins will have reached 38% of sales.

Too, China is now the world’s largest exporter of EVs. For 2022, exports from China acquired 11% of the European market. An irony of sorts, Tesla’s Shanghai factory is China’s largest EV exporter.

North America is vulnerable to an invasion of EVs from China too. China’s BYD will soon launch the BYD Seal in North America to compete with the Tesla Model 3. Other Chinese EV brands are planning international expansion. By contrast, North American EV and battery investments related to the U.S. Inflation Reduction Act and Canada’s Budget 2023 await production start-up dates.

Fascinating is the electrification of the three-wheelers for which China and India account for 90% of the global fleet. There were 117 million 3-wheelers on the roads in the world by 2022, 70% of which were electric, though most with lead-acid batteries. That jumps to 300 million if two-wheelers are included.

The 3-wheeler sales in 2022 were over 12 million units encompassing a major migration to lithium-ion batteries. For the short-term, it is the two- to three-wheelers that will generate a noticeable decline in oil consumption.

The global share of EVs in two- and three-wheeler sales increased from 34% in 2015 to 49% in 2022.

Clean tech manufacturing

China has 9 of the 13 largest solar manufacturers in the world and 7 of the top 10 global wind manufacturers are in China.

Solar panels production was 310 GW in 2022; were about 500 GW for 2023; and 1000 GW in 2025, the latter 4 times the output worldwide.

Energy storage battery capacity to accommodate intermittent renewables power will go from 550 GWh in 2022; to 800 GWh in 2023, and 3,000 GWh in 2025.

By early 2022, China accounted for 80 percent of global battery production capacity.

China had 125 battery factories in 2022 and more than double are in the planning or construction phases This despite, China having only 10% of lithium raw material, while Australia has 50%.

Lower battery prices give China an EV edge in global markets. The average price of a Chinese EV battery is US$26,500. That is one third of the transaction price in Europe and half that of the U.S.

An astonishing next generation battery head start is that of China’s BYD breaking ground in January 2024 for the first sodium-ion gigafactory, a technology still in the development stage for most. Sodium-ion batteries are composed of abundant iron and sodium, free the more expensive lithium plus nickel, cobalt and graphite. This technology replaces lithium cathode material and can be combined with hard carbon anode. It is less vulnerable to cold weather. BYD will initially use these batteries for scooters and micro-vehicles.

Also, China’s leadership comprises a long-term view, having issued rules that all battery powered vehicle manufacturers must be responsible for battery recycling. The policy also directs that the design of batteries facilitates recycling. China is experimenting with a battery recycling framework.

Decarbonization

By far, China dominates global industrial production, 61% of global steelmaking, 57% aluminium manufacturing and 52% cement output, collectively more than half of global production. The chemical and paper sectors represent 40% of the global share in these sectors.

China’s wide array of state-owned enterprises (SOEs) are pillars for backing a decarbonization goal under the umbrella of China’s 14^th 5-year plan. Under this plan, carbon neutrality will be accomplished by 2060, CO2 emissions will peak by 2030 and 50% of increased energy consumption will stem from renewables by 2025.

As for energy SOEs, they are immune to the straitjacket of oil and gas companies, incapable of changing their increased fossil fuel trajectories. In this regard, SOEs are diversifying their portfolios, with a strong push for renewables and massively investing in research and development and innovation of clean technologies.

Belt and Road Initiative (BRI)

BRI is by far the most ambitious global economic development program involving over 115 countries.

From 2013 to 2022, fossil fuel infrastructure accounted for two-thirds of BRI power sector investments.

In September 2021, China announced it will not support new coal plants abroad, though not all new coal projects were shut down.

China has since established the BRI International Green Development Coalition with 134 international partners. UN Environment will facilitate BRI recipients to achieve UN Sustainable Development Goals including green finance and energy, plus energy efficiency.

For the first half of 2023, 56% of the US$12.3 billion in BRI energy investments were allotted to renewables. Colour coded prioritization of projects favours green ones.

At COP29 in Azerbaijan, November 2024, China let it be known that since 2016, it invested $24 billion in developing countries.

China emissions to-date

There are those who suggest China must act first before their own countries take action on climate change and China is addicted to coal. China is acting first, leaving no excuses for the climate naysayers.

Granted, China emitted 31% of global emissions, 11,397 metric tonnes (Mt) in 2022. This is more than twice as much as the U.S. for 2022 at 13.6%, with 5057 Mt.

This does not tell all. On a per capita basis, China’s emissions are half that of the U.S. Since 1751, China is responsible for half the cumulative emissions as the U.S.

But this is history, China is migrating into a green transition quicker than most can assimilate.

The takeaway

The U.S.$369 billion Inflation Reduction Act (IRA) which is spurring a tsunami of investments in clean tech plus manufacturing of EVs and batteries is largely about closing the green economy gap with China. One year after the IRA passage, in August 2023, private sector investment announcements in U.S. clean tech projects totaled up to US$278 billion and 170,000 jobs.

The domino effect on the European Union is such that it is exploring how to close the clean tech investment gap with the U.S. The EU “lost” its solar industry in favour of China, European wind manufacturers are struggling to compete with lower cost Chinese turbines and 11% of the European EV market is represented by Chinese imports.

China’s march to dominate the green economy suggest a green transition will become a global competition imperative.

China will change the course of the global energy geopolitical titanic.

By contrast, the exclusion of reducing fossil fuel production in the COP28 final statement is not a milestone.

Big Oil, renewables, electric vehicles + clean tech: Fossil fuel windfalls

By

-

October 6, 2022

image solar wind + ev charging — Wind, solar, storage + electric vehicle

Prior to the Russian barbaric invasion in Ukraine, announcements made by the oil and gas majors seemed to imply they were engaged in energy diversification. This diversification has been typically presented as that of increasing the proportion of their assets in clean technologies while reducing the exploitation of fossil fuel reserves.

Now, with the oil and gas companies earning windfall profits linked to the Ukraine war, inflation and European urgent short-term requirements for fossil fuel sources substitutes, the real truth is coming out. High fuel prices have revealed opportunist short term thinking prevails over lofty long-term goals.

China: Largest emitter to green gamechanger, but…

By

-

July 4, 2022

China climate emergency global influence

China is several years ahead of other developed countries on the migration to a green economy, in clean technology production capacity, massive market penetration and green investments. China already has an extraordinary global green export potential. China leads in renewables, electric vehicles and battery production, incrementally regulating plastic solutions, high-speed rail, private clean tech investment, government environmental support and green bonds. China’s concurrent climate actions are gamechangers destined to have huge global competition impacts on energy, economic, transportation, industrial and other paradigms, perhaps more so than the climate crisis. But there are simultaneous contradictions. China is the world’s largest liquified natural gas importer, once again ramping up coal production and certainly not a leader on human rights.

Putin losing energy war: European climate emergency

By

-

April 26, 2022

1

Nord Stream 2 60464933_303 — Nord Stream 2 gas pipeline padlocked

Putin’s war has created an electroshock for Europe because it depends on fossil fuel imports for 60% of its energy, one-third of which comes from Russia. Organically evolving European Union (EU) plans target 2027 for a massive and rapid transition to a green economy and energy independence. Renewables, electric vehicles, clean technologies and energy efficiency will all play major roles in the creation of fast-forward paradigms for global emulation. For the immediate, by the end of 2022, EU plans entail cutting Russia gas imports by two-thirds, substitution fuel sources plus ramping up renewables and energy efficiency. These EU plans will be devastating for the Russian economy. Russia needs European oil and gas revenues more than Europe needs these fuels.

Green hydrogen, no panacea: Deep dive

By

-

January 10, 2022

Green hydrogen offshore tractebel — Green hydrogen offshore wind powered

Green hydrogen, produced with electrolysers to separate hydrogen from water, uses clean energy as a power source. Green hydrogen will not be with cost competitive with grey hydrogen for some time, perhaps not until 2030. Grey hydrogen, derived from steam reformation of natural gas, represents 98 percent of global hydrogen consumption, and is primarily used for industrial processes. To replace grey hydrogen with green hydrogen would require a doubling of global electricity generation with primarily solar and wind sources. This would pre-empt the use of renewables for electrical power, with energy losses totaling up to 75% when green hydrogen is reconverted into electricity! The result would be more use of natural gas for power production. And there are extraordinary inefficiencies and technological challenges for green hydrogen use, while there is no shortage of affordable and efficient clean technologies alternatives. Nevertheless, US$30 billion has been committed to-date for green hydrogen through government stimulus packages. Is green hydrogen a fossil fuel industry trojan horse for gas derived hydrogen and the use of gas for electrical power?

Shipping sustainability: Oxymoron but paradigm to change

By

-

September 30, 2021

1

ian-taylor-jOqJbvo1P9g-unsplash (1) — Container ship powered by dirty oil, updated April 27, 2023

Cargo and cruise ships represent 2.6 percent of global emissions and could reach 17 percent by 2050. Nearly all these ships use cheap dirty heavy oil with high sulphur content. International regulations aren’t helpful as they are lax and difficult to enforce. Fortunately, Maersk, the largest container shipping company in the world, has created the conditions for an industry-wide sectoral revolution by setting 2040 as a target to achieve net-zero emissions, requiring all new vessel acquisitions be carbon-neutral and has already ordered 12 green methanol powered ships. Concurrently, many new technological solutions are under development including ones associated with electric, wind and biofuel energy sources. Stringent territorial waters and docking standards, Maersk technological catalysts, financing of emerging remedies, could advance clean technologies quickly. Finally, open-loop scrubbers are widely used as a band-aid to remove sulphur from the exhausts to transfer the pollutants into the sea.

Investing responsibly, in the Canadian green economy, not easy: Policy solutions

By

-

July 5, 2021

Photo Lion Biovin-electric-waste-collection-truck 29 06 21 — Canada compares poorly in buttressing clean tech firms.

Reliable standards for environmentally sound investments do not exist and very few Canadian clean tech firms are listed on a stock exchange. Too often, Canadian clean tech firms must go outside Canada for financial support and/or to enter the stock market. This article presents solutions for investors and clean tech companies alike, but these solutions require government action.

Green economy: Financial sector zigzags

By

-

June 20, 2021

photo-green-dollars-1702286__340 — Green financing improves but has a long way to go

BlackRock, the world’s largest investment firm, has indicated that those that don’t tackle climate change will lose money in 5 years. Some financial institutions have made multi-trillion commitments from now to 2030 to invest in the green economy while still focusing the majority of investments in fossil fuels. Canadian banks are among the global top fossil fuel investors.

Fossil fuel sector contrasts: Green transition engaged, but not enough

By

-

June 16, 2021

2

photo-Man-fueling-vehicle-2-850x712 — Not all fossil fuel companies the same

Not all Big Oil firms are alike. Some are engaged in a rapid green migration, many are sitting on the fence and others are still in climate denial. Meanwhile, the value of fossil fuel assets are declining but the industry is camouflaging this by selling assets and debt financing to keep shareholders happy.

Green jobs see huge growth globally: Why is Canada missing out?

By

-

April 28, 2014

There are those like Stephen Harper who repeatedly say we must choose between economic development and sustainable development.

And there are those who, concerned about the environment and the latest reports from the International Panel on Climate Change, suggest that economic development and sustainable development should be reconciled. Countries such as Germany are often cited as cases in point. Most environmental organizations fall into this latter reconciliation category.

China’s chaotic leap forward to a green economy

By

-

October 15, 2013

When most people talk of China and its environmental and energy challenges, they tend to paint a very bleak picture. While this view is historically justified, things are changing fast in today’s China.

Criticism of China’s environmental record has been traditionally well-justified. After all, China: 1) displaced the US as the world’s largest energy consumer as of 2009 – doubling its energy consumption between 2000 and 2009; 2) produces the world’s highest pollution levels, with 16 of the top 20 most-polluted cities in the world being in China; and 3) now has total annual vehicle sales higher than that of the US.

Canada’s Green Economy needs public investment

By

-

August 14, 2013

Both the Intergovernmental Panel and Climate Change and the International Energy Agency have concluded that public policies, rather than the availability of resources, are among the key determinants for a shift from fossil fuels to clean technology development and deployment. Public banks are critical agents for change along these lines.

Public financial institutions and the green economy around the world

Starting with some of the largest public banks, in July 2013, both the World Bank and the European Investment Bank announced that they will limit to the bare minimum investments in fossil fuel projects, while shifting the lion’s share of their respective energy investments to renewables.