About this transcript: This is a full AI-generated transcript of China's Green Energy Boom — Richard Hames meets Tim Sahay from Novara Media, published November 15, 2026. The transcript contains 17,018 words with timestamps and was generated using Whisper AI.
"It's like an upside down world. The West was the leaders in these technologies 20 years ago. And now it's the Chinese that are, you know, churning out six minute chargers. And, you know, how do you, how the hell do you get enough electricity into a charger to charge a car that rapidly? It requires..."
[00:00:00] Speaker 1: It's like an upside down world. The West was the leaders in these technologies 20 years ago. And now it's the Chinese that are, you know, churning out six minute chargers. And, you know, how do you, how the hell do you get enough electricity into a charger to charge a car that rapidly? It requires you to solve very difficult. A whole car. Yeah, I mean, yeah, a whole car in six minutes. Wow. Now energy futures are transforming before our very eyes in ways that experts like us, you know, just found unfathomable. We were, we thought that these numbers would arrive in 2035. Instead, they've arrived a decade sooner.
[00:00:43] Tim Sahay: For decades, the world has run on oil. If you wanted to understand power, you had to understand oil. You had to follow it through its pipelines, on its tankers, through the petrodollar recycling system, and through a narrow strip of water in the Gulf called the Strait of Hormuz. But this year, Israel and the US went to war with Iran, and the Strait was closed. And one-fifth of global oil and gas trade stopped. The closure of Hormuz was to Asia, as the Ukraine war was to Europe. It was the moment at which countries stopped looking at energy purely in terms of price, and started to think about it in terms of security. And so what did the world do? It bought solar panels. Because not even a war can shut off your access to the sun. Suddenly, there was enormous demand, and China already had the supply. In March of this year, China shipped 68 gigawatts of solar panels abroad, which is more than three times the amount that Britain has ever installed. But how did China have so much capacity in the first place? Plenty of American and European firms had tried and failed to make solar panels profitable in the past. But that's the key difference. China wasn't really trying to make solar panels profitable. It was trying to control the energy of the next wave of industrial production. We may look back on the Iran war as one of those enormous pivot points in history. From an American world order to a Chinese one. And from an order defined by oil to one organised around renewables. My guest this week is Tim Sahay, who is an expert in all of this. He co-directs the Net Zero Industrial Policy Lab at John Hopkins University, which has tracked over $200 billion of cleantech Chinese companies' pledges to factories abroad, in what he calls the Belt and Road Initiative 2.0. He co-writes the Polycrisis newsletter with Kate McKenzie. And he's also trained, in addition to all his geopolitical and economics knowledge, in physics, which is ideal for understanding the deep material changes we're going to be discussing today. This conversation connects to the discussion that I had a couple of weeks back with Kaiser Guo on how China is redefining modernity, and to my conversation with Theoria Frankos from the previous series of Do Your Own Research about the minds that the green transition still has to dig. The full map of everything that has ever mattered in an increasingly Chinese world is available anytime at nevaramedia.com forward slash D-Y-O-R. And if you're listening on the audio version, there are graphs that Tim and I will be discussing during this, which you can find on the YouTube video. Tim Sahay, welcome to Do Your Own Research. Pleasure to be here. I want us to both tell a story this time. And that story is going to be how we got to a green revolution or green energy revolution coming out of China, but then globalizing around the world, moving into different countries, factories made by Chinese capital, or powered by Chinese capital, popping up in Brazil, Morocco, all around the world. And in order to do that, I want to go a long way back actually to the beginnings of sort of climate change politics on a global scale and to ask why it is that other countries didn't manage to do the green transition despite all the urgency. Why, despite, you know, George H.W. Bush, George W. Bush's father, saying that he would counter the greenhouse effect with the White House effect. Why, despite the Europeans planning for solar panels and green energy transitions, why did none of that come to pass on the scale that was necessary? Why did it take China to do this?
[00:05:01] Speaker 1: I mean, that is a great question because this almost seems like an unwitting hegemon or unwilling hegemon. This is not how China started out its development path or its energy path, but it is where it has ended up as the green superpower in the world. So I think how it got here is a story of almost like a U-turn, a rapid ascent into heavy industry, coal-based industrialization, cement, coal, steel. You know, the China that urbanized so rapidly, putting a billion people into housing, required a lot of steel, cement, and coal. So the first period of Chinese growth is a heavy industry, coal-backed industrialization model to lift, you know, with a major factory and urbanization sort of requirement. And that's basically the story of China, say, from the 1950s with the Maoist sort of heavy industry focused, you know, to the China of the 1990s, which tries to rapidly sort of do a domestic version of neoliberalism, where they shut down a lot of these heavy polluting state-owned enterprise coal and steel companies, particularly in the north, in the northeastern China. And the former heavy industrial belts are shut down. And the new China sort of emerges under dung that is doing lots more manufacturing, FDI, special economic zones, and these are further south. And so you get a transition within China of a shutdown of the coal and steel that sort of starts a little bit in the 1990s, geographically shifting it down. But then what you really start to get from the 1990s and 2000s is China starting to think about its position in the world as a coal power, but an oil and gas importer. So as China is urbanizing and growing very rapidly, that dilemma of actually we're becoming more and more dependent on foreign energy starts to really haunt Chinese policymakers. And that really takes off after 9-11 and particularly after the Iraq war. When the U.S. disrupts fossil fuel energy supplies in the Middle East and you get a commodity super cycle that starts from the early 2000s and peaks, you know, the price of oil and gas is doubling every five years, you know, quadruples by the time you get to the financial crisis. And China, as a large oil and gas importing nation, suddenly starts to frame its dilemma in terms of energy security. And I think that's where the roots of the turn towards renewables, the turn towards electrification really begin.
[00:07:55] Tim Sahay: Yeah, just to say, people who are watching this might be looking at this graph and thinking, that doesn't look like this is the oil price chart in this period. So the period in which we're talking about, right, this 11th five-year plan, which is when China starts to include green energy planning in its five-year plan for the first time, 2006, right, which is around here on the graph. If you are not listening, if you're listening to the podcast version of this and you're not watching the video, the line is going up. Oil is becoming more expensive, right? We are entering a period in which China is becoming increasingly dependent on oil at quite an alarming rate. And there's no saying when that will come down. And therefore, there's a need to sort of become more resilient to those shocks to get things, energy supply, in-country. Why does that mean that we have to pivot towards green energy? Why is that more in-country than oil is?
[00:08:47] Speaker 1: This is the dilemma which Chinese policymakers call the Malacca dilemma, which is we do not have a navy that can guarantee the safe and secure passage of oil and gas out of the Middle East. That's the Americans' job. But it's the Americans that could disrupt oil and gas and make it volatile, intermittent, expensive, unaffordable, driving up our import bills. And that's their worry. And their second worry is at some point, if there is any war with the United States, the United States Navy has a plan to embargo oil and gas to China on the high seas. So there will be no flow of oil and gas molecules coming into China from the rest of the world. And secondly, the job of that embargo is to stop Chinese products from being sold into the United States and Europe, which similarly require the transportation on the high seas. So that Malacca dilemma sort of is pushed by Chinese policymakers to look for domestic energy sources. And those domestic energy sources, you know, are coal, they are hydropower, and they are alternative energy sources. So that Chinese five-year plan really starts to invest in electric vehicles, batteries, and particularly solar panels, none of which China had any position in manufacturing. The leaders in manufacturing at this time in the mid-2000s are German, Japanese, American companies that are making solar panels, EVs, batteries, and it's exactly that world that we thought would happen. That it's the rich world, the rich industrialized world with its science and technology, with its universities, that would be churning out alternative energy and transition the world of oil and gas towards some clean green future. So that's, that's what everyone expected would happen. And why did that? Why it didn't do that is because the, the, the sort of like failures on the Western side and, and sort of striking advances on the, on the Chinese side that both account for it. So the Chinese state is doing all of this subsidies, planning, investments in, in science and technology. And, and, and, but, but more crucially, it's sort of like a, a way of thinking about energy and climate as not just about the climate, but linking it to two things that we talked about, their security and their development strategy. And linking climate and development, climate and security allowed for sort of it to, to penetrate into the very sort of core of the growth model, instead of just being something that you're doing to cut carbon. And so that formulation, you know, never really happened in, in the United States or in Europe. So you always thought of energy as a nice to have, as something that we might be doing for climate reasons, but never as something that could generate wealth and prosperity, could generate innovation and sort of future growth. And why was that? Well, these industries were small, you know, these industries were much, much smaller. They were, they were basically new, you know, they were less than 1% of sales, you know, or 1% of electricity install, you know, in the early 2000s. So it never felt like this new nascent baby industry could ever become a driver of growth, a driver of, of massive investment, which is all that has transpired 25 years later, where, you know, Chinese growth, you know, something like 10 or 15% of Chinese growth in 25, 26 is being powered by the new three industries of solar, EV and battery. So these are now big, heavy, big, big, big industries that command trillions of dollars of investment in the, in the global economy. And that's just not something that people thought was possible in the, in the early 2000s. Secondly, the failures on the, on the, on the Western side really have to be accounted for. And one of the sources of those failures was simply the political incumbency of oil and gas power and oil and gas power in the United States. Um, in that period of that chart in that early 2000 is the beginning of the fracking miracle in the United States, where the United States goes from being a net oil and gas importer, but depleting oil and gas fields to a sudden by 2011, 2012, America is already the largest oil and gas producer on the planet. By 2015, 2016, it is the largest oil and gas exporter. So, and by the time you get to the 2020s, it's the largest gas exporter. So in a span of 20 years, the United States goes from becoming an importer to the largest producer, to the bigger oil exporter than Saudi Arabia, a bigger gas exporter than Australia and Qatar. So the period of the 2000s is a nonstop oil and gas boom, um, in the United States, which dramatically alters its domestic politics, um, and its ability to act on climate.
[00:14:04] Tim Sahay: So the U.S. doesn't do the transition because it gets fracking instead. Part of that fracking boom is because interest rates are kept super low.
[00:14:16] Speaker 1: So that's important to think about, okay, there's a political factor there of oil and gas incumbency. There was a political factor in China of coal incumbency. So somehow the coal interest had to be shrunk and powered and, and, you know, a alternative source of power had to be brought to bear to reduce, um, um, their power and shaping China's energy policy and allow the rise of the new industry. So, so how did that happen there, but not in the United States is something to do with that state logic of core development and security, where green energy was no longer nice to have, but a must have core to national security interests and national interests. Uh, that, that, that, that, that transition never really happened inside the, uh, the United States and Europe, you know, it may, may be starting to happen in Europe in the 2020s with the twin fossil shocks of Ukraine and Iran, but it is absolutely not, um, happening in the, in the United States where, which if anything has said, it's oil and gas. It provides energy security, um, in an uncertain, uh, in an uncertain world, but the question about financing, how do you finance, um, um, an alternative energy? Well, we just said, you know, wall street is supposed to do that. The public sector is going to de-risk those investments. The public sector is going to provide a minimal amount of subsidies is going to reduce the risk of green investments, but is not going to be the biggest investor. It's not going to be public money that builds and owns the new grids or builds and owns the new solar wind parks, et cetera, or creates a new, you know, state owned car company or whatever. That was the public sector was going to be an enabler, but not the biggest driver and financing would have to be done at market rates. Not, um, as, uh, we had done in the, over the course of the 20th century, almost all, um, energy in the, in the West was also state owned. So, you know, over the neoliberal period, we privatize our grids. We, um, separate, um, electricity markets, um, you know, we deregulate electricity markets and that a whole leverage of state control and state financing was removed, uh, from the energy sector. So you could say that by the time we are hitting the climate crisis in the 2000s and 2010s and desperately need rapid doses of investment and planning and subsidies, the Western state and its ideology of, uh, you know, actually these are private fields and not something that the state needs to be involved in, you know, really bites us. Um, when we need that planning and state backed financing the most is when ideologically we are in the grip of the neoliberal imaginary.
[00:17:03] Tim Sahay: So China succeeds because it's able to discipline its coal producers in parts, right? It's able to suppress their demand to sort of, I guess, ever, ever expand their, their share of energy. I want to ask a question about how concretely did China make, uh, uh, photovoltaics, solar panels, cheap, right? There's two parts of this, right? On the one hand, there's the kind of the, the supply side, how do you make sure that there are enough solar panels and they're cheap enough? And the other side that we have sort of discussed in brief, right? The question of, um, the demand for these objects, right? Which is in large part to do with energy security in a much more turbulent and volatile world. But how did, what are the factors that allowed China to actually make cheap solar panels and green tech more widely? But solar panels seem to be the thing that is coming down the price curve the fastest.
[00:17:58] Speaker 1: I mean, the first one is, um, it's not just subsidies, which is a very classic answer that, that, that people will give you. Well, they were willing to plow local subsidies, subsidies, national subsidies, uh, towards this new industry through its early stages, shepherd it towards, uh, commercial sort of, um, uh, commercial levels. Uh, but that is not the only thing that has happened. There are sort of three, in my view, like core factors. One is the Chinese did not know how to make solar panels. So they needed, um, Western expertise in particular, German expertise, Japanese expertise, Korean expertise to teach them how to make solar panels in the early 2000s. Um, and, and, and, and so, so, so without sort of that sort of willingness to do joint partnerships, technological partnerships with other people who are leading that technology. And then the second phase is sort of slowly indigenizing that technology, making it a domestic source of science and technology and, and skill and capabilities, manufacturing capabilities inside the country. And so that is the second phase of sort of scale up where, which the Chinese do in the 2010s, where they are offering a huge amount of support to these industries and to the suppliers and to the science and technological development of these industries. So you basically go from a phase of imitating and copying to a phase of indigenizing, acquiring, building up capabilities to the 2020s, where the Chinese are advancing solar panel technology, you know, towards top-con technology, which is much more highly efficient solar panels. So you basically, that's, that's what I meant by a level of mastery of an energy regime. You go from being an imitator to being an innovator. And that is, that has been the sort of the 20 year arc of all clean energy technologies, not just solar panels, where the Chinese learned from foreign actors in phase one, in phase two dramatically expanded their own domestic knowledge base. And in phase three are now leading the innovative capabilities of that whole technology. So CATL, for example, is, you know, churning out six minute chargers. And, you know, how do you, how the hell do you get enough electricity into a charger to charge a car that rapidly? It requires you to solve very difficult. A whole car. Yeah. Yeah. A whole car in six minutes. And, you know, but these superchargers, in other words, the capacity of the charger is so rapid that you could charge it, you know, in roughly the same time that you would fill up a gas tank. And that requires you to solve deep technical problems in the same way that the Chinese government, you know, you know, enabled the science and technological base to solve problems in making those efficient solar panels, highly rapid, fast chargers or transmission lines and the grid. You know, the Chinese state grid is now the leading sort of innovator in high voltage DC transmission lines that allow you to sling electricity for thousands of kilometers with very low losses of energy over the transmission. How do they do that? Well, it's at extremely high voltage. It's at 10,000 kilovolts. You know, the American system is at 120 kilovolts. So it's like a hundred times higher voltage. And that requires you to form new, you know, dielectric cables, capacitors, conductors. And, you know, these companies are hugely skilled companies in their technology. And I think it's this phase of where the Chinese have landed up as masters of this new technology that is absolutely, you know, is like an upside down world. The West was the leaders in these technologies 20 years ago. And now it's the Chinese that hold all of the IP, that are doing the bulk of the innovation and the research. So if you think that it's just subsidies that did it, then you don't really understand the sort of the level of sophistication of these firms and of the universities that are producing the patents, et cetera.
[00:22:13] Tim Sahay: Just to give people a sense of the distance they implied by those ultra high transmission, ultra high voltage transmission lines, a lot of the sunniest areas of China, right? So where you would put solar panels naturally are down here in the southwest in Tibet or in the northeast in Xinjiang, which is a massive desert, right? But almost all the population centers of China are on the east coast, right? Which means that you have to get the energy from the far west of the country to the far east. Bear in mind, China is roughly the same size as the United States. So this is like an absolutely vast continental sized country. You have to take the energy from there all the way over to here in this particular instance. So these are very, very, very, very, very long distance energy lines.
[00:23:05] Speaker 1: Oh, yeah. I mean, so they're very long distance energy lines. And if you just use the standard voltage, you would lose a lot of the energy over the course of those two, 3000 kilometers. And so you require technological innovation, which the Chinese state grid and, you know, tens of thousands of the engineering state of China sort of, you know, made it their life's mission to solve this deep, challenging technical problem in the same way that, you know, there's a whole cohort of scientists and engineers that solve the problem of making the solar panels more efficient that solve the problem. In the case of the solar panel, how do you make them cheap? Well, you need to reduce the amount of silicon that you use as you're cutting the wafers from polysilicon to turn it into a silicon wafer, which is the same wafer that is used in semiconductor chips, is the same, exactly the same wafer that is used in a solar panel because it's a photoelectric effect that requires you to master semiconductor technology. Well, how do you make that cheap? You know, you need to reduce the amount of waste every time you cut a wafer. How much of the waste material is left behind, which is precious, which you've just spent a huge amount of energy turning into polysilicon and now you're cutting it into a wafer. And if you end up losing most of that wafer every time you cut it, then it's just going to remain expensive. So they devise sort of new cutting techniques to do with, you know, with diamond saws and etc. So this is what I meant by a huge amount of technological learning. The more you make something, the better you get at making it, which is a classic learning by doing sort of cost curve, as it's called in economics. And that level of learning by doing is something that an entire generation of scientists and engineers in China have learned to make these things more efficiently.
[00:24:55] Tim Sahay: When we're talking about efficiency, right, one of the kind of the classic pieces of the neoliberal ideology that you were talking about earlier is that, of course, the states cannot be efficient, right? The state is sort of incapable of doing efficiency because state funding means that there will always just be this immense amount of waste because there's no impetus to really sort of cut costs. And yet what you're describing is a system in which the companies have become immensely more efficient to some extent with some sort of state backing. Is it simply that that ideology of the state being inefficient was sort of always ideological? Or is there some particular set of things, for example, the cutthroat competition between companies in this market? That means that, you know, the waste is driven out, that companies become more efficient, that there is an overall tendency towards more effective development technology? Or like, how do you see the kind of components there, right? How do you see the kind of the state and the technology and the competition and the companies and private capital and so on working together to produce something like a highly efficient technology?
[00:26:08] Speaker 1: Yeah, I mean, in that sense, all technological systems are products of an entire sort of social economic sort of system. And the way I think about, you know, how these technologies were sort of created is to think about, you know, in the neoliberal period, like, you know, you could almost think of it as the theorem of neoliberalism is that the governments are, as you said, incompetent and inefficient. The market is what is efficient and it should be market actors that should allocate capital towards most efficiently towards the best technologies. The second sort of theorem of neoliberalism could just be that the comments are just tragic. There's just no way to solve private coordination in the service of any sort of goal. So in the case of sheep grazing, well, there's just no way you could possibly organize this system to achieve some sort of ecological rational use of a shared resource. And the planet and the atmosphere is just this sort of shared resource that we're just dumping waste into because it's completely impossible to wrangle thousands and millions of private sector interests in the service of a common goal. And so the fact that the Chinese have managed to sort of create a different kind of an economic system that is actually capable of solving these common resource problems that is actually capable of making efficient firms. You know, there's something about the organizational capabilities there that is sort of missing in other systems and may not be possible to replicate outside China, outside of a sort of a party state that can direct technological development, you know, for decades, etc. But the way sort of I think about this is, you know, I don't think this is a state-backed miracle in China. The state sort of gave direction, but the energy, the firms that are actually carrying out most of this work are private sector firms, right? So it's in some sense, the state is organizing the market to have what the market should do, which is a massive level of competition to drive down costs and increase consumer welfare, not the welfare of the firms that are fat and sitting on a huge amount of profits, right? So in some sense, it's managing the market competition to direct most demands of consumer welfare and sort of ecological welfare in this case. And so I don't think one should say this is just a state-backed and state-controlled and state-organized thing. It's mostly state-directed, but it's not really state-financed. And, you know, it's not state-owned enterprises. BYD is not a state-owned enterprise that is going out. So in some sense, it's sort of like a Chinese sort of fusion of some neoliberal ideas with sort of state backing. And it's just its own sort of thing, really. There's also this kind of broader question
[00:29:15] Tim Sahay: that this series is asking as a whole, which is about the question of socialism, basically, in China. And a lot of theorists on the left will tell you that capitalism is fundamentally incapable of solving climate change. And that's for a whole bunch of different reasons. The most basic one is simply that capitalism demands an infinite or indefinitely large amount of growth, right? And that the resources of the planet are finite. And these two things are obviously in contradiction. But the second one is that there's something quite specific about green energy, which is that, yes, green energy may be cheap, but it is not necessarily profitable. And capitalism doesn't, or capital rather, doesn't care about cheap, it cares about profits. And oil and gas has sustainable profits, in part because it can be cartelized, like OPEC, you know, the oil-producing countries, but also for a bunch of other sort of reasons that are much more civic to the kind of the mechanics of how it works. When we're thinking about China, like producing the energy infrastructure of the future, producing solar panels, does that mean, like, does that bear that argument out? This is Brett Christopher's argument in The Price is Wrong. Is that argument born out that really capitalism, sort of neoliberal capitalism, as you were just describing it, can't actually deal with the climate crisis? Or do you think there's something more sort of sophisticated or stranger going on here?
[00:30:45] Speaker 1: I mean, firstly, there's a lot of truth to that. Oil and gas sector profits are just higher than the profits in the green energy sector. And if it is private finance that is going to be choosing which sector to allocate its money towards, you know, they do a basic risk return calculation and they conclude, well, green energy is safe, it's reliable, so it's lower risk, but the returns are also low. So, you know, that's never really going to drive a massive private investment boom. But I'd really think that the question of the imaginary of the future and expectations of future growth is what drives investments and the expectations of future profits, not necessarily current profit levels. So, when you look at the giant booms inside the United States, for example, over the last three decades, what sectors have they been in? They haven't been in sectors that actually drove up massive profits. So, you had a housing boom in the early 2000s for three to four years, you know, which drove a substantial real estate investment uptick in the United States. Then you had a fracking boom for about 15 years from, you know, the late 2000s and about the early 2020s, which again drove hundreds of billions of dollars year after year into fixed infrastructure, into oil and gas export terminals, into pipelines, into drilling. A lot of that investment was not profitable. It didn't actually make profits for over 15 years from the mid 2000s to the early 2020s. You know, the burn rate of that cash was so high that Wall Street investors were complaining that these oil and gas fields are just burning their cash. They're not gushing cash, they're burning cash. And that's because it had a high investment demand. So, any returns that the oil and gas companies would make during the fracking boom, they would plow back immediately back into fixed investment and further drilling. Which means fewer profits, fewer dividends for their investors and instead a rapid sort of capex cycle. And so, the question is why did Wall Street investors stay with the fracking boom when their cash was being burned? And I think it's all about expectations of future profits. You know, they were able to sell a dream that of course these things are going to be profitable. Of course, oil and gas molecules are going to fetch you a lot of money, even despite the reality of 15 years of not making profit. And now with the AI boom, you know, the United States has, you know, over five, six hundred billion dollars of investment year after year for the last few years. That's exactly what us on the green energy side would have liked. You know, with the IRA, we were de-risking green energy investments and we wanted, you know, 300, 400, 500 billion dollars of investment year after year for a decade, a sustained investment boom in industries of the future that would be both profitable and good for economic growth, prosperity and for human life on this planet. That is not what we got, because as we were just saying, the expectations of future profit on the green energy side never really materialized. But it's the same thing with the AI boom. It's not actually generating revenue. It's all about we are going to reorganize economic life to such a degree over the future that sometime in the future, capital invested in this will generate massive profits and revenues. And I think that's the sort of the very important part about this, which is it's not really about current profits. It's about future and expectations of profit, which, you know, may never really materialize.
[00:34:31] Tim Sahay: Yeah. In a sense, the argument that capital wouldn't invest in green energy because it wouldn't return profits makes capital, like makes it seem like capital is actually more rational than perhaps it is. Right. It's actually the kind of the, there's a certain degree of sort of exuberance or certain degree of animal spirits to use the classic sort of terminology in the market, right, that drive investments rather than necessarily, you know, a rational expectation of expected returns.
[00:34:59] Speaker 1: Although I mean, you could, you could even argue it's like high investment almost, almost, you know, guarantees like lower future profits. Right. So, so essentially, you have to kind of manage the boom, the investment boom creates a massive amount of overcapacity, oversupply, there's not enough current demand, prices collapse, profits collapse. And you need to figure out our new entrants allowed in the sector, or should we have some sort of dominant monopoly that is protected against competition so that new entrants can't just keep entering and driving down, driving down and the profits and the current prices. And that's just a question that's, that's, that's, that's exactly the same question that, that the United States faced with the oil and gas boom. It's what it is currently facing with the AI boom. It's a question that the Chinese state is facing with the new three industries of, of quote unquote, oversupply of EV production, battery production, solar panel production, but there's more supply than current demand, which drives down prices, which drives out producers, you know, and, and the state has to step in to manage the, the, the, the, the boom.
[00:36:08] Tim Sahay: And the, the reason why the US doesn't do that, right, is an ideological aversion to industrial planning on the one hand, but also there was quite a, what was the name of the company in the early, or the late 2000s?
[00:36:19] Speaker 1: Yeah, Soleandra was the famous company that went bankrupt after being given subsidies by the Obama industrial policy of 2008. The post-crash recovery bill gave money to a lot of new energy companies, including Tesla and Soleandra. So, you know, Soleandra goes belly up under the face of sort of rapid Chinese growth in those industries in the early 2010s, while Tesla massively succeeds and makes the government backing, early stage backing of, of Tesla quite successful. But there is exactly that ideological grip of the government should not be picking winners that, that ensured that the Obama government never really tried that again. And it took, you know, a crash and a decade later for that ideological grip to be loosened and the state to return to planning and investment with, with its, with its IRA and the, and the Biden government.
[00:37:17] Tim Sahay: But also the Trump government to some extent as well, right? Trump has been taking big chunks of critical mineral companies, right? And bringing them into state ownership. That seems like they're in some ways learning from the Chinese state planning, or is that not what's going on?
[00:37:34] Speaker 1: I think there's a broader story of, of American elites learning from the Chinese miracle as elites all over the world are trying to figure out how do they do it? Like what's going on there? And can we copy, paste, mimic, you know, indigenize some of, some of these tools? And in some sense, it's Chinese growth and success that legitimizes the tools of state planning in the United States. So, you know, American developmentalist elites reach back to their, um, to their own sort of, um, uh, era of, of, uh, Hamiltonian, um, sort of state, um, state backing infant industries, development planning, economic growth, uh, and to legitimize themselves in the 2010s. But the, the, the kind of the structural forces that are bearing upon them, that reopens the question of bringing the state back into investment and growth and planning is I think three factors. It's not just one. One is the success of China. Two is the failures of economic growth in the West post 2008, with a very, very slow recovery, underinvestment in key sectors of health and housing and, and, and, and so on that really drive, uh, uh, a rapid rise of the far right. Um, and it is because of that stagnation that American elites basically fear the rise of the far right and Trumpism and the rise of the far left with the, with the Bernie Sanders. And so for them, the idea is liberals need to find a way back into growth if they want to keep the far right and the far left at bay. So that's the second factor, the stagnation of, of Western economies. And the third factor is the climate crisis itself. You know, scientists and others are monitoring the earth system and it is frightening the rapid base of, of global warming and extremes. And, uh, scientists are demanding more and more, uh, rapid actions in cutting greenhouse gas emissions to have a stable flourishing planetary, um, ecosystem. Um, uh, and so it's the combination of those three structural factors that legitimizes the state and Brian Deese, you know, one of the, um, the, um, the national economic council directors under Biden, um, was formerly, uh, worked for the Obama white house as well. You know, he says it's, it's because there were three sort of failures that the state had to step back in and the failures were inequality, China and climate, you know, in exactly the way that I formulated it. And so it's, it's, it's for that multitude of reasons that the state has to step back in. It has to contain a geopolitical adversary that has gotten rich and the United States sort of helped it get rich. But now China in the 2010s is now too rich and is converting that money into power and geopolitical power. And that is something that is challenging, um, American primacy in, in the world system. So that needs that the state has to step back in to, to change the attitudes of the merchants and the business classes that are happy to do business with China, but now the state has to discipline them and contain them and say, no, we are now having to deal with the geopolitical adversary. You wall street, you fortune 500 companies have to pull your investments out of China and not feed the beast. So this is, this is a very core part of national security logic asserting itself over commercial logic. Um, and, and then the third factor of, if it is in fact true, if the scientists are in fact, right, that the conditions of planetary stability are now gone, then capitalism has to alter course and bring down emissions. If it is, if we capitalists have to make money for a thousand years, then we need a safe and stable climate. So the state has to step back in for that reason as well.
[00:41:30] Tim Sahay: I do want to get to the, that sort of pivot moment, Theorem, talking about there, which is the kind of the move from an American, broadly speaking, world order into either a Chinese world order or into a sort of post hegemonic world order, right? Where there isn't really a dominant power, because that's also a sort of possibility. It doesn't have to be that we have some sort of dominant power at particular, you know, every single phase, right? The kind of the so-called interregnum period, the period in between having dominant powers could go on more or less indefinitely. So, you know, I do want to get to that kind of pivot because it really feels like, you know, you were talking about the straits of Malacca earlier. Malacca straits are near, um, Singapore and Indonesia, right? Um, they are a strait that through which oil and gas has to go. And as you were saying, China doesn't control those. So if they get blocked, right, China can't do anything about that. That's dependence. That means they are not secure in their energy supply. Um, but it really feels like the Iran war has sort of perhaps paradoxically massively accelerated this process of shifting from the American, uh, world system into the Chinese world system and indeed from fossil capital as the dominant energy source, let's hope, into something like renewable energy as the kind of the dominant, um, energy source in the world to the extent that, you know, if you had asked radical climate direct action groups, what would their absolute dream be? You know, lots of them, Extinction Rebellion, Jostop Oil in the UK were doing blockades of various sorts. It really feels like blocking the straits of Hormuz would have been the right strategy. I don't know if you, if you, if you, if you see it in those
[00:43:13] Speaker 1: kind of like stark terms. My joke on this is that the, the IRGC and the Houthis are the shock troops of the Green New Deal. They are the armed wing of the Green New Deal. They are the ones busy lobbing bombs, atrofingeries and shippers and tankers. Yeah. And so in a sense like that, you know, this,
[00:43:31] Tim Sahay: the existence of the choke point in the early 2000s, the Malacca dilemma you were talking about before, China's not sure if it can ensure energy security, turns into by 2026, when the strait Hormuz is blocked, right? That turns into an accelerant of China's increasing dominance in global trade. Talk to us about the current situation. Like, how do you see the current situation with, you know, Chinese capital going abroad, with the divestments you were talking about from the Fortune 500 companies? How do you see the current world order? We will go back in time and sort of talk through the process of getting to this, but how do you see the current moment in terms of this energy
[00:44:13] Speaker 1: transition? I mean, it's the dawn of the electric world order is how Kate McKenzie and I put it in our essay, which we later turned into a podcast. It is a rapid acceleration of electrification as a solution to the problems that countries are facing of just not having oil and gas or it's too expensive. So this war has rapidly accelerated the alternative. Now, why has it done that? Well, the first thing to say is that the United States empire, the military supremacy of the United States was anchored on providing the safe passage of fossil fuels from the Middle East, from the most hydrocarbon rich part of the world to the fossil fuel importing parts of the world to Europe and to Asia. That is the core of the Carter doctrine that was set up after 1979, after the Iranian revolution. So it is absolutely central to the military primacy and the sort of military hegemony of the United States to have control of the Persian Gulf. Because if you don't have control of the Persian Gulf, you cannot guarantee the passage of oil and gas. If you cannot guarantee the passage of cheap and available oil and gas to East Asia and to Europe, then those countries will abandon American hegemony. They will no longer be willing to be dominated by the American hegemony if the American hegemony is unable to guarantee oil and gas. And why oil and gas? Because energy is just poor to industrial growth. So that is the main thing that this war is challenging, is that the United States Navy is unable to assert control of the Persian Gulf. They are locked on one side by the Iranians, on the other side of the Red Sea by the Houthis. And despite years of bombing the Houthis, they are unable to get them to stop bombing oil and gas assets that move through the Red Sea. And you know, over this year, we have seen inability of the United States Navy to really stop Iranian forces from shooting drones and missiles at oil and gas tankers and oil and gas assets across the Persian Gulf. So that's the uncertainty that has emerged in the energy system is a direct result of lack of military capacity of the hegemon. And I think that's really important to drive through is that every country's energy strategy was predicated on safe and stable oil and gas. If it is no longer safe and stable, then every country in the world has to alter its where to be getting our energy from. And so that's that's why we're seeing that the Iran was rapidly accelerated energy security concerns across the world. And all countries are now resorting to actually we just need more homegrown energy. We need more energy on our land that we can control that is not going to be choked at Hormuz or in Malacca or anywhere else. So in some sense, it's a stunning vindication of the Chinese concerns with energy security in the early 2000s. So that's the first thing to say. The second the second thing to say is that the fact that there is an alternative, the fact that countries are now rapidly buying solar panels, EVs, batteries, wind, heat pumps, this entire electro kit of resiliency that the Chinese are supplying is because of Chinese industrial success over the last 20 years. That planning actually has produced the factories. Those factories are churning out the goods that anywhere in the world people can press buy and it'll be rapidly delivered to their doorstep. And that's just not something that was true five years ago. But it has become true with the Ukraine war and the Iran war, which, you know, in the 2020s led to a burst of green industrial investment and factory investment across the world, of which 70-80% was in China. And so that's the second reason. The alternatives are here, they're cheaper, they're superior, and people find it much more easy to find an alternative. If this war had happened in 2015, you know, we've never all said, well, I guess we just need to do more oil and gas drilling. But because it's happened in 2026, the exit from the fossil order has been created by the Chinese that in many ways are the big winners of both the Ukraine war and the Iran war, because they are the
[00:48:48] Tim Sahay: ones supplying the kit to the whole world. Yeah. There's a kind of a, in a sense, what climate change means, because it unsettles the basic inputs, food inputs, energy inputs, and so on, into, you know, human life, into, you know, society. What that means is that we are going to enter a period of increasingly erratic kind of movements in history. And so because climate change means shocks, right, of many different kinds, pandemics, part of that, food shocks, food price shocks, part of that as well, because it means shocks, there's this sort of need to kind of on onshore, right? And it's not just that we had the single crisis of the Iran war, but before that, four years previously, we'd already had the Ukraine war, which was a shock to Europe, but also a shock to lots of countries sort of west of the Gulf, right? And now the Iran war is a shock to countries largely east of the Gulf, for geographical
[00:49:45] Speaker 1: reasons we can maybe get into. Yeah, I mean, I think the way to think about that, the Ukraine war was just a shock to Europe, largely, the Iran was a shock to Asia, largely. And so, you know, the Asians are responding exactly the way the Europeans responded, which is rapidly look for alternatives and accelerate their green industries, you know, for energy security and resiliency.
[00:50:10] Tim Sahay: But I remember, I mean, in 2022, I remember, not Friedrich Merz, whoever was the previous German chancellor, his name I could be forgotten, like him going to Qatar, right? I remember, I think, Liz Truss, the dearly departed British prime minister, going to Qatar. Like, the way in which people adopted, or the way in which Europe, at least it seemed to me, immediately adopted to the Ukraine war in 2022, was to try and increase levels of natural gas imports, rather than solar panels, right? Or rather than photovoltaics, or rather than EVs, rather than kind of the green energy solutions.
[00:50:49] Speaker 1: I think that is a very dominant interpretation of what has happened. And it's just wrong. It's just factually wrong. So the emphasis on energy security and oil and gas is going to provide us energy security. Obviously, in the short term, Europeans looked to find oil and gas molecules that were not coming from Russia. And they found them from the US, and they found them from the Middle East, the two oil and gas parts of the world. But simultaneously, Europe dramatically accelerates its green industrial policy, and its green energy. And it just rapidly buys more solar panels from China, more batteries, and its own homegrown gigafactories, you know, dozens of which were built out over the last five years. So Europe's answer to that, to the to the Ukraine war, was to actually rapidly green and electrify its own grids and its own EVs, to reduce the need for future oil and gas. So it's not true factually, in terms of, you know, has Europe become greener since 2022? The answer is yes. Is there more electric appliances and electric? Are there more heat pumps installed in France and Spain and Germany? The answer is yes. So it's just like, it has reduced its overall demand for oil and gas, thanks to that
[00:52:09] Tim Sahay: shock. That's a very useful corrective. Thank you for saying that. How much of that comes from the other piece that you've been writing about recently, which you refer to as the Belt and Road Initiative 2.0, or the BRI 2.0. We should say what the Belt and Road Initiative 1 was, which was largely the Chinese state in collaboration with states, lots in the Global South, but across Asia, states to states direct, like financing, basically. You would say that Pakistan or Sri Lanka would take out a massive loan with the Chinese government and use that to, the Chinese would build a port, for example. So big pieces of heavy infrastructure, and they could use that port, and obviously it would help to facilitate trade with China. But if they didn't, you know, keep up repayments, right, that port could be returned to sort of Chinese sovereign control. And so that was the Belt and Road Initiative one. Lots has changed with the Belt and Road Initiative 2. But to what extent, I'm asking, is the kind of the European process of mitigation now that you're describing, increasing heat pumps, increasing solar panels, and so on, down to what you described as the BRI 2.0?
[00:53:31] Speaker 1: I mean, firstly, the BRI 2.0 is just sort of a name that we have given to it. It's not an official piece of Chinese sort of state policy. That's okay. This is how it should happen. I guess the way to think about it is when there are domestic routes to China switching from that hydrocarbon growth towards this sort of green growth model of the 2020s. So in the 2010s, particularly after the global financial crisis, the Chinese basically lost their export markets in US and Europe. And there was a huge policy concern inside China, which is if we have lost their export markets, then where the hell are we going to get growth? The West can't get its banks in order, has just managed to implode its entire financial sector, and it might suffer a decade of recession. And so who are we planning to sell our factory goods to? And the answer was clear that we need a domestic source of industrial growth and economic growth. And then the question was, which industries should we support in a big Keynesian investment to get out of this recessionary impulse in the world economy? And they chose the industry that was already the dominant industry in China, which was the the gold steel cement heavy industry. And they embarked on this dramatic real estate investment drive to get out of that export oriented growth model of the 2000s towards a domestic real estate urbanization, domestic investment oriented country of the 2010s. But the core, the material core of that was cold steel cement. By the time you get to what we are referring to as a BRI, sorry, so that domestic growth in the heavy industries creates quote unquote over capacity, but there are too many firms now that are capable of making cold steel cement power ports and too few markets inside China as they've just basically saturated. They've just plastered the entire country with heavy industry output. And so the Chinese state starts to help find those firms global markets. So that's the real source of BRI 1.0 is over capacity in the heavy industries inside China. The Chinese state backs these companies, asks largely state owned enterprises to go out and build heavy industry ports, logistics, highways, trains for other people. So that's the domestic roots of BRI 1.0. And that's a very natural turn to thinking about BRI 2.0 in the 2020s with the simultaneous shocks of COVID and Ukraine and inflation. The Chinese state in 2020 basically says, you know, with the new, with the red lines policy, the three red lines policy, that we actually need to contain real estate, which is now becoming a dangerous financial bubble that could cause massive problems to the Chinese economy. And so we need to cut back all the loans that we've been giving to the real estate sector. But then the question again, what should our new growth industry be? And the answer in 2020 was the new three solar EVs and batteries. So all the, all the, all the banks in China were asked to reduce their loans towards real estate sector and increase their loans towards solar EV battery factories. And the result was this private sector explosion of investment in the new sectors that the government had chosen as drivers of future growth. So you very rapidly by 21, 22, 23, there are all of the industrial policies that are put out to support, uh, the, the new growth sectors. And it's not just green, it's also biotech. It's also nanotech. It's, you know, it's a, it's, um, it's cyber, it's nuclear, it's all kinds of other sources of growth are chosen, but fundamentally that then creates overcapacity where there are too many factories that are now producing, um, uh, these green goods. And again, that the Chinese state is just like, okay, well, I guess you should be finding markets overseas. Uh, but this time around, there's no official government policy to support these firms going abroad. It's just private sector firms that in our, you know, we, in our own, um, sort of database created by Matthias Larsson, who's now at LSE, we just tracked what are these private sector firms doing? And they've built out a Marshall Plan's worth of investment overseas. Over $210 billion of private sector investment has surged overseas since the pandemic. Where has it gone? Well, it's gone to, um, the rich countries, but 70% of it has gone to developing countries. So it's gone to Latin America, it's gone to North Africa, it's gone to Morocco. And I think those three countries in particular that you're seeing on the map there, it's Indonesia, Morocco, and Brazil, um, that are sort of emblematic of, of the types of countries where, um, this BRI 2.0 green investment has, has gone. Um, Brazil, um, you know, attracted these investments by basically telling the Chinese, look, we have a large market. If you want to sell your green goods into this market, we aren't going to put, we aren't going to do that. What we want is we want factories from you. So the Lula government, you know, generates its whole new industrial policy that attracts Chinese BYD, which, you know, sets up the first giant EV plant in, in, uh, in Latin America. And that's basically the Brazilians using their market power, their market size as leverage to force the Chinese to build a factory for them instead of what perhaps the Chinese companies might have wanted, which is, you know, we have factories in China. We'd rather just put it on a ship and send it to you. But instead, the Brazilians use their power, their market power to force factories to be built in them. The second sort of, uh, motivation, uh, for, for, um, you know, the second kind of leverage that other countries exercise was something, uh, like Indonesia, which used its nickel, uh, reserves, nickel metal reserves to tell the Chinese, look, if you want access to this raw material, you need to build me a factory that does the processing and the value added steps in Indonesia, instead of just me exporting my raw material to you. And so the Chinese companies, mining, smelting companies set up a huge number of smelting industrial parks in Indonesia. Um, and in return, you know, can now get their hands on the nickel that, that Indonesia was refused, uh, refusing to export. And then the third motivation, uh, for those Chinese companies going overseas is to look for access to rich Western markets that were rapidly being denied to them as a wave of protectionism grew in the United States and in Europe, the walls were coming up, the tariff walls were coming up. So then the question became, how the hell are we going to access the United States and Europe? And it's through countries that have free trade agreements with the U S and Europe. So Morocco doesn't have a large internal market, doesn't have a dramatic, huge resource, but what does have is the most important piece of paper, a free trade agreement with Europe, a free trade agreement with the United States. And so Chinese companies that are seeking third market access end up building battery factories and car factories, um, in, in Morocco. And it's not just Morocco, it's also Oman. It's also countries like Korea that have free trade agreements with the West that emerges as destinations for this Chinese, uh, private capital going out.
[01:01:18] Tim Sahay: So we have, uh, these, these shocks and we have enormous amounts of, uh, supply of solar panels. How does that actually manifest itself in countries, perhaps in the global South or countries sort of outside of China, where are the solar panels being installed?
[01:01:36] Speaker 1: I mean, this is, this is one of the most shocking things to me is like, you know, I've been traveling to Brazil, to Mexico, to India. And what I'm seeing is solar panels are popping up in rural places, in completely poor parts, um, of these countries. Uh, and, and, you know, the way I've been trying to make sense of this is that the Chinese have turned solar panels into Coke cans. They're just cheap. They're easily available all over the world in the same way that a Coke can is. Like, I would never think twice if I walked into a shop in rural Brazil and found myself a, a, a Coke can. And that's basically what's happened. They've become so cheap that they're all over the world. And, uh, the question about how rapidly they're, that they're being adopted, I think is best exemplified by Pakistan. And, you know, the, the traditional way that we had thought about green energy was it was always going to be expensive and therefore the rich countries should do it first and, you know, let the poor countries use coal and gas for a longer period of time. But Pakistan, you know, suffered these massive energy shortages after the Ukraine war. And again, after the Iran war and the countries just had this, the fastest solar boom in economic history where over the last five years, 40 gigawatts of solar panels have been installed in Pakistan, largely in a bottom up way where people, factories, farmers have just purchased these, these cheap solar panels and installed them very rapidly. Um, and I think, and I think that is the sign of the future where, um, you know, border countries are just going to adopt the cheapest source of energy and solar panels and batteries are just going to pop up in very rapid transition. So if you look at the sale of, of, of these things, they're shooting up, not just in the rich world, but in Africa, in Pakistan, in South America, in places that were supposed to get these transitions much later, are now rapidly leapfrogging towards a new energy future. And that's basically enabled by this cheap Chinese kit.
[01:03:38] Tim Sahay: Give me a, a visceral sense of what 40 gigawatts means. Cause I know about a hundred watt light bulbs, but what is 40 gigawatts? Like that's just like a sort of unthinkable.
[01:03:48] Speaker 1: A gigawatt is a city's worth. So, so city's worth of electricity would be one gigawatt. So 40 gigawatt is a country of 220 million people in Pakistan, like rapidly buying like city's worth of like 40 big London's worth of solar panels and installing it just literally everywhere. So what it looks like physically is everywhere you look, if you just go to Google Earth and you just like look at a 2025 image of, of Pakistan and zoom in, there'll be these blue shimmering solar panels on rooftops, on farms, on factory rooftops, everywhere in the country. So it's just absolutely pervasive in a way that it just wasn't five years ago. But it's these shocks and these energy shortages that in a catastrophic way, have driven the dawn of the electric world order, enabling rapid shifts in the poorest parts of the world. In Africa, we are seeing, you know, a total leapfrogging by people that could afford diesel. They would just get a diesel genset as a backup because there was no grid. And now they're just getting solar panels and batteries. Again, not true three or four years ago, but rapidly transitioning. And all of the forecasts of the next five years will basically say that more solar panels are going to be installed in the, in the next five years. And we have cumulatively installed in the, in the history of, of, of the species. So we are in an era of just solar leapfrogging, um, all over the world, uh, in poorer countries. And as I mentioned, the rich countries are no slouches either. You know, the Europeans are, are buying solar panels very rapidly. The United States, despite being a petrostate and an oil and gas power, you know, has more solar panels installed in 25, 26, than it did in the years before. So it's just, it's not just something that's happening in poor countries. It's just happening everywhere. Uh, a rapid surge of, of, um, EV sales, solar panel sales, battery sales, and our energy futures are, are transforming before our very eyes in ways that experts like us, you know, just found unfathomable. We were, we thought that these numbers would arrive in, in 2035. Instead they've arrived a decade sooner. The other kind of place that I think is really interesting in
[01:06:03] Tim Sahay: this regard is, is Lebanon, right? Lebanon went through in the 2020s, incredible crisis, um, starting in, uh, what the World Bank I think described as like a vast Ponzi scheme being run out of the central bank there. And, um, this meant that, uh, Electrosité du Liban, right, which is the state energy company, simply wasn't providing, um, energy, uh, for, you know, large portions of the day. And this led to mass adoption, both of diesel generators, which are incredibly polluting and which rose cancer rates in Lebanon quite dramatically, but also later on, massive investments in solar panels. So the same kind of thing that you were describing in Pakistan with people having solar panels on their roofs, right, is also starting to happen in countries with it, with much more fragmentary sort of infrastructure, um, before them. You mentioned their petrostates, which is a really interesting designation. Given that this sort of, you know, change the Belt and Road 2.0, the big boom in solar panels seems to be a, you know, undermining the power of petrostates, right, geopolitically. How are countries that we might think of sort of true petrostates, like not just the US, which is much more diversified economy, but also Russia, Saudi Arabia, and so on. How are they responding to China's, uh, push? Are they, you know, opposing it in some ways, because it D, because it gives them
[01:07:31] Speaker 1: less leverage in the world economy? I mean, the petrostates, you know, are countries that have a lot of oil and gas production as a share of their economy, right? So if you're over 15, 20% of your GDP is coming from selling oil and gas, you know, then you might be a petrostate. So in that sense, the US economy is just too diversified, or Canada is too diversified to be a petrostate. And we basically use this term as, you know, we abuse this term because politically the oil and gas flares are so powerful in these countries that you could think of them in that sense as a political petrostate, but they're not really dependent on oil and gas sales for their economy in the way that a Saudi Arabia or a Qatar or a Kuwait, um, or even a Norway is like where the large bulk of state wealth is tied up in, in, in oil and gas assets. And so the big question in this transition is how are petrostates going to respond in one way is that they, that they would politically slow down the rise of renewables, which has happened, you know, with, with all of the, the, the climate cop summits, you know, you always find the Saudi Arabia's and the Qatar's and the UAE's and, and, you know, the, the US's and Russia's of the world, just like acting as a blocking coalition that slows down, um, any ambitious, you know, policies to electrify the world rapidly. But the point is that they, that they're, they're now facing, you know, the, the unstoppable, uh, behemoth of the, the Chinese electrostate that is making cheap energy available, that is driving down future oil and gas demand. And so the question is how the hell can they slow down the Chinese, uh, and, and, and the answer is they probably cannot. And so these states are rapidly, particularly in the Middle East where they have money, uh, you know, they are not plowing that money into more oil and gas development. What they're now doing is using that money to diversify their entire economy, which is something that they should have been doing over the past decades, but diversify their economy, not just from oil and gas to clean energy, but oil and gas into a genuine economic diversification. So the Gulf Kingdoms have been trying to have an healthcare sector, tourism sector and education sector so that you have an economy that is like more finance, education, tourism, et cetera, et cetera. So I think that's the future for petro states. That's a viable economic future is, is taking that current oil and gas money, knowing that we are amongst the last two or three decades of oil and gas to be sold in this planet. Again, not coming necessarily out of policy, but out of this level of sort of technological substitution away from oil and gas and taking that money, diversifying their economies. And if they are too poor to diversify their economies in an, in an ideal world, they would get help. So the Angola's of the world and, you know, the poorer oil and gas states should get help from richer countries in order to diversify their economies, because they're going to have a very difficult time finding a new economic growth model. And so the question about petro states' future is, do they become hostile and an implacable sort of foe to the transition? Or do they actually end up being forced towards a diversification and modernization pathway? And, you know, you could imagine some country like Norway, for example, that is a gigantic oil and gas producer, has a sovereign wealth fund. You know, every Norwegian is essentially a millionaire, thanks to their stakes in their sovereign wealth fund. A rich country like Norway has been rapidly electrifying its EVs. They're not consuming oil and gas at home. They're saying, yeah, it's the last 20 or 30 years of oil and gas on the planet. We should just export oil and gas rather than use it at home. And I think there the difference is that the United States is actually a massive domestic consumer of oil and gas, has tens of millions of petrol cars. And in some sense, the American oil and gas companies see the future of diminishing oil and gas demand and therefore want to preserve oil and gas sales in North America and South America if they can insure it. And so there's, in some sense, slowing down the transition as much as possible to squeeze out those few extra years of oil and gas sales. But I don't really think this is a winnable proposition simply because of the rapid pressures. You know, despite having a fossil fuel supremacist government, you're still seeing rising EV sales in America, rising solar panels, et cetera, in America. So it's just like a losing proposition. It's just a question of can they stall and slow it down for a few more years.
[01:12:12] Tim Sahay: So we have these Chinese companies going out. We've got BYD, we've got Longy, we've got CATL. The latter two are, the BYD is a car company, right? People probably have seen BYDs around if they live in the UK. Longy and CATL are both like green energy companies of different sorts. They then go abroad and they invest in other countries. They build factories there in order to do the kind of three things that you were just mentioning. The Chinese government is not behind this, right? This is not some sort of coordinated plan. But they also don't seem particularly, from what I've read of your writing, keen on it. Like, why would they not be keen on it, given that it seems to extend the form of Chinese sort of power projection abroad? Isn't that good for China?
[01:13:00] Speaker 1: I mean, in a very basic way, the commercial calculations of those companies is to make money, right? They can't make money inside China because profit margins have been driven down by a dramatic competition in these sectors. Huge investments, as we were talking about, which is absolutely driven down prices and profits. So these companies are not making many money inside China. So they're driven by commercial considerations to go abroad to make money and find those rich customers that can actually have them earn some margin. So from the Chinese government point of view, you could imagine like, why the hell are you building factories for other people? You know, you're basically leaking industry, technology, growth and jobs to other people. Why not build those factories in China? I mean, you could imagine exactly this conversation as it has repeatedly happened in the West, where we just say, why are you offshoring? Why are you offshoring your factories? If you want to build a factory, you should build it inside the United States. That's been the response of the Trump government and the Biden government to American capital that is seeking to go overseas. But that logic of why should you be building factories for other people when we could have the economic growth and jobs and supply chains and technology instead, you know, you could imagine them just sort of saying that. The second thing that they are in fact saying is why are you using your latest, greatest technology and just giving it away to other people, developing your own competitors in the future? We, the Chinese government would rather that you did not build high tech factories for other people. And in fact, we are going to roll out a bunch of technology controls so that you have to actually apply for licenses from Beijing before we allow you to sell, set up a high tech factory in Korea or in the United States or in UK or in Europe. So, so the Chinese government, both for sort of commercial sort of reasons might want its factories to be at home. And for geopolitical reasons may not want its technology to be given to its enemies. And in fact, might just want to assert control over that technology. We are okay giving it to a friend. So we might, we might be okay with the, with the Europeans getting it because the Europeans are behaving in terms of balancing, um, um, um, um, you know, um, giving us market access and, and, and, and, and we have good friendly relations with them, but we may not want to give it to India where we are fighting a geopolitical sort of conflict with India, which is signed up for the American cold war. Um, and we may not want to allow the Indians access to high tech solar, solar wafer cutting equipment or battery processing equipment. So over the last two years, the Chinese government has rolled out a series of technology controls, uh, which is a new regime for its companies. Look, if you're going overseas, you need to get permission from us. So I think those are the two sort of big reasons why the government, um, the Chinese government is not particularly keen on its companies going overseas. Balancing against that is, is, is what you sort of laid out is, you know, isn't this just a way of, of power projection in, in the world? Um, you know, shouldn't you be interested in helping your firms go overseas, hooking every other country towards an energy system, the green energy system to which you, the Chinese government have, uh, dominant power, um, over. So that's, that's something that, that you could imagine the Chinese government sort of saying, actually, we want to encourage you to set up factories overseas to make sure that the rest of the world moves towards green, where we have some, some real power and control over. And that, and that's, that's the counterbalancing sort of, um, factor. But I'll just like to sort of, sort of step back and, and just sort of like think a little bit more about how the Chinese, um, government like broadly has gotten here, right? Like, and, and the way it's sort of gotten here is by conceiving, you know, in a very Marxist kind of a way that like every hegemony, every global hegemony in the world requires mastery over some underlying technology. So, you know, in, in their formulation, in the, in the Chinese Marxist kind of formulation, the reason why the British empire ruled the seas was because the Brits were the masters of the steam engine and the tech, the technologies of the second industrial revolution in the 19th century. The reason why the United States becomes the dominant power in the mid-century, um, after World War II is because the United States was the dominant oil and gas producer and the master of the internal combustion engine. Um, and so for the Chinese, this kind of Chinese Marxist, we need to be masters of a new energy regime. And that is why they move towards electric technology in the 1990s, 2000s, ramp up the investment waves in the 2010s. And in their view, if you can master a new energy regime, then the entire world will become, um, sort of like the energy, like you can project your power over, over the whole planet. And I think that, that is the underlying sort of reason for why the Chinese government has now backed green energy for, for, you know, the, the decades of the 21st century is, uh, sort of, uh, we have to become masters of a technology in order for us to ever have a geopolitical, um, presence in the, in the whole world. And so if we are now in the 2020s where the Chinese companies are now going out to build these factories for other people, what is missing is that same amount of learning in other places where, you know, in some sense, these companies are landing with their factories that are 10, 15 years ahead of, you know, the Brazilian engineers or the American engineers or the European engineers. And so there is this, this hugely important focus on learning from the technological leaders, um, that needs to happen, um, in order for these technologies to actually be diffused across the world. Otherwise, the rest of the world will remain dependent upon Chinese know-how for decades to come.
[01:19:17] Tim Sahay: I guess one question I might have is like, do you think that the Chinese model here, which seems to rely on extremely patient long-term state-backed capital to make EVs cheap, to, um, insist upon harsh competition between EV makers, right? Uh, in order to drive down margins and make the technology cheap. Is that a model that any other country in the world can actually replicate? Or is China now permanently the only country capable of like being at that frontier of clean energy?
[01:19:49] Speaker 1: I mean, being at the frontier is different from just participating in the, in the clean energy miracle. So, so you've had, you know, if you look at, if you look at the international energy agency's reports called the energy technology perspectives report, it tells you where every single clean energy factory in the world is located. And there are huge number of factories in North America, in Europe, in Korea, in Southeast Asia. So, you know, clearly other countries are capable of participating in the, in clean energy production and manufacturing. They are no longer the leaders, but they are participating. Sure. The Chinese companies are leading it because of this sort of big state backing that they have received and the R and D and technological basis that they've built. But that doesn't mean that other countries cannot participate in it. And I think we're basically transitioning into a world where countries are copying those similar kind of patient finance, state backed industrial policy kind of tools to enable them to participate and eventually maybe do to China, what China did to the West, which is, you know, we, we just need to invite the leading companies in. We need to humbly learn from them and indigenize this technology and invest in our human capital in our skills and R and R and D and take that 10, 20 years to eventually get closer to the frontier. But you cannot get closer to the frontier if you shut off the, the highly skilled Chinese companies. In fact, you should invite them in, do joint ventures with them, license their technologies, learn as rapidly from them as possible so that you too could, you know, become closer to the frontier and be a part of the most profitable parts of this value chain as the Chinese currently are.
[01:21:35] Tim Sahay: We mentioned earlier that the U.S. has begun to try and prevent Chinese solar panels from being sold in the U.S. And part of that is protectionism. Part of that is attempts to, part of this kind of a strange ideological aversion to the green energy transition and the assertion, as you put it, that America's energy security relies on oil and gas and not on the green transition. Part of that comes from a very different place, right, which is sort of the NGO sector, in which there have been claims that the polysilicon that goes into photovoltaic solar panels is mined under conditions of forced labour, particularly by the Uyghurs in Xinjiang, which is this area I mentioned a while back in the northwest of the country that is very sunny, but also has lots of the polysilicon mines. What should we make of these claims? Is there forced labour in the supply chain?
[01:22:34] Speaker 1: I mean, the way to think about it is that the Chinese polysilicon is extremely coal intensive, firstly, and has forced labour in it. There are private sector firms in Xinjiang that are employing people under forced labour sort of conditions. And that was the primary reason why in, I can't remember if it was 2020 or 2021, where the United States sort of passes an act to forbid companies from sourcing their supply chains from Xinjiang. But this sort of broader question and, you know, similar things were happening inside Germany. So, you know, a huge sort of level of awareness of where the polysilicon sort of supply chain kind of originates in both forced labour practices and in the carbon content. And I think we really have to think about green energy much more as sort of, we have to be realistic in some sense about where this is coming from. And if you want to think about alternatives, if you want to manufacture solar panels in the US or in Brazil or wherever or in India, like, you know, countries should try that out. But you have to remember that if you try and replicate those solar panels at home, it is going to be costlier and it is going to take more time. So that's the trade off, right? So if you want a China free supply chain for all sorts of reasons, the reason may be forced labour in Xinjiang, the reason may be a geopolitical autonomy, you're worried about the Chinese, you know, at some point stopping the flow of some product to you because you're no longer their friend, but I've turned into the enemy, then, you know, you should have more resilient, independent supply chains. The problem when you try and embark upon that is, A, you may not have the technology anymore. So in other words, you don't really know how to melt polysilicon or you don't really know how to cut solar wafers efficiently. So that's one problem. And the other problem is it's, you cannot convince your private sector firms to put money behind something that is going to be expensive and take time. And so you may not actually get the level of investment you need to build a China free supply chain. And that's the kind of the trade off. And these are difficult trade offs. And every government in the world is sort of considering it. And they come down to, you know, as the Europeans did, which is, you know what, we are just going to be fine with buying Chinese solar panels, because what we want is geopolitical independence from Russia. And so we are going to rapidly, you know, Europeans become the largest buyer of solar panels over the over the 2020s. And the Indians are the second largest buyer of Chinese solar panels. You know, the Brazilians are the third largest buyer of Chinese solar panels. So these countries have made that these decisions weighing these competing sort of trade offs of speed and cost. And I've concluded that what is more important for them is to rapidly electrify their electricity system. And what is more important to them is, you know, to do something about the climate crisis that could make the climate in Europe uninhabitable or the Amazon in Brazil sort of die back, etc. And so that's what I meant by there are these trade offs that have to be made. And countries are choosing to basically buy Chinese solar panels at factory gate prices and look away from whatever might be happening in Xinjiang. The other thing to do would be to tell the Chinese, you know, we're just not going to buy it. You need to free up your supply chain from forced labor, which then, you know, changes the Chinese producers strategy. And maybe they go elsewhere, which, you know, which they have tried to do where they've tried to build more manufacturing capabilities elsewhere. But the polysilicon itself is still sourced from China, even if the wafers are being cut in Southeast Asia. The polysilicon is still heavily just requires so much coal and willingness to deal with environmental waste that other countries don't want to do. And it's the same sort of technological dependence question that has popped up again over rare earths, over processing of metals to be turned into the magnets that are used in solar panels, EVs, wind turbines, etc. Sorry, the magnets are not used in solar panels, but they're used in EVs and wind turbines. And so it's the same question of, do we have the technological capabilities to develop magnets in the West or outside of China in a China-free supply chain? And B, do we have the raw materials, in particular, these rare earths? And so the United States has gone in this whole search for which countries could provide the rare earths. And, you know, it's gone to the Brazilians and said, you guys have the largest reserves and we now need to turn those reserves into production capacity. You know, it's gone to Canada, it's gone to Mozambique to get graphite. And, you know, there's this whole effort to build a China-free supply chain, but it is running into these barriers of
[01:27:51] Tim Sahay: technology, costs and delays and time. That rare earth mineral kind of control piece, right, which China seems to be the dominant player in, in the way that Britain in the period of its hegemony was, you know, the dominant controller of coal. America has obviously built its empire largely around the control of oil, the petrodollar and so on. China seems to have decided that the rare earths are the thing to control in order to produce sort of global power. There's one particular moment, right, in the last year, which is the tariff escalation from April 2085, so-called Liberation Day in America, China responds by putting export licensing on seven rare earth minerals. And by October 2025, America is basically completely back down, particularly around yttrium, right, which is a rare earth mineral that is needed to make a whole bunch of things. But I think it goes into some very key part of the F-35 fighter, right? And China controls almost the entire supply of it, which means that prices spike when it puts controls on it. And this means that the Americans can't make their own airplanes that they need in order to produce the military dominance that was sort of at root of their global empire. So, you know, a canny move, right, to say the least.
[01:29:17] Speaker 1: I mean, I think it's exactly the kind of the way you put it, that it's a response of the Chinese to the tariff war started by Donald Trump's first administration in 2017. And so before that, you know, China had already started to process rare earths from the 2000s, when the last kind of rare earth mine in the U.S. and California and mountain pass sort of closes down. Western production of rare earths is basically offshored to China. And the Chinese spent the last 20, 25 years developing mastery of rare earth processing, which requires, again, thousands of engineers and patents and R&D to sort of do this effectively. But the Chinese state just sort of lets it happen. But it's after 2017 when they basically look around and say, we need an economic weapon to compel the Americans to give up this tariff war, an economic war of containment against us. So the Chinese state starts to think through a whole series of policies to tell companies, you know, who can you give these rare earth processing technologies to? Who can you sell it to? You know, who are you currently selling it to? And at some point, you know, they developed this whole system of licensing and rare earth sort of control. So in some sense, they developed an economic weapon from 2017 onwards that is unleashed and unfurled in 2025, when Donald Trump's second administration launches a Liberation Day tariff war upon the whole planet. And the Chinese have this extremely effective rare earth weapon now that they did not have in 2017, that they spent, you know, nearly a decade developing the policies, the political will, the control over the private sector firms, you know, and in the end developed this sort of highly effective weapon, which, as you said, is important, you know, not just for fighter jets, but also just for civilian car production, for semiconductors, you know, for magnets, etc. And so you can imagine what starts to happen with private sector interests when the Chinese say, we're going to deny you this critical resource. And they start calling up Donald Trump and say, maybe you should give up this tariff war, because we can no longer commercially produce, or we'll be forced to shut down our factories in weeks as soon as our reserves dwindle. And so it's that pressure of private commercial pressure on the US national security state. That, you know, in some sense forces Donald Trump to back down and embark upon diplomatic truce with China over the last year in a series of meetings in Beijing. And, you know, recently, with Xi coming to Washington. So the rare earth was a weapon in the hands of the Chinese, did compel a change in the American sort of tariff war. But it also forced the American government to really sort of say, we should never be in this position again, where an adversary has so much power over us. And so the American government has embarked upon a huge amount of state backed equity financing, de-risking, you know, they are basically telling companies we are willing to buy, we the Pentagon are willing to buy magnets made from domestic rare earth mines, or from rare earth mines in our allies at three times the market price. So in other words, you are willing to pay that cost. And it's fine if it takes five to 10 years, but we do not want to be in this position again. So they're developing alternative metal suppliers and rare earth suppliers. And that's the deal with any technological sort of control weapon that you use, is that your enemy gets a vote, your enemy starts to adapt their own strategy in response to you using that weapon. And so, you know, will the Chinese control over rare earths remain 10 years from now, is the open question. You know, if the Japanese and the German and the Korean and the American firms actually spent 10 years developing mastery over rare earth processing, which is the critical bottleneck there, do you have enough people that know how to process rare earths efficiently and at low cost? Can you develop that? And secondly, can that state willingly back the private sector for a decade and is willing to put down those tens of billions of dollars committed to purchasing domestically made magnets? So it's an open question. Yeah, it's an open question whether we can develop that resiliency.
[01:33:47] Tim Sahay: This is what I think Theora Pankos, when we spoke to her in the first series of Do Your Own Research, called Trumpian state capitalism, this process of de-risking, taking shares of companies and so on. And it's the process of states reshaping markets to call it their own strategic priorities, which of course they have been doing for hundreds of years, right? But nevertheless, you know, it's a sort of new phase of it.
[01:34:09] Speaker 1: Yeah, I mean, this second Trump government has taken nearly 40 equity stakes in companies. So there's a tracker put out by the Council of Foreign Relations on just the amount of state capitalism and state intervention that the Trump government has done. And it's really striking. And it's largely in the fields of chips and metals and minerals. But you could imagine a future left-wing government. I mean, imagine if a left-wing government was taking equity stakes in 40 companies. So we are very far away from the world of Soleandra, where the government wasn't even allowed to de-risk a single company. Now we have a right-wing government in the United States that is taking government ownership control, minimum price controls, minimum prices offered. You know, the government-backed companies are going to purchase the off-takes from these mines to guarantee their demand, etc. So it's definitely a much more muscular state interventionism is back in an era of geopolitical conflict.
[01:35:11] Tim Sahay: It's like only Nixon could go to China, right? Because everyone knew that he was definitely not a communist. He was really quite right-wing and really quite hawkish towards communists. That meant that he was able to go to China and do the kind of the famous trip in 1972, because no one could ever accuse him of being a communist, right? Only Trump can do state capitalism, right? Because no one would ever accuse him of being a socialist of any kind. I want to close actually with a thing that genuinely confuses me, and that I'm not quite sure I understand, and maybe you can help me with. So Jean-Baptiste Frazos, who's a French historian of energy, has the book called More and More and More, in which the idea is that each successive stage of energy history doesn't replace the previous one, but simply adds additional energy use. So one kind of like colourful example here is that wood energy, it was burning wood for fire and so on, was a major part of lots of industrial processes for a very, very, very, very, very long time. But when we get to the oil age, for example, John D. Rockefeller, the famous oil baron, has to grow his own forest in order to cut down trees, in order to make barrels for the oil to go in, right? Because a barrel of oil is literally a wooden barrel of oil. So there is a, and when coal mine starts to be made, the slats that keep the coal mine up require a huge amount of trees to produce them. So it's not that we sort of, we leave the forests alone and we go on to the next thing, or we leave coal alone, we go on to the next thing, or we leave oil alone, we go on to the next thing. It's that each successive wave implies just like more and more and more and more and more, hence the title of the book. And that seems to be the same thing that is happening now, even with the extent of the build-out of Chinese photovoltaics, solar panels, EVs, and so on. The Chinese state is still using a lot of coal, right? The Chinese state still requires lots of fossil capital or fossil fuels to go into it. So my question is like, what does this, even though it seems helpful, hopeful rather, enormous build out of green and renewable energy, what does it actually mean for climate change?
[01:37:33] Speaker 1: I mean, I think the Friseau's book is brilliant in looking at the past and spectacularly wrong about the future. Which I think the diagnosis is exactly right, that in the past, all energy additions have been additive. They've just added layers onto the cake. It's not that we have removed coal when we made the switch to oil and gas. Coal use in the year 24, 25 has never been higher than ever before in the history of humanity. And so in that sense, when you look at the past and you make a thesis for addition, I think that's right. What is different now and has been different for over a decade is oil use has stopped growing. Oil use has stopped growing and there's been a peak in the demand for oil. Why has that happened? And that peak, you know, the International Energy Agency will tell you happened in 2018 in the demand for oil products. So crude oil that is turned into gasoline, into jet fuel has peaked in 2018. Why? And you know, it's flattened and plateaued and is supposedly going to start going down sometime around now, 25, 26, 27. Why has that happened? It's because the technology of internal combustion engines that was consuming oil and gas is being replaced by new energy vehicles, by electric vehicles. Starting roughly 2017, 2018 is when internal combustion engine cars sales stopped growing. They had been growing for over a century and they're flattened and they've been going down since 2018, replaced by EVs. And EVs are simply not consuming oil and gas, right? So you're actually seeing a peak in oil demand, a plateau, and then a reduction in oil and gas demand. In fact, the freakout in the decisions for oil and gas companies and whether they should invest their profits into drilling new oil and gas fields or simply return it to their shareholders returns with a vengeance in the 2020s, where oil and gas companies are actually unwilling to invest in new oil and gas fields because they're seeing those same projections and models made by people like the International Energy Agency that simply asks how much oil and gas is going to be sold over the next 10 years given this rapid electrification of the transportation field. So it's not more and more and more and more. It's more transitioning to a plateau, transitioning to a world of less and less and less oil use in particular since 2018. So this is sort of the peak demand. So in other words, what the Frazeau's book kind of gets right about the past is previous technological substitutions just led to an addition. What it's getting wrong is this spectacular shift in the fundamental machines that consume hydrocarbons. So it's the engines that are being replaced with EVs, it's the turbines, the gas turbines that are being replaced with solar panels, wind, hydropower, nuclear, etc. And that process of replacement is actually happening and you're getting projections. With oil it's just true, it's just plateaued and on its way down. And the question is, will the same thing happen to coal as the future big consumers of coal? We're going to be China itself and India and Africa. And are those countries consuming coal or are they adding on more solar panels, etc., etc., etc. And the answer is, you know, all of the big coal powers in the world are going electric. So the Indians, you know, are now the world's, you know, second or third largest solar electricity and they're no longer expanding their coal power plant fleet in the way that they did in the 2010s. So because the Frazeau's book is global, is historical data looking, it is sort of missing the very rapid transitions that are happening in the 2020s on the fundamental sort of which countries were going to be purchasing coal, oil and gas. They're no longer doing that in the same volumes that they did, that they did before. And, you know, and all of the future growth that we are seeing of EV sales and solar panels and wind turbines, etc., just mean that you're going to have less and less and less of hydrocarbon production. And, you know, you can see that fear in private companies and in the governments and the states that are producing coal, oil and gas. They're all sort of pivoting towards a world in which they may not be in as much demand anymore.
[01:42:26] Tim Sahay: Well, I hope you're right. Tim Sanhei, thank you so much for doing your own research.
[01:42:31] Speaker 1: Thank you so much for having me. This was a great conversation.