There is general talk amongst Democrats in Washington of “the adults being back in charge.” And certainly, the amount of policy action is impressive. Multilateralism is to the fore, and Biden’s long experience in foreign affairs is starting to reap rewards. After all Trump’s sabre rattling, the sight of China and the US jointly issuing a statement on climate change slightly took my breath away. This was confirmed when I read an enthusiastic response from Greenpeace saying “the G2 are united again.”
That is before I realized the plaudit came from Li Shuo, Greenpeace’s “senior climate advisor” based in Beijing. I’m sure Mr. Shuo has to be careful what he says, and a quick glance at his previous statements indicates what I can only call an ‘overenthusiasm’ for China’s commitment. Take his ‘can china really lead the world in fighting climate change?’ published in 2017. Just before its Co2 emissions reached new heights. In the two years following Mr. Shuo’s article, China’s emissions went up by 424 million tonnes. That was 57% of the total increase across the Globe.
Let’s be quite clear here (I’m not based in Beijing). China is destroying the planet, and unless we stop them, we will lose the fight against climate change.
Looking at the future, I have more bad news. The IEA recently issued its global energy review, and for responsible investors it doesn’t make comfortable reading. Greenhouse gas emissions are expected to rise by 5% this year, after the Planet briefly paused for breath during the Pandemic. And it won’t stop there: the underlying trends are very worrying.
Central to these will still be the activities of China, although you often have to look hard through all the propaganda to see it. I am frankly tired of reading about China’s “huge strides” in alternative energy use. In a recent report, Credit Suisse noted that the generous government subsidies that funded this are now being retracted (many of them weren’t actually paid in the first place). The Government energy subsidy fund is in massive deficit ($50bn) and is now cutting back dramatically. Offshore windfarms are now reported to not be getting any subsidy in the coming year. Longyuan Power, the country’s largest wind producer, lost a third of its value in just four days.
Besides, even with all the recent growth in alternatives, the IEA noted China still consumed more than half the world’s coal in 2019. In its latest Five-Year Plan, published last month, China employs the ruse of claiming a reduction of “emissions intensity” by measuring the amount of CO2 produced per unit of GDP. Since the same plan is ramping this up (this year’s target is 6%), the supposed 18% reduction in emissions over the period 2021 to 2025, is actually a sleight of hand. Emissions will likely increase by 1% a year or more.
That’s not all. Apart from what it’s doing domestically, China’s overseas policy, ‘the Belt & Road Initiative’ is nothing short of a masterplan for the assisted suicide of the planet. Huge coal investments across Africa (threatening a near tripling of production on the continent).
So please be clear. There are three things that matter in fighting climate change: China, China, and China.
Fortunately, it would appear that President Biden’s new administration gets this. The ‘G2 statement’ came after Climate Tsar John Kerry flew to Shanghai to sweet talk the Chinese into co-operation. The Wall Street Journal was quick to suggest that Kerry had essentially been “Shanghai-ed.”It said: “China is happy to jibber jabber about climate with the Americans if it means not having to engage on Taiwan, Hong Kong, Beijing’s repression of Uighurs (increased aggression in) the South China Sea, North Korea or intellectual property theft.” Kerry’s “Shanghai jaunt” certainly handed China a PR opportunity – they spoke of “the bad student returning to the classroom.” Really? China’s contribution to emissions over the last two years was fourteen times the United States’. That’s 1,400%.
China is destroying the planet, and unless we stop them, we will lose the fight against climate change.
It is unfair to criticize Kerry. The Biden administration is seeking to do a lot of things simultaneously. Central to this is a pivot away from an obsession with the Middle East towards the Indo-Pacific. Obama’s former Deputy National Security advisor Ben Rhodes told Vox, if you “really want to deal with China and climate change, you can’t spend the same amount of bandwidth on issues like Iran in the way this country has done over the last five years. Iran is a medium-size country…(we) need to clear the decks.” Announcing the US withdrawal from Afghanistan, the White House said the move was to “free up the time and attention and resources… to focus on what we believe are the fundamental challenges of the 21st century. And they lie, fundamentally, in the Indo-Pacific.”
In crafting this major shift in foreign policy, Japan is being given a central role (the first world leader to visit Biden was Prime Minister Suga). Biden has started talking a lot about ‘the Quad,’ which brings in Australia and India). Europe’s support is also being marshalled. An Indo-Pacific tilt is central to the UK’s Integrated Review of Security released last month. France and Germany have recently started to hold naval exercises with ‘the Quad.’
China’s increasing aggression towards Taiwan, and its suppression in Hong Kong is alerting everyone to the importance of this tilt. Japan has issued what is essentially a manifesto for a “Free and Open Pacific” that is full of subtle digs at China. The White House declaration after the Japanese summit dared to mention Taiwan – sweeping away decades of tiptoeing around China’s sensibilities. Nothing like this has been said since 1969.
All of this is a sensible application of Biden’s multi-lateral wizardry, but how would working with China on emissions fit into all this? Rhodes told Vox, he’s “not convinced yet that climate change is actually the central pillar of Biden’s foreign policy.” Rhodes worries that “Biden may have to make some unpalatable trade-offs on climate change issues if he wants to make progress on those other priorities.” Basically, we are entering some particularly challenging times in foreign policy. What Professor Mitter of Oxford University has called not so much a new ‘Cold War,’ as a ‘Hot Peace.’
Responsible investors need to worry about this. As Rhodes concluded “If you’re a progressive who cares about both climate change and human rights in China, it’s a very difficult call as to which one you’re going to care about more. I don’t think we know how the Biden administration is going to answer that question.”
Suddenly, I’m not so enthusiastic about the G2.
Christopher Walker is a writer on business and politics. He sat for several years on the asset allocation committee of a major asset manager, and worked with a sovereign wealth fund in Washington.