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[Episode #14] – China’s Energy Future

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China is always a bit of an enigma to the West: It is the world’s largest user of coal and the world’s largest emitter of carbon dioxide; the world’s largest car market; it has the world’s largest shale gas resources; and it has been building entire “ghost cities” with no one living in them. But it is also the world leader in energy transition, with more wind and solar deployment than any other nation; it has a massive grid construction program and the world’s largest and most rapid high-speed rail construction program; and before long, it will probably have the world’s largest market for electric vehicles.

To understand the trajectory of the world’s energy transition effort, we have to understand what’s happening in China. But its official data are unreliable, and official statements can vary wildly from the facts on the ground. That’s why in this episode we talk with James West, a senior digital editor for Mother Jones and former senior producer for Climate Desk, who has traveled to China to get those stories firsthand.

Geek rating: 2

Guest: James West, senior digital editor for Mother Jones, former senior producer for Climate Desk, and the author of Beijing Blur.

On Twitter: @jameswest2010

On the Web:
http://www.motherjones.com/authors/james-west
http://www.james-west.net/

Recording date: March 23, 2016

Air date: April 6, 2016

Chris Nelder: Welcome James to the Energy Transition Show.

James West: It's so good. I feel like we've been Twitter buddies for so long it's finally good to actually talk to you.

Chris Nelder: I know. I feel the same way. It's about time, it's about time. So let's start with your trip to China because I think that's just an amazing thing that you pulled off there, so in 2014 you and your colleague Jaeah Lee went to China and investigated its use of coal and its emissions situation in person and also fracking and produced an excellent five part video series for Climate Desk called the Great Frack Forward about what you saw there. And we'll link to that in the show notes but briefly for our listeners who have not seen it, what is that series about?

James West: Well Jaeah Lee and I kind of went on this hunch that natural gas in China could be something that finally got it off this you know as you and your listeners know this sort of addiction to deadly and dirty coal. The vast majority of China's sort of miracle energy boom and it's lift out of poverty has been relying on coal, 70 percent of its economy is based on coal. What could natural gas do to unlock the potential to move away from coal, that was the proposition that we were investigating. China is sitting on arguably the world's biggest reserve of natural gas, shale natural gas if it can get to it that could possibly build this so-called bridge that we're always promised away from coal and on to cleaner hopefully less emitting technologies. And so this was the idea, what if it could break the addiction to coal by using this new technology of fracking, we knew for example that the State Department under Hillary Clinton was advocating strongly for new technologies in the renewable field and in fracking, right around the world. We knew that the US government was encouraging US companies to get involved in fracking in China and was playing sort of host, trying to meet these people where they are in China and introduce their executives to key players in China, we knew all this, what really was the key for us was we got invited to this top level meeting in this city called Xi'an which for your listeners you might recognize as home to the Terra Cotta Warriors that's its most famous sort of calling card. It's also this really historic and amazing and polluted Chinese city where we got invited to this top conference, this fracking conference where we got unprecedented access and saw the then U.S. Ambassador Gary Locke give a speech, we saw the executives of Halliburton and other U.S. energy giants there trying to get a piece of the pie really. And from then we just went on this amazing road trip where we saw for ourselves the fracking wells that had just begun to be sunk deep in rural Sichuan Province which is this lush and gorgeous part of the world and really started to delve into what would a fracking revolution in China look like, and really is it worth it given the kind of environmental damage that we began to see everywhere around us.

Chris Nelder: You know I watched that documentary when it came out and thought it was excellent, particularly because it showed a really an unscripted, unvarnished side of China that we rarely see here even in documentaries here in the West. Was it difficult to get into all those places and get that footage and then get back out with it?

James West: You know China is this weird place, it's sort of lawless in one way but then really strict on the other hand. We had remarkable luck. We would turn up in a rural hamlet of Sichuan, very small town, we would ask a few people where the fracking wells were, people wanted to tell their story. I've never seen anything like, people would direct us to these fracking wells and we would literally drive onto them in some instances and pull out a camera and start talking to people. It's so new. Or at least it was back then that we had very little opposition to us filming. There was the occasional sort of scuffle here and there, why are you filming, you can't film here, the kind of usual reporting in China problems. But in general Chris I have to say it was remarkable. People wanted to tell their stories. There was this amazing moment where we're standing in this farm these these rice paddies classic sort of southern China scene, steam rising off these paddies trying to film a fracking well. A local comes up, invites us in and tells us these most extraordinary stories about how they were promised money from these wells, they were promised that these wells would be clean. This weird stuff kept on coming up from their own drinking wells they could no longer drink the water there. People were just really pregnant with stories to tell us and we encountered that absolutely everywhere that we went.

Chris Nelder: Amazing, you must have just managed to land there right during a crucial window when things were just getting going but they hadn't really clamped down on the controls and the security yet.

James West: Exactly. And these are places in China that aren't particularly used to either (a) foreigners asking questions, or (b) the types of uprisings and protests and things of that nature, which are far more common on the eastern seaboard which has all of the population and has these strings of protests all the time about chemical plants, coal plants pollution, air pollution, degradation of water, that kind of thing that happens pretty regularly in other parts. This is a pretty lush and pretty you know I have to say pretty idyllic part of the world as an outsider. But then when you scratch the surface there's all of this discontent. There's all of this sort of really Upton Sinclair type. Real people aren't asked about what they want. People aren't informed of their rights. Promises aren't kept. There's a lot of discontent brewing down in that area of China.

Chris Nelder: You met numerous people on that trip who were displaced, who suffered damage to their farmlands and their personal health or who who actually lost a lot of personal wealth I think as a consequence of this rush for shale gas. Why do you think China did it so badly such that it incurred all that damage or was there not a more equitable and environmentally friendly way to go about developing this shale gas resource?

James West: You know I think there is a more equitable way, there is a more friendly way. But in China it's sort of the case of let's do it and then let's clean it up later. That's how one state regulator had been campaigning for regulatory controls over this boom for years when we met him and it's sort of been stifled, his research money had been drained away. He'd been trying to propose all of these rules. China is just one of those sort of remarkable places where huge enterprises can exist overnight almost and in whole parts of the economy are just brought to life and questions are asked afterwards. You've got to remember there's no civil society in China right. There's no community group that's advocating for the school to be you know a certain 100 feet away from a fracking well, there's no, there's no rights essentially in the way that you or I in the West understand them to be. And what your listeners would most regularly understand them to be. It's one thing to have a problem with the Marcellus shale field or in West Texas where there's a lot of water issues, there's a drought. You know it's one thing there, at least you could protest at least as a civil society and bring your concerns to the local statehouse or the council or whatever it is. In China there's just literally none of that. And so things happen. People aren't asked. People don't have a sense of their own rights. People aren't environmentalists in China in the way that we would think of the word environmentalist but they certainly want clean water and they want clean air. And when you ask people about it this is also a society that is been a one child policy society for so long, people have a very different sense of what they're giving their their only child. And if it's dirty water and dirty air then suddenly the whole equation changes and people start to complain. So it's a completely different dynamic in China and always has been. But particularly on this issue where you can just throw a whole of money, you can be abetted by enormous amounts of global capital that is being welcomed into China by the Chinese leadership and of course U.S. companies are wanting to prospect there in the way that gold rush people used to prospect with pans in the river and then you kind of have this toxic mix of discontent and money all in the one picture.

Chris Nelder: Wow, you really paint a vivid and interesting picture that, I mean you're right it is very different than something we might imagine over here.

James West: Yeah. I mean completely different. I've been up to Pennsylvania, I've been to various different fracking places in the U.S. to North Dakota to Williston. It's very, very different. People in America have a sense that if things go too far they can complain. You know I'm not saying that things have been rosy in the United States at all for fracking development. And I think the horse is being put behind the cart to use a hackneyed expression in a lot of us fracking development but no where near the scale of what I saw in China by any stretch of the imagination.

Chris Nelder: Right. So let's go ahead and start putting some numbers on this because you know I'm kind of a data guy. This show is about data, so let's talk about some data. So the point of China's pursuit of shale gas was to displace coal. So how much shale gas is China actually producing now and how much coal is it displacing?

James West: Well I don't think it's displacing any coal. I think China is one of those economies where it's sort of above the line, everything goes. And we want everything. You know fracking is so much in its infancy. We saw maybe half a dozen fracking wells when we were there and visited them ourselves. I think we're now talking only in its hundreds. This is minuscule when you compare it to any other energy industry, particularly hydro, and particularly coal in China. It doesn't displace some of these giant energy industries. The promise of fracking is that it might. The promise of fracking is that it might also offset the need for China to import gas which would change the kind of economic equation and potentially maybe even take up a bigger portion of their energy needs if it was cheaper. But the geography in China, the difficulty of getting to this stuff is it's an engineering feat that even some of the Western companies that we were talking to still haven't quite cracked. It's very deep in the ground, it's in very mountainous terrain in rural Sichuan, you know given how spectacular it is if you just imagine these sort of soaring mountains and these roads that bend around these mountains that are thousands of feet in the air some well has to sink through all of that terrain and down into the actual shale bed. That's a huge amount of energy in and of itself, it's a huge amount of water. Sichuan is, it is a very water rich place but not infinitely so. And a lot of the waste water gets put back into the Yangtze River which is a huge bread bowl for the entire, not only China but the entire world. So there's a resource question. Do you proportion all of the water to go to fracking which to do it right would probably have to be a substantial amount of water which would divert it away from agriculture. This is all to say in a very wonky way, in a very nerdy way. There's a lot still to do before this so-called fracking revolution takes place. That's not to say that it won't happen and the Chinese government doesn't want it to happen but there is a bit of a moving target here still in terms of what China wants and what China can actually get from this enterprise.

Chris Nelder: Right. So basically not much. Not much shale gas production yet.

James West: Not yet. That doesn't mean there's not a whole bunch of money splashing around over there. When we were there, we were reporting that in 2012 Royal Dutch Shell was inking a contract with one of the big state players over there that was like $1 billion a year for the next several years just in shale gas. BP, Chevron, ExxonMobil has, they've all signed joint ventures to explore shale prospects in China, a lot down in Sichuan, also up in a very restive area called Xinjiang which has a big population that really doesn't want Chinese enterprise coming in there. The Uighur minority. Chesapeake Energy alone got $4.52 billion out of its deal with another giant state player there, there's a lot of money splashing around here. And you know you can't you can't ignore the money. But there's a certain reality here, it's still you know, caution you that it's still in the prospecting days, and the people that I would listen to, the people that I would believe would really take a lot of this with several grains of salt.

Chris Nelder: Yeah now there's definitely a good deal of risk. There's geological risk, there's all sorts of risk that we're far from understanding yet as I have seen anyway. Exactly what the geology looks like over there exactly how prospective those shales are. We do know, I think we know anyway, that there really aren't other shales in the world that are exactly like US shales in terms of how they perform once you frack them how well they keep the fractures open. How efficiently you're able to frack through it, and you know there may be quite a few things technologically that have to be learned in order to really make the whole thing pay off.

James West: That's right. And I don't think it's any secret that China can get stuff done in a way that other countries can't. And I think if they want to solve a problem they're going to solve it. I don't think there's any other country in the world right now, I'm sure you'd agree with this, that is doing more on this front, throwing more at this problem just from a sheer capital point of view, than China is, solar wind, fracking, nuclear. You know, every single possible thing because this is the biggest challenge that China has right now. This nexus of the environment, and energy is the key to its survival as a one party state. And you know that's where it becomes a really fascinating political question. More than it becomes a question about, can they frack a well? Sure they can frack a well, you and I both know they can frack a well if they want to, if they can get it done, they can do whatever the hell they want on this front. But where it becomes really interesting for me is why is, why is this so important to them. It's not that they want to save the world, far from it. They want to be a big superpower that is controlled by one party, and that one party can control everything, and if they can keep a lid on continual economic growth without people getting upset that then they can no longer breathe the air, then you're looking at a pretty successful state at that point still in 10 years time, in 20 years time, in 50 years time.

Chris Nelder: Yeah that's an excellent point and we're going to revisit that in a minute. But first I want to talk a little bit about just kind of how the greenhouse gas emissions situation looks over there. So we've been told repeatedly over the past several years that China is building a new coal fired power plant every three days or whatever and that it's, I mean it's certainly the world's number one emitter of carbon emissions. But in a recent article which we'll link to in the show notes, you write that China's greenhouse gas emissions may have actually peaked already and that it might even reduce its emissions well in advance of its own 2030 target that it pledged at the last climate summit in Paris. Why don't you fill us in a little bit on that data.

James West: Right. So there's a really interesting growing research consensus from people who watch China regularly that perhaps they're going to meet this goal maybe five years early. You will recall that they put in their Paris Agreement and in the historic U.S.-China agreement that led to it that they are going to start tapering off their emissions by 2030. This is a huge thing. You know China who has long been recalcitrant in these climate talks to finally agree to let's start reigning these in and yes America we're with you, we're going to, we're actually going to negotiate with you this time in Paris and I think that that was historic and I think that it unlocks an enormous amount of political potential that led to Paris. There's now this growing consensus that you know what China you can maybe probably do some more and be more aggressive about this because all signs are pointing to the fact that this is going to start if it hasn't already. Five, six years before 2030. The most recent report is from the London School of Economics and was coauthored by the famous Lord Stern the UKs sort of luminary climate economist Nicholas Stern. And he's been, you know I think in the range of China watches he's been pretty bullish on China's ability to begin to reign this in for a long time. And most recently in this report basically saying if they hadn't already peaked in 2014, and the data kind of says that they may have, they're certainly going to peak early. This is a position that Greenpeace holds. I think it's a position that a lot of China watchers hold right now to the point where it's sort of put China in this weird position. China is such a defensive weird player on you know on global politics that they were forced into that position recently where they had to say no, no, no we're still emitting, we're still growing, we're still emitting which was which, was really hilarious...

Chris Nelder: Because normally they'd want to be saying, no we're doing much better than you think.

James West: Right. They're so sensitive to any kind of criticism of their policy settings specifically that they were forced into this absurd sort of position where they when they had to say publicly that it was still growing. Which was really funny for people that sort of know China's psychology on this stuff. It's like you cannot criticize China's policy settings. And this was also a period of time where they were actually putting the sort of final bits and pieces together on their 13th five year plan, and this five year plan is this sort of highly scrutinized document in China, it's this very central planning, kind of very old school Chinese document that lays out how things will be over the next five years and they were putting the final touches to this when LSE came out with their report which I think made them even more skittish about this report and maybe they should be doing more to curb their emissions, so it is sort of this comedy of the absurd that goes on retitle quite regularly I think.

Chris Nelder: Why do you think China is taking action on its emission situation so much more quickly than people expected, or to put it another way, why is the popular perception of China's emissions problem so out of date?

James West: Well you know we have people regularly in American public life using China as a scapegoat for everything.

Chris Nelder: Or as an excuse for inaction.

James West: Right. Any excuse for inaction can be pinned to China, and I think that is historically been accurate. You know China has, as I said before, been a non-player, or you know deliberately going against global consensus about how to act on climate change for some time. I think the real tipping point has been the environmental crisis that has enveloped millions of people in China. This has become not only an environmental crisis but a political crisis as well. You have to remember a few key things about China when you when you talk about this. China's great bargain with its people, going back to when it opened up under Deng Xiaoping, the historic Nixon visit all the way back then, it's bargain with its people was: we will give you prosperity, as long as you just stick with us, we will give you money, we'll put you in apartments, you can go buy an Ikea couch eventually. You know there's all of these sort of middle class things that we will give you, just don't complain. Keep us in power and we will give you everything you want. I think that for the first time in a generation which has really been exposed to a staggering amount of growth and a staggering amount of allevement of poverty, and a huge increase in the standard of living, and an amazing spectacular galactic level of growth, for the first time people have really begun to see the downsides of that and the health implications of that and the fact that kids have to wear gas masks to go to school. The fact that regularly schools are shut down. The fact that people can't go to work. The fact that people are dying of cancer at record levels in China, the fact that you know routinely more often than not the city's air that you breathe registers crisis points on any scale that is accepted by any kind of world health organization including the World Health Organization. So the population itself is becoming active about this issue, and it's becoming political about this issue and that is the Chinese government's Achilles heel if there's anything that can bring down the Chinese government. I'm not saying that it that it will but if there is anything that can, it is the public mobilizing about any issue, and this one is at a crisis point for the Chinese government.

Chris Nelder: And now they've got a whole 'nother sort of fuel on the fire, and that's the layoffs that are going on. So just to bring people up to date, for the past decade or so, the world has largely depended on China to be the marginal buyer of just about everything, particularly commodities like iron ore and oil. And in my view, which I admit was an unpopular one, it was the softening of Chinese demand for oil that really precipitated the decline in oil prices that began over a year and a half ago. Now as you pointed out in a recent article, the Chinese government is cutting 1.3 million jobs in the coal industry and another half a million in the steel industry and that it's also imposing a three year moratorium on all new coal mines, and plans to shutter a thousand existing coal mines this year alone with more cuts to come. And all of these changes are just breathtaking in size. I mean anything of the kind in the U.S. would be just devastating you know. And as The Economist recently pointed out these layoffs all will just as I said add fuel to the fire. Thousands of strikes and protests that have gone on in China over the past two years, most of which were related actually to lost jobs and nonpayment of wages, output of both steel and coal fell by 6 percent in the first two months of this year alone. And China's total debt has risen to 240 percent of GDP which is, of which the biggest holders are state owned companies so you know I get that China is able to get away with these things because it's a command economy run by the Communist Party. But this just seems like an explosive brew here. I mean will the party be able to continue containing these protests or could this actually lead to mass unrest. And are these millions of workers eventually going to get paid what they earn. Or is it or is this actually the beginning of the great unraveling in China?

James West: Well look I don't think any one thing will be the great unraveling of anything. You know the Chinese government is very good at this. They know this calculus better than anyone. How do we balance this environmental crisis with the crisis in the economy, with the crisis of social inequality. China has the biggest income disparity of any country in the world. How do we balance all of these things and there's got to be give and take, right there's got to be a little risk given here to a little reward here and there, and I you know I think in general my sort of analysis and you know I don't think anyone knows this for sure but my analysis is that any one issue is going to simmer at a certain rate in China for a long time. The social inequality issue is devastating. But do you make decisions about that or do you make decisions about the environmental crisis? Do you make decisions about layoffs versus cleaning up the air. There's this brutal calculus that is going on at the very top levels of the Chinese government that has all of these things in balance. And the one guiding force is them staying in power. And whether that's shuttering, there's going to be 10, over nearly 11,000 coal mines that will eventually be forced to close in the country. If it means doing that for, for this kind of painful gain of shifting off primary production and on to more service economy jobs. They're wagering that that's going to work. Whether it does, who knows, we'll be there to report on it throughout. But I wouldn't, I wouldn't fall into the trap and I used to, very much so about even things like the Internet. I was like young and naive and thought maybe the internet could bring down China, maybe it could diversify public opinion. Maybe it could give voice to dissidence maybe it could create a civil society. None of those things have happened. And so I think the trap with China is to get drawn into these sort of easy conclusions that would make sense for any other country. Right. Like if we were seeing the coalescence of this much inequality and this much sort of degradation of demand for steel, and for all of these different things, in any other country we would write it off and we would say there has to be some structural changes here. For China, it's so vast and so complicated and so unpredictable and there's so much that we don't know as outsiders and so much that we are probably almost definitely lied to about in terms of the official numbers that any conclusion that we try to draw from any of these tea leaves is just bound to be wrong. You know, it's sort of like strap yourself on go for the ride. See where it takes you. Make sure you have a critical mind while you are doing it, but to pretend that any one of these things is going to result in any other one of these things is misleading I think.

Chris Nelder: You know, speaking of that data question this is one of the biggest conundrums for me, is what its actual demand for resources, I mean the official data is clearly unreliable and I'm not the only observer to think so by any means. You know particularly when it comes to its actual economic growth rate. I mean it could be far below what it claims and it could be importing far more oil to fill its new SPR than it admits. In fact that might be one of the answers to the so-called missing barrels problem that we've been talking about in the oil press lately. It could be exporting far less stuff than it says. Do you have any sense about the reliability of official data from China or what parts of it we can believe and what parts of it we should be skeptical about?

James West: I think you can basically say let's be skeptical of everything. Let's let's not at all like every single thing that we read about its economic data I think should be passed through lashings of doubt and lashings and skepticism and I think most people who take China seriously would say that that's true. I think we saw that with the massive revision of emissions recently. I think a lot of Chinese watchers knew that was coming and had prepared for it. And I don't think it upset international understandings of how much China is emitting but the economy is so vast and so unknown and there's such lack of transparency all the way down to the local level, that the right hand does not know what the left hand is doing at all in China. And local officials are encouraged to like wholesale lie about data all the time that you can imagine just how widespread the problems with the data actually is. And so yeah I mean to answer your question everything let's question absolutely everything. Let's try to go back to first principles let's try to get some international accounting transparency built into these deals from the very beginning. Let's put it in free trade agreements let's treat it as talking about human rights for example let's bring it up all the time. How do we make sure. Can we get some independent monitoring? Can we somehow encourage China to have a healthier relationship to non-governmental organizations so that we can have this kind of independent monitoring that other countries rely on that the international community can rely on. I don't think there's any one silver bullet that will enable us to trust economic or emissions data out of China. There's this host of engagement activities that needs to happen on all different kinds of levels. Led by the U.S. I think but also now under this framework that can really begin to apply pressure.

Chris Nelder: Sounds like you're advocating a don't trust but verify policy.

James West: Absolutely. I think. Is there any other way? Is the question that leaders have to grapple with it's the one that got China to the table in the first place. We can't tell China what to do. In fact when we do it ends badly. So what are the other options here. And engagement I think is is really the only way that is proven to work, and be skeptical, be educated, listen to the people that know what they're talking about. But you know try to make them as accountable as possible.

Chris Nelder: You mentioned a few minutes ago that China had done some revisions of its official numbers, for those who might not be familiar with what you're talking about, what was that about?

James West: Why this broke in the international press was sort of a bit misleading. The New York Times did a story about how China had revised its numbers. A prominent global environmental organization ended up questioning this. Greenpeace was like this is this is not right. The Times has got this wrong. So backpedaling a little bit let me put this in context for you. The Times reported that the world's biggest carbon polluter China had ratcheted up the amount of coal that it said was burning every year and that figure they put at 17 percent more than the Chinese government had previously disclosed and this was back in November 2015. And so this 17 percent figure on its face is absolutely staggering right. Like how can a country get it wrong to the tune of 17 percent? And one of one of the article's conclusions was that this would somehow derail international negotiations, you got to remember this was before the Paris Agreement.

Chris Nelder: A couple of weeks before I think.

Right. Exactly. And I think that contributed to why it was such a blockbuster number. China has been lying to the world to the tune of 17 percent of its coal consumption. But if you scratch the surface, this was known to all of the major environmental organizations: the world Resource Institute, Greenspace. The information had actually first been made public in the February, the year before November by the Chinese government by a routine kind of statistical assessment that had put out this kind of boring very dry very vanilla, you wouldn't want to read this at all it's better than Ambien. This kind of stuff you know puts you right to put the right to sleep. But the people that are paid to read it all knew about this stuff really early on, and so that this sort of premise of this 17 percent revision was actually not particularly new to anyone who was looking at China and had certainly been factored into the Paris negotiations, and had been factored into the way that you know climate scientists and environmental advocates had been treating China since that February, so we're talking you know eight months or so before this scoop, so-called scoop sort of landed on the international stage. So that's what I mean by taking this statistical stuff in China with a real grain of salt. It takes a long time for it to filter out, there's translations that are done that that kind of get picked up by journalists, and rightly so I'm not necessarily blaming the Times for making this a story. I think it is a story.

Chris Nelder: That was an important story for sure.

James West: A very important story for us to know about. But the context is equally as important, and translating the body of knowledge that we know already for readers is just as important. And so this is what I mean by realizing that it's a total excuse my French shitshow in China when it comes to official statistics, and sometimes it takes months for them to be absolutely finalized to the point where we can trust them. And even then I would say that it's it's like a Salvador Dali painting sometimes up is down, sometimes left is right.

Chris Nelder: And sometimes the data is corrupt because nobody knows and sometimes it's corrupt because they wanted it that way.

James West: That's right. And you know I think to a certain extent, and maybe this is getting a little too philosophical for my station here. But go with me for a second. Sometimes I think that we have to be good faith players with China. Right. We we see all of the changes that they're making. And yes, there's a lot that China does badly. There's a lot that they can do better. And of course everyday life in China should be better than it is. But if you are to take these broad historical shifts and trends there's a lot of good news coming out of China. And you know I don't say that lightly. And there's a lot of good trends coming out of China. We have reason to be optimistic. That's not to say that things shouldn't be wildly better than they are. And that the Chinese government should wildly treat its people better than it does. But there's no reason for us to be bad faith actors in the relationship with China at this point I don't think. There's only good to be said out of engagement, and every time that I've been to China I see engagement on absolutely every level. You know this fracking trip for example there were scientists there, as well as Halliburton executives but there were academics, there were people involved in environmental regulation, I think when the U.S. engages with China and sends its best and brightest, it's not as if China is ignoring that stuff. It's not as if China doesn't want it to be best practice. There are capacity issues. There are human rights issues, there are civil rights issues, there are huge environmental problems but it doesn't mean we shouldn't be good faith actors with China at this point.

Chris Nelder: I think that's a really important point and probably one that's not made often enough to be honest.

James West: And I think it's not a particularly popular point of view I don't think necessarily.

Chris Nelder: Oh no, it's so much nicer to just vilify everyone else because we're perfect.

James West: Right. And I just don't think a real assessment of the amount that China has done in the last even the last six months really backs up a position that you know at some point you have to report the good news as well as the bad.

Chris Nelder: Well and we're going to talk about that good news because they are by far the world leader in energy transition right now. And that story too is I think under reported. But before we get to that there is a conundrum that I just cannot get my head around and that's these ghost cities. I mean it just boggles my mind that they would be building entire cities without having actual demand of people who want to live in them. And I wonder if China hasn't made a massive blunder here and committed this just an outrageous misallocation of resources particularly considering the slowing birthrate in China. I mean is it possible that all this new real estate will actually get occupied?

James West: I can't see any way that it could possibly. So I think two things to say about that the first is I've seen some of those places and it's. spooky.

Chris Nelder: It's got to be just freaky.

James West: You catch these super fast trains through these industrial belts of northeast China for example and these whole like apparitions out of the smog appear and then vanish, and then appear and then vanish, whole mini cities as big as downtown Manhattan, bigger perhaps.

Chris Nelder: And there's nobody there.

James West: All unoccupied. And this kind of netting of cranes everywhere and this enormous amount of growth. It's shocking and it is makes your stomach churn about why this is happening. The second thing to say is I think that economic rationale is beginning to change. And you know I don't want to say that without evidence but I now know that in this pollution crisis is so important for the government that instead of sole GDP indicators which I think is the birth of those ghost cities has been this imperative for the flacs of the Chinese Communist Party to fiddle their numbers and to just stack growth in the form of construction and the steel industry and all of that nonsense. I think that's slowly giving way to another kind of key performance indicator which is the environment and it's not perfect. And certainly when I was there, there's you know I can imagine that that is another indicator that can be just fiddled. But local governments are now required to in a lot of different places in China, and I'm not sure exactly to what extent this is happening, but lots of places that I went are now using environmental cleanliness, PM 2.5 the particulate matter in the air which is most deadly to human consumption. There are now goals for that kind of stuff for local governments to begin to curb the environmental hazards of their construction. So they're now putting in play this idea that you have to balance GDP growth and growth per unit of GDP with environmental concerns. And aI would say my prediction is if I'm to make one that that will shake down into some of these places not being built. I don't know whether they're going to get inhabited. I have no idea. But I would say that the sole GDP incentive for these local places to throw up these buildings is going to be in balance with some of these environmental concerns.

Chris Nelder: Well then I think you're basically reinforcing what I, what I had suspected about this which is that they were building these ghost cities not because actually anyone needed them or because you know they really expected there was going to be people that wanted to live in them but because it was a way to prop up GDP growth rates.

James West: Absolutely. I mean I think that is now without a shadow of a doubt. The most interesting things that we saw when we were there were these local campaigns by what are called gong-cos, they are sort of government approved non-governmental organisations and there's an inherent conflict there. But these organizations that have been government sanctioned now can finally talk about the environment in a way that when I first visited China back in 2005 over 10 years ago now was impossible when I first went there. There was no conversation about the environment in any sanctioned way. Now you see this flourishing of talk about the environment in part because they have to, because otherwise the public would just go absolutely ballistic. You know one of the most interesting things is that environmentalists can now talk about the environment in a way that they never were allowed to before. Two stories about that. We visited Yingli at the time the biggest solar manufacturer in the world, its now been surpassed but at the time it was, and we visited this amazing facility that was building in front of our eyes solar panels that were destined for rooftops in Arizona as well as South America. Everywhere. And it was phenomenal and the people that ran that place spoke the fluent language of global renewable energy like I've never heard anyone speak it. They were totally singing from the same hymn book as I don't know California lawmakers for example.

Chris Nelder: Oh yeah, absolultely, back in 2007 they were my top pick, when I was a solar market analyst they were my top pick in the world for solar companies to invest in.

James West: And they've benefited not only from kind of top down government regulatory policy in China but they have benefited from this huge boom in the global market right. But the language that came in and out of their mouths is what was really instructive for me. If I had met them I think 10 years ago you know obviously it was a different kind of place and but they wouldn't be talking about the cleanliness of the air or how it's good for the environment to have solar panels or climate change or you know any of these things. In corporate China as well as Chinese society there is now a language by which people talk about the environment which didn't exist 10 years ago I mean maybe in private people knew about the degradation of the environment but it was censored widely. I mean there's still a cat and mouse game. You know you recall this documentary that went viral online called Under the Dome which was this pretty phenomenal sort of inconvenient truth style documentary by a former TV presenter in China and it went viral and the Chinese government sort of entertained for a little while to allow it to flourish and then clamp down on it. But people had already seen it and it became the most sort of viral thing on the Chinese internet for weeks and weeks and weeks. There's still a cat and mouse game with how much they are willing to tolerate. But my God it's so much more than ten years ago. And young people 17, 18, 19, 20, 21 year olds are now growing up in it in a kind of environment where they can talk about the air pollution in a way that they can, and I don't think that that can be underestimated. That is a new generation that has a language by which to be active about this. And it's delicate for the Chinese government but I think that it's changing.

Chris Nelder: Well OK so let's let's turn to the bright side of the story then. You know in less than a decade China has gone from having almost no wind and solar power to having the most wind and solar capacity of any nation on Earth. Plus installing more every year than any other nation by a long shot. For a little perspective, China installed about 17 gigawatts of solar PV in the last year 2015 which brings it to a total of 43 gigawatts of installed capacity. That means that China installed more than twice as much new solar capacity last year as the US did and now has one and a half times as much solar installed capacity as the US does. Similarly China installed a whopping 30.5 = Gigawatts of wind capacity last year or about three and a half times as much new wind as the US installed and now has a total of 145 gigawatts of installed wind capacity which is about twice as much as the US has. I mean this is just phenomenal for less than a decade of activity and its projections are that actually these installations will continue to increase. But at the same time all is not well thanks to a lack of grid capacity for all these projects, China has been forced to curtail output of some of its wind and solar farms and actually has reportedly fallen behind as much as 18 months on making subsidy payments to solar project developers and those developers in turn have had cash flow problems and have had to sell their interest in projects and stop further development activities. So kind of a mixed bag there on the downstream end of these projects. So are these indications that China has once again overdone its ambitions and is living beyond its means or do you think that they're just sort of growing pains in an extraordinarily rapid transition to renewable energy.

James West: Both. You know there's well documented overcapacity here, I think there are growing pains, I think they probably have invested too much too early but this is what China does right if they want it to happen, they're going to build the train from Beijing to Lhasa in Tibet. They're just going to do it right, they don't really care about this stuff so much. I think the real sort of issues are around its international obligations right. Can they meet their obligations under trade agreements, under international norms, under what's expected legally then so that there's no dumping of this stuff, if there is dumping is there going to be a muscular response to it from the United States or the EU. These are sort of things that are at play. You know these re athings that are ongoing. So it's hard for me to sort of stare into the crystal ball and go it was a mistake because we just kind of don't know, this history is getting written as we speak. And who knows who its going to benefit. I mean it doesn't look like China is in any way going to slow down its capacity building on this front. As you rightfully point out in the introduction to that question whether the world economy sort of kicks back and says no there's too much. Who knows. You know there's a lot to happen. Is the key point that I would make about all this stuff is this sort of history at play as we as we look at China in and marvel at its growth. All we can sort of do is report that the fits and starts and treat it with some skepticism but from on balance I don't think it's going anywhere and I think the general trend is is positive on that front.

Chris Nelder: Yeah I think it's pretty clear that their push toward renewables is definitely going to continue. One of the things that I'm still waiting to see actually is how much, how much of this grid building effort is actually happening and how well are they coordinating it. And what is their planning around it. Because it seems to me that that's been one of the big sort of missing elements in this whole picture and it's one thing to say let's put up a bunch of giant solar farms or a bunch of giant wind farms. But it's quite another to figure out OK well exactly where do we need to bring the transmission and distribution grids together and how do we balance all this stuff. And I think that's the part that I don't ever I don't ever see any reporting on that from anywhere.

James West: Right. I mean it's instructive to to know that the world's, well China's biggest turbine maker is called Xinjiang Gold Wind Science and Technology. Xinjiang is this vast Northwestern autonomous region that has a lot of problems in terms of civil rights and all of that kind of stuff. But it's also just very remote. It's super windy but it's also really remote so imbedded in the name of its biggest wind producer is its remoteness and its difficulty to connect to these transmission and distribution grids so I don't think they're unaware of this problem. And I think if they're serious about the embrace of renewable energy which by all reports they are then I would suggest that they're going to make getting that power to the east of the country where the bulk of the industry is is going to be a huge priority for the Chinese government going forward.

Chris Nelder: You know it seems to me that with China showing this kind of leadership not only on renewable energy and energy transition but but on climate as well I mean as we were talking about earlier probably on track to significantly beat its own targets set up the COP 21 conference. Where does that leave the U.S. and its own emission problems. And where does it leave the defenders of the fossil fuel complex who have argued for years that it would be pointless to for the US or perhaps your home country Australia to reduce its emissions unless China did first?

James West: Right. I think it gets rid of that argument entirely and that's part of the reason why I am so fascinated by this story, its not about necessarily the gigawatts of installed capacity that happened in the last month. That's something that I report. But the bigger picture is what's interesting to me is that the global politics of this have shifted and it's it might be the last vestige of global denial that people can rely on. China comes to the table and I think this is what was so important about the U.S. China climate pact was that finally we had the two superpowers of meaningful emissions importance. Finally fighting from the same corner. And that's the story that I won't tell. That's the story that I think upsets the status quo the most in Australia where I'm from, and in the United States is that it can't be relied on as an excuse anymore and it has meaning for just so long, there's no discernible climate denialism amongst the ranks of the Chinese Communist Party. There never has been. The are a bunch of engineers. I think the majority of the Politburo are engineers, they're scientists. They're people that practical to the point of being excruciating. There is no political advantage for them to deny climate change is happening. That they are causing it. There's no political advantage. And so it shows the political obstinance in this country for what it is which is just cynical and you know we can talk about why that is what they're pandering to. And that's a kind of separate conversation. But the fact that China is acting on climate change we can debate and have been debating about how effective they've been on that front, the fact that they are changes the game for me entirely and shows up political denialism for what it is which is just political denialism and I think we finally have proof of that in Chinese actions.

Chris Nelder: I think you're absolutely right. Wow. Well James that was a quick hour and I so enjoyed talking to you. That was really fun.

James West: No worries. I'd love to do it again. And let's let's keep chatting.