Under the threat of climate change, is the new energy industry a "surplus" or a "shortage"?
The World Meteorological Organization said on June 3 that the El Niño phenomenon, which has pushed up temperatures and brought extreme weather since mid-2023, has shown signs of fading, and the La Niña phenomenon, which will "cool" temperatures, will appear later this year. The World Meteorological Organization pointed out that although the El Niño phenomenon is coming to an end, the earth will continue to warm due to the influence of greenhouse gases.
Denny Roderick, a professor at Harvard University in the United States, recently wrote an article titled "Green Industry: A Say Thank You to China", pointing out that thanks to Chinese companies expanding production capacity and leveraging economies of scale, the cost of renewable energy has been greatly reduced. Boosted optimism in the climate community and gave us the ability to control global warming within a reasonable range.
However, in the face of the increasingly severe climate crisis, there is still another voice that is completely different from Roderick's view in today's world, that is, China's "overcapacity" of new energy products.
Which one is the real situation?
Extreme weather is "normalized" and crises are looming
The threat posed by climate change is becoming increasingly real to every ordinary person. Since the beginning of summer in the northern hemisphere this year, severe heat waves have hit many countries. In India, temperatures in many places have exceeded 45 degrees Celsius for days. On June 1, 33 election workers died of heat stroke in Uttar Pradesh. In Mexico, hot weather since March has killed more than 60 people.
According to the World Meteorological Organization, this El Niño event is one of the five strongest El Niño events on record. El Niño is coming to an end, and La Niña is coming soon. Can it bring some "coolness" to the earth that continues to "burn"?
El Niño is a naturally occurring climate pattern associated with warming of the ocean surface in the central and eastern tropical Pacific. La Niña, by contrast, is associated with cooling of the ocean surface in the central and eastern tropical Pacific. La Niña often occurs after the strong El Niño phenomenon, and both are related to natural disasters such as persistent droughts and floods in some areas. The World Meteorological Organization pointed out that despite the "cooling" impact of successive years of La Niña phenomena from 2020 to early 2023, the past nine years have been the hottest period on record globally.
In addressing climate change, the Paris Agreement adopted in 2015 set a goal to control the global average temperature rise to "well below" 2 degrees Celsius by 2100 compared with pre-industrial levels, while seeking to limit it to a safer level. Within 1.5 degrees Celsius.
However, the progress of implementing the Paris Agreement is not satisfactory. In November last year, the United Nations Environment Program issued an alert that based on the current pace of greenhouse gas emissions, the earth is on a trajectory of warming to 2.9 degrees Celsius by 2100. Bill Gates, co-chairman of the Gates Foundation, admitted that it is "impossible" to limit the temperature rise to less than 2 degrees Celsius.
Liu Ying, a researcher at the Chongyang Institute of Finance and director of the cooperative research department of Renmin University of China, told a reporter from the Beijing Daily client that extreme weather such as droughts and floods that occasionally occurred in the past have gradually become "normalized" in recent years, largely due to human factors., that is, carbon emissions cause sudden changes in climate. Humanity needs to control carbon emissions, and more than 130 countries have proposed carbon neutrality goals. As an important source of carbon emissions, traditional fuel vehicles need to be replaced by electric vehicles. In 2023, EU member states and the European Parliament have jointly decided to ban newly registered diesel and gasoline-engine vehicles from 2035.
"In the long run, considering the global stock of fuel vehicles, there is a huge demand for electric vehicles to replace fuel vehicles. However, whether there is overcapacity is a professional term in the field of economics, and rapid changes on the supply side and demand side must be considered." Liu Ying said.
China's production capacity can be easily absorbed based on global market demand
Recently, senior U.S. officials such as Secretary of State Blinken and Treasury Secretary Yellen have been publicly hyping up the "overcapacity" of China's new energy industry, and have also "expressed concerns" to China on this issue during their visit to China.
In this regard, China has repeatedly stated that the US "overcapacity theory" completely deviates from objective facts and economic laws, and is essentially protectionism. China's new energy production capacity is the advanced production capacity that is urgently needed to promote the green transformation of the world economy, rather than excess production capacity.
Bai Ming, a member of the Academic Degree Committee and researcher of the Research Institute of the Ministry of Commerce, told the Beijing Daily client reporter that the prerequisite for talking about "overcapacity" is to talk about what production capacity is excess relative to, whether it is domestic demand or the world's demand. According to the principle of comparative advantage, all countries should give full play to their strengths and provide services to the world with strong production capacity that exceeds their own needs. Some people in the West deliberately confuse relevant concepts. "For example, in the United States, Boeing aircraft are not only used in the United States, but also sold around the world. Many of the soybeans in the United States are sold to China. Why don't they say there's overcapacity at this time?"
"The supply side and demand side of production capacity are constantly changing." Liu Ying cited the example of automobiles. When the epidemic strikes, people go out less and the demand for car purchases also decreases, and production capacity will be significantly overcrowded. But if purchase restrictions across the country are relaxed and people flock to buy cars, it is likely that the supply of cars will exceed demand. If the market is optimistic about new energy vehicles and invests one after another, the production capacity will be divided into production capacity under construction, built production capacity and proposed production capacity. As supply and demand continue to change, production capacity reaches complete equilibrium on the supply side and demand side, which is an event with almost zero probability in economics. In reality, in order to meet market demand, production capacity slightly exceeds demand, which is also an inevitable requirement of the market economy.
According to estimates by the International Energy Agency, global demand for new energy vehicles will reach 45 million in 2030, 4.5 times that of 2022. In 2023, China will export 1.203 million new energy vehicles, which is only about one-tenth of global demand.
Lin Boqiang, dean of the China Energy Policy Research Institute of Xiamen University, told a Beijing Daily client reporter that the relatively low prices of China's new energy products have caused some countries to worry about the impact on their domestic new energy industries. But in fact, while China's new energy industry is developing rapidly, the new energy industry in developed countries is developing slowly."If you don't develop yourself, you still feel that others are running too fast." Lin Boqiang said that if China's new energy production capacity is viewed in the global market,"overcapacity" is unreasonable. Based on the current global market demand, China's production capacity can be easily absorbed. The key is that they "don't want to buy".
Politicized concepts hyped up due to lack of competitiveness
U.S. Treasury Secretary Yellen, who has repeatedly hyped up China's "overcapacity" in new energy sources, is a senior economist. She has served as economics professors at many world-renowned universities and served as chairman of the Federal Reserve.
"The 'overcapacity' that the United States is now hyping is actually not an economic concept." Liu Ying revealed a detail about Yellen to reporters. At a press conference held in Beijing before the end of her visit to China in April, when she was asked by many reporters about the issue of "overcapacity", she kept frowning and reluctantly answered. In Liu Ying's view, Yellen, as an economist, obviously knows that "overcapacity" is a politicized concept intended to suppress Chinese products.
Bai Ming pointed out that the United States and other Western countries accuse China of "overcapacity", which is related to the lack of competitiveness of its new energy industry. Compared with the higher production costs of new energy industries in European and American countries, China's new energy products have obvious comparative advantages. "It is unreasonable to accuse competitors of 'overcapacity' if the cost performance ratio is not high and the competitiveness is insufficient."
Liu Yangyang, founder of Asian Influence Innovation Capital and senior researcher at Taihe Think Tank, pointed out to a Beijing Daily client reporter that in the revolutionary process of energy transformation, no country in the world has invested on a large scale and responded seriously like China. After continuous development in recent years, the construction of China's new energy industry in terms of scale, logistics and the entire supply chain has enabled China to have the highest efficiency and lowest cost in the world's new energy industry. Western countries cannot compete with China in the new energy field, so they can only use "overcapacity" as an excuse to carry out various inexplicable means such as anti-dumping investigations and tariff increases to suppress it.
Liu Ying said that after the Biden administration came to power, it successively introduced three major bills: the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the Chip and Science Act, hoping to promote the return of key industries and increase the United States 'own production capacity. But it has never been done. The United States has also encountered setbacks in its global implementation of "decoupling and breaking links" with China and changed it to "risk removal." Today's hype about China's "overcapacity" is based on the hope to continue to promote the return of industries, and on the other hand, it hopes to legitimately continue to impose tariffs on China. Its starting point is purely political.
