I'm Rob Zemeier, the founding executive editor of Heatmap News. And I'm Jesse Jenkins, a professor of energy systems engineering at Princeton University.

And you are listening to ShiftKey, Heatmap's weekly podcast on decarbonization and the shift away from fossil fuels. This week, it's a big one. So Trump has been so helpful this week because we have long planned to do an episode on China's industrial policy, talking with two absolute giants in the field who have been studying China's energy-specific industrial policy at this point for more than a decade, who were onto it before anyone else. We have them here on the show today. And because he is so nice, because he loves Shifky so much, Donald Trump chose this week as the week to put on giant tariffs with all of our major trading partners, including China. And so we have an extremely timely conversation for you about how China became the behemoth that it is in EVs and solar and wind in specific techniques their industrial policy pursued, whether those techniques included tariffs, how we should think about tariffs in an industrial policy mix, and what these tariffs, what the Trump tariffs could mean for the U.S. economy and the U.S. industrial base going forward. We have two amazing guests. First is Joanna Lewis. She's the Provost, Distinguished Associate Professor of Energy and Environment and the Director of the Science, Technology, and International Affairs Program at Georgetown University's School of Foreign Service. She was also a lead author of the Intergovernmental Panel on Climate Change's Fifth Assessment Report. She wrote the book, Clean Innovation in China, literally wrote the book on this. Also joining us, another giant, the assistant professor at George Washington University in Department of Engineering Management and Systems Engineering, J.P. Helveston. He studies China's technological transition and its change from internal combustion vehicles to electric vehicles and renewables. I'm so excited to have this conversation with them. Let's bring them in now. J.P. and Joanna, welcome to Shift Key. Thanks.

It's great to be here. Yes,

great to be here. Thanks for having us. So

Joanna and JP, I think we originally invited you on the show because you were studying China, I think, in industrial policy before it was cool. And so as the OG hipsters, we'd like to bring you on here to talk about, in the light of frequent news discussion about tariff and non-tariff barriers to trade. We'd like to break down what exactly China did do to grow its dominance in clean energy sectors and how we should think about an appropriate U.S. response. We can come back to whether the current trade policy response is appropriate or not. But let's start with China and maybe take a trip back to around the period of the Great Recession, 2008-2009. We'll start with you, Joanna, and then JP, you can jump in. Can you kind of summarize what that moment looked like for China and how it approached solar and batteries and EVs at that particular time? Yeah,

happy to. And as you may know, I mean, the first technology I really studied in China was wind, because I really I look at wind as sort of the first technology that China really decided to dive into in a big way in terms of government support. Right. And and really apply these sort of green industrial policies that it then kind of perfected or, you know, changed up a bit in solar. And then by the time it got to batteries and EVs, this was a well-oiled sort of state green industrial policy machine, right, and thinking about how to support these industries. So just a couple of things I would say. China's motivation to do this, right, in terms of why China does clean energy technologies, environment is a part of it. Climate change is a part of it. But this is always, from the beginning of government strategy been about how China can develop its role in the world and developing high technology industries, right, and look for ways that it can play an important role in these technology sectors. I think they were very, there's a lot of foresight, right, in going back again to the early 2000s and thinking about how China can play a big role in manufacturing and then innovation and eventually trade and export in these technologies. So, you know, they did it in wind and it started with a kind of broad renewable energy policy strategy. The Renewable Energy Law launched in 2005 in China. Wind was really a domestic industry. It was for domestic consumption. Even today, China exports very few wind turbines, which is why we don't hear a lot about wind turbines now that we talk about trade and tariffs, right? Solar was really quite different where local manufacturing didn't play as big a role in the early days of the solar industry because they were really developing these technologies primarily for export. Both industries, though, were created through a variety of technology transfers on partnerships with foreign companies that, you know, we can come back to because I think we're in an interesting time now where a lot of China's learning, right, came from foreign firms. And now we're looking at, okay, maybe how can U.S. firms learn from China, right? This has been going on for a long time. I think the playbook that we see applied to batteries and EVs, a lot of that was learned in the wind and solar sectors. But the big difference is that China did a lot of that through their own domestic innovation and really are far ahead of the rest of the world, whereas in wind and solar, they were playing catch up to big industrialized countries.

So JP, let's talk maybe about the EV side and battery side of things as well. China took a pretty big bet here too, pretty early on battery technology. Can you talk about that? Yeah.

And I'll just add a little bit more to this, the other two industries as well, that it's been a little bit different across each of them. Like Joanna just said, that in some cases they were playing catch up, in other cases they were leading the way. And it's sort of where is their position in the global ecosystem at the time. But I think a bigger strategy that they've attempted over time is enticing foreign companies to come to China and invest in China. So through the joint venture requirements and things like that, or local content requirements. So you have to move your supply chain here to have certain amounts of local content made by Chinese companies. Those are all, you know, ongoing and have been around for many decades. I mean, going back to the 80s. And used pretty broadly across

a wide range of industries.

Yeah, this isn't just clean tech. We're talking like construction equipment, high-speed rail, every major industry. Those are some of the mechanisms, just to put them out there. But how they shook out and how they all played out was a little bit different. There's interesting histories in each of these. So with batteries and cars, the story's a little bit different that battery manufacturing was already there for the electronics industry in a much smaller scale. So that's been there for a while. And things like making your iPhones and making power tools and stuff like that. And companies like BYD were making batteries for power tools well before they were making cars. The automotive sector came along in a very different way. I think if you went back to the late 90s, early 2000s, China's government wanted China to become a major gas car company. They wanted their own Toyota, their own Volkswagen. They wanted to transfer that gas car knowledge, the internal combustion engine. And they never really got there. They never really figured that one out. But during that time, there was also this other side push for EVs and to electrify. And that's where private companies largely led a lot of the push. And they were going after a market that global automakers were not yet going after. So they had an opportunity there with the battery supply chain that was already there, sort of nascent, but they needed to scale it up. And there was a coordinated effort between central government upstream doing things like mining and refining of materials, getting that aligned and supporting that. And then also private companies further downstream, innovating and making cars and experimenting with new batteries and things that a lot of automakers around the world weren't doing yet. So when you look at the behemoth that is the Chinese EV industry today, it's a lot of private OEMs that are at the forefront here, not necessarily your big state-owned companies. I think the vision that China's government had maybe 20 years ago was a very different one that actually played out. But they ended up getting what they wanted, which was Chinese leadership in the industry.

Can I ask one kind of classical hard problem about industrial policy, right, is that selecting the technology that is going to eventually be a winner. And there's a few ways to get around this problem. One is to just make lots of bets. One thing that's been a little unclear to me about the set of technology bets that China has made is that it has seemed to pick a set of technologies that are now extremely competitive globally. And it did seem to pick up on those technologies before Western governments or firms really got to them. Is that entirely because China just made a bunch of technology bets and it happened that these are the ones that worked out? Is it because China could look ahead to the environmental needs of the world and the clean development needs of the world and say, well, there's probably going to be a need for solar. There's probably going to be a need for wind. There's probably going to be a need for EVs. Or is it like a third thing, which is that China's domestic needs, its domestic energy security needs just happen to align really well with the direction of development that the world is interested in moving in anyway. Can

I choose option D all the above? I don't know. I feel like that's the answer here. I'll add one thing that's a little bit nuanced. So there's been tremendous waste. I'll just put that out there. There's been all kinds of investments that did not pan out at all, like semiconductors for a long, long time, just things that didn't work. I think where China has had a lot of success is in areas where it's like the inverse of what the United States innovation ecosystem does well. China's ecosystem is really driven around production. And a lot of that is part of the way the government set up and that local provinces have a ton of power over how money gets spent. We often repurpose funds for export oriented production. And so that's been a piece of the engine of China's like economic miracle is mass producing everything. But there's a lot of knowledge that goes along with that. So when you look at things like solar, like that technology goes back to many, many decades for satellites, but making it a mass produced product for energy applications requires production innovations. You need to get costs down, you need to mass produce, you need to figure out how to like make the machine that makes the machine. And that is something that the Chinese ecosystem like does very well. So that's one through line across all of these things is that the technology got to a certain level of maturity where production improvements and cost decreases were the bigger things that made them globally competitive. I don't think anyone would be considering an EV if we were still looking at $1,000 a kilowatt hour. And we were there just like 15 years ago. And so that's the big thing. It's just production. I don't know if they've been exceptionally good at just picking winners, but they're good at picking things that can be mass produced.

Can you contrast that to the US system a little bit? Because I think when we think of the U.S. system, it's much more R&D and lab dependent with very little of this process innovation. Is that right? That's

always been my understanding when I look at, and there's so many anecdotal stories of things like this, like A123 systems for batteries, where a startup that spins out of MIT that struggles to find financing and struggles to find a production facility in North America. And they go to China because they have all of that there. So there's been cases of IP theft, but there's also been direct cases of just pure entrepreneurship of people looking for places to mass produce. And they go to China because that's where you can do it and you can do it at lower cost. That's Apple's whole business model. So I think that's the big difference. When you look at what's the next breakthrough, where's the next breakthrough battery going to come from? It might come out of one of our national labs, but will it be mass produced in North America? I don't know. It's hard. It's hard to find the resources you need to do that well here. I

wanted to pick up on what JP was saying, because I think that I agree with most of what he said, but I think China actually plays this role, not just of mass scale deployment, but demonstration, right? Like we see a lot of US companies that have these great technologies. They are sitting in the lab and they actually can't get those first few projects built, right? To be able to get whatever the seed funding they would need, the venture capital and sort of build those first test projects. There were several US companies that I've studied that had these applications for the United States, but they demonstrated the technology in China. We saw this for like multiple, even like air pollution control technologies. So I think that is a really unique part of China's innovation ecosystem. The other thing I would say on just the question of picking winners, there I think are a few technologies China chose because of IP barriers, right? And it was a place they could get into the market. And again, using the wind example, China became a huge leader in the manufacturing of permanent magnet direct drive wind turbines, which was not at all the conventional sort of technology in the market, but it was an area where they felt like they could compete, they could get access to, you know, IP, they invest a lot in innovation. And that is actually, it hurt them in the early years, but it served them well, because that's where a lot of companies are using in the offshore space. So they now have that advantage there, I think.