Ep. 4: Henry Sanderson on his book, Volt Rush: The Winners and Losers in the Race to Go Green

SEASON 1 EPISODE 4

[INTRODUCTION]

[0:00:07] ANNOUNCER: This is Financial Climate. Can innovations in finance help the world decarbonize? How can trillions of dollars of assets be redirected to catalyze a net zero economy? We explore these questions through conversations with innovators, experts and investors from around the world. Here's your host, Alex Roth.

[OVERVIEW]

[00:00:33] AR: The energy transition brings to mind sleek, futuristic electric cars. It brings to mind hyper efficient appliances, and fresh-faced tech entrepreneurs, pitching green innovations. What we see a lot less of is everything that needs to happen behind the scenes to make that energy transition possible.

Production of minerals in faraway countries is increasing astronomically. We need those minerals quickly. Even though opening a new mine can take years. Of course, we want assurances of high environmental and labor standards. But those can be hard to come by. We aspire to build critical industries domestically. But right now, we're hugely dependent on Chinese companies for everything from batteries to solar panels. We want short and resilient supply chains. But right now, many of the ones we depend on for the energy transition are long and complex. We need to build things at a monumental scale, at a time when we're testing the endurance of the Earth's natural systems. And all of this is happening amid high inflation, and rising interest rates.

None of these complexities is an argument against decarbonizing as fast as we can. But as we start sprinting toward net zero, we run right away into most of the biggest and broadest issues the Western world faces today, in terms of the economy, and international trade, and public policy.

My guest has written a fascinating book that encompasses all of these topics. Henry Sanderson, is the author of Volt Rush: The Winners and Losers in the Race to Go Green. One of the things I loved about the book is that Sanderson is basically the exact opposite of a guy sitting in an armchair spouting off unfounded opinions. In the book, he describes his travels to mines, and interviews with key participants on multiple continents, from China, to Chile, to the Congo and elsewhere. His reporting builds on his experience covering commodities for the Financial Times. And he's also spent time living and working as a journalist in China, a country central to the story. Here's our conversation.

[INTERVIEW]

[00:02:52] AR: Henry Sanderson, welcome to Financial Climate.

[00:02:57] HS: Thanks for having me on.

[00:02:58] AR: Your latest book is called Volt Rush: The Winners and Losers in the Race to Go Green. A lot of your book is about the mining and processing of the minerals and materials that will be needed to decarbonize our economy. From the standpoint of mining and physical materials, can you just give us an idea of the scale of the transformation ahead of us?

[00:03:21] HS: Yeah, so I mean, if you look at battery demand is going to grow 20 times between 2020 and 2030. So, passenger vehicles, if you think about the, the millions of vehicles that need to be made electric, and each one of those electric vehicles has big batteries that contain all these minerals. We're talking about quite a big increase in supply, especially for things like lithium, which lithium traditionally was a much smaller market, but it needs to essentially double this decade to meet the demand.

So, it's really quite big increase in supply for these minerals. And bringing mines online is not easy. New mines will take five years minimum, and they're often delayed. They're big projects, you need permitting, you need environmental assessment, approvals, et cetera. But yeah, so it's really not an easy task.

[00:04:15] AR: One of the things you talk about in the book is your travels to the Congo in the central part of Africa, and you talked a lot about the Congo’s role in the production of cobalt, which is, of course, an element that's essential for the green transition. What are some of the challenges and issues in obtaining cobalt, particularly from the Congo?

[00:04:33] HS: Yeah, so it's really interesting, because, at the moment, Cobalt is using a lot of EV batteries and DRC is the Saudi Arabia of cobalt, really produces about 70% at the moment. 

[00:04:47] AR: DRC mean, the Democratic Republic of Congo.

[00:04:50] HS: Yeah, so it's a fascinating country because they have, geologically wise, they really have such rich deposits of cobalt and copper and they have hydropower there as well. So, they could be a really key player in this energy transition. But while I was writing the book, a few years ago, there was all this concern about child labor and individual miners in the Congo. And I think the supply chain, the automotive companies got very concerned and very worried about how to deal with the DRC. And in some ways, we have seen a lot of progress and there's still much more to be done.

But basically, for the foreseeable future, there's not much replacement in terms of cobalt from the DRC. But it's quite a fragile supply chain, because if you go there, it's all trucked out of the country along one road. So, it's quite a fragile supply chain, and you do still have these individual miners mining cobalt by hand, selling it to Chinese traders. So, the government's now try to improve that sector to make it, give better equipment, et cetera. But yeah, it's a challenging situation.

But then on the other hand, DRC is one of those countries that should benefit from the opportunities of the energy transition. So, we should help them to do that. And they’re kind of key. They have, obviously, a huge forest, which is a big carbon sink. So, we should definitely do what we can to help them.

The good thing about electric vehicles is because it's a green product, people want to have a responsibly sourced battery. So, that's all changing, and there's much more sort of pressure to improve the situation. Whereas I think, with consumer electronics and smartphones, it's just sort of swept under the rug for several years.

[00:06:35] AR: You mentioned in the book an Amnesty International report from a few years ago, that documented some terrible human rights problems with respect to mining in the Congo. Can you talk a bit more about what some of these problems were? And what are some of the efforts to address them?

[00:06:51] HS: Yeah, so the Amnesty report really had a huge impact in the supply chain, I think, really opened a lot of people's eyes to what was going on, because it's really was quite horrific with people mining with no safety protection. So, digging big tunnels. I think after that report, the initial reaction, I think, was just to try and avoid the Congo completely. But then I think NGOs and others pushed back to say, the answer is not just to run away. I think since then we've seen automakers try to get engaged. There's Fair Cobalt Alliance and some other groups try to help. But I think we haven't – I think they're uneasy about what to do right, and how to get involved. I think, at the same time, the government has set up a government company to try and purchase all of the individually mined cobalt, and try and regulate it a bit and try and make sure the miners get a fair price.

Because at the moment, when you go there, they just take their cobalt to Chinese traders on the side of the road and just sell to them or these cooperatives, which sell to Chinese. So, I think there are efforts to try and formalize it. But we still haven't seen any automakers sort of stand up and say they're willing to buy cobalt from individual miners. I think one result of the Amnesty report that I talk about in the book is that they thought, well, we need to secure supply with the big industrial miners, like Glencore, who mined in this vast mining camps that are walled off, that are completely isolated, in most cases, not in all cases, but that sort of big installation, industrial installations.

So, that's what happened with Tesla, signed a deal with Glencore. I think that was sort of the move for automakers. But those companies came with their own issues, allegations of corruption, et cetera. So, it's kind of an interesting situation where neither option was, at the time, particularly palatable. But I think that's the way it went. I do think now, what we need to see is, some automakers are coming out and saying, they'll buy cobalt from individual miners in the DRC and this is the risk they're willing to take, and this is what they've tried to achieve. I do think it's hard to have zero risk, right? If you’re having individual miners, it's very hard to have absolutely no risk and 100% control. But I think, we have to accept some element of risk to improve the situation. And I think, running away is the worst thing to do.

In fact, if western companies turn away, the Chinese will just buy the cobalt, and it will still come into our supply chains, either way. So, that cobalt is going to get into global supply chains either way.

[00:09:37] AR: Yeah, shows how difficult and complex are those issues surrounding, navigating human rights as well as the green transition both at the same time.

[00:09:46] HS: Yeah. I think it's an issue in solar as well. You've got polysilicon coming from Xinjiang in China. So, there are these issues. And in a way, a lot of these issues result from the West being so slow to get involved and the West sort of just relying on China to build these supply chains and supply these products. The West, apart from Glencore, very few mining companies have been willing to get involved in the DRC. Glencore, Ivanhoe Mines, a few others, but very few.

The same with polysilicon, of course, the Chinese have also been very cost effective, right? And they are very competitive, and in some sense, they have managed to corner these markets. But now the West is finally trying to manufacture some of tis own clean energy technologies and it's confronting a lot of these issues in the supply chain, which need to be resolved.

[00:10:39] AR: One of the themes of your book is the dominance of China in so many relevant markets. It's even already come up a bit in our conversation today. I was thinking that a few years ago, a lot of advocates for climate action talked about how we could create jobs and economic opportunities by investing in industries related to clean energy. I'm sure for some people at the time, that sounded like a cynical or disingenuous effort to advance an environmentalist agenda. But here we are now, where electric cars and batteries and renewable energy are huge and growing in strategically important industries. And the Chinese are miles ahead of the West, and we're facing all these challenges from the fact that they are so.

To take just one example from the book, you talk about China's dominant position in the battery industry. And you mentioned in particular, a company there called CATL, which is hugely important, but not well known in the US. Can you talk a bit about how China has come to dominate the battery industry so quickly?

[00:11:39] HS: Yeah, I think this is one of the problems that we're waking up to, which is that, if you look at the late ‘90s, Japan was dominant, and Japan commercialized the first lithium ion battery, so Japan really had a really good start in the market. But then the industry shifted to Korea and then China. And I think China, as it's done in other clean energy technologies, it's managed to scale remarkably well. And obviously, when you increase production, you bring the cost down, you get the learning curve, et cetera.

We saw in solar, battery production, they really invested a lot, they scaled up quickly. And they were supported by a lot of government subsidies on the purchase of electric vehicles, the purchase of electric buses, et cetera, which really provided the end user demand for batteries to scale up. And then China also was quite protectionist, introduced a rule 2015 that effectively banned foreign battery makers from the country. So, the South Korean and Japanese companies that had built plants in China, it was kind of a blow to them.

It was all this combination of things that help them, I think. And I think the issue is now for the West being far behind is we've got to start at a higher cost base if we build these Gigafactories in the US, and that's why the IRA is so important, because it subsidizes that difference in cost.

[00:13:06] AR: The Inflation Reduction Act in the US.

[00:13:08] HS: Yeah, Inflation Reduction Act. So, it helps both for solar, solar cells, et cetera, and batteries too, to bridge that gap in terms of cost of production, because we're a bit of a late comer. But I do think it is a real concern and it's also sad because I think, former President Obama, and at the time of the financial crisis, as I'm sure you remember, they’re right. They did talk about green jobs. They did talk about subsidizing the industry, tried to make the US a leader in clean energy technologies. Tesla was a real success story out of that period, but a lot of other startups didn't succeed. I think China really sort of raced ahead from that point onwards.

I mean, it's a brutal market in China. I wouldn't say that it's a completely subsidized, easy market. It's really brutally competitive market. And if you look at solar, we saw those bankruptcies happening in 2011. And in batteries, it is a really – now it's becoming, it's a really competitive market. There are lots of players in the market. But the CATL, the one I write about in the book has emerged as the world's dominant producer. It’s already expanding in Europe. And now the question is kind of expand in the US as well.

So, yeah. It's a fascinating story that I think leaves the West in a bit of a tricky situation. But we'll find out through the Inflation Reduction Act, how these investments will pan out.

[00:14:32] AR: Yeah. And you talk also not just about the dominance of China and battery manufacturing, but also in terms of their ability to control a huge amount of the supply of the critical minerals from these various different countries where they're concentrated around the world. Can you talk a little bit about the ways in which they've managed to acquire control of those supplies?

[00:14:54] HS: Yeah, so China's not especially blessed with loads of great deposits. It's not like Australia or anything. So, what China's done really well is the processing side of the industry, which is a dirty industry, energy intense industry that I think probably the West didn't want a decade ago or two decades ago. And China, as in many other cases, industry shifted to China, because environmental regulations were weak and labor costs were low, and et cetera, et cetera. And they started to build up scale as well.

So, China really dominates the processing of lithium and nickel and cobalt and pretty much every metal. And then they've gone outside their borders to buy up deposits. I think a time when people weren't really paying attention, so they bought, you know, the best lithium mine on the planet in Australia, Greenbushes mine. I think at that time, Australia just approved the deal. That wasn't the situation we're in now. They bought a stake in SQM, the Chilean company, and they've bought projects in Africa.

They've really had to go outside their borders to buy the raw materials, which are then processed in China. And then each stage of that supply chain, once the material arrives in China, they've got quite a big foothold in. And then you think of China is the biggest EV market as well, right? So, it makes it makes sense that their own domestic market is so big, that they can attract a lot of investment.

That's really been the situation. I do think, though, in China, environmental regulations are getting tougher. Obviously, labor's gone up, and electricity prices moving more towards the market pricing. So, I think it is getting more tricky in terms of cost, but they've definitely really benefited from the scale that they've generated. And also, entrepreneurial energy. It’s an entrepreneurial country. I think people don't realize the number of billionaires in the clean energy sector, right? Yeah. So that's what's been going on.

So, the raw material side, they're not as dominating in the mine side, as people might think. It's really the processing side. They suck up all the raw materials. So, it means that the West has a bit of a chicken and egg situation where even if tomorrow we open a mine somewhere, chances are that material could get shipped to China to be processed unless we also open the lithium refineries and things like that.

The issue now is they both got to be developed at the same time. So, when a mine comes on, and the processing is there as well. And then we need to build out the rest of supply chain, because if any link is weak, it will just go to China back again, sort of thing.

[00:17:33] AR: That makes sense. You touched a bit about on copper. I think for some people that may not come first to mind. We think of these materials like lithium, but copper brings to mind sometimes sort of 19th century mining. So, can you just explain a bit more about why copper is so important and how it's expanding? And then some about where it's being sourced from?

[00:17:55] HS: Yeah, so copper is really important. And I think it definitely shouldn't be overlooked. Because, as I said earlier, we need it for – it’s the best conductor of – it’s not the best conductor. It’s the most reasonably priced conductor of electricity. So, if you think of copper demand, that's going to be very strong. But supply is super hard. Copper mines are very expensive big projects. And in the book, I write about Robert Friedland, who's this miner who went into the Congo, Democratic Republic of Congo. He first went there in the late 1990s and his mine only started production two years ago.

So, copper projects are really big investments and the grade of copper, in most places in the world, that's the amount of metal. In Iraq is quite low. In Chile, the biggest producer has been falling, because obviously, the highest-grade stuff has been mined first. So, it's a kind of interesting situation where the more minerals we need for the energy transition, they might have to come from the tougher jurisdictions or the lower grade mines. That means we might actually need even more energy to mine this copper and even more, resulting in even more emissions, et cetera. Because we have to get the lower grade mines into production.

But yeah, I just think copper is one of those businesses where you need a lot of capital, and you need big mining companies to develop these projects.

[00:19:21] AR: Another faraway country that you traveled to and wrote about in the book is Chile. And in Chile, you met a controversial billionaire who's involved in lithium production, a man named Julio Ponce Lerou. Can you tell us a bit about the mining of critical materials in Chile, and how Lerou and his company fit into recent developments there?

[00:19:42] HS: Yes, it's really interesting because Chile, as I said earlier, is set to play a really key role in the energy transition, because it's the biggest copper producer and you need copper. We're going to electrify everything, you need copper for the wiring, for grids and collecting a lot of clean energy for wind turbines, et cetera. So, Chile is in a really good position from copper. And then lithium, they're the second biggest producer after Australia.

But just as this demand for lithium has increased, and the prices have increased, in Chile there's been a real fundamental rethink of the domestic situation. There were protests a few years ago, and then they've elected a leftist former student activist to be president. And they still are rewriting the Pinochet era constitution.

So, just as lithium demand is increasing, all these political changes were happening. And it's quite interesting that the guy who's behind the big lithium producer in Chile is Julio Ponce Lerou who was previously married to Pinochet's daughter. So, for a lot of people in Chile, it's a very uncomfortable situation. And at the time I visited Chile, there was a whole load of corruption scandals springing up across the country and SQM. This lithium producer was implicated in some of these.

It's a really interesting situation, because I think people would prefer – people feel like they haven't benefited enough from the country's natural resources. I think Chile, there haven't been any new projects apart from these two companies, SQM, and Albemarle. So, Chile risks sort of losing out in some respects in lithium to their neighbor, Argentina, and they've already lost out to Australia, because they need to get more of a political consensus on what sustainable mining looks like and what they want from new projects.

There’s talk of a national lithium company being formed in the country, as some sort of private public partnership. But right now, that growth has been powered by SQM and Albemarle. But one of the really interesting things is, is because of all this political pressure, and some of this backlash we've seen in the country, SQM and Albemarle have really put a lot of effort into the environmental aspects of their production. And actually, Chile has quite a quite a high royalty regime in terms of the money it gets from the lithium.

[00:22:07] AR: Another one of the really important complexities you write about is the energy that's needed to extract and process critical materials. One of the examples you explore is Indonesia, which is a major producer of nickel. Can you tell us about that?

[00:22:23] HS: Yeah, so Indonesia is set to play a really key role, and it’s the biggest producer nickel. It’s got huge, huge reserves of nickel. And the government's been very proactive about trying to build a battery supply chain in the country. They restricted exports of raw nickel. So, the country – you can't just pick up the nickel and ship it out. So, you've got to build the processing in the country. And that's what the Chinese have done in a big, big way. They've invested some 30 billion in nickel processing.

It's a really energy intense. And before the Chinese did it, it was quite a tough business, and they seem to have cracked it in quite a remarkable way where they can build these things quite quickly and quite cheaply. But they all use coal fired power. So, it's a lot of energy you need. The nickel in the rock is less than 1% or 1% of the rock. So, you need a lot of energy. This also produce in a process called high pressure, acid leaching. You need a lot of acid, and you need to dispose of a lot of the waste as well. So, all these things are issues, and I think Indonesia is one of those countries that's going to play a pivotal role.

They need to clean up the supply chain. Because right now, we don't face that much of a choice. We have to get a nickel from Indonesia, but it's reliant on coal fired power. So, we need to find ways to clean up that process. Because again, if we don't do it, the nickel will still be produced, and it will still – it will go to China and will come into our supply chains either way. So again, we need to engage with the country. And it's interesting because at the G20 meeting, Western country signed a deal to help invest 20 billion for Indonesia to shift away from coal. I just hope some of that can be used to green up the nickel industry, though as well.

[00:24:18] AR: Your book, Volt Rush has the subtitle, The Winners and Losers in the Race to Go Green. We've talked about a number of poor and middle-income countries that are sources of key minerals. Historically, we've seen situations where countries that are rich in some particular natural resource may end up the poorer for it, because their economy becomes tied to a single volatile commodity or because it engenders corruption or some other reason.

Just from the perspective of economic growth and economic opportunity, do you see these low and middle-income countries that provide raw materials as among the winners or not necessarily?

[00:24:58] HS: Definitely that amongst the winners, because they've got the minerals we need for the clean energy transition. So, if they set it up, right, they should be beneficiaries. I mean, if you think of Chile from lithium, the government's already getting more revenue this year, then from copper, which is a huge industry, because they've set the royalties quite high. So, I think, the country needs, obviously, to set up the right regulatory regimes to benefit. But I do think they could be winners. And if you look at what Indonesia has done, it's trying to attract the whole supply chain into the country. So, battery manufacturing, the nickel processing. They're being quite clever in trying to attract all of that into the country, and also trying to stimulate their own EV demand. And I think, these countries can't be winners in that sense.

I mean, obviously, the resource curse has a history and resources have often left countries with boom and bust cycles, et cetera. But the thing about this is, a lot of it is battery chemicals, which is quite high value add industry. So, it's a question of what the country can – what kind of investment can the country attract to develop the raw materials more into high value products into something they can get more revenue from?

I think, every country is looking at that, basically. Every country with these raw materials is looking at that. So, that's the question on how they use the opportunity to drive economic growth.

[00:26:28] AR: So, they have to be affirmative in putting in place policies to avoid some of those resource curse issues that we talked about from the past.

[00:26:36] HS: Yeah, I think that's right. I think it is good that the West is getting more involved in the supply chains, because that's hopefully going to come with better standards with more transparency, rather than leaving it all to China. So, that's really a hopeful message.

[00:26:50] AR: Good. Another potential solution to some of these difficult problems of obtaining necessary materials that you talk about is the idea of deep-sea mining. That's a relatively new idea to obtain some of these materials from areas that have not been exploited before. Can you talk a little bit about that idea, and some of the challenges and potential benefits that would come with it?

[00:27:13] HS: Yeah. So deep sea mining is a potential avenue for getting these minerals, which lie on – they lie containing these polymetallic nodules at the bottom of the sea floor. But the question is that there's a lot of opposition to it, amongst NGOs, amongst others, amongst even some big, big companies. And I think it probably will happen at some point, but the question is under what sort of rules and regulations, because the International Seabed Authority is the one that decides the rules. They're working on the rules. And yes, it probably will happen. But what's the kind of regulatory regime is going to happen? And what are the costs of production? And will consumers accept it? Right? Will the ultimate of companies be willing to buy these minerals? That's going to be a huge question.

[00:28:03] AR: Yes. And I guess the world is full of terrible environmental disasters that have resulted from people who say that they're just exploiting some wasteland where there's no real life to be considered. Right?

[00:28:15] HS: Yeah, I think that's one of the interesting things I learned, really about this topic is just the sheer richness of the deep sea. And it's interesting that people used to think there was no life down there. But it's actually extraordinary. All that different species down there, and they find new ones every time they do research. So, I think, it's kind of an incredible, in a way, this whole deep sea mining is encouraging a lot of research about the deep sea and scientific studies. So, it's really interesting, what's going on. But I agree, I think people worry that if we allow it, what line are we crossing, right? What are we unleashing? And how's it going to be controlled? So, as I say, we have to wait and see to see what the regulations are going to be like.

[00:28:59] AR: Yeah, it reminds me some of the stories we've seen elsewhere with nuclear weapons testing or toxic waste in the desert or the places where they say, “Well, there's nothing here”, till they start to look, and then they realize there's a lot more there than they thought. So, you talked about some of these potential ways to address a lot of these challenges. One of the encouraging stories you talked about was a man named Peter Carlsson in Sweden, who has a company to develop a green battery. Can you tell us more about that?

[00:29:30] HS: Yeah. So, I think what's really originally about Northvolt is, it's a really example of Europe developing a homegrown battery industry to compete with China and raising lots of capital and trying to do it in a green sustainable way and getting something built into production. It's sort of a big achievement to go from nothing, to having this industry. And I think is this an example of what we're seeing now, which is efforts to compete with China and also government support, industrial policy is back in a big way, and governments want to support these industries. I guess, Northvolt, was a sort of early, early example of Europe really focusing and coming up with tackling the challenge and developing the skills or importing the skills and really, really going for it. So, it's going to be interesting to see how the company develops and how it goes moving forward.

I do think, when they started out, obviously, their mission is to build the world's greenest battery. And that's been really interesting to watch. But I do think, a lot of Chinese battery players now are also trying to have more green production and move to areas with clean energy in China. So, it's not as if the West does something in a green way, it's the only competitive advantage. No, you’ve got to have costs and scale and all the other things that automakers require. So, it's going to be really interesting to see how Western and especially homegrown Western battery companies develop.

[00:30:59] AR: Yeah, really interesting. So, it shows kind of this interplay of both not only the environmental aspects and the human rights aspect, but then also just the kind of business and international competition among countries too.

[00:31:12] HS: Yes, that's right. And also, they face some of the same issues in raw materials that any other player does. Yes, we need to move towards the recycling, that's important. But certainly, for this decade, these homegrown players have to access suppliers of raw materials, and they're competing with everyone else in the market. So, it's not easy to secure supply of raw materials, number one, but secure low carbon, sustainable supply of raw materials, because that's getting a whole lot more competitive as well.

[00:31:43] AR: Yeah. And so, while we're on that, you talked a lot about recycling of these materials as a potential way to create something like a circular economy where the cast offs from an earlier generation of products can be used to create new product. Can you talk about some of the challenges and some of the efforts underway to do that?

[00:32:03] HS: Yeah. So, recycling is going to be a big industry and we're already seeing a lot of developments, a lot of investment in that. But I think, this decade, because we have this exponential increase in demand, we're not going to have all these batteries coming back to be recycled. So, this decade, probably what we're going to see is the waste from all these Gigafactories being recycled. And then post 2030, we have more batteries coming back.

But the current lithium ion battery in your vehicle is pretty good, and most people don't drive – most people they drive relentlessly or drive that much. So, these things are going to last quite a long time. So, it could be a while till we get them back. But they certainly are a big industry. It's big in China as well. And that's the direction we need to go. And we need to recycle, obviously. But we also need to try and capture some of the electronic waste and all this other waste. It’s quite high in cobalt, that the batteries that we use in consumer electronics are higher in cobalt, right? So, that's one way where, especially in cobalt, we can get a lot of metal supply.

[00:33:13] AR: But for now, though, even if much of that supply was exploited, sounds like there's not really enough to feed the demand that's currently experiencing. Is that right?

[00:33:21] HS: Yes, that's right. But when we get out to 2030, 2035, I think, the picture is going to change.

[00:33:29] AR: Yeah. And is that how you see things playing out in the long term, that eventually we can reach a point where we do achieve something like a circular economy to recycle these materials, and have that be a closed loop? Or is it the case that there will always be something else we need to exploit further or some imperfections in that loop?

[00:33:49] HS: Yes, I think, we definitely need to become more efficient with how we use raw materials in general. And I think this relentless economic growth that we pursue has meant huge amount of raw material extraction. So, we definitely need to become more efficient. But definitely, with recycling, we could get to a more closed loop model by midcentury. But obviously, recycling takes energy, it takes chemicals and nothing’s a free lunch, right? And you lose some materials when you recycle. So, the best thing is to use materials more efficiently, right? And think about, as we made this energy transition, how can we best – how can we also rethink mobility and think about how best what size cars we need, what size batteries we need? Because you think about a huge battery just sitting in someone's garage or not being used, it's probably not the greatest use of those materials.

[00:34:47] AR: Yeah, so I guess you think about some of the early advocates for action on climate came out of the environmental movement, and we're very focused on the ethics of living within limits and having a sense of humility with respect to the rest of the planet and curtailing economic growth in some cases. And I think, nowadays, we have people who, as the climate issues become more mainstream, a lot of people from the business community and the tech community who've gotten very into the climate issue, but yet at the same time, they don't necessarily come from that environmentalist background, and they speak about the infinite abundance that we can have through technological growth and other things.

So, I guess, I'm curious if you have any further reflections on that. I thought that those themes, even when they weren't being directly addressed, that your book spoke to them, in many respects. Has the writing of this book changed your thoughts on those issues? The kind of bigger picture issues, as to whether we need to focus on the limits of growth versus infinite abundance that we can have through new technologies?

[00:35:48] HS: I think, it's interesting, because we need economic growth, right? And especially, countries that I'm trying to move out of poverty and develop, they need economic growth. But if you look at a lot of the resource use, or the carbon emissions, is actually produced by quite a small number of people, right? Rich people. So, I think there are ways that governments can look at whether it's a frequent flyer tax, or like France is doing, I think they're banning domestic flights and promoting railways.

There are ways where we in the rich world can think about how to better move people around or reduce the burden that we have on the planet, right? And it is the rich people who account for a lot of these emissions, and whether that's flying less, doing less meetings by flight, flying to meetings, that's all the things we can consider. But I think, other countries, I wouldn't say, I'm anti-economic growth, I think we need economic growth. In terms of resources, where we always tend to find solutions or innovation or technological ways to increase the amount of resources or use them more efficiently. But yeah, I wouldn't say that, I don't believe like degrowth is the answer. And I think what we need to do now is make sure that a lot of these emerging economies that they're developing can do it in a greener way. I mean, we don't want to penalize them or stop them from growing, but try to do it in a sustainable greener way. And that's, I guess, the opportunity for Indonesia and India as well.

I think if you look at China, it is a pity in my mind that the development that took off in the ‘80s, ‘90s and 2000s was so carbon intensive. And that sort of massive period of economic growth was so carbon intensive. That's a real pity, in a sense. But China in a way now is doing more than others in terms of investing in renewable energy, trying to transform the economy into a more sustainable footing.

So, I think it's a really difficult question. I haven't quite sort of come to the answer. Apologies on –

[00:38:07] AR: You, along with everybody else on the planet, right?

[00:38:08] HS: Yeah. But I guess just I would say, I'm cautious to say, we shouldn't have economic growth, or we shouldn't grow anymore. I just don't think that's the answer. But I do think, especially in the West now. What's interesting is, I think you mentioned earlier, which is, in a way, we've managed to win over many people to combat climate change by promoting it as a jobs – a growth industry and industry that can provide jobs to poorer areas, to areas that lost their traditional industries before, or when industries went to China.

In a way, it's quite good talking about it as a way that promotes economic growth, because it brings more people together to support it, and that's what we need, right? And I think that's what we've seen in the US is a complete sea change, where now a lot of these projects are in Republican states, right? And we've seen that people can get behind it, because it supports jobs and economic growth. So that's good. That's a way to get things moving. So, I think that is really helpful.

[00:39:08] AR: Yeah, absolutely. And now, that's one of the challenges for the people who are interested in advancing these causes to try to facilitate permitting and building on a vast scale that we've put in place some of these barriers. So, those are some of the challenges ahead too.

[00:39:23] HS: The policies are now being done. Another challenge is actually building stuff and trying to get the permitting, trying to get people on board with actually building stuff.

[00:39:32] AR: So, we've talked a lot about the issues from a climate standpoint and a resource standpoint, human rights. But from a geopolitical and international economic competition perspective, how do you see this playing out in the coming few years? I mean, it sounds like a lot of the story is China getting far, far ahead of the West and then the West finally waking up and trying to really sprint to catch up. And in the meantime, as we're waiting, the West remains quite dependent on a lot of the facilities and technology manufacturing and so on that China’s created. How do you see that playing out in the coming years?

[00:40:05] HS: I think it's going to be tricky, because what's going on as the West is trying to decarbonize and decouple at the same time, and all in a period of rising interest rates, energy crisis that's making energy very expensive in the UK, in Europe. So, it's quite hard to build out this infrastructure in an inflationary environment and completely decoupled from China. I think the challenge for the West is how to have a strategy to China that we diversify from China, but we don't completely cut off from China. How to build these green industries in a cost competitive way. We need the training, we need the skills, we need the energy supplies. So, that's going to be really interesting to watch.

And then you've got the question of Chinese electric vehicles coming out into Western markets. How are consumers going to deal with those products? Are they going to be agnostic that it’s Chinese? Or if there is a flare up in tensions, are they not going to want to have a Chinese vehicle?

So, these are all issues that we're quite uneasy sort of relationship with China at the moment. But at the same time, as outlined in the book, I just don't think you can decouple overnight or decouple tomorrow. So, in a sense, what's the approach? And Chinese companies are keen to invest in America and Europe. Are we going to let them? What's the sort of policy around that? So, that's going to be interesting to watch, too. Because maybe they can come to the US, but the ultimate owner is an American company, right? And it's just a Chinese company operating their factory.

So, there are all these sorts of questions, but I do think, if we're moving away from globalization, we're going to confront a lot of challenges that have sort of been blind to us as part of globalization, which is how dirty a lot of these supply chains are, the energy use, the chemical use. These are all industrial facilities that we now need to build at home, so it’s not going to be easy by any stretch of the imagination.

[00:42:11] AR: Yeah, we often see the end product that looks so clean and new and technologically advanced and you've done such tremendous work exposing and explaining all of the things that need to happen behind the scenes to make that consumer experience possible, and all the complexities involved in it.

The book is Volt Rush: The Winners and Losers in the Race to Go Green. Henry Sanderson, thank you for your tremendously informative and insightful reporting. And thank you so much for joining us on Financial Climate.

[00:42:45] HS: Thank you very much. Thanks for having me.

[END OF INTERVIEW]

[00:42:47] ANNOUNCER: Thank you for listening to Financial Climate. If you enjoyed the show, you can help us grow by rating us on Apple, or Spotify, or wherever you get your podcasts. Our website is financialclimate.fm, and you can email us at feedback@financialclimate.fm.

[END]