Believe Me, You Don't Have To Worry About China Seizing "Climate Leadership"

My last post on this subject was dated April 1, but it was not an April Fool's joke -- at least not on my part.  The New York Times had just reported (on March 29) that China was "poised" to seize the "climate leadership" from the United States should the U.S. make the horrific error of exiting from the Paris climate agreement.  Pravda quoted the Chinese state-run Global Times newspaper chastising the United States for preparing to exit Paris (“[The U.S.] is undermining the great cause of mankind trying to protect the earth, and the move is indeed irresponsible and very disappointing.”).  Meanwhile, of course Pravda failed to note that China already had about triple the coal-fired electricity-generation capacity of the U.S., had made no commitments under Paris to reduce the amount, and in fact had another 1.5 times total U.S. capacity either planned or under construction -- even as the U.S. has been reducing coal-fired electricity-generation capacity for years.  Great "climate leadership," China!

They just have to find something to try to frighten you, no matter how absurd it may be.  On Tuesday's front page, they're back on this "climate leadership" thing with a big article headlined "China Turns Economic Engine Toward Clean Energy Leadership."   The theme this time is that China now has this gigantic economic engine, and they are going to use the genius of their state-directed capital model to go all in for renewable energy, thereby crushing the foolish purist capitalist laggards like the U.S.  Scary!

Our fearless reporter (Keith Bradsher) takes us to Liulong, China, where China is building the "world's largest floating solar project."  It will provide "light and air conditioning" to "much of" a nearby city.  (Do they actually think that a solar project can provide "light" when it is needed -- at night?  If so, they don't offer any explanation in this article of how that might work.) 

The project reflects China’s effort to reshape the world order in renewable energy as the United States retreats. Such technological expertise will form the infrastructure backbone needed for countries to meet their climate goals, making China the energy partner of choice for many nations. . . .  China has already started an expensive campaign at home and abroad to solidify its considerable hold on solar, wind and other energy-saving businesses. If successful, China would win the economic and diplomatic spoils that the United States and some European countries have long enjoyed from dominating businesses like software, computer chips and airplanes.

Better get on board with the brave new world, United States, before China passes you by and leaves you in the dust!

Are you worrying about China cornering all those "economic and diplomatic spoils" that are sure to come pouring forth from its dominance of the global wind and solar businesses?  Don't.  Here's all you need to know:  Private capital is not stupid.  State-directed capital is stupid.  Private capital only finances projects expected to repay the investment (plus something).  Thus wealth is created.  Private capital does not undertake wind or solar energy projects without massive government subsidies and tax credits.  That tells you that wind and solar energy projects destroy rather than create wealth.

State-directed (stupid) capital gets invested for lots of reasons other than making money.  For example, state-directed capital might finance a project in order to convey perceived recognition or prestige upon the leader who directs the money.  Or state-directed capital might be used in pursuit of economic fallacy.  Do you think that's not too likely?  You would be wrong.  The main such fallacy is that the project in question will "create jobs."  (Exhibit A:  So-called "infrastructure" spending.)  Both of these reasons apply in spades to China's renewable energy projects.  The praise and honors that China is winning from the world community for its Potemkin village climate charade illustrate the first reason.  As to the "creates jobs" fallacy, try this from the New York Times article:

The solar industry employs more than one million workers in everything from making panels for export to installing them domestically, though solar accounts for only 2 percent of its electricity needs. By contrast, China has four million coal miners to supply the power plants that generate 70 percent of the country’s electricity.   

In other words, solar projects only produce about one-ninth the energy per worker employed.  In the eyes of the New York Times -- and, apparently, of Chinese officials -- this is a good thing about solar energy.

And, about that supposedly gigantic "economic engine" that China has put together.  China's GDP is now reported as being up to over $11 trillion (per Trading Economics here) -- if you believe their numbers.  That would make their economy about 60% the size of the U.S. economy; but remember, they have about 4 times as many people.  So their per capita GDP is only about 15% that of the U.S.  That puts them down around number 80 on the world list of countries by per capita GDP, behind just about any country you have heard of (e.g., Argentina, Mexico, Dominican Republic) and some others you may not have heard of (e.g., Gabon, Botswana).  And again, that is if you believe their numbers.  

And there is a huge problem with their numbers.  They have vast overcapacity in the seeming "prestige" industries, the big stuff like steel, aluminum, coal (!), ghost cities and the like.  It's the old "heavy industry" fallacy that Stalin fell for and that ultimately brought down the Soviet Union.  In the U.S., when the steel industry finds itself with vast overcapacity, economic forces bring on a shake out, and the industry right sizes.  In China, state banks and state subsidies keep the wasteful production going indefinitely.  Government statisticians count it all like it's real and needed.  China's GDP numbers could easily be overstated by 30 or even 50%.  There's no way to tell.

So, guys, go ahead and knock yourselves out building up capacity to make solar panels and windmills.  Ten years from now, you'll just be further behind.

UPDATE, June 9:  In case you harbor any crazy thoughts that the Chinese know what they are doing in energy policy, check out this Wall Street Journal blog entry from back in February, headlined "China Generates Record Wind Power, Then Throws It Away."  As pointed out here many times, wind energy -- with its wild swings back and forth between full capacity and nothing -- is not so easy to integrate into a grid that need steady, reliable power.  So in China, they generate vast amounts of power from wind, and then can't use it, and throw it away.  For 2016:

Wind power generated in 2016 rose an impressive 30% to 241 billion kilowatt-hours, according to figures reported Tuesday. But the amount of unused wind power rose much faster. Wastage rose nearly 50% to 50 billion-kilowatt hours: about as much as Greece or Bulgaria use in total electricity each year.