1 00:00:00,320 --> 00:00:03,120 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,360 --> 00:00:06,600 Speaker 1: the Beanna of podcasts, and today we talk about the 3 00:00:06,680 --> 00:00:09,719 Speaker 1: roles subsidies and tariffs are trying to play in creating 4 00:00:09,960 --> 00:00:14,200 Speaker 1: world leading industries in clean technology. It's undeniable that the 5 00:00:14,320 --> 00:00:18,000 Speaker 1: US's Inflation Reduction Act has had far reaching effects on 6 00:00:18,120 --> 00:00:21,119 Speaker 1: global trade for clean tech manufacturing. This has left the 7 00:00:21,120 --> 00:00:24,640 Speaker 1: European Union considering the policies they need to keep up. 8 00:00:25,000 --> 00:00:28,560 Speaker 1: The EU has historically been a leader in the energy transition, 9 00:00:28,800 --> 00:00:31,800 Speaker 1: with the world's first emissions trading system and the European 10 00:00:31,800 --> 00:00:35,440 Speaker 1: Green Deal that dedicated one trillion euros to climate funding. 11 00:00:35,720 --> 00:00:40,040 Speaker 1: More recently, they responded with the Net Zero Industry Act. However, 12 00:00:40,200 --> 00:00:43,320 Speaker 1: the EU continues to trail on subsidies and has less 13 00:00:43,320 --> 00:00:46,640 Speaker 1: aggressive trade barriers than the US. There is six times 14 00:00:46,680 --> 00:00:49,760 Speaker 1: as much public funding offered to clean tech manufacturers in 15 00:00:49,800 --> 00:00:52,599 Speaker 1: the US when compared to the EU. One of the 16 00:00:52,600 --> 00:00:57,000 Speaker 1: industries benefiting the most is battery manufacturing, with sixty two 17 00:00:57,080 --> 00:01:02,120 Speaker 1: percent of manufacturing subsidies in the US target battery making. Specifically, 18 00:01:02,400 --> 00:01:04,720 Speaker 1: other parts of the world are considering how they should 19 00:01:04,720 --> 00:01:08,080 Speaker 1: adjust their policies in response to which makes sense considering 20 00:01:08,080 --> 00:01:11,160 Speaker 1: that roughly thirty nine billion dollars of value in twenty 21 00:01:11,240 --> 00:01:15,240 Speaker 1: twenty three of EU and US clean tech imports could 22 00:01:15,240 --> 00:01:18,000 Speaker 1: be subject to new tariffs which were proposed the first 23 00:01:18,040 --> 00:01:20,399 Speaker 1: half of twenty twenty four. But even in the phase 24 00:01:20,440 --> 00:01:23,520 Speaker 1: of tariffs, imports from some countries may continue to be 25 00:01:23,600 --> 00:01:26,840 Speaker 1: cost competitive. So to share what this all means today, 26 00:01:27,040 --> 00:01:30,119 Speaker 1: I welcome Matthew Hiles from bn EF's Trade and Supply 27 00:01:30,240 --> 00:01:33,400 Speaker 1: Chains team, and Antoine Wagner Jones, who leads that team. 28 00:01:33,680 --> 00:01:36,039 Speaker 1: They draw from some of their findings and a recent 29 00:01:36,120 --> 00:01:40,160 Speaker 1: research report which was titled US Clean Tech Industrial Policy 30 00:01:40,240 --> 00:01:43,759 Speaker 1: leaves EU behind for now. Bn EF subscribers can access 31 00:01:43,800 --> 00:01:46,520 Speaker 1: the full report at BNF go on the Bloomberg terminal, 32 00:01:46,800 --> 00:01:49,720 Speaker 1: or at BNF dot com. Let's speak with Antoine and 33 00:01:49,840 --> 00:01:52,920 Speaker 1: Matthew about trade, where we are and where it could 34 00:01:52,920 --> 00:02:05,120 Speaker 1: all be going andtoon. Welcome back to the show. 35 00:02:05,400 --> 00:02:06,840 Speaker 2: Hi, Dana, great to be here. 36 00:02:06,800 --> 00:02:08,679 Speaker 1: And matt nice to have you here as well. 37 00:02:08,840 --> 00:02:10,120 Speaker 3: Hidana, thank you for having us. 38 00:02:10,440 --> 00:02:12,400 Speaker 1: So we've got a theme for today's show. We're going 39 00:02:12,440 --> 00:02:15,880 Speaker 1: to be talking about on shoring and what we're seeing 40 00:02:15,880 --> 00:02:19,520 Speaker 1: in particular in the United States. Although this also involves 41 00:02:19,600 --> 00:02:24,519 Speaker 1: Mexico and in Europe, and really this story that's starting 42 00:02:24,520 --> 00:02:26,720 Speaker 1: to unfold over the last couple of years or some 43 00:02:26,800 --> 00:02:30,200 Speaker 1: real stimulus for some of the industries that we're looking 44 00:02:30,240 --> 00:02:34,040 Speaker 1: at here at BNEF, whether they're renewables or other low 45 00:02:34,080 --> 00:02:37,720 Speaker 1: carbon technology like hydrogen, but really where that technology is 46 00:02:37,760 --> 00:02:42,080 Speaker 1: being built and what companies and countries are allowed to 47 00:02:42,160 --> 00:02:46,000 Speaker 1: play in that development. So let's start off with just 48 00:02:46,200 --> 00:02:49,440 Speaker 1: a quick summary of what the US Inflation Reduction Act 49 00:02:49,600 --> 00:02:51,280 Speaker 1: is and then we can get to what the EU's 50 00:02:51,360 --> 00:02:52,480 Speaker 1: response to that is. 51 00:02:52,840 --> 00:02:55,640 Speaker 3: So pretty much, the US Inflation Reduction Act launched in 52 00:02:55,800 --> 00:02:57,600 Speaker 3: twenty twenty two, and really you can think of it 53 00:02:57,639 --> 00:02:59,440 Speaker 3: as a big job spill, and what it's trying to 54 00:02:59,480 --> 00:03:03,040 Speaker 3: do is reindustrialized bits of America using new kind of 55 00:03:03,160 --> 00:03:07,680 Speaker 3: high technology manufacturing areas such as clean tech or electric 56 00:03:07,800 --> 00:03:09,760 Speaker 3: vehicles and things like that. And there's a bunch of 57 00:03:09,760 --> 00:03:12,919 Speaker 3: subsidies that come with it in different forms. And what's 58 00:03:13,000 --> 00:03:15,120 Speaker 3: really interesting about it is it has a load of 59 00:03:15,120 --> 00:03:17,160 Speaker 3: money behind it, but it also has what we call 60 00:03:17,240 --> 00:03:20,680 Speaker 3: local content requirements, which are ways of trying to access 61 00:03:20,720 --> 00:03:23,480 Speaker 3: this money and trying to limit who can access this 62 00:03:23,560 --> 00:03:26,080 Speaker 3: money so that it's mostly US firms that get it. 63 00:03:26,560 --> 00:03:29,760 Speaker 1: So to what extent, given that the US election is 64 00:03:29,919 --> 00:03:32,959 Speaker 1: very very near to what extent is the Inflation Reduction 65 00:03:33,000 --> 00:03:35,520 Speaker 1: Act in these tax codes, have they been written or 66 00:03:35,560 --> 00:03:37,400 Speaker 1: are we still working our way through them. 67 00:03:37,800 --> 00:03:41,760 Speaker 3: So most of the actual detailed legal documents around these 68 00:03:41,800 --> 00:03:45,520 Speaker 3: tax codes are finalized or very least very close to 69 00:03:45,560 --> 00:03:49,320 Speaker 3: being finalized, especially Section forty five X, that really important 70 00:03:49,400 --> 00:03:52,280 Speaker 3: tax credit on the production of all these different clean 71 00:03:52,360 --> 00:03:55,400 Speaker 3: tech components, and so it'll be really hard for anything 72 00:03:55,440 --> 00:03:58,640 Speaker 3: to dramatically change in terms of the measure being repealed. 73 00:03:58,720 --> 00:04:01,480 Speaker 3: What could happen in an OVEN election, depending on if 74 00:04:01,520 --> 00:04:05,080 Speaker 3: the Republicans win and depending on how political favor it's 75 00:04:05,160 --> 00:04:08,520 Speaker 3: after the election, the Republican Party could make the access 76 00:04:08,560 --> 00:04:11,160 Speaker 3: to these tax credits a bit more tricky, and they 77 00:04:11,160 --> 00:04:15,000 Speaker 3: could limit other areas of US financing for these solar 78 00:04:15,040 --> 00:04:18,000 Speaker 3: industries and clean tech industries. But we don't expect to 79 00:04:18,040 --> 00:04:20,719 Speaker 3: see a big repeal of all of these different bits 80 00:04:20,760 --> 00:04:22,360 Speaker 3: of legislation that have been put in for now. 81 00:04:22,640 --> 00:04:25,240 Speaker 2: And certain aspects of the IRA, like the supplied side 82 00:04:25,600 --> 00:04:28,440 Speaker 2: incentives for electric vehicles are a lot more prominent and 83 00:04:28,480 --> 00:04:31,039 Speaker 2: I have been subject to a lot more criticism than 84 00:04:31,120 --> 00:04:34,239 Speaker 2: some of the manufacturing subsidies, which have behind the scenes 85 00:04:34,320 --> 00:04:37,000 Speaker 2: been leading to all kinds of investments happening in so 86 00:04:37,120 --> 00:04:40,080 Speaker 2: called red states where the majority of clean tech factories 87 00:04:40,120 --> 00:04:42,800 Speaker 2: are actually being cited. So we see things like the 88 00:04:42,839 --> 00:04:44,840 Speaker 2: forty five x tax credit. This all gets a bit 89 00:04:44,920 --> 00:04:47,240 Speaker 2: arcane when you're comparing different types of tax credits, but 90 00:04:47,320 --> 00:04:52,599 Speaker 2: this particular supply chain incentive subsidy look less vulnerable to 91 00:04:52,640 --> 00:04:57,920 Speaker 2: any post election targeting of IRA incentives than other incentives, 92 00:04:57,960 --> 00:05:00,880 Speaker 2: such as ones for purchasing electric vehicles, which have really 93 00:05:00,920 --> 00:05:03,200 Speaker 2: been front and center of a lot of the Republican 94 00:05:03,240 --> 00:05:04,600 Speaker 2: criticism of the bill. 95 00:05:04,920 --> 00:05:07,280 Speaker 1: Well, now that we've been through the election question at 96 00:05:07,279 --> 00:05:09,400 Speaker 1: the beginning of the show, we can get on to 97 00:05:09,480 --> 00:05:11,400 Speaker 1: the rest of the policy stuff, because that one's always 98 00:05:11,440 --> 00:05:13,680 Speaker 1: on the tip of everyone's tongue. So let's pivot now 99 00:05:13,839 --> 00:05:17,120 Speaker 1: to the EU. So what's happening in Europe? And you know, 100 00:05:17,320 --> 00:05:20,120 Speaker 1: before the Inflation Reduction Act even came out, the EU 101 00:05:20,200 --> 00:05:24,800 Speaker 1: dedicated a trillion euros in this green deal during the 102 00:05:24,800 --> 00:05:27,520 Speaker 1: decade between twenty twenty and twenty thirty. How is that 103 00:05:27,560 --> 00:05:30,320 Speaker 1: getting on? And then really, since the Inflation Reduction Act 104 00:05:30,360 --> 00:05:33,520 Speaker 1: came out after that commitment, what sort of policies are 105 00:05:33,560 --> 00:05:35,679 Speaker 1: we seeing in response from the EU. 106 00:05:36,320 --> 00:05:38,440 Speaker 3: So the thing about the IRA was that it was 107 00:05:38,440 --> 00:05:41,640 Speaker 3: trying to reindustrialize a lot of American manufacturing, and the 108 00:05:41,680 --> 00:05:44,400 Speaker 3: EU's response, the Green Industrial Deal, came a little bit 109 00:05:44,440 --> 00:05:47,400 Speaker 3: before it, and really its target was to kickstart the 110 00:05:47,440 --> 00:05:50,000 Speaker 3: economies after the pandemic, and there was a bunch of 111 00:05:50,160 --> 00:05:52,919 Speaker 3: pandemic related debt that was raised which was used to 112 00:05:52,920 --> 00:05:54,920 Speaker 3: finance a lot of these different measures. The kind of 113 00:05:55,160 --> 00:05:57,960 Speaker 3: exact response to the US's IRA was what the EU 114 00:05:58,000 --> 00:06:00,599 Speaker 3: is calling the Net Zero Industry Act, and within the 115 00:06:00,600 --> 00:06:03,640 Speaker 3: Next Zero Industry Act, that EUS targeting a specific amount 116 00:06:03,760 --> 00:06:06,880 Speaker 3: of annual demand of EU clean tech to be made 117 00:06:07,120 --> 00:06:09,640 Speaker 3: in the EU by twenty thirty. But what it's not 118 00:06:09,760 --> 00:06:13,039 Speaker 3: doing is it's not giving different subsidy types or different 119 00:06:13,040 --> 00:06:16,440 Speaker 3: subsidy pools of funding for clean tech manufacturing like the 120 00:06:16,560 --> 00:06:17,840 Speaker 3: US's IRA is doing. 121 00:06:18,160 --> 00:06:20,400 Speaker 1: What is that target that the Net Zero Industry Act 122 00:06:20,440 --> 00:06:20,960 Speaker 1: is going for. 123 00:06:21,240 --> 00:06:23,440 Speaker 3: So it's going to go for forty percent of clean 124 00:06:23,480 --> 00:06:25,960 Speaker 3: tech across the board by twenty thirty, but this change 125 00:06:25,960 --> 00:06:28,839 Speaker 3: is based on what's being manufactured, so it's much higher 126 00:06:28,839 --> 00:06:30,960 Speaker 3: for areas like batteries, which we're expecting to be about 127 00:06:31,040 --> 00:06:32,599 Speaker 3: ninety percent by twenty thirty. 128 00:06:32,880 --> 00:06:35,279 Speaker 2: And that's the really fascinating thing about the IRAS that 129 00:06:35,320 --> 00:06:38,320 Speaker 2: has led to all kinds of copycat policies across the world, 130 00:06:38,360 --> 00:06:42,200 Speaker 2: where politicians have suddenly come under this seeming pressure that 131 00:06:42,200 --> 00:06:43,880 Speaker 2: they've got to come up with some kind of a 132 00:06:43,920 --> 00:06:46,520 Speaker 2: convincing answer to what the US is doing. And we've 133 00:06:46,520 --> 00:06:48,440 Speaker 2: really seen that in the EU because all of these 134 00:06:48,480 --> 00:06:50,720 Speaker 2: companies after the passage of the IRA was saying we're 135 00:06:50,720 --> 00:06:52,440 Speaker 2: going to relocate to the US, and many of them 136 00:06:52,480 --> 00:06:55,400 Speaker 2: actually did end up leaving Europe and some of them 137 00:06:55,560 --> 00:06:58,480 Speaker 2: built out some expanded their manufacturing capacity in the US. 138 00:06:58,600 --> 00:07:00,840 Speaker 2: So the European Commission was under massive pressure to come 139 00:07:00,880 --> 00:07:02,800 Speaker 2: up with some kind of an answer, and that's something 140 00:07:02,839 --> 00:07:05,000 Speaker 2: that we've seen not just in the EU, but in many, 141 00:07:05,040 --> 00:07:07,320 Speaker 2: many different parts of the world. So actually, this research 142 00:07:07,480 --> 00:07:09,400 Speaker 2: note that we're going to be drawing from when talking 143 00:07:09,400 --> 00:07:11,160 Speaker 2: about a lot of the numbers going forwards in this 144 00:07:11,200 --> 00:07:13,520 Speaker 2: conversation is actually part of a wider project where we're 145 00:07:13,560 --> 00:07:15,880 Speaker 2: just kind of trying to quantify what's being offered to 146 00:07:16,560 --> 00:07:19,800 Speaker 2: clean tech manufacturers across all of these different regions of 147 00:07:19,840 --> 00:07:22,080 Speaker 2: the world that are all sort of starting to think 148 00:07:22,120 --> 00:07:24,960 Speaker 2: about supply chains differently in the wake of this really 149 00:07:25,040 --> 00:07:26,920 Speaker 2: seminal US piece of legislation. 150 00:07:27,240 --> 00:07:30,080 Speaker 1: Well, and this is all for funding new projects or 151 00:07:30,120 --> 00:07:33,679 Speaker 1: stimulating certain parts of the economy. The inflation Reduction Acts 152 00:07:33,720 --> 00:07:36,480 Speaker 1: and these tax codes have really freed up a lot 153 00:07:36,520 --> 00:07:39,360 Speaker 1: of money from the government, one might say, in order 154 00:07:39,400 --> 00:07:42,280 Speaker 1: to facilitate this, has the EU and have their targets 155 00:07:42,320 --> 00:07:45,040 Speaker 1: really also unlocked new funding opportunities. 156 00:07:45,560 --> 00:07:48,400 Speaker 3: So the EU has a lot less funding than we're 157 00:07:48,400 --> 00:07:50,840 Speaker 3: seeing in the US. We're seeing about six times less 158 00:07:50,880 --> 00:07:54,040 Speaker 3: total public funding go to clean tech manufacturing, and I 159 00:07:54,080 --> 00:07:55,680 Speaker 3: think one of the key things to take away from 160 00:07:55,720 --> 00:07:58,720 Speaker 3: this is that the US's subsidies and their incentives offer 161 00:07:58,760 --> 00:08:01,600 Speaker 3: a lot of visibility for clear tech manufacturers into the future. 162 00:08:01,760 --> 00:08:04,120 Speaker 3: In the EU this is not the case. So the 163 00:08:04,160 --> 00:08:06,480 Speaker 3: only part of the EU's funding which we see have 164 00:08:06,520 --> 00:08:09,760 Speaker 3: a lasting impact was twenty thirty are auction revenues from 165 00:08:09,800 --> 00:08:13,120 Speaker 3: the EU's ETS scheme. The other aspect of this is 166 00:08:13,560 --> 00:08:16,320 Speaker 3: member state funding, and that's funding coming from members eight 167 00:08:16,360 --> 00:08:19,280 Speaker 3: countries of the EU, that's France, Germany and Italy. Is 168 00:08:19,280 --> 00:08:21,400 Speaker 3: what we're looking at within the research note that we're 169 00:08:21,440 --> 00:08:23,640 Speaker 3: referring to, and those are really the ones we focus 170 00:08:23,680 --> 00:08:26,320 Speaker 3: on because they're the big industrial heavy hitters of Europe. 171 00:08:26,400 --> 00:08:28,560 Speaker 1: So I'm going to play devil's advocate here for a second. 172 00:08:28,560 --> 00:08:30,840 Speaker 1: And I love that you brought up the EU Emissions 173 00:08:30,880 --> 00:08:33,840 Speaker 1: Trading System because that was established in two thousand and five. 174 00:08:34,160 --> 00:08:37,440 Speaker 1: In terms of trying to reach climate goals and emissions targets, 175 00:08:37,520 --> 00:08:39,760 Speaker 1: that actually is a long time ago, even though the 176 00:08:39,840 --> 00:08:42,320 Speaker 1: number does start with the two thousand. Do you think 177 00:08:42,360 --> 00:08:44,960 Speaker 1: that part of the reason that there's lower funding in 178 00:08:45,000 --> 00:08:46,640 Speaker 1: Europe has something to do with the fact that they 179 00:08:46,640 --> 00:08:49,199 Speaker 1: had a head start and maybe they've been consistently working 180 00:08:49,240 --> 00:08:52,840 Speaker 1: on decarbonizing or is it really just that they're not 181 00:08:53,280 --> 00:08:56,520 Speaker 1: actively pursuing these goals in such an aggressive way as 182 00:08:56,520 --> 00:08:57,120 Speaker 1: the US is. 183 00:08:57,640 --> 00:09:00,200 Speaker 2: So it's really interesting. Is one of the things things 184 00:09:00,200 --> 00:09:03,160 Speaker 2: that came out after the IRA was this new depiction 185 00:09:03,280 --> 00:09:05,720 Speaker 2: of what's going on in the EU versus the US 186 00:09:05,760 --> 00:09:08,400 Speaker 2: and talking about how the US uses more of a carrot, 187 00:09:08,440 --> 00:09:11,000 Speaker 2: deploying lots of funding but not really having any federal 188 00:09:11,040 --> 00:09:13,560 Speaker 2: carbon pricing or any kind of a stick when it 189 00:09:13,600 --> 00:09:17,000 Speaker 2: comes to mandating that companies pursue given course of action, 190 00:09:17,040 --> 00:09:20,200 Speaker 2: whereas the EU was putting in place aggressive targets that 191 00:09:20,280 --> 00:09:22,719 Speaker 2: countries were actually trying to strive towards in a more 192 00:09:22,760 --> 00:09:25,240 Speaker 2: concrete sense, and putting in place things like a carbon price, 193 00:09:25,280 --> 00:09:27,679 Speaker 2: which has been quite effective at decarbonizing the power sector 194 00:09:27,679 --> 00:09:30,440 Speaker 2: in many different areas. Now that's very different, and the 195 00:09:30,440 --> 00:09:34,680 Speaker 2: emphasis really has been on decarbonizing efficiently and not so 196 00:09:34,840 --> 00:09:37,640 Speaker 2: much on on shoring supply chains, which is a very 197 00:09:37,640 --> 00:09:40,640 Speaker 2: different proposition. When you're making lots of funding available and 198 00:09:40,720 --> 00:09:43,319 Speaker 2: channeling it towards supply chains, well, that's a good way 199 00:09:43,360 --> 00:09:45,199 Speaker 2: of getting lots of announcements of the type that we're 200 00:09:45,200 --> 00:09:46,839 Speaker 2: seeing in the US with over one hundred and ten 201 00:09:46,840 --> 00:09:49,360 Speaker 2: billion dollars of clean tech factories being announced. But when 202 00:09:49,360 --> 00:09:52,760 Speaker 2: you're putting in place the conditions to decarbonize as quickly 203 00:09:52,800 --> 00:09:56,320 Speaker 2: as possible, that's not necessarily something that's conducive to getting 204 00:09:56,360 --> 00:09:58,960 Speaker 2: a homegrown solar value chain, because actually it's a lot 205 00:09:59,040 --> 00:10:01,360 Speaker 2: cheaper to import from wherever that piece of equipment is 206 00:10:01,400 --> 00:10:05,080 Speaker 2: produced at lowest cost. So different approaches, and the latter 207 00:10:05,320 --> 00:10:07,400 Speaker 2: it's got its pros, it's got its cons. But the 208 00:10:07,440 --> 00:10:11,600 Speaker 2: focus really in the EU hasn't been on nurturing sort 209 00:10:11,640 --> 00:10:14,880 Speaker 2: of homegoing solar manufacturing, where we're starting to see a 210 00:10:14,880 --> 00:10:17,400 Speaker 2: bit more of an emphasis now on reviewing that and 211 00:10:17,440 --> 00:10:19,440 Speaker 2: seeing whether or not the EU wants to get more 212 00:10:19,520 --> 00:10:22,720 Speaker 2: serious about trying to put in place that production capacity 213 00:10:22,840 --> 00:10:26,280 Speaker 2: not just for generating clean atricity, but also the equipment 214 00:10:26,360 --> 00:10:27,240 Speaker 2: that goes behind it. 215 00:10:27,400 --> 00:10:30,079 Speaker 1: That's a great and really important distinction to call out, 216 00:10:30,120 --> 00:10:32,840 Speaker 1: which then brings us to these tariffs. Let's talk about 217 00:10:32,960 --> 00:10:35,679 Speaker 1: the EU and the US and what the impact has 218 00:10:35,760 --> 00:10:38,000 Speaker 1: been of the tariffs that are in place. So what's 219 00:10:38,040 --> 00:10:40,240 Speaker 1: happening in the US, and I guess how much success 220 00:10:40,280 --> 00:10:42,720 Speaker 1: is it having and what's it targeting? Where where are 221 00:10:42,720 --> 00:10:46,640 Speaker 1: we no longer seeing imports from these supply chains coming from. 222 00:10:47,000 --> 00:10:50,320 Speaker 3: So the US first put tariffs on clean tech related 223 00:10:50,320 --> 00:10:52,240 Speaker 3: stuff back in twenty twelve, and that's when we can 224 00:10:52,320 --> 00:10:54,560 Speaker 3: really see this game of cat and mouse kickoff. So 225 00:10:54,600 --> 00:10:57,520 Speaker 3: what it did is it put tariffs on Chinese solar equipment. 226 00:10:57,559 --> 00:11:00,480 Speaker 3: Those are solar modules and solar cells. So after this 227 00:11:00,559 --> 00:11:02,720 Speaker 3: long running game of cat and mouse on solar what 228 00:11:02,760 --> 00:11:05,960 Speaker 3: we're seeing now is tariff's being imposed on other areas 229 00:11:05,960 --> 00:11:08,480 Speaker 3: of clean tech to quite a significant degree. So we're 230 00:11:08,480 --> 00:11:11,360 Speaker 3: seeing one hundred percent plus on evs, and it is 231 00:11:11,520 --> 00:11:14,360 Speaker 3: likely to stop a kind of avalanche of cheap Chinese 232 00:11:14,440 --> 00:11:17,640 Speaker 3: evs coming in which have benefited from just better competition 233 00:11:17,840 --> 00:11:20,440 Speaker 3: out in China and its advanced market that it has there. 234 00:11:20,520 --> 00:11:22,960 Speaker 3: We're also seeing batteries being affected by this, and this 235 00:11:23,080 --> 00:11:26,320 Speaker 3: is likely going to impact battery energy storage projects from 236 00:11:26,360 --> 00:11:28,840 Speaker 3: about twenty twenty six when these tariffs will be imposed, 237 00:11:28,920 --> 00:11:32,520 Speaker 3: and it's still unsure whether China, that's low cost of 238 00:11:32,559 --> 00:11:35,680 Speaker 3: their equipment produced, will negate these tariffs completely. 239 00:11:36,200 --> 00:11:39,440 Speaker 2: And yeah, it's really interesting because right now we've seen 240 00:11:39,480 --> 00:11:42,480 Speaker 2: this real political prominence of evs as the focus of 241 00:11:42,480 --> 00:11:44,360 Speaker 2: a lot of tariffs that we're seeing discussed around the world, 242 00:11:44,400 --> 00:11:46,120 Speaker 2: whether it's in we'll get to the EU, but in 243 00:11:46,160 --> 00:11:48,480 Speaker 2: Canada and the US, et cetera. But right now, there 244 00:11:48,480 --> 00:11:51,839 Speaker 2: really aren't that many Chinese evs being exported to the US. 245 00:11:51,960 --> 00:11:54,760 Speaker 2: So the fear is exactly has Matt said to stave 246 00:11:54,800 --> 00:11:59,000 Speaker 2: off future imports given the lack of affordable, low cost 247 00:11:59,000 --> 00:12:01,560 Speaker 2: competitive models that are being put out by, for example, 248 00:12:02,000 --> 00:12:04,360 Speaker 2: some the big three manufacturers in the US when it 249 00:12:04,360 --> 00:12:06,480 Speaker 2: comes to auto making. So it's more of a forward 250 00:12:06,480 --> 00:12:08,840 Speaker 2: looking thing, whereas with batteries, it's a bit different. The 251 00:12:08,920 --> 00:12:11,520 Speaker 2: US does import a lot of Chinese batteries, but the 252 00:12:11,559 --> 00:12:14,120 Speaker 2: tariffs being set are a bit lower than for evs. 253 00:12:14,280 --> 00:12:17,080 Speaker 2: And actually, what we've seen is quite interesting is that 254 00:12:17,120 --> 00:12:18,679 Speaker 2: even though these these are going to be imposed in 255 00:12:18,720 --> 00:12:20,760 Speaker 2: twenty twenty six, even though they're going to make stationary 256 00:12:20,800 --> 00:12:25,640 Speaker 2: storage projects more costly, the continued decline in battery prices worldwide, 257 00:12:25,679 --> 00:12:28,200 Speaker 2: it looks like we'll offset that tariff and will actually 258 00:12:28,200 --> 00:12:32,560 Speaker 2: continue to make Chinese batteries more cost competitive with US batteries. 259 00:12:32,559 --> 00:12:34,000 Speaker 2: But at the end of the day, these batteries are 260 00:12:34,040 --> 00:12:36,480 Speaker 2: sort of understanding what's happening on the tariffront, it's sort 261 00:12:36,480 --> 00:12:39,880 Speaker 2: of a moving target. We've seen extremely high blanket tariffs 262 00:12:39,880 --> 00:12:42,760 Speaker 2: announced by the Trump administration at various levels for the 263 00:12:42,800 --> 00:12:45,040 Speaker 2: whole world of the world or just focusing on China, 264 00:12:45,200 --> 00:12:48,760 Speaker 2: and that level of uncertainty makes it very hard to 265 00:12:48,800 --> 00:12:50,959 Speaker 2: sort of assume what tariffs are going to be two 266 00:12:51,120 --> 00:12:54,160 Speaker 2: three years from now. And overall, this situation where we're 267 00:12:54,200 --> 00:12:56,760 Speaker 2: just generally seeing a rising tide of tariffs, with the 268 00:12:56,800 --> 00:12:59,720 Speaker 2: Trump tariffs being kept under Biden, with these then expected 269 00:12:59,760 --> 00:13:02,040 Speaker 2: to be built upon just basically means that there's a 270 00:13:02,080 --> 00:13:04,880 Speaker 2: stronger business case for building in the US because that's 271 00:13:04,920 --> 00:13:06,880 Speaker 2: perceived as the one way that you're going to be 272 00:13:06,920 --> 00:13:10,000 Speaker 2: reliably able to tap into one of the world's fastest 273 00:13:10,000 --> 00:13:11,880 Speaker 2: growing markets. When it comes to a lot of this 274 00:13:12,000 --> 00:13:13,440 Speaker 2: clean technology. 275 00:13:13,040 --> 00:13:16,240 Speaker 1: How have some of the clean technology manufacturers who are 276 00:13:16,280 --> 00:13:19,640 Speaker 1: experiencing these very low prices, how have they been able 277 00:13:19,679 --> 00:13:22,120 Speaker 1: to circumvent some of these tariffs and have they set 278 00:13:22,160 --> 00:13:25,280 Speaker 1: up production in different countries and really worked around it. 279 00:13:25,320 --> 00:13:26,200 Speaker 1: How's that unfolded. 280 00:13:26,440 --> 00:13:29,160 Speaker 3: So one of the things we've seen is Chinese manufacturers 281 00:13:29,200 --> 00:13:32,440 Speaker 3: moving to Southeast Asia. And what's really interesting about this 282 00:13:32,559 --> 00:13:35,679 Speaker 3: is the US extended their tariffs to cover Chinese cells 283 00:13:35,720 --> 00:13:39,520 Speaker 3: being produced in Southeast Asia and getting exported into the US. 284 00:13:39,800 --> 00:13:43,760 Speaker 3: What's recently happened is the US is investigating more tariffs 285 00:13:43,800 --> 00:13:47,200 Speaker 3: on Southeast Asian production of modules themselves. 286 00:13:46,679 --> 00:13:48,600 Speaker 2: And I mean this is something that we might end 287 00:13:48,640 --> 00:13:50,800 Speaker 2: up seeing in other sectors as well. So these US 288 00:13:50,840 --> 00:13:53,200 Speaker 2: tariffs on SOLO have made SOLO a lot more expensive 289 00:13:53,200 --> 00:13:56,240 Speaker 2: in the US. They haven't spurred much domestic manufacturing, although 290 00:13:56,240 --> 00:13:59,000 Speaker 2: there are announcements now with the provision of subsidies under 291 00:13:59,040 --> 00:14:01,720 Speaker 2: the IRA. But the question is if these tariffs are 292 00:14:01,720 --> 00:14:03,599 Speaker 2: then applied to evs. For example, are we going to 293 00:14:03,640 --> 00:14:05,000 Speaker 2: see the same thing, Are we going to see the 294 00:14:05,120 --> 00:14:08,920 Speaker 2: likes of BYD or different Chinese manufacturers relocate their production 295 00:14:09,000 --> 00:14:11,520 Speaker 2: and begin to export from other markets into the US 296 00:14:11,559 --> 00:14:14,120 Speaker 2: as a way of circumventing those tariffs. It's a complicated 297 00:14:14,160 --> 00:14:16,280 Speaker 2: picture because of some of those local content rules that 298 00:14:16,320 --> 00:14:19,320 Speaker 2: we mentioned as well, which specifically restrict the availability of 299 00:14:19,360 --> 00:14:22,720 Speaker 2: certain subsidies to companies or to certain models of EVS 300 00:14:22,800 --> 00:14:25,920 Speaker 2: that are using parts produced by Chinese companies. So it's 301 00:14:25,960 --> 00:14:28,440 Speaker 2: not that simple. But what we've seen in the US 302 00:14:28,480 --> 00:14:31,560 Speaker 2: is an enormous amount of cost and complexity for very 303 00:14:31,640 --> 00:14:35,000 Speaker 2: little apparent benefit when it comes to the key goals 304 00:14:35,000 --> 00:14:38,040 Speaker 2: that you could conceive of when these tariffs were drawn up. 305 00:14:38,080 --> 00:14:39,600 Speaker 2: And the risk is that we might end up seeing 306 00:14:39,600 --> 00:14:42,160 Speaker 2: a similar trend with these new sectors, whether it's batteries, 307 00:14:42,160 --> 00:14:44,640 Speaker 2: whether it's evs, of a lot of complexity, a lot 308 00:14:44,640 --> 00:14:47,480 Speaker 2: of cost, a lot more lawyer fees for example, for 309 00:14:47,560 --> 00:14:50,120 Speaker 2: some of these for some of these manufacturers who might 310 00:14:50,120 --> 00:14:53,440 Speaker 2: spend a lot more time in DC talking to policymakers 311 00:14:53,480 --> 00:14:56,800 Speaker 2: about their priorities at the cost of certain efficiencies that 312 00:14:56,840 --> 00:14:59,320 Speaker 2: you might hope for when you're thinking about the energy 313 00:14:59,320 --> 00:15:01,680 Speaker 2: transition and how to make it happen as quickly as possible. 314 00:15:01,800 --> 00:15:03,840 Speaker 1: So what sort of tariffs are we seeing in the EU. 315 00:15:04,320 --> 00:15:06,960 Speaker 3: So the EU's tariffs are a lot lower across clean tech, 316 00:15:07,040 --> 00:15:09,280 Speaker 3: and that's really because the EU has had a more 317 00:15:09,320 --> 00:15:11,400 Speaker 3: liberal approach to trade for a long time. The way 318 00:15:11,440 --> 00:15:13,600 Speaker 3: the block has been set up kind of incentivizes this. 319 00:15:13,760 --> 00:15:15,960 Speaker 3: But the big change that's happened recently is that EU 320 00:15:16,000 --> 00:15:19,760 Speaker 3: has announced additional tariffs on imports of Chinese evs. So 321 00:15:19,840 --> 00:15:23,440 Speaker 3: the maximum tariff on imports of Chinese EV's was decided 322 00:15:23,480 --> 00:15:26,280 Speaker 3: earlier in October at forty five point three percent, and 323 00:15:26,360 --> 00:15:28,840 Speaker 3: the impact this is likely to have will be vastly 324 00:15:28,840 --> 00:15:32,000 Speaker 3: different between different firms. So what the EU did is 325 00:15:32,040 --> 00:15:35,720 Speaker 3: it put this maximum tariff on Chinese production, put specified 326 00:15:35,760 --> 00:15:38,960 Speaker 3: specific rates for specific companies. One of the really interesting 327 00:15:39,000 --> 00:15:42,000 Speaker 3: things we see about this is someone like BYD their 328 00:15:42,080 --> 00:15:44,800 Speaker 3: rates seventeen percent, and actually the margins that they have 329 00:15:44,880 --> 00:15:48,480 Speaker 3: when importing when exporting cars into Europe will likely mean 330 00:15:48,560 --> 00:15:50,840 Speaker 3: that this tariff will not have much of an effect 331 00:15:50,920 --> 00:15:52,360 Speaker 3: on their sales into Europe. 332 00:15:52,680 --> 00:15:56,760 Speaker 1: Can you explain why equipment coming from China, in the 333 00:15:56,840 --> 00:15:59,880 Speaker 1: simplest sense, is so much less expensive. 334 00:16:00,160 --> 00:16:01,960 Speaker 2: Enjoying up a lot of these tariffs and the rational 335 00:16:01,960 --> 00:16:04,840 Speaker 2: behind them. There's been a lot of focus on the 336 00:16:04,880 --> 00:16:08,960 Speaker 2: provision of subsidies to manufacturers in China, which have exist 337 00:16:09,160 --> 00:16:13,080 Speaker 2: in a very clear form for demand of evs, for example, 338 00:16:13,120 --> 00:16:16,160 Speaker 2: in the past, and there's been certain low cost loans, 339 00:16:16,400 --> 00:16:19,800 Speaker 2: or certain tax deferrals, or various incentives that have been 340 00:16:19,840 --> 00:16:22,400 Speaker 2: and continue to be given to Chinese manufacturers. But there's 341 00:16:22,600 --> 00:16:24,880 Speaker 2: that's really been a big part of the conversation. But 342 00:16:24,920 --> 00:16:27,880 Speaker 2: what it's done is stop sort of looking at the 343 00:16:27,880 --> 00:16:30,280 Speaker 2: fact that the picture has evolved a lot since then, 344 00:16:30,440 --> 00:16:32,480 Speaker 2: and now what we really see is that there are 345 00:16:32,520 --> 00:16:36,280 Speaker 2: several factors that are contributing to the competitiveness of Chinese evs, 346 00:16:36,480 --> 00:16:39,440 Speaker 2: and they are things like scale, for example. They are 347 00:16:39,480 --> 00:16:43,640 Speaker 2: things like supply chains being extremely efficient and clustered in 348 00:16:43,960 --> 00:16:47,600 Speaker 2: certain Chinese provinces. They are things like an intense level 349 00:16:47,640 --> 00:16:51,320 Speaker 2: of competition. As China's EV sales have rocketed, but production 350 00:16:51,480 --> 00:16:55,200 Speaker 2: has in some cases for batteries or solar exceeded demand, 351 00:16:55,320 --> 00:16:57,480 Speaker 2: and then that really drives a need to find new 352 00:16:57,560 --> 00:17:02,200 Speaker 2: markets for this equipment. So there's this extreme level of 353 00:17:02,280 --> 00:17:05,400 Speaker 2: competition in China, which is really one of the primary 354 00:17:05,480 --> 00:17:09,560 Speaker 2: drivers for companies like CATL like Bid engaging in price 355 00:17:09,640 --> 00:17:12,440 Speaker 2: wars against each other to try and get market share 356 00:17:12,480 --> 00:17:14,840 Speaker 2: and retain it. And a lot of these companies are 357 00:17:14,840 --> 00:17:16,359 Speaker 2: sort of still spending a lot on R and D 358 00:17:16,600 --> 00:17:19,679 Speaker 2: and behaving like scrappy startups where you'd expect them to 359 00:17:19,680 --> 00:17:22,640 Speaker 2: be resting on their lawrels as incumbents, and that's something 360 00:17:22,680 --> 00:17:25,440 Speaker 2: that's quite hard to just to and when you look 361 00:17:25,440 --> 00:17:27,520 Speaker 2: at the fact that actually what they're providing, if it's 362 00:17:27,600 --> 00:17:30,560 Speaker 2: electric vehicles, for example, are models that are in some 363 00:17:30,640 --> 00:17:33,480 Speaker 2: cases quite premium models. When you look at the Neo 364 00:17:33,640 --> 00:17:36,560 Speaker 2: for example, and what they're offering that compare favorably to 365 00:17:37,240 --> 00:17:39,480 Speaker 2: some of the Western brands and are far more advanced 366 00:17:39,760 --> 00:17:42,440 Speaker 2: when it comes to certain bells and whistles with digitalization. 367 00:17:42,680 --> 00:17:46,399 Speaker 2: Then it becomes quite difficult to make up that lost ground. 368 00:17:46,520 --> 00:17:48,480 Speaker 2: And I think one of the hard things is that 369 00:17:48,560 --> 00:17:50,800 Speaker 2: it's about price, but it's not just about price. 370 00:17:51,200 --> 00:17:56,000 Speaker 1: So these tariffs, if they are then spurring on domestic 371 00:17:56,040 --> 00:17:59,159 Speaker 1: manufacturing in the US and do a lesser extent, but 372 00:17:59,200 --> 00:18:02,240 Speaker 1: also the EU, let's say they become successful, are we 373 00:18:02,320 --> 00:18:05,960 Speaker 1: going to see global cost competitiveness that's ultimately going to 374 00:18:06,000 --> 00:18:08,600 Speaker 1: result in the tariffs being removed or will they have 375 00:18:08,680 --> 00:18:09,520 Speaker 1: to exist forever. 376 00:18:09,800 --> 00:18:11,760 Speaker 3: That's a really key question, and actually it's one of 377 00:18:11,840 --> 00:18:14,879 Speaker 3: the ways that people think if a policy, an industrial policy, 378 00:18:14,920 --> 00:18:18,480 Speaker 3: has been successful, is if the product can become export competitive. 379 00:18:18,720 --> 00:18:20,760 Speaker 3: I think it's very fair to say that you use 380 00:18:21,040 --> 00:18:24,439 Speaker 3: battery and ev making ecosystem has a long way to 381 00:18:24,480 --> 00:18:27,040 Speaker 3: go before it can become cost competitive with many of 382 00:18:27,040 --> 00:18:29,840 Speaker 3: the Chinese producers. But at the same time, a lot 383 00:18:29,880 --> 00:18:32,920 Speaker 3: of the big EU companies, that especially the German companies, 384 00:18:33,000 --> 00:18:35,320 Speaker 3: have got a vast number of factories out in China 385 00:18:35,440 --> 00:18:37,919 Speaker 3: through JVS, which they can learn from people who are 386 00:18:37,920 --> 00:18:39,840 Speaker 3: at the cutting ends of the industry. So, for example, 387 00:18:39,920 --> 00:18:42,800 Speaker 3: Volkswagen has forty factories out in China and it's one 388 00:18:42,800 --> 00:18:45,119 Speaker 3: of the reasons why it was quite heavily against the 389 00:18:45,160 --> 00:18:48,560 Speaker 3: imposition of tariffs because its production was affected. But really 390 00:18:48,600 --> 00:18:50,960 Speaker 3: those factories out in China can tap into, as we 391 00:18:51,000 --> 00:18:53,639 Speaker 3: said before, one of the most advanced domestic markets and 392 00:18:53,720 --> 00:18:54,680 Speaker 3: really learned that way. 393 00:18:54,920 --> 00:18:57,320 Speaker 2: And I think that's a really key point is just 394 00:18:57,320 --> 00:18:59,280 Speaker 2: the fact that it's very hard to see a scenario 395 00:18:59,320 --> 00:19:02,040 Speaker 2: where you managed to scale Western manufacturing to the extent 396 00:19:02,080 --> 00:19:06,040 Speaker 2: that it becomes suddenly competitive with Chinese manufacturing, the scale 397 00:19:06,119 --> 00:19:09,240 Speaker 2: is just not there. And even if you're ring fencing 398 00:19:09,280 --> 00:19:12,360 Speaker 2: the economy and providing this sort of infant industry protection 399 00:19:12,440 --> 00:19:14,240 Speaker 2: whatever you want to call it, to provide a mix 400 00:19:14,280 --> 00:19:16,800 Speaker 2: of subsidies in tarifs and local content rules to then 401 00:19:16,920 --> 00:19:20,880 Speaker 2: nurture the creation of supply chains across Europe and North America, 402 00:19:21,080 --> 00:19:23,679 Speaker 2: it's going to be extremely hard to catch up and 403 00:19:23,760 --> 00:19:26,239 Speaker 2: to reach those economies of scale and that level of 404 00:19:26,359 --> 00:19:30,280 Speaker 2: innovation that we've seen elsewhere, especially if that protectionism comes 405 00:19:30,280 --> 00:19:34,000 Speaker 2: at a cost of shielding firms from the most competitive 406 00:19:34,000 --> 00:19:36,879 Speaker 2: firms and their technologies. And that means that what we 407 00:19:37,000 --> 00:19:39,680 Speaker 2: could end up seeing is that, Okay, there's some onshoing 408 00:19:39,720 --> 00:19:42,840 Speaker 2: that's successfully happening in North America, but actually, when we 409 00:19:42,880 --> 00:19:45,440 Speaker 2: look at market share and many of the fastest growing 410 00:19:45,680 --> 00:19:48,800 Speaker 2: economies the world over, and especially in emerging economies, those 411 00:19:48,840 --> 00:19:52,800 Speaker 2: are regions that will be dominated by Chinese manufacturers for 412 00:19:53,080 --> 00:19:55,760 Speaker 2: years to come. And what's really interesting is we're also seeing, 413 00:19:55,800 --> 00:20:00,080 Speaker 2: you know, BYD has announced car manufacturing facilities in at 414 00:20:00,000 --> 00:20:02,239 Speaker 2: at least eight countries the world over, This is an 415 00:20:02,240 --> 00:20:05,880 Speaker 2: opportunity that's already been seized with seeing booms of imports 416 00:20:05,880 --> 00:20:08,679 Speaker 2: of solar equipment from China in places like Pakistan. The 417 00:20:08,720 --> 00:20:11,800 Speaker 2: world is moving really fast, and just looking at okay 418 00:20:11,840 --> 00:20:15,120 Speaker 2: onshoring regionally and self sufficiency is going to be quite 419 00:20:15,160 --> 00:20:18,960 Speaker 2: a limited lens through which to appreciate the fact that, actually, yeah, 420 00:20:18,960 --> 00:20:21,040 Speaker 2: things are looking pretty tough when it comes to catching up. 421 00:20:21,359 --> 00:20:24,280 Speaker 1: So you've given some examples of how Chinese companies are responding. 422 00:20:24,320 --> 00:20:27,639 Speaker 1: You cited c ATLBYD, But give me some examples on 423 00:20:27,640 --> 00:20:30,720 Speaker 1: where it's going right or potentially wrong in the US 424 00:20:30,800 --> 00:20:33,800 Speaker 1: and in Europe? Are there some standouts examples there? 425 00:20:34,160 --> 00:20:38,080 Speaker 2: We've Europe has had a pretty successful story of scaling 426 00:20:38,119 --> 00:20:41,160 Speaker 2: as a battery manufacturer. We've seen a lot of investments 427 00:20:41,200 --> 00:20:44,280 Speaker 2: being made in mainland Europe with facilities coming online, but 428 00:20:44,320 --> 00:20:47,600 Speaker 2: they've been largely brought online by companies like lg As 429 00:20:47,680 --> 00:20:50,760 Speaker 2: a South Korean company, or Tesla, an American company, or 430 00:20:50,800 --> 00:20:54,240 Speaker 2: even Chinese manufacturers. What we haven't seen as much of 431 00:20:54,440 --> 00:20:59,000 Speaker 2: is a scaling of manufacturing from European headquartered companies. There's 432 00:20:59,240 --> 00:21:01,520 Speaker 2: one question in Europe, which is, well, should we be 433 00:21:01,880 --> 00:21:04,840 Speaker 2: just focusing on scaling manufacturing with companies that know what 434 00:21:04,920 --> 00:21:07,440 Speaker 2: they have more of a track record, like these South 435 00:21:07,480 --> 00:21:09,840 Speaker 2: Korean companies for example. And in the US, is it 436 00:21:09,880 --> 00:21:12,120 Speaker 2: really a good idea to have this environment where we've 437 00:21:12,119 --> 00:21:14,720 Speaker 2: made it very hard for Chinese manufacturers to invest, which 438 00:21:14,760 --> 00:21:17,760 Speaker 2: is the case currently where there's a number of solar 439 00:21:17,800 --> 00:21:21,120 Speaker 2: and EV and battery manufacturing investments that are being made 440 00:21:21,200 --> 00:21:23,359 Speaker 2: or have been announced by Chinese manufacturers, but they've be 441 00:21:23,440 --> 00:21:25,720 Speaker 2: met with a lot of uncertainty and a lot of 442 00:21:25,760 --> 00:21:29,240 Speaker 2: political pushback and several proposed bills which would limit the 443 00:21:29,280 --> 00:21:32,320 Speaker 2: availability of funding to a much wider extent than is 444 00:21:32,359 --> 00:21:34,680 Speaker 2: the case today. So this is another question is when 445 00:21:34,680 --> 00:21:36,840 Speaker 2: we look at countries that are industrialized in the past, 446 00:21:36,840 --> 00:21:39,880 Speaker 2: they've invited the most advanced manufacturers and they've learnt from them. 447 00:21:39,920 --> 00:21:41,200 Speaker 2: And this is even something that we saw in the 448 00:21:41,240 --> 00:21:44,439 Speaker 2: eighties in the US with Japanese carmakers, for example. And 449 00:21:44,480 --> 00:21:47,159 Speaker 2: the question is is it really possible to not just 450 00:21:47,359 --> 00:21:50,200 Speaker 2: catch up on this massive lead that China has today, 451 00:21:50,200 --> 00:21:54,400 Speaker 2: but to also do so while only supporting locally grown manufacturers. 452 00:21:54,440 --> 00:21:56,560 Speaker 2: And that's a pretty challenging proposition. 453 00:21:56,840 --> 00:21:59,199 Speaker 1: Now, we've talked about queen tech as a theme but 454 00:21:59,320 --> 00:22:01,480 Speaker 1: really the exact samples that we've gone through have really 455 00:22:01,480 --> 00:22:04,120 Speaker 1: been focused on electric vehicles and solar and I think 456 00:22:04,119 --> 00:22:06,040 Speaker 1: I'm the one who brought up hydrogen. Can you just 457 00:22:06,040 --> 00:22:08,159 Speaker 1: give an idea of what the scope is? How wide 458 00:22:08,359 --> 00:22:11,320 Speaker 1: is that basket of companies within clean tech? 459 00:22:11,400 --> 00:22:13,000 Speaker 3: So this is one of the central things that we 460 00:22:13,080 --> 00:22:15,639 Speaker 3: had to address when we were doing this project. So 461 00:22:15,680 --> 00:22:18,280 Speaker 3: we're trying to look at the global kind of shifting 462 00:22:18,600 --> 00:22:21,840 Speaker 3: sands around clean tech, and clean tech is just vast. 463 00:22:21,960 --> 00:22:24,439 Speaker 3: So the amount of sectors within it, you can broadly 464 00:22:24,480 --> 00:22:27,240 Speaker 3: break up into eight or so sectors, but the actual 465 00:22:27,280 --> 00:22:30,760 Speaker 3: components within each of those sectors, the list is incredibly long, 466 00:22:30,800 --> 00:22:32,280 Speaker 3: and actually you can see this in a lot of 467 00:22:32,320 --> 00:22:34,520 Speaker 3: the policy documents and a lot of the tariff documents. 468 00:22:34,560 --> 00:22:37,040 Speaker 3: When they're talking about what they're trying to target, it's 469 00:22:37,080 --> 00:22:39,760 Speaker 3: often covering pages and pages and pages. So the reason 470 00:22:39,800 --> 00:22:43,080 Speaker 3: why we chose solar, evs and batteries as our initial 471 00:22:43,160 --> 00:22:45,040 Speaker 3: main ones that we're going to focus on, or that 472 00:22:45,119 --> 00:22:48,320 Speaker 3: we might actually add more areas in terms of geographic 473 00:22:48,320 --> 00:22:51,879 Speaker 3: scope and also clean tech scope into the database that 474 00:22:51,880 --> 00:22:54,119 Speaker 3: we're building, is because there's been a massive push on 475 00:22:54,200 --> 00:22:56,439 Speaker 3: these three areas and in China they're called the New 476 00:22:56,480 --> 00:23:00,080 Speaker 3: Industrial Forces, and it's a lot of the political focus 477 00:23:00,119 --> 00:23:02,760 Speaker 3: and a lot of the economic focus around clean tech 478 00:23:02,880 --> 00:23:04,040 Speaker 3: is within these industries. 479 00:23:04,560 --> 00:23:07,280 Speaker 1: So this show has largely been a comparison around the 480 00:23:07,400 --> 00:23:09,920 Speaker 1: US in the EU, and what I'm really hearing here 481 00:23:10,080 --> 00:23:12,280 Speaker 1: is that in the US things seem to really be 482 00:23:12,359 --> 00:23:15,040 Speaker 1: humming at a pretty fast speed, and the EU may 483 00:23:15,080 --> 00:23:17,359 Speaker 1: have a long way to go. What are we seeing 484 00:23:17,520 --> 00:23:20,000 Speaker 1: in the EU and what do we expect to see 485 00:23:20,000 --> 00:23:20,560 Speaker 1: in the future. 486 00:23:20,880 --> 00:23:23,240 Speaker 3: One of the most interesting things is that on shoring 487 00:23:23,520 --> 00:23:25,320 Speaker 3: is at the top of the EU's agenda. So as 488 00:23:25,359 --> 00:23:28,000 Speaker 3: vonder Lyon goes into her second term, we're expecting to 489 00:23:28,040 --> 00:23:30,800 Speaker 3: see some new policies under what's being called the Clean 490 00:23:30,800 --> 00:23:32,879 Speaker 3: Industrial Deal, but we're not yet sure as to what 491 00:23:32,920 --> 00:23:34,920 Speaker 3: those policies are. So one of the things that vonder 492 00:23:34,960 --> 00:23:37,080 Speaker 3: Lyon did towards the end of her last term was 493 00:23:37,119 --> 00:23:40,520 Speaker 3: she got Mario Dragio, is the ex ECB president and 494 00:23:40,560 --> 00:23:43,720 Speaker 3: also Prime Minister of Italy, to look at sweeping structural 495 00:23:43,720 --> 00:23:46,800 Speaker 3: reforms needed to make the EU more competitive. His report 496 00:23:46,880 --> 00:23:49,840 Speaker 3: came out last month. We're expecting to see a lot 497 00:23:49,840 --> 00:23:53,760 Speaker 3: of policies coming out in the next presidential term, and 498 00:23:53,760 --> 00:23:55,760 Speaker 3: it's going to be interesting to see how those policies 499 00:23:55,760 --> 00:23:57,720 Speaker 3: are framed. Are they going to be production linked like 500 00:23:57,720 --> 00:23:59,560 Speaker 3: we're seeing in America, Are they going to be to 501 00:23:59,600 --> 00:24:03,159 Speaker 3: do with capital expenditure, which is more traditional EU grant 502 00:24:03,320 --> 00:24:05,119 Speaker 3: type of funding, or are they going to be something 503 00:24:05,119 --> 00:24:06,400 Speaker 3: in between that we haven't yet seen. 504 00:24:06,640 --> 00:24:09,040 Speaker 2: And what's really interesting about this Mario Dragy report, which 505 00:24:09,080 --> 00:24:12,800 Speaker 2: was released quite recently still is which really lays these 506 00:24:12,840 --> 00:24:16,600 Speaker 2: priorities for the European Commission going forwards, is that it 507 00:24:16,800 --> 00:24:20,000 Speaker 2: really relies on this enormous amount of new funding that 508 00:24:20,080 --> 00:24:21,880 Speaker 2: is required. So it basically says we're going to need 509 00:24:21,960 --> 00:24:24,399 Speaker 2: to pursue all of the EU's very strategic priorities eight 510 00:24:24,520 --> 00:24:27,800 Speaker 2: hundred billion euros per year of funding private and public. 511 00:24:28,000 --> 00:24:30,399 Speaker 2: But that is an enormous amount, and it's to be 512 00:24:30,440 --> 00:24:32,720 Speaker 2: funneled into all kinds of new priorities which are supposed 513 00:24:32,720 --> 00:24:35,600 Speaker 2: to get a lot more money, such as military pursuits 514 00:24:35,640 --> 00:24:37,919 Speaker 2: as well as things like onshore and clean tech. So 515 00:24:38,000 --> 00:24:40,399 Speaker 2: already that seems pretty challenging, and it's even more challenging 516 00:24:40,480 --> 00:24:43,240 Speaker 2: for the fact that it really relies on this central premise, 517 00:24:43,280 --> 00:24:45,320 Speaker 2: which is that your EU member states are going to 518 00:24:45,359 --> 00:24:47,280 Speaker 2: get together like they did during the pandemic, like we've 519 00:24:47,280 --> 00:24:50,560 Speaker 2: talked about previously, and are going to raise common debts 520 00:24:50,600 --> 00:24:53,200 Speaker 2: once more to have this big new packet of funding 521 00:24:53,240 --> 00:24:56,679 Speaker 2: that's available for channeling into these clean energy supply chains. 522 00:24:56,760 --> 00:24:59,880 Speaker 2: And there doesn't really seem to be the political will 523 00:24:59,880 --> 00:25:02,760 Speaker 2: to do that. There doesn't really seem to be any 524 00:25:02,840 --> 00:25:04,800 Speaker 2: kind of appetite from the likes of Germany or some 525 00:25:04,840 --> 00:25:07,960 Speaker 2: of the more fiscally conservative member states to actually engage 526 00:25:08,000 --> 00:25:10,159 Speaker 2: in that kind of common raising of debts. So what 527 00:25:10,160 --> 00:25:12,400 Speaker 2: we're going to end up seeing is probably more the same, 528 00:25:12,480 --> 00:25:16,200 Speaker 2: and which is basically a very constrained sort of environment 529 00:25:16,280 --> 00:25:18,320 Speaker 2: where what we've seen to date and what we'll probably 530 00:25:18,320 --> 00:25:21,000 Speaker 2: continue to see, is a reshuffling of existing pots of 531 00:25:21,040 --> 00:25:23,399 Speaker 2: money like the Innovation Fund, which are already spread out 532 00:25:23,400 --> 00:25:26,720 Speaker 2: across lots of different purposes and aren't particularly targeted when 533 00:25:26,720 --> 00:25:29,080 Speaker 2: it comes to the technologies that the EU is trying 534 00:25:29,080 --> 00:25:32,199 Speaker 2: to support. So the US funding extremely targeted. You've got 535 00:25:32,200 --> 00:25:35,720 Speaker 2: specific tax credits for producing battery cathodes, for example, as 536 00:25:35,720 --> 00:25:38,040 Speaker 2: in the EU, you've got these different pots of money 537 00:25:38,040 --> 00:25:40,400 Speaker 2: that are available for doing just about anything, and it's 538 00:25:40,440 --> 00:25:42,720 Speaker 2: extremely unclear as to what's going to go where, and 539 00:25:42,840 --> 00:25:44,879 Speaker 2: that pot is a lot smaller and it's made up 540 00:25:44,920 --> 00:25:47,520 Speaker 2: of many, many more parts, so it's much harder to decipher. 541 00:25:47,680 --> 00:25:51,160 Speaker 2: So the EU is really structurally constrained, and it's really 542 00:25:51,200 --> 00:25:53,960 Speaker 2: interesting to compare the two because basically, going forward, there's 543 00:25:53,960 --> 00:25:55,960 Speaker 2: a lot of ambition in the EU to make grand 544 00:25:56,000 --> 00:25:58,199 Speaker 2: pronouncements and do more, but it's tough to do so 545 00:25:58,280 --> 00:26:01,840 Speaker 2: within the existing environment. In the US, there's this looming 546 00:26:01,920 --> 00:26:04,320 Speaker 2: sense that the IRA might get challenged, but we might 547 00:26:04,320 --> 00:26:06,240 Speaker 2: not see it be changed as much as a lot 548 00:26:06,280 --> 00:26:07,919 Speaker 2: of people are fearing in terms of some of the 549 00:26:07,920 --> 00:26:10,880 Speaker 2: incentives that are important to manufacturers. So actually we could 550 00:26:10,920 --> 00:26:13,919 Speaker 2: see this picture remaining quite stable going forwards. And the 551 00:26:14,000 --> 00:26:17,720 Speaker 2: one more uncertain element is this question of tariffs, where 552 00:26:17,720 --> 00:26:20,199 Speaker 2: the EU's really broken away from its approach in the 553 00:26:20,240 --> 00:26:22,480 Speaker 2: past and is starting to be a bit more assertive 554 00:26:22,520 --> 00:26:24,919 Speaker 2: when it comes to be putting in place barriers to 555 00:26:25,040 --> 00:26:27,840 Speaker 2: trade with this new ev tariff that we've just mentioned. 556 00:26:27,880 --> 00:26:30,359 Speaker 2: The question is going forwards, does the EU choose to 557 00:26:30,400 --> 00:26:33,159 Speaker 2: do so for other technologies and batteries would be the 558 00:26:33,200 --> 00:26:35,439 Speaker 2: really obvious one, and that's already what a lot of 559 00:26:35,560 --> 00:26:38,600 Speaker 2: lobbying groups and what industry is already calling for in 560 00:26:38,640 --> 00:26:41,439 Speaker 2: the EU in from many quarters, we're seeing talk of 561 00:26:41,760 --> 00:26:45,080 Speaker 2: imposition of new battery tariffs that hasn't really become concrete 562 00:26:45,119 --> 00:26:47,680 Speaker 2: in any sense. We've already seen a lack of cohesion 563 00:26:47,720 --> 00:26:50,280 Speaker 2: when it comes to these EV tariffs, for example, But 564 00:26:50,520 --> 00:26:53,560 Speaker 2: there's still a lot of uncertainty and there's still this 565 00:26:53,600 --> 00:26:55,800 Speaker 2: big looming question of is the EU, which has just 566 00:26:55,840 --> 00:26:58,640 Speaker 2: started to change its tune when it comes to protectionism, 567 00:26:58,800 --> 00:27:00,800 Speaker 2: is this going to be the beginning of a trend 568 00:27:00,840 --> 00:27:03,000 Speaker 2: that we see going into the future, and that's going 569 00:27:03,040 --> 00:27:05,360 Speaker 2: to lead to a lot of manufacturers starting to get 570 00:27:05,359 --> 00:27:07,800 Speaker 2: more serious about setting up in the EU or in 571 00:27:07,920 --> 00:27:09,480 Speaker 2: areas where they think they're going to be able to 572 00:27:09,520 --> 00:27:11,240 Speaker 2: export into the EU in the future. 573 00:27:11,680 --> 00:27:14,280 Speaker 1: So, Matt Antwine, thank you very much for keeping an 574 00:27:14,320 --> 00:27:17,919 Speaker 1: eye on tariffs and subsidies, and we will continue to 575 00:27:17,960 --> 00:27:21,920 Speaker 1: watch the upcoming elections and what happens with policy makers 576 00:27:21,960 --> 00:27:25,439 Speaker 1: in both continents as they look to on shore more 577 00:27:25,480 --> 00:27:27,280 Speaker 1: of their manufacturing across clean tech. 578 00:27:27,640 --> 00:27:29,720 Speaker 2: Thanks so much, Dana, great to be here, Thank you 579 00:27:29,840 --> 00:27:30,240 Speaker 2: very much. 580 00:27:39,240 --> 00:27:42,359 Speaker 1: Today's episode of Switched On was produced by cam Gray 581 00:27:42,560 --> 00:27:46,240 Speaker 1: with production assistants from Kamala Shelling. 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