Climate 21

China - Climate Hero, Or Climate Villian? A Chat With EAC's Daniel Berger

July 06, 2022 Tom Raftery / Daniel Berger Season 1 Episode 79
Climate 21
China - Climate Hero, Or Climate Villian? A Chat With EAC's Daniel Berger
Show Notes Transcript

The climate news about China seems to be consistently contradictory. On the one hand, we hear how China is responsible for high levels of emissions, while on the other we hear how China is leaping ahead in its deployments of renewables. Where does the truth lie?

I invited Daniel Berger of EAC who has been based in China for the last 20 years to come on the podcast to give his perspective.

We had a fascinating conversation discussing all aspects of climate as it pertains to China, everything from its famous five-year plans through to what people on the ground think.

I learned loads. I hope you do too.

If you have any comments/suggestions or questions for the podcast - feel free to leave me a voice message on my SpeakPipe page, head to the Climate 21 Podcast Forum, or send it to me as a direct message on Twitter/LinkedIn. Audio messages will get played (unless you specifically ask me not to).

And if you want to know more about any of SAP's Sustainability solutions, head on over to www.sap.com/sustainability, and if you liked this show, please don't forget to rate and/or review it. It makes a big difference to help new people discover the show. Thanks.

And remember, stay healthy, stay safe, stay sane!

Music credit - Intro and Outro music for this podcast was composed, played, and produced by my daughter Luna Juniper

Daniel Berger:

These are immense investments. Other think tanks, estimate total investments into environmental and energy, reduction of around 20 trillion Euro, not from the government, but from the entire industry. So also from the corporates, and so on. So these are immense figures, not only to make, climate change looking nice on the paper, but also to act up on that, yeah.

Tom Raftery:

Good morning, good afternoon, or good evening wherever you are in the world. This is the Climate 21 podcast, the number one podcast, showcasing best practices in climate emissions reductions, and I'm your host global vice president for SAP, Tom Raftery. Don't forget to subscribe to this podcast in your podcast app of choice, to be sure you don't miss any episodes. Hi everyone. Welcome to the climate 21 podcast. My name is Tom Raftery with SAP and with me on the show today, I have my special guest Daniel. Daniel, welcome to the podcast. Would you like to introduce yourself?

Daniel Berger:

Thank you very much, Tom, for having me today and, uh, make it a quick, one. My name is Daniel Berger. I'm partner of EAC. EAC being a strategy management consulting company. And I'm calling here, out of Shanghai today where I have been the last 20 years.

Tom Raftery:

Okay, fantastic. And Shanghai, we are talking today because the Southeast Asia region, China in particular is hugely important when it comes to sustainability and climate, it's one that gets a lot of attention in other media, but it's not one I've focused any episode on. So I'm interested to find out more about it. We hear lots about China, that it's a terrible polluter, that it hasn't done a lot of pollution in the past and all kinds of things like that. So I'm, I'm fascinated Daniel to hear your perspective as someone who's lived there now for quite some time and are deeply embedded in the ecosystem there what's happening in China. So could you just start us off and give us a, a broad overview of the Chinese context?

Daniel Berger:

I will, I will. Thanks for asking, uh, you dropped two points. The first one is sustainability. The other one is Asia. Both are very broad terms. So let me dissect it a little bit. If you talk about sustainability, you very soon come to the point of environment and climate change. So let's focus on that. Also in terms of Asia, let's focus on China. Of course, China has been within the region, not only the, the major production hub, but also let me, put it this way, the environmental sinner that has been in the past. Yes. But that is, a topic which is, to change in the, years to come. China has a very bold roadmap, to reduce that. And to move towards a greener environment and greener economy. And, uh, this is certainly the point I would like to share with you and with the audience today, because that is what I'm, also, very familiar with. Not only because I'm living here in China and in Shanghai particular, but also this is part of our consulting offering to our clients, helping them to set the roadmap, into a greener future, whether it's energy, efficiency programs, whether it's a sustainability, programs, whether it's sustainable product development, these, uh, different topics which have been, really hot topic for us and for our clients, uh, in the last couple of months and years, yeah?. So I mentioned environment, certainly the major topic, uh, with in sustainability and, uh, not only China, but globally. This has, of course drawn a lot of, interest. over the last couple of years, climate change is among the most urgent topics, uh, being discussed at the moment. And, uh, of course, if you look at weather news or the news report disaster here, disaster there. You hear a temperature rise once in the century, once in a thousand years. So these terms have been, become a, a common, uh, prefix in weather reports nowadays. And, uh, really everyone really has a sense and can feel it can see, that the climate is changing. Not only temperature getting higher, but we are talking about pollution of rivers. We're talking about roads, food shortages. So this topic, also impacts the daily life of everyone, on the planet. And of course, particular in, in China. And, uh, China has realized that that, pollution and, and, environmental topics is impacting health. Ability also to grow food. And, you know, in China, there are a lot of people who, who need to be fed. Housing is a topic, uh, scarcity of land safety at work. All these topics, with China has come to realize. And, this also being, a major initiator of all these bold programs China has been, has defined over the, the last years.

Tom Raftery:

okay. Interesting. And you said China's goals are ambitious. I'm going to, challenge you on that because here in Europe, we have set goals of 55% emissions reduction by 2030, which is hugely ambitious. The Biden administration has said they want to cut their emissions. 52% by 2030, and China has said it wants its emissions to peak by 2030. The EU and the US said they want to get to net zero by 2050. China has said 2060, so how are you saying that the Chinese goals are ambitious given that it's, it seems to be lagging behind Europe and the us in those aims.

Daniel Berger:

sure you are right. You are right to ask that. And if I look at a little bit at the statistics and figures, I know that China is accounting at the moment for 30% percent of the global greenhouse gas emissions. 30% percent. Put it into the context of, the GDP global share of China 18%. So it's an over proportionate pollution on GDP generated. However, again, that the population is big so that the capita emission is rather low around seven tons compared to US I remember around 14-15 tons, but keep in mind that China is yet a developing country. So China started rather late with industrialization. China had other priorities in the past, so economic roles was the priority. So naturally they also started rather late thinking in, uh, into a greener growth. However, they are there at the moment and china has realized the importance of environment. So they are trying to, speed up that. And I give you later also a few facts to underline that. And you mentioned that, uh, that's a clear message also from the government in Beijing, carbon peak by 2030 and carbon neutrality by 2060. So it's 30 years and I looked it up cause I didn't have everything in my head. It's a very short cycle from peak to neutrality. If you look at industrialized countries, they took much longer to reach from peak to neutrality.

Tom Raftery:

Okay. Okay. And in fairness to China, you're right. China started much later, but also I gotta say, looking at the last few five year plans, China has a record of setting, extremely ambitious goals for the rollout of renewables and then blowing through those targets a year or two early. The, plan for 2020, for example. I forget how many gigawatts of solar and wind China committed to getting to, but it was seen as very ambitious at the time and they blew through those targets in 2018, 2 years early. And then they set more targets for 2020, which they reached in 2019. So China does have that record of doing well on those targets. And in fact, just a few weeks ago, Bloomberg issued a report saying that China was set to reach its 2030 goals by 2025, which is incredible.

Daniel Berger:

It is indeed. That is indeed a fact Tom, as a clear indication that China is doing, quite a lot of, things. They initiate a lot of programs and they are also successful in that before I go further into that allow me also to bring it a little bit into the context h where all this strong push uh for um sustainability , climate change. And, emission reduction is coming from. Of course, first of all, it's a really a big topic of safeguarding, the natural resources Xi Jinping President of China said um something and lush mountains are invaluable assets. This is a clear message we need that to sustain and of course emissions also cause a lot of economic damage, health problems. And, I don't go into details, but, you can also measure the economic loss and percentages of the GDP. And, also in, US dollar terms, these are immense. China has realized that, of course there are also other topics like, reducing the strategic, dependency on oil imports or imports of, gas and coal. And of course, China also has, a point to prove internationally. and I guess, this, this whole climate change and this whole, environmental topic is a great, opportunity for China to shine. Yeah. And you talk also about achievements. Yes, you are right. The targets are achieved earlier. Typically, you know, if I look at it installed a wind power end of 2021. With, 330, uh GigaWatt that's number one second to none. It's, uh, double off the installation in the US. For solar, same picture, even more extreme, 310, Giga Watt installed, capacity also global number one, triple than US. So these are clear indications within the period of seven eight years when they ramped that up. Keep that in mind. Yeah. So of course these are some examples how fast and how determined policies and initiatives are implemented. And China does have a really, a, broad set of policies. A broad set of regulations and also, big pockets to fund that. And I give you some examples, the national, development and reform commission, which is also, economic planning body of the state government. They have invested over the last years around 70 billion, uh, Euro into, these kind of programs. Yeah. So these are immense investments, other think tanks, estimate total investments into environmental and energy, reduction of around 20 trillion Euro, not from the government, but from the entire industry. So also from the corporates and so on. So these are immense figures, so not only to make, climate change looking nice on the paper, but also to act up on that, yeah.

Tom Raftery:

Okay. Very good. And, you mentioned that, China tends to shine in some of these areas. One area that I'm quite interested in is electric mobility. And for example, you have a lot of electric vehicle manufacturers in China. You have a high percentage of electric vehicle sales in China. Maybe not now as compared to Europe, but China was very early in this space and certainly ahead of the US in that, and in terms of particularly electric buses, so the global fleet of electric buses, I'm gonna get the numbers wrong because it changes constantly, but I'll be in the right ballpark. The global fleet of fully electric buses is roughly in the order of 650,000. Of which around 600,000 are in China. So China got very early into this space, perfected the technology and is now going out globally. And selling its expertise and selling its buses manufactured in China to places like Santiago de Chile and places like that around the world. So this tends to be, I think, a pattern that we see in China, particularly in this space where they go all in on a particular technology, figure out early how to do it, and then sell that technology and their expertise around it globally.

Daniel Berger:

You're interpretation is correct. Of course we can argue the motivation behind this push for e-mobility, whether it was really sustainability. I would rather say, the, the rationale was to build up, an own technology compared to combustion engines where International players were dominating. But again, I would also see this as a puzzle of, sustainability. This is part of this, part of the entire story, even though the rationale was a different one, but you are right. China started very early. around 15 years with also massive investments, uh, also from government, help with subsidies, to push also not only manufacturing, but also consumption. So that worked, pretty well. By the way, these subsidies, have been reduced over a couple, uh, last couple of years to make that industry more sustainable, but the results are, uh, really impressive. And especially last year, 2021, compared to 2020, we had a doubling of e-cars being sold in China, give you some figures. last year around 3.3 million, uh, vehicles being sold. And that's, uh, almost a tripling from 2020. So, but the majority are cars still, Tom? Yes, you're right. Commercial vehicles, trucks and buses, take an important share, but the majority is electric cars and here, especially fully full electric cars, not hybrid, but fully electric cars. Again, another example how determined China is and, um, how effective the policies, work. I mean talking about Shanghai. We know that we are just coming out of the lockdown, for 10 weeks and putting a city with 20 million, people into a lockdown tells a story.

Tom Raftery:

Yeah. Yeah, yeah, absolutely. curious about that because China is obviously very different, politically from the likes of the us or the EU, it's a central government. essentially whatever the government says happens. There's there's no opposition. So it's great to see that there is a lot of work happening in the sustainability space in China, and that there is this top down approach, but is there a bottom up ground swell support for it as well? Do the regular people on the ground in China? Are they in favor of this? Are they demanding it or is it something that's being imposed on them?

Daniel Berger:

You are certainly right. Of course the government, uh, pushed quite a bit in the past. Yeah. But in the meantime, And I give you, gave you the example in the beginning, because also the, the people they see also the impact of climate change, they see it not only in the weather reports, they see it in the news, they see it on the streets. They see it when they go to the doctor, they realize that, yeah, of course, all this online media, also adds up to that where sustainability and environmental topics are really, overwhelmingly communicated. So yes, there's a very high awareness. The people are supporting that. all over China. Of course, you have some differences in yeah. In the regions, Eastern China, Western China, especially larger cities like Shanghai or smaller cities. typically you have a higher awareness in larger cities. Of course, this awareness is also changing by education level by income level and so on. But I would say. looking at recent studies around 90, 95% are first of all, aware about, carbon topics, carbon peak, carbon neutrality, climate, initiatives, without everyone knowing, uh, all the details. But overall they're very much aware about that. And, interestingly also they recognize that environmental topic starts with the individual and, not from the government. So this is also some, uh, interesting learning. And if I look out of the window, how does it look in practice? you see also how the waste is classified, which you bring, downstairs, to dispose. Uh,

Tom Raftery:

mm.

Daniel Berger:

If you run through Shanghai, you hardly find any trash bins to put your trash in. So means also keep it with yourself or don't, dispose it, and put it on the street. As for awareness and willingness to reuse, to use, recycled packaging bags. To buy organic green food, couple of, topics, which, tells me very clearly. Yeah. The, the population is also supporting that. There's a very, very strong awareness. Down

Tom Raftery:

Okay. Fantastic. That's great to hear. And can you speak to any fantastic, showcases of sustainability, any kind of lighthouses, any kind of best practice companies or organizations or cities, that are doing a really stellar job?

Daniel Berger:

Would be difficult to name any particular companies. Especially larger multinational companies. They're doing quite a bit in terms of sustainability and a little bit more than public image, but also launching programs, uh, investing in, renewable energy, for their factories, optimizing their processes. So it would be, would be unfair. I can only tell you also from our consulting practice, we support quite a lot of multinational companies, whether it's building materials, whether it's chemical companies, whether it's typical manufacturing companies who have to shift their energy supply. But if you ask me for a lighthouse project, probably I would point out, uh, winter Olympics. Of course. Uh, there has been quite, quite some arguments about, uh, winter Olympics in Beijing, but. These Olympics wear carbon neutral. So, this is certainly, one of the lighthouse project. I would point out if you ask me. It's not that they didn't emit any carbon, but they leveled that out on a accounting book means, trading carbon certificates. And this is maybe another interesting topic where China is, I would say, in the early stage, but very determined to build up here also the sophisticated carbon trading system. Yeah. And the volume is quite massive. Still the European trading carbon trading system. It's still, I would say international benchmark and quite developed, but, in China, this is quite a massive, initiative. So again, this winter Olympics, uh, certainly, a, project to point out the same, uh, by the way, will also, uh, happen for the Asia games in Hangzhou in next year. So these are some examples, where you can also see the will to implement what is written on the paper. Yeah. But again, there are a lot of other companies, who are also working and by the way, not only international companies operating in China, but also Chinese companies, they are very active on that.

Tom Raftery:

Okay, superb. And you mentioned the Olympics. I think many of us will remember when the summer Olympics were in Beijing and the reports were coming out about the air quality issues there. Has that improved in the meantime?

Daniel Berger:

Yes, it has. It has. I mean, I'm living in Shanghai since 20 years now when I came to Shanghai in late 99, I had very funny days in summer where the air was thick and yellow and, uh, I couldn't see a 200 meters wide and. This has improved tremendously. And, and again, this is really great job, China has done in the meantime and we're talking about 20 years. It's not a, it's not a long, long period.

Tom Raftery:

Yeah,

Daniel Berger:

Same applies for Beijing. but it, uh, also depends a little bit on the industrial activity, also direction of the wind. So it's sometimes hard to cons control, you know, uh, Of course, you know, if these, uh, milestone events, uh, happen, of course, China will also take precaution, uh, to shut down the industries in the, uh, in the suburb of Beijings in order to manage the, air quality, but talking about Beijing Olympics 2008, almost 15 years ago, that has, improved tremendously.

Tom Raftery:

Okay. Super. And what kind of opportunities are arising from the focus on climate change in China?

Daniel Berger:

All right. I think we talked about the greater good, and of course I'm not, uh, elaborating on fulfillment of the regulations by companies or being compliant. I would see the major advantage. And opportunities are on the one side really to define a unique selling proposition for your company, compared to your competitors. This applies for every company, to define sustainability as a core DNA of your future strategy. Be recognized by market players, be recognized by yeah, by the entire ecosystem and, last but not least, by your customers, who then, and also this is a fun fact, customers are also willing to pay a price premium. So, ideally, sustainable product, sustainable production will also benefit, uh, your top line results. I see, another opportunity in development of new business models. Yeah. That, uh, companies doing a very traditional product, they could also, jump into this kind of new business endevour to add, more sustainable offerings, whether it's, to enhance their product offerings, to enhance their service offerings, to get engaged into a greener and sustainable business operation model. So there are also a lot of opportunities in developing new businesses. Yeah.

Tom Raftery:

Okay. Very good. Very good. What kind of challenges are lying ahead because we've said the plans are ambitious. Although Bloomberg seems to think they're not ambitious enough, given they're going to meet their 2030 aims in 2025. But to get to 2030 to get to further on to 2060, what kind of challenges are lying ahead for China and the organizations in China, the politics in China, people working in China, what kind of, what are the big roadblocks.

Daniel Berger:

I would say on macro level, that this indeed further defining, implementation guidelines, implementation rules. Certainly, startup financing, by the government is also important. And also monitoring is important. Cause you can make the rules, but you need to make sure that these are implemented and China is a big country which is difficult to monitor, but again, also here, big improvements have been made. But what I would say more on this, on the company level challenges I see, here, and of course, having a more sustainable manufacturing process, cost money. Yeah. This cost in investment dependent. So it would probably, take some commitment from the companies to invest first then of course, maybe a lack of technical understanding. Of course it's you can say easier. We shift from coal to gas, and from gas to uh solar or to wind but it’s also requires a certain technical understanding how to get it implemented and how to get it operated. This is certainly, I would say the more operational challenges to really make that happen. Uh, I mentioned before everyone was talking about climate change, sustainability, but really to get it, done this is, this is, this is a challenge. Starting also from getting a clear understanding where do I stand in terms of carbon emission? A lot of companies ask this question at the moment. So this is of course, also interesting, for us as consultants who support them based on that also to define, a net zero, roadmap for the future, but getting it also implemented getting all stakeholders in, there's certainly also an operational challenge ahead.

Tom Raftery:

Okay. Will China get there?

Daniel Berger:

Actually, yes, I'm very, convinced that they will get that within the framework of, government regulations. That's a big push and you don't see that. Of course, uh, you can see it either way, but, in terms of climate change, that, government, framework and, push of the government and monitoring, initiators of the government certainly supports that target

Tom Raftery:

Okay. Super, super given all that we've talked about Daniel, is China a climate hero or a climate villian?

Daniel Berger:

Good question. I expected that, that question to come Tom, to be honest, it's very difficult to, to, I would say a little bit of both. I mention in the beginning where China stands at the moment with carbon emission, also in terms of volume, in terms of, major ratios that certainly something where I would say, yes, it's a climate sinner. But a good point is they have realized that. They have, what I've elaborated before they have initiated these programs. And, we talked about examples. So e-mobility, you mentioned installation of renewable energy. This is certainly something where I would say China is a forerunner or a global leader. Also, if you look, at, the share economy, like, uh, share bikes, share cars, uh, share motor bikes, also, eCommerce, development, which also certainly helps also to yeah. Decrease dependency on packaging, materials or transportation. So these are, I would say, some examples where I would say China is playing here in the, in the first league. No, I think,

Tom Raftery:

Okay. Tremendous, tremendous, super. Daniel we're coming towards the end of the podcast now, is there any question I haven't asked you that you wish I had, or any aspect of this that we've not touched on, that you think it's important for people to be aware of?

Daniel Berger:

No, I think we are all good. I think with the last question. Uh, you asked me. I think that was the missing piece, was waiting for that question, but I guess, we covered it all. I mean, not all, but, in this kind of, framework, I guess, that should be fine from my side.

Tom Raftery:

Okay. Super, super Daniel. If people want to know more about yourself or about your company EAC or any of the topics we discussed on the podcast today, where would you have me direct them?

Daniel Berger:

I guess it's, pretty straightforward. you can search my name, Daniel Berger on LinkedIn. And, you can get further from there. The link and also the homepage, will be part of the, the podcast information, I guess, Tom. So apart from that, that's all good.

Tom Raftery:

Great. Yeah, no, I'll have, I'll have links to the company site and to your LinkedIn account in the show notes, so everyone will have access to them. Daniel, that's been really interesting. Thanks a million for coming on the podcast today.

Daniel Berger:

And just all Myong. Thanks for inviting me and having me today.

Tom Raftery:

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about Climate 21, feel free to drop me an email to Tom dot Raftery @ sap.com or connect with me on LinkedIn or Twitter. If you liked the show, please don't forget to subscribe to it in your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks catch you all next time.