You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
The government is forcefully intervening across the economy — but only because it’s worried about China.
On Thursday, the top climate diplomats from the world’s two most polluting countries are meeting in Washington, D.C. John Podesta, America’s climate envoy, and Liu Zhenmin, China’s climate envoy, will hold their first formal session and lay the groundwork for the United Nations climate conference in Azerbaijan later this year. They will discuss, among other topics, boosting climate finance and making further cuts to methane emissions, according to Axios.
Both men are new to their posts, with their predecessors John Kerry and Xie Zhenhua having each stepped down in the past year. That could prove important. Kerry and Xie could draw on their long personal relationship in their negotiations: During the UN climate conference in Glasgow in 2021, their friendliness seemed to hold the talks together.
Now, Liu and Podesta, who is also overseeing the Inflation Reduction Act’s implementation, must forge a new bond. And they must do so in an environment where vastly every climate-related issue — electric vehicles, coal power, industrial potency, and trade — has gotten caught up in the deteriorating relationship between the two superpowers.
Does it make sense to talk about the economy, climate change, and national security as separate issues anymore? Some of the same issues that have complicated America and China’s political and economic relationship — the former’s rising tariffs, the latter’s alleged “overcapacity” — are inextricable from their climate policies. In a way, the questions that Podesta and Liu will confront all come down to one idea: What kind of world can we all live in?
I recently attended the Hewlett Foundation’s Common Sense conference outside San Francisco, a gathering of thinkers, scholars, and journalists from the right and left who are trying to find a “post-neoliberal” ideology, something to replace the dogma of free trade and unfettered markets that has reigned since the days of Ronald Reagan and Margaret Thatcher.
Rana Foroohar of the FTnoted last year that the Hewlett conference aims to become a kind of post-neoliberal “Mount Pelerin Society,” the midcentury ensemble of economists, philosophers, historians, and business leaders who first plotted what later became neoliberalism. I’m not sure about that — there weren’t too many business leaders in California last month, and not every attendee adhered to the post-neoliberal school of thought — but it was a fascinating few days of discussion, and some big names, including Rep. Ro Khanna and Sen. Chris Murphy, appeared onstage. (I was there to moderate a climate policy panel.)
I agree with the central thesis, though: Look around and you can see a new school of political and economic thought come into view. At its best, this post-neoliberal ideology sees markets as onetool of many to organize prosperity and human effort. Its adherents believe that markets are created and organized by governments — and that, therefore, governments have a right to shape markets to achieve more societally harmonious ends.
Under Biden, the Federal Trade Commission and the Justice Department have investigated tech companies and blocked high-profile corporate mergers, a trend that could continue under Trump. There is an emerging bipartisan interest in industrial policy, even if Democrats and Republicans can’t always agree on how it should be used. Biden is the most pro-labor president in a generation, and even a few Republicans now sympathize with unions. (Perhaps most importantly, last month the United Auto Workers successfully organized a Volkswagen factory in the right-to-work South.) Lawmakers and officials talk about the economy not as a self-balancing marvel, but as a set of interlaced supply chains and industrial processes, which can sometimes be managed at the source. The government can distribute vaccines, subsidize solar panels, and contract for the production of heat pumps.
But at its worst, this new ideology seeks to seed the economy with protectionist institutions in the name of political expediency. Unconstrained, such a tendency could, for instance, degrade the American car industry, filling the roads with bloated and expensive gas guzzlers. It could make housing and healthcare even more expensive for Americans while justifying new patronage networks, autarky, and the politicized persecution of companies or industries.
Whether good or bad, though, something is coming. “I believe we’re in the seventh inning stretch of consolidating a successor to neoliberalism,” Jennifer Harris, a former White House official who now runs the Hewlett Foundation’s Economy and Society program, said at the conference’s opening. Innings one through three were just about “jumping up and down and saying the word neoliberalism a lot,” she added, but now a more complete ideology is forming. Call it a liberalism that builds, productivism, or something else: Policymakers are approaching the economy in a new way.
And, well, cheers for that — not three, though. Maybe two. Here at Heatmap, we try to cover that new way of thinking about economics and society in part because climate change is a big force driving that change in the first place. The challenge of decarbonization is leading policymakers to think about the real economy in new ways. You can see this in Biden’s approach to remaking the American economy: He has rejected the old climate orthodoxy that governments should price carbon and let the market do the rest in favor of a more experimental, sector-by-sector scheme of tax credits, grant programs, and public investments.
But I can only go so far in saluting this new paradigm, because the other factor driving the change is the deteriorating geopolitical environment. If the United States government is taking the reins of its economy, that is because it fears what the Chinese government might do in the near future. This anxiety, too, you can see across economic policy. Under Biden, the government’s most forceful bipartisan intervention in the economy — the CHIPS Act — stemmed from anxieties over a Chinese invasion of Taiwan. Even the Bipartisan Infrastructure Law has been justified by citing the Chinese threat. Senator Joe Manchin’s decisive support of the Inflation Reduction Act, too, was rooted in the fear — now partly realized — that China would dominate the clean-energy future.
That must lend an air of melancholy to our post-neoliberal moment: If economic policy is getting better, it’s because the world is getting worse.
One more thought to complicate the Podesta-Liu talks: The two forces driving this phenomenon — the urgency of decarbonization and the rise of a menacing Sino-American relationship — coexist with great difficulty in U.S. policy. But in China, they fit more easily.
Over the past few months, the American and European press have come to terms with just how exceptional China’s electric-vehicle and battery industries have become. This advantage is due in part to China’s large consumer market and its pre-existing proficiency at making electronics of all kinds. (China’s top EV battery maker, CATL, was spun off of a Hong Kong-based company ATL, which manufactured iPhone batteries.)
But policy has played a decisive role, too. China has subsidized its EV industry far more generously than the U.S. or Europe, and its officials have cracked down on internal-combustion vehicles to a degree not seen in the West. Why have China’s leaders leaned so much into EVs? And why has China become so skilled at manufacturing solar panels, wind turbines, grid-scale batteries, and other essential decarbonization tech?
The answer lies, in part, in its national security prerogatives. China’s economy depends on oil, of which it has almost no domestic reserves to speak of. It imports more than 10 million barrels of oil a day, and in a hypothetical Sino-American conflict, the U.S. would move to cut off China’s access. So it behooves China to invest in technologies that reduce its dependence on oil and fossil fuels.
Now, is energy security the only reason that China has embraced the energy transition? Of course not. Its political and corporate leaders know that decarbonization presents a massive global market opportunity. They know, too, that climate action is the humanitarianism of the 21st century: It is one of the few things that a country can do that seems to redound to every other country’s benefit.
But note that decarbonization plays virtually the opposite role in the U.S. At least for now, we have vast fossil fuel reserves, while we have to rely on imported minerals and materials to make EVs, many of them from China. Decarbonizing, in other words, does little for our energy security in the short-term — at least until sufficient mining and refining capacity opens in North America.
This is just some of what Podesta must weigh as he sits down with Liu. And it’s a good reminder: During the free trade era, climate was a side issue that could be shunted to its own UN session. Now, in more ways than one, it’s life and death.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
The foreign entities of concern rules in the One Big Beautiful Bill would place gigantic new burdens on developers.
Trump campaigned on cutting red tape for energy development. At the start of his second term, he signed an executive order titled, “Unleashing Prosperity Through Deregulation,” promising to kill 10 regulations for each new one he enacted.
The order deems federal regulations an “ever-expanding morass” that “imposes massive costs on the lives of millions of Americans, creates a substantial restraint on our economic growth and ability to build and innovate, and hampers our global competitiveness.” It goes on to say that these regulations “are often difficult for the average person or business to understand,” that they are so complicated that they ultimately increase the cost of compliance, as well as the risks of non-compliance.
Reading this now, the passage echoes the comments I’ve heard from industry groups and tax law experts describing the incredibly complex foreign entities of concern rules that Congress — with the full-throated backing of the Trump administration — is about to impose on clean energy projects and manufacturers. Under the One Big Beautiful Bill Act, wind and solar, as well as utility-scale energy storage, geothermal, nuclear, and all kinds of manufacturing projects will have to abide by restrictions on their Chinese material inputs and contractual or financial ties with Chinese entities in order to qualify for tax credits.
“Foreign entity of concern” is a U.S. government term referring to entities that are “owned by, controlled by, or subject to the jurisdiction or direction of” any of four countries — Russia, Iran, North Korea, and most importantly for clean energy technology, China.
Trump’s tax bill requires companies to meet increasingly strict limits on the amount of material from China they use in their projects and products. A battery factory starting production next year, for example, would have to ensure that 60% of the value of the materials that make up its products have no connection to China. By 2030, the threshold would rise to 85%. The bill lays out similar benchmarks and timelines for clean electricity projects, as well as other kinds of manufacturing.
But how companies should calculate these percentages is not self-evident. The bill also forbids companies from collecting the tax credits if they have business relationships with “specified foreign entities” or “foreign-influenced entities,” terms with complicated definitions that will likely require guidance from the Treasury for companies to be sure they pass the test.
Regulatory uncertainty could stifle development until further guidance is released, but how long that takes will depend on if and when the Trump administration prioritizes getting it done. The One Big Beautiful Bill Act contains a lot of other new tax-related provisions that were central to the Trump campaign, including a tax exemption for tips, which are likely much higher on the department’s to-do list.
Tax credit implementation was a top priority for the Biden administration, and even with much higher staffing levels than the department currently has, it took the Treasury 18 months to publish initial guidance on foreign entities of concern rules for the Inflation Reduction Act’s electric vehicle tax credit. “These things are so unbelievably complicated,” Rachel McCleery, a former senior advisor at the Treasury under Biden, told me.
McCleery questioned whether larger, publicly-owned companies would be able to proceed with major investments in things like battery manufacturing plants until that guidance is out. She gave the example of a company planning to pump out 100,000 batteries per year and claim the per-kilowatt-hour advanced manufacturing tax credit. “That’s going to look like a pretty big number in claims, so you have to be able to confidently and assuredly tell your shareholder, Yep, we’re good, we qualify, and that requires a certification” by a tax counsel, she said. To McCleery, there’s an open question as to whether any tax counsel “would even provide a tax opinion for publicly-traded companies to claim credits of this size without guidance.”
John Cornwell, the director of policy at the Good Energy Collective, which conducts research and advocacy for nuclear power, echoed McCleery’s concerns. “Without very clear guidelines from the Treasury and IRS, until those guidelines are in place, that is going to restrict financing and investment,” Cornwell told me.
Understanding what the law requires will be the first challenge. But following it will involve tracking down supply chain data that may not exist, finding alternative suppliers that may not be able to fill the demand, and establishing extensive documentation of the origins of components sourced through webs of suppliers, sub-suppliers, and materials processors.
The Good Energy Institute put out an issue brief this week describing the myriad hurdles nuclear developers will face in trying to adhere to the tax credit rules. Nuclear plants contain thousands of components, and documenting the origin of everything from “steam generators to smaller items like specialized fasteners, gaskets, and electronic components will introduce substantial and costly administrative burdens,” it says. Additionally the critical minerals used in nuclear projects “often pass through multiple processing stages across different countries before final assembly,” and there are no established industry standards for supply chain documentation.
Beyond the documentation headache, even just finding the materials could be an issue. China dominates the market for specialized nuclear-grade materials manufacturing and precision component fabrication, the report says, and alternative suppliers are likely to charge premiums. Establishing new supply chains will take years, but Trump’s bill will begin enforcing the sourcing rules in 2026. The rules will prove even more difficult for companies trying to build first-of-a-kind advanced nuclear projects, as those rely on more highly specialized supply chains dominated by China.
These challenges may be surmountable, but that will depend, again, on what the Treasury decides, and when. The Department’s guidance could limit the types of components companies have to account for and simplify the documentation process, or it could not. But while companies wait for certainty, they may also be racking up interest. “The longer there are delays, that can have a substantial risk of project success,” Cornwell said.
And companies don’t have forever. Each of the credits comes with a phase-out schedule. Wind manufacturers can only claim the credits until 2028. Other manufacturers have until 2030. Credits for clean power projects will start to phase down in 2034. “Given the fact that a lot of these credits start lapsing in the next few years, there’s a very good chance that, because guidance has not yet come out, you’re actually looking at a much smaller time frame than than what is listed in the bill,” Skip Estes, the government affairs director for Securing America’s Energy Future, or SAFE, told me.
Another issue SAFE has raised is that the way these rules are set up, the foreign sourcing requirements will get more expensive and difficult to comply with as the value of the tax credits goes down. “Our concern is that that’s going to encourage companies to forego the credit altogether and just continue buying from the lowest common denominator, which is typically a Chinese state-owned or -influenced monopoly,” Estes said.
McCleery had another prediction — the regulations will be so burdensome that companies will simply set up shop elsewhere. “I think every industry will certainly be rethinking their future U.S. investments, right? They’ll go overseas, they’ll go to Canada, which dumped a ton of carrots and sticks into industry after we passed the IRA,” she said.
“The irony is that Republicans have historically been the party of deregulation, creating business friendly environments. This is completely opposite, right?”
On the budget debate, MethaneSAT’s untimely demise, and Nvidia
Current conditions: The northwestern U.S. faces “above average significant wildfire potential” for July • A month’s worth of rain fell over just 12 hours in China’s Hubei province, forcing evacuations • The top floor of the Eiffel Tower is closed today due to extreme heat.
The Senate finally passed its version of Trump’s One Big Beautiful Bill Act Tuesday morning, sending the tax package back to the House in hopes of delivering it to Trump by the July 4 holiday. The excise tax on renewables that had been stuffed into the bill over the weekend was removed after Senator Lisa Murkowski of Alaska struck a deal with the Senate leadership designed to secure her vote. In her piece examining exactly what’s in the bill, Heatmap’s Emily Pontecorvo explains that even without the excise tax, the bill would “gum up the works for clean energy projects across the spectrum due to new phase-out schedules for tax credits and fast-approaching deadlines to meet complex foreign sourcing rules.” Debate on the legislation begins on the House floor today. House Speaker Mike Johnson has said he doesn’t like the legislation, and a handful of other Republicans have already signaled they won’t vote for it.
The Environmental Protection Agency this week sent the White House a proposal that is expected to severely weaken the federal government’s ability to rein in planet-warming pollution. Details of the proposal, titled “Greenhouse Gas Endangerment Finding and Motor Vehicle Reconsideration,” aren’t clear yet, but EPA Administrator Lee Zeldin has reportedly been urging the Trump administration to repeal the 2009 “endangerment finding,” which explicitly identified greenhouse gases as a public health threat and gave the EPA the authority to regulate them. Striking down that finding would “free EPA from the legal obligation to regulate climate pollution from most sources, including power plants, cars and trucks, and virtually any other source,” wrote Alex Guillén at Politico. The title of the proposal suggests it aims to roll back EPA tailpipe emissions standards, as well.
Get Heatmap AM directly in your inbox every morning:
So long, MethaneSAT, we hardly knew ye. The Environmental Defense Fund said Tuesday that it had lost contact with its $88 million methane-detecting satellite, and that the spacecraft was “likely not recoverable.” The team is still trying to figure out exactly what happened. MethaneSAT launched into orbit last March and was collecting data about methane pollution from global fossil fuel infrastructure. “Thanks to MethaneSAT, we have gained critical insight about the distribution and volume of methane being released from oil and gas production areas,” EDF said. “We have also developed an unprecedented capability to interpret the measurements from space and translate them into volumes of methane released. This capacity will be valuable to other missions.“ The good news is that MethaneSAT was far from the only methane-tracking satellite in orbit.
Nvidia is backing a D.C.-based startup called Emerald AI that “enables AI data centers to flexibly adjust their power consumption from the electricity grid on demand.” Its goal is to make the grid more reliable while still meeting the growing energy demands of AI computing. The startup emerged from stealth this week with a $24.5 million seed round led by Radical Ventures and including funding from Nvidia. Emerald AI’s platform “acts as a smart mediator between the grid and a data center,” Nvidia explains. A field test of the software during a grid stress event in Phoenix, Arizona, demonstrated a 25% reduction in the energy consumption of AI workloads over three hours. “Renewable energy, which is intermittent and variable, is easier to add to a grid if that grid has lots of shock absorbers that can shift with changes in power supply,” said Ayse Coskun, Emerald AI’s chief scientist and a professor at Boston University. “Data centers can become some of those shock absorbers.”
In case you missed it: California Governor Gavin Newsom on Monday rolled back the state’s landmark Environmental Quality Act. The law, which had been in place since 1970, required environmental reviews for construction projects and had become a target for those looking to alleviate the state’s housing crisis. The change “means most urban developers will no longer have to study, predict, and mitigate the ways that new housing might affect local traffic, air pollution, flora and fauna, noise levels, groundwater quality, and objects of historic or archeological significance,” explainedCal Matters. On the other hand, it could also mean that much-needed housing projects get approved more quickly.
Tesla is expected to report its Q2 deliveries today, and analysts are projecting a year-over-year drop somewhere from 11% to 13%.
Jesse teaches Rob the basics of energy, power, and what it all has to do with the grid.
What is the difference between energy and power? How does the power grid work? And what’s the difference between a megawatt and a megawatt-hour?
On this week’s episode, we answer those questions and many, many more. This is the start of a new series: Shift Key Summer School. It’s a series of introductory “lecture conversations” meant to cover the basics of energy and the power grid for listeners of every experience level and background. In less than an hour, we try to get you up to speed on how to think about energy, power, horsepower, volts, amps, and what uses (approximately) 1 watt-hour, 1 kilowatt-hour, 1 megawatt-hour, and 1 gigawatt-hour.
Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Jesse Jenkins: Let’s start with the joule. The joule is the SI unit for both work and energy. And the basic definition of energy is the ability to do work — not work in a job, but like work in the physics sense, meaning we are moving or displacing an object around. So a joule is defined as 1 newton-meter, among other things. It has an electrical equivalent, too. A newton is a unit of force, and force is accelerating a mass, from basic physics, over some distance in this case. So 1 meter of distance.
So we can break that down further, right? And we can describe the newton as 1 kilogram accelerated at 1 meter per second, squared. And then the work part is over a distance of one meter. So that kind of gives us a sense of something you feel. A kilogram, right, that’s 2.2 pounds. I don’t know, it’s like … I’m trying to think of something in my life that weighs a kilogram. Rob, can you think of something? A couple pounds of food, I guess. A liter of water weighs a kilogram by definition, as well. So if you’ve got like a liter bottle of soda, there’s your kilogram.
Then I want to move it over a meter. So I have a distance I’m displacing it. And then the question is, how fast do I want to do that? How quickly do I want to accelerate that movement? And that’s the acceleration part. And so from there, you kind of get a physical sense of this. If something requires more energy, if I’m moving more mass around, or if I’m moving that mass over a longer distance — 1 meter versus 100 meters versus a kilometer, right? — or if I want to accelerate that mass faster over that distance, so zero to 60 in three seconds versus zero to 60 in 10 seconds in your car, that’s going to take more energy.
Robinson Meyer: I am looking up what weighs … Oh, here we go: A 13-inch MacBook Air weighs about, a little more than a kilogram.
Jenkins: So your laptop. If you want to throw your laptop over a meter, accelerating at a pace of 1 meter per second, squared …
Meyer: That’s about a joule.
Jenkins: … that’s about a joule.
Mentioned:
This episode of Shift Key is sponsored by …
The Yale Center for Business and the Environment’s online clean energy programs equip you with tangible skills and powerful networks—and you can continue working while learning. In just five hours a week, propel your career and make a difference.
Music for Shift Key is by Adam Kromelow.