Just hours ago, Joe Biden and Xi Jinping held their first bilateral videoconference together. The three-hour virtual meeting was, as expected, cordial despite sharply diverging views on many issues. (An effusive Biden even managed to elicit something between a Cheshire Cat grin and an outright smile from the famously stone-faced Xi.) Without much detail, both sides agreed to continue working together on climate following their COP26 joint pledge, and to return to normalcy on trade. On Taiwan — by far the prickliest of many prickly topics including Hong Kong and Xinjiang — Xi warned America to not "play with fire" while Biden responded that both countries are responsible for avoiding open conflict over the self-governing island. Nevertheless, the two leaders showed, at least in the brief part of the call that was open to the public, that they can deal with each other face to face in a respectful way, which puts at least some "guardrails" (the precise word Biden mentioned) on a bilateral relationship that is otherwise spiraling in slow motion toward confrontation.
Ian Bremmer's Quick Take:
Hi, everybody. Ian Bremmer here. Just about to head to Singapore, but before I do, I thought I would give you guys a quick recap on the COP26 summit, couple weeks long in Glasgow.
And I understand that it's fashionable and important to talk about just how immediate and immense the climate crisis is, and that we didn't do enough, and we have more work in front of us, and all that is true, but actually I come away from the last two weeks fairly optimistic in the sense that the acceleration of effort that we're seeing from all corners, I mean there's even more from the central governments than you would've expected, and they were the underperformers, certainly more from the private sector, more from the banks, more from the corporates. And as a consequence, right now, I mean the big headline is that we are still on track for 2.4 degrees centigrade of warming if all of the countries make good on their existing pledges, which is itself unlikely. So we're not really on track for 2.4, it's higher. And that's double where we are right now, 1.2.
Having said that, there are a number of positive things that I think are also getting baked in, not just how much carbon is in the atmosphere. One is that they have decided, the participants of COP26, that they're going to come with new goals next year, as opposed to every five years, which had been the process. So as we're seeing more effort, as we're seeing more progress, we're also seeing stepped up urgency. And the very fact that you will now have a one-year, an annual summit that becomes an action-forcing event, even if it's marked by half measures, will end up getting you a lot more progress. I think that's significant and everyone agreed to that.
Secondly, the fact that fossil fuels were specifically called out in this agreement. And you'd think, well, that's crazy. Of course, we know that fossil fuels are one of the biggest contributors to carbon emissions, and so you need to get past fossil fuels if you're going to reduce climate change. But the fact is that governments, because all governments are able to veto the draft, have been unwilling to make that mention. We now actually see that this is a global draft that is really about making the transition away from fossil fuels, and everyone is on board with that now. A lot of countries are much more squirrely. A lot of countries will take a lot more time. Some because they're really committed in terms of the wealth that they make from the production of oil and gas; think about Saudi Arabia, think about Russia. Some because they're really poor and they desperately need to be able to continue to use relatively cheap energy to bring their people up to middle class, specifically India, but also Indonesia, to a degree China and others.
Having said all of that, I think it is pretty clear now that we are on track to have a majority of the world's energy consumption well before 2050 to be coming from renewable energy. And I include nuclear in that because it doesn't lead to carbon emissions, but in other words, post-fossil fuels, not gas, not oil, not coal. The International Energy Agency believes that that date is potentially 2035, which is wrong because it again requires that everyone actually adheres fully to stated goals. And this is a lot of countries that don't necessarily have a way to get from here to there legally enshrined, especially in the nearest-term. But the big story is acceleration of effort, and related to that, reduction of cost, improvement of technology; the fact that at scale, solar and wind, and particularly solar, are increasingly much cheaper than coal.
And so, once you have the financing that allows you to put new infrastructure in place, and again, it's using old infrastructure that is so much of the reason why there's going to be more of a lag around fossil fuels, you will see all countries, not just wealthy countries, moving much faster. So I mean, the four years of the fact that the United States and the Trump administration left Paris Climate Accord, renewable energies were still getting cheaper. They were still getting invested in inside the United States. State governments, mayors, city governments, lots of private sector actors, NGOs, they were all continuing to press and do more to respond to climate change, even as the federal government basically punted for four years.
The Biden administration is more disappointing than you would expect. John Kerry doing a really strong job and not alienating or antagonizing many people inside Biden administration, which frankly, a lot of people were surprised by, myself included. Nonetheless, I mean, you see that with the $1.2 trillion in infrastructure and what is likely coming down the pike in the coming weeks on social spending, a lot of the committed green transition spending is going to be taken out. So the Federal Government is doing less, but even so, you are getting significant effort from the United States, even in terms of moonshots. Part of this is there's so much money, interest rates are so low, investors are not happy with the idea of half a point, a point of returns every year. They're chasing returns and they're much more willing to invest in untested, but potentially moonshot technology.
So the fact that Peter Thiel, a company he's been involved in just raised $500 million for fusion energy technologies, I mean, could go absolutely nowhere, but it's by far the largest investment we've seen in that tech. Some of these things move, some of them are more incremental changes in improving things like battery technology and energy transmission, with greater efficiency and lower waste, the storage. All of these things very, very important to move the global economy away from fossil fuels.
Now, long-term, this is going to be very, very challenging for countries that are reliant on the production of fossil fuels. And in that regard, I think the UAE, which is looking to pump more now, but recognizing they need to diversify far more in the short- to medium-term, seems like a smarter strategy to me than the Saudis who I think believe that higher prices for longer are going to persist, and they will can continue to be the inexpensive producer of last resort. They will be, but I'm not sure that goes for as long as they are presently betting, just given how fast we're seeing government action is actually moving.
Now, of course, all of this is happening at a time where the planet is routinely breaking records and will continue to break records every year for extreme weather trends and for high levels of temperature. And of course, that means that larger parts of the world will be unlivable for longer periods of time. There will be more forced migrations. There will be more difficulty in providing agriculture for an additional billion people on the planet over the next 20, 25 years, most of whom will be in Sub-Saharan Africa, which is facing some of the greatest climate stresses. All of that is true. And particularly true is the sharp reduction in biodiversity that comes along with all of this that doesn't affect humans immediately and directly, but has all sorts of knock-on effects that we don't yet quite understand on the planet. And if you have a massive, great extinction, even if you don't know the science, you can generally suspect that there will be problems for the planet going forward, but this no longer feels like an existential threat to me.
In other words, I see out of COP26 that we have passed the tipping point of global seriousness on climate action. And so even if COP26 was not the point of no return; it was not, we either take seriously or we fail; it was not, we have to get to 1.5 degrees or its Armageddon; that was never true, but what I'm seeing is significant progress. I'm seeing a rationing up of the resources of the intense focus, maybe not of the coordination, but certainly of the urgency on a country-by-country, sector-by-sector, company-by-company basis.
And in that regard, we should come out of COP26 fully aware of just how much worse global climate will get over the next 25 years. By 2050, so much of the increase in climate change we're going to see is already baked in from carbon that we have already emitted. We are facing this cliff where 1.5 degrees is increasingly completely unreachable, and I'm not expecting that. But I am, nonetheless, more optimistic in human potential and capacity to address and respond to this challenge, the most existential, the most significant, the most all-encompassing challenge of our lifetimes that we've faced thus far on the basis of everything we've seen over the last two weeks.
So how's that to kick off your week? Maybe a little different than the headlines you're seeing other places, but I understand if it bleeds, it doesn't necessarily lead. But at least for me, I feel like it drives us a little less crazy that way. So, better to talk about what's actually going on.
Hope everyone is well. I'm on the way to Singapore and I'll see you all from there. Be good.
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Biden-Xi on Zoom. Joe Biden and Xi Jinping will meet face-to-face (virtually) on Monday for the first time since Biden became US president last January. The two have a lot to discuss: trade wars, the 2022 Beijing Olympics (which Biden won't attend, but probably won't boycott), and how to deliver on the joint US-China pledge on climate made at COP26. But the elephant in the Zoom room is Taiwan, an ultra-sensitive issue for China. Xi is seething at the Biden administration's recent public support for the self-governing island, which the Chinese regard as part of their own territory. The Americans insist they are simply doing what they've always done since 1979 — pledging to help Taiwan defend itself. Can Biden and Xi navigate these issues in a calm, cool way? It may help that the two leaders have known each other since over a decade ago, when they were both VPs. With US-China relations getting chillier by the day, the stakes are high.
What We’re Watching: Eastern Europe border crisis, US-China climate pledge, Bolsonaro’s a centrist now
Migrants suffer as Eastern European deadlock deepens. The stalemate at the Polish-Belarusian border continues, with reports that several migrants languishing in freezing temperatures in the forest have recently frozen to death while waiting for asylum. The EU says Minsk is using the migrants as a political weapon against Brussels international heavyweights have intervened in recent days to try t chart a path forward. German Chancellor Angela Merkel – who's just days away from her retirement — has been appealing to Russian President Vladimir Putin to use his sway with Minsk to resolve the dispute. Putin, who's no doubt enjoying his clout and leverage, says that Brussels needs to negotiate directly with Belarusian President Alexander Lukashenko – but that has been a non-starter so far because the EU has cut off communication with the strongman since his rigged re-election last year. Feeling emboldened by the standoff, Lukashenko doubled down Thursday, saying that if the bloc slaps fresh sanctions on him, he would cut off the flow of gas that flows from Russia to Western Europe via Belarusian territory. That's a scary prospect indeed for a Europe which is already dealing with painful gas shortages as winter approaches.
US and China announce a climate "deal." It's hard to get the US and China to agree on anything these days, but climate is one area where cooperation has always seemed at least possible. In that spirit, both sides announced on Wednesday a rare joint pledge to work together on slashing carbon emissions. The statement itself was light on details on how they'll actually do just that, but it's still a big deal. Why? For one thing, the two countries are the world's top polluters, accounting for just under half of all global emissions. For another, as the two largest economies, the US and China can muster the financial muscle needed to de-carbonize themselves and help the rest of the world do it too. Even more importantly, only the US and China together have the political power to get other countries to get on board with their plans. But given that there's a host of other prickly issues in the broader US-China competition, the biggest threat to future US-China cooperation on climate is how far apart they are on pretty much everything else.
Bolsonaro the centrist? After two years without belonging to any political party, Brazil's anti-establishment, far-right President Jair Bolsonaro has decided to join the Liberal Party, one of the small parties that form the establishment Centrão ("Big Center") coalition he's been courting for over a year. Bolsonaro — who quit a right-wing party back in 2019 and has since then failed to set up his own — hopes that the centrist platform will help him appeal to more moderate voters in next year's presidential election. The president also needs political cover from multiple open probes against him in the courts and Congress, including a criminal investigation in the Senate for mishandling COVID. But mostly he can't actually run for re-election without being backed by a party, big or small. With his approval rating in the tank, Bolsonaro faces increasingly long re-election odds against his likely competitor and biggest nemesis, former president Lula da Silva.
The COP26 climate summit in Glasgow is almost done and dusted, with some ambitious commitments and breakthroughs from governments and corporations to more aggressively tackle the climate disaster. Yet, though there seems to be broad agreement on what needs to be done to stop the planet getting hotter — like getting to Net Zero emissions over the next few decades — big disagreements remain on how to pull it off.
As countries try to turn jobs green while also boosting exports to keep foreign cash flowing in, reliance on protectionist economic policies is becoming an increasing point of friction between governments. Here are two juicy examples where this dynamic is playing out.
The US rumbles with Mexico and Canada over cars. The Biden administration has united Mexico and Canada in rage over its proposal to roll out financial incentives for Americans to buy US-made electric vehicles, with additional tax credits for buying a car with a US-made battery or made at a unionized factory. Some American political nerds weren't surprised at all given Biden's longtime bonafides as a pro-union warrior.
Ottawa, however, was shocked and is now furious, calling it a protectionist move that'll encourage automakers to build electric vehicle factories in the US rather than Canada. That's a massive deal because the auto industry is one of Canada's largest manufacturing sectors, contributing more than $12.5 billion to its GDP in 2020. Mexico, for its part, is also riled up, saying that the US proposal undermines its plans to transition its equally crucial auto industry to electric models, which is central to Mexico's overall climate change mitigation strategy.
Mexico City and Ottawa have accused Washington of violating the USMCA — a NAFTA replacement that was painstaking to negotiate — which was supposed to guarantee a level playing field for the three countries. Canada and Mexico could now bring a case forward under the pact's dispute mechanisms.
The most exclusive club in Europe: carbon. The European Union, which has made some of the most ambitious climate pledges in the world to date, has proposed a carbon tax on specific imports entering the bloc, including steel, fertilizer, oil and cement. Essentially, Brussels wants to impose carbon tariffs so that foreign producers will be subject to the same financial burdens as European manufacturers when making similar products.
Indeed, by putting a price on carbon emissions — and forcing EU-reliant economies to pay up or lose big business — the European Commission has figured out a way to pay, at least in part, for its very expensive Green Deal.
What's more, some countries are up in arms that Brussels has been pushing for wealthy, like-minded countries to join its carbon pricing scheme in exchange for access to the EU's single market, excluding tariffs and quotas already in place for other goods. (Canada is now looking into its own scheme). Critics say that setting up a "trans-Atlantic climate club" – whereby all states would either impose a border carbon tax or an equivalent emission trading system – is discriminatory: Australia's coal-loving Prime Minister Scott Morrison, for example, said the push is "simply trade protectionism by another name." Meanwhile, Brazil, South Africa, China and India have also complained that a far-reaching carbon border tax would be a "trade barrier," unfairly penalizing developing nations who are still reliant on fossil fuels to grow their economies.
While the EU has pulled back a bit in recent months — giving countries five years to get their climate priorities in check — the US has not ruled out imposing tit-for-tat tariffs if Brussels slaps carbon levies on US goods. Meanwhile, countries like China, Russia and Turkey — which stand to lose a lot from an EU carbon tax — have accused Brussels of violating international trade principles.
What now? Some climate policy advocates are worried that using coercive tools like tariffs and tax credits could backfire, giving ammunition to the naysayers who believe that climate policy makes for bad economics.
In the end, will global efforts to protect the planet run aground on national efforts to protect certain industries?
Ian Bremmer shares his insights on global politics this week with a look at rising US inflation, the migrant crisis at the Poland-Belarus border, and the draft deal of the COP26 climate agreement.
US inflation hits its highest level in three decades. How will the Biden administration be impacted?
Well, it's not well. I mean, the economy is doing very well right now. We're getting all of these record levels in the markets. And companies have extraordinary profits, and growth is going gangbusters. So it's not stagflation. But I mean, the inflation levels on top of the fact that it's Christmas season coming up, and people are exhausted from dealing with COVID, is making people feel much worse about the economy otherwise would. I don't think we've ever seen this kind of a gap between economic reality and expectations and Biden's ability to do a lot on inflation is very limited at this point. I mean, he's pushing OPEC to produce more energy, which is a problem with the COP summit, but at the end of the day, I mean, this has a lot more to do with the massive explosion of post-COVID supply and demand growth, and all coming online at the same time. Plus labor shortages. It's not something that's easy for them to deal with. So I think it's going to be a challenge for them for months, but elections aren't for a year so the timing is not so horrible.
What's happening on the Poland-Belarus border?
Well, you've got all of these refugees that have come in from other countries around the Middle East for example, in Belarus that are being pushed by the Belarus military towards Poland. The Poland government doesn't want them. The Belarusians are happy to cause trouble. The Russians have been behind the scenes supportive and the Europeans with support from the United States will expand sanctions in relatively short order, including probably on the Belarus foreign minister, who has given these people asylum and maybe further sectoral sanctions, as well as against the folks that are leasing planes that are allowing these people to get into Belarus in the first place. This is yet another flash point between the Europeans and Minsk and more significantly Moscow because the Lukashenko government isn't going anywhere.
What's the draft deal of the COP26 climate agreement?
Well, I mean, as we've been expecting, it's a bit of a disappointment in the sense that the governments aren't aligned. The United States and China are not seeing climate in the same way. The developing world, the poorer countries are saying, unless you provide real money, we are not going to give you significant improvements in our net-zero commitments. And that money is very slow and it's not trusted. But you do have a lot of movement on climate. It's just not happening primarily through intergovernmental coordination. It's happening at the individual country level. It's happening at the NGO level, the individual action, mass support level and as a consequence, a whole bunch of corporates and bankers whose conversations I have with them are radically different on expectations of how fast they need to transition compared to three or five years ago. So I'm actually getting somewhat more optimistic, but the COP process, and if you look at that deal, is definitely one-third full at best glass.
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Like many other big corporations, Japanese brewer and distiller Suntory want to achieve net zero carbon emissions by 2050. But that's not enough for CEO Tak Niinami. "It's far away and lacks the sense of urgency," he says. Niinami predicts that especially after COP26 people will be wary of greenwashing, so it's essential for corporations to "to be transparent, showing society what we are doing and how much progress we are making" on climate.
Suntory CEO Tak Niinami spoke during the first of a two-part Sustainability Leaders Summit livestream conversation sponsored by Suntory. Watch here.