China’s hot supply chain summer is a huge problem

The heat is on China’s supply chain

Searing temperatures have turned China into a furnace this summer. That’s resulted in power cuts to factories, including ones that make batteries, electric vehicles, polysilicon and other materials needed for decarbonizing. It reflects the bumpy road ahead for climate tech, one where the world’s race to decarbonize will be affected by the climate crisis impacts already baked in.

China’s summer of heat has been a nightmare. Extreme heat has gripped much of the nation all summer, but it’s been on another level the past few weeks.

• Daytime highs have reached well into the triple digits (upper 30s and low 40s, for Celsius readers) across a large swath of the country, crushing all-time heat records.
• Among the more eye-popping numbers are the overnight lows, which include Chongqing, a city of 32 million, cooling to just 95 degrees Fahrenheit. Again, that was the low temperature.
• Climate change is, of course, making extreme heat like this more likely and intense.

The tech to save us from climate change is suffering as a result. The heat coupled with drought has curtailed hydropower, leading to factory shutdowns. Oh, the irony.

• In Sichuan province, Toyota and Contemporary Amperex Technology, the world’s largest battery maker, have suspended operations in response to provincial demands to save energy.
• The province produces major amounts of lithium and polysilicon needed for batteries and solar panels, respectively, and numerous other manufacturers have also shut down shop during the blistering heat.
• SAIC Motor, which is China's largest automaker, and Tesla have also seen their operations in Shanghai — which is located far from Sichuan — impacted because suppliers in the Western province have been unable to ship needed parts.

Supply chains are increasingly feeling the heat from climate change. There’s a growing body of evidence — both in academic literature and the real world — that supply chains are increasingly vulnerable.

• The heat wave in China is a prime example, one that Christoph Schiller, a finance professor at Arizona State University, said shows the “big knock-on effects” the climate crisis can have on how goods are made and moved around the world.
• A 2021 paper he co-authored found that customers are up to 11% more likely to end their relationship with a supplier if a climate shock exceeds their expectations. And things could get much worse.
• A 2020 McKinsey analysis found that the odds of a typhoon near South Korea, Japan or Taiwan plunging the semiconductor industry into chaos could quadruple by 2040. Meanwhile, the chances of heavy downpours affecting rare earth mining could increase threefold by 2030, resulting in a 20% drop in production.

While many tech companies have focused on getting their suppliers to decarbonize, the risks that are already here — to say nothing of the future ones in the pipeline — show the need for companies to also work with suppliers to adapt to climate shocks.

“Adaptation can take a whole lot of different ways,” Schiller said. “[There are] physical adaptations, as in, we put a higher wall so the floods aren't going to get to a factory, or it could mean changing patterns of work: Do you work later, do you work earlier?”

Find out more about what companies can do and what the risks are here.

— Brian Kahn

The rules of carbon removal

Big Tech is going all in on carbon dioxide removal, and startups have proliferated in the space. More than $1.4 billion poured into the climate tech space this past quarter. But there are potential ethical issues that should be addressed before the industry gold rush goes too far.

CDR is a small industry — for now. All those startups suck a few thousands tons of carbon from the sky a year. But it’s possible they’ll have to scale up to remove billions of tons by the end of this century.

• The scale up means that without forward-looking governance now, the industry could exacerbate old problems. Or create new ones.
• “The really uncharted territory is what CDR means for environmental and social justice, and that’s where I see a lack of understanding,” said Lauren Gifford, a postdoctoral research associate at the University of Arizona, who has studied carbon governance for over a decade.
• From noise pollution tied to direct air capture facilities to the ecological impacts of land- and ocean-based carbon removal techniques, the industry has a lot to reckon with as CDR becomes more widely tested and deployed at scale.

Some groups are trying to create a carbon removal code of conduct. Getting ahead of potential pitfalls is as vital to the success of the industry as getting removal costs to $100 per ton or less.

• In May, researchers published a piece calling for a scientific code of conduct for ocean-based carbon removal. It includes provisions for public or stakeholder engagement, minimizing potential harms and rules about funding.
• The Carbon Business Council, a nonprofit coalition of about 40 carbon management startups, has created an “Oath to Restore the Earth.” Members must sign the document, which includes a promise that, among other things, they will be “cognizant of the implications that my work can have for the biosphere as a whole.”
• One carbon removal startup, Planetary, is taking it a step further and drafting up its own code of conduct, the first draft of which is expected to be available by the end of this quarter.

Creating a code of conduct is a fine line between rigor and greenwashing. Like corporate net zero pledges, these codes of conduct don’t have teeth; there’s nothing holding pledge-makers and oath-takers accountable to their promises. Still, putting out a public pledge can nudge companies toward responsible behavior, and there are ways to ensure codes of conduct are rigorous enough.

• “There's a lot of social pressure that comes to bear,” as well as reputational risk, Simon Nicholson, an associate professor of international relations at American University whose work focuses on global environmental governance, said.
• Andrew Bergman, a Ph.D. student in applied physics at Harvard studying CDR governance, said if companies are serious about giving their codes heft, they should write an allowance for community and worker seats on their boards.

“Like so many technocratic interventions,” he said, carbon removal has become an “end” in and of itself, as opposed to a means to an end. “You can’t have carbon removal projects override people’s well-being,” he added.

Read more about the ethics of CDR here.

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One big number: $100 million

That’s the amount of money Indiana is set to receive from the Bipartisan Infrastructure Law to build out a network of electric vehicle charging stations by 2025. That’s all well and good, but local officials and Indiana NAACP leaders are calling on the Biden administration to reject the state’s plan, arguing that communities of color have been left out of the planning process. It could even lead to entrenching racist transportation policies the Biden administration has vowed to rectify.

"The state of Indiana has created a plan that is not equitable for communities of color, Black and brown,” said Henry Davis Jr., a city council member in South Bend, where Transportation Secretary Pete Buttigieg was mayor. “We want to be included in that plan. It is kind of hard to be included on a plan when you are not even at the table.”

An alliance that includes the Indiana NAACP, Black Lives Matter South Bend and local Black business leaders is worried because the plan makes fleeting mention of the state’s commitment to equitable distribution of charging stations but is light on details about how exactly the state plans to go about achieving those goals. The state, for its part, noted in its EV plan that it consulted with groups including the NAACP and the South Bend chapter of Black Lives Matter, but those meetings were not open to the public.

The federal government now has until Sept. 30 to consider the state’s plan.

Read more about the fight to ensure that the plan is fair here.

— Kwasi Gyamfi Asiedu

Hot links

The Inflation Reduction Act could pay long-term dividends. A new OMB analysis shows the law could save up to $1.9 trillion by midcentury by reducing the risks of climate disasters and cutting air pollution.

We could soon be plumbing the ocean’s depths for EV materials. A United Nations body is working up final rules to regulate deep-sea mining.

Au revoir l’auto, bonjour les e-bikes. France is upping its subsidy for those trading in their gas-powered cars for a bike or e-bike, offering up to 4,000 euros.

Rubber, meet road. Tires and wheel size play a surprisingly big role in an EV’s range.

California finally gives EV drivers a break. The state has at long last changed its policy requiring EV owners to install a second meter to gauge their car’s power use.

The IRA will boost nuclear power. While the law has made headlines for its renewables provisions, it also includes benefits for nuclear power that include a production tax credit to keep existing plants operating.

Turns out mining uranium near the Grand Canyon is unpopular. Shocking findings, really.

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