LAUSANNE — While plenty of attention has been paid to Donald Trump's "America First" pledge — as troublesome or laughable as it may seem — relatively little is being said about another protectionist economic strategy, one that could have a far greater impact on Europe and the West.
Unlike the U.S. president, with his well-known habit of airing every thought and whim on Twitter, authorities in Beijing have been discreet about their "Made in China 2025" initiative. Don't be fooled though. It may not have a lot of fanfare, but this is no half-measure.
Just as China has already done with solar and wind technology, its "Made in China 2025" strategy — also known as "China Manufacturing 2025" — is a no-holds-barred plan to borrow Western know-how and then bank on it. Massively.
That means buying patents or entire companies specialized in high-tech areas such as artificial intelligence, semi-conductors, biopharmaceuticals, electric cars and energy production. It also involves applying China's particular arsenal of protectionism and market manipulation via preferential business rules and financing.
President Xi Jinping describes science and technology as "the principal economic battles' currently in play, and it's clear that — along with military muscle — this is the foundation on which China looks to build its global hegemony.
Companies such as battery manufacturers are obliged to share their know-how in exchange for the privilege of selling their products in China. And yet these companies can't resist. China has generated a huge demand for electric cars — a huge market for battery makers.
China has put 1 million electric vehicles in circulation, with another 4 million expected in the next three years. Since 2012, this sector has been encouraged with massive subsidies and changes in the law that favor local electric car manufacturers. In the space of just a few years, Shenzhen-based company Build Your Dream (BYD) has seen its market capitalization explode. BYD is now worth nearly $19 billion and it has set its eyes on Tesla, the market leader, which is worth an estimated $50 billion.
Over the past decade, the battery industry has been dominated by Japan and South Korea. But by doubling its production between now and 2020, China is looking to take the lead. The current focus is on the lithium-ion systems so cherished by automakers, with expected earnings, over the next eights years, of $40 billion. As was the case with solar energy, the Chinese strategy is to stifle the competition by offering unbeatable rates. In just a few years, solar energy prices dropped by 70%. Battery prices are already following suit.
The world's biggest supplier right now is Panasonic. On its heels, however, is the Chinese company CATL, which currently produces about 7.6 Gigawatt hours (GWh) worth of batteries per year. By 2020, it could pass Panasonic's supply and create about 20,000 jobs.
China will soon be able to produce enough batteries to power 5 million cars for 100 kilometers, according to Bloomberg. With protectionist mechanisms custom-made for the likes of companies like BYD and CATL, Beijing has made sure that local companies benefit at the expense of foreign companies like Samsung and Panasonic.
To protect their leadership position, the Chinese must find ways to improve the performance of their vehicles while continuing to lower prices. Beijing has been careful to secure access to the raw materials it needs, particularly rare earth metals such as cobalt and lithium. It has already made the rounds of the world's mines, starting with Argentina and Chile, which have major lithium deposits, and the Democratic Republic of the Congo, a key source of cobalt.
Aware of the problems associated with oil, China is planning ahead and expects to become the "Saudi Arabia" of electric mobility. By establishing itself at the head of the electric car and new-generation battery markets, Beijing has a tool in its hands that is more powerful than any conventional weapon.
President Trump, in the meantime, has his heart set on drilling ... for more oil.
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Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.
It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.
More than a year later today, experts believe that air traffic won't return to normal levels until 2024.
But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:
Cleaner aviation fuel
The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.
While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.
Fees imposed on the airline industry should be funneled into a climate fund.
In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.
Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.
High-flying ambitions for the sector
Hydrogen and electrification
Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.
One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.
Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.
New aircraft designs
Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.
International first class will be very nearly a thing of the past.
The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.
Aerial view of Rome's Fiumicino airportcommons.wikimedia.org
Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.
The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.
Data privacy issues
However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.
Auckland Airport, New Zealand
The billion-dollar question: Will we fly less?
At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.
Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.
40% of Swedes intend to travel less
According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.
But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.
At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.
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