InvestMacro

By Skip York, Rice University 

As the Trump administration makes announcement after announcement about its efforts to promote the U.S. fossil fuel industry, the industry isn’t exactly jumping at new opportunities.

Some high-profile oil and gas industry leaders and organizations have objected to changes to long-standing government policy positions that give companies firm ground on which to make their plans.

And the financial picture around oil and gas drilling is moving against the Trump administration’s hopes. Though politicians may tout new opportunities to drill offshore or in Arctic Alaska, the commercial payoff is not clear and even unlikely.

Having worked in and studied the energy industry for decades, I’ve seen a number of discoveries that companies struggled to moved forward with because either the discovery was not large enough to be commercially profitable or the geology was too difficult to make development plausible. Market conditions are the prime drivers of U.S. energy investment – not moves by politicians seeking to seem supportive of the industry.

Market fundamentals trump policy announcements

The general decline in oil prices from 2022 through late 2025 has reduced the attractiveness of many drilling investments.

And opening the East and West coasts to drilling may sound significant, but these regions have unconfirmed reserves. That means a lot of subsurface work, such as seismic surveys, stratigraphic mapping and reservoir characterization – potentially taking years – would need to be done before any drilling would begin.

Offshore drilling also faces enormous opposition.

On the West Coast, California Gov. Gavin Newsom and California Attorney General Rob Bonta have made forceful statements against any new California offshore oil drilling. They have said any effort is economically unnecessary, environmentally reckless and “dead on arrival” politically in the state.

California local governments, environmental groups, business alliances and coastal communities also oppose drilling and have vowed to use legal and political tools to block them.

There is opposition on the East Coast, too. More than 250 East Coast local governments have passed resolutions against drilling.

Governors on both sides of the aisle, including Democrat Josh Stein of North Carolina and Republicans Brian Kemp of Georgia and Henry McMaster of South Carolina, have spoken out against drilling off their coasts.

Arctic drilling is even harder

Drilling for oil and gas in the Arctic National Wildlife Refuge and the Beaufort Sea off Prudhoe Bay in Alaska would be a massive undertaking. These projects require years of development and are subject to future reversals in federal policy – just as Trump has lifted long-standing drilling bans in those areas, at least for now.

In addition, Alaska is one of the most expensive and technically challenging places to drill. Specialized equipment, infrastructure for frozen landscapes, and risk mitigation for extreme weather drive costs far above other regions. These projects also face logistical challenges, such as pipelines running hundreds of miles through remote, icy terrain.

Natural gas from Alaska would likely be sold to Asian buyers, who increasingly have alternative sources of supply from Australia, Canada, Qatar and even the U.S. Gulf Coast. As production rises in those places, the entrance of Alaskan natural gas into the market raises the risk for global oversupply, which could depress prices and reduce profitability.

Despite political support from the Trump administration, the oil and gas companies would need financing to pay for the drilling. And those loans won’t come if the oil companies don’t have agreements with buyers for the petroleum products that are produced. Major oil companies have withdrawn from Alaska and signaled skepticism about attractive long-term returns.

Trump has helped some

In the first 10 months of the second Trump administration, the president has signed at least 13 executive orders pertaining to the energy industry. Most of them focus on streamlining U.S. energy regulation and removing barriers to the development and procurement of domestic energy resources. However, the broad nature of some of these orders may fall short of establishing the stable regulatory environment necessary for the development of capital-intensive energy projects with long time horizons.

Those efforts have reversed the Biden administration’s go-slow approach to oil drilling, reducing – though not completely eliminating – the backlog of requests for onshore and offshore drilling permits that accumulated during Biden’s presidency.

Delays in permit approvals increase project costs, risk and uncertainty. Delays can increase the chances that a project ultimately is downsized – as happened with ConocoPhillips’ Willow project in Alaska – or canceled altogether. Longer timelines increase financing and carrying costs, because capital is tied up without generating revenue and developers must pay interest on the debt while waiting for approvals. Delays also lead to higher project costs, eroding project economics and sometimes preventing the project from turning a profit.

Investment follows economics, not politics

Unlike in some countries, such as with Saudi Arabia’s Aramco, Norway’s Equinor or China’s CHN Energy, the U.S. does not have a national oil or gas company. All of the major energy producers in the U.S. are privately owned and answer to shareholders, not the government.

Executive orders or political slogans may set a tone or direction, but they cannot override the fundamental requirement for profitability. Investments can’t be mandated by presidential decree: Projects must make economic sense. Without that, whether due to low prices, high costs, uncertain demand or changing regulations, companies will not proceed.

Even if federal policies open new areas for drilling or relieve some regulatory restrictions, companies will invest only if they see a clear path to profit over the long term.

With most energy investments costing large amounts of money over many years, the industry likely wants a sense of policy stability from the Trump administration. That could include lowering barriers to profitable investments by accelerating the approval process for supporting infrastructure, such as transmission power lines, pipelines, storage capacity and other logistics, rather than relying on sweeping announcements that lack market traction.

About the Author:

Skip York, Nonresident Fellow in Energy and Global Oil, Baker Institute for Public Policy, Rice University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Jason Gray, University of California, Los Angeles 

The world is losing vast swaths of forests to agriculture, logging, mining and fires every year — more than 20 million acres in 2024 alone, roughly the size of South Carolina.

That’s bad news because tropical forests in particular regulate rainfall, shelter plant and animal species and act as a thermostat for the planet by storing carbon, keeping it out of the atmosphere where it would heat up the planet. The United Nations estimates that deforestation and forest degradation globally contribute about 11% of total greenhouse gas emissions.

Over the years, countries have committed to reverse that forest loss, and many organizations, governments, and Indigenous and local communities have worked hard to advance those goals. Many of their efforts have been at least partly successful.

For instance, Brazil credits stronger law enforcement and better monitoring at the state and national levels for helping reduce illegal land clearing and deforestation in the Amazon. The deforestation rate there fell by 31% from 2023 to 2024.

Funding from governments and the private sector is helping communities restore land that has already been cleared. Other programs protect forests through payments for ecosystem services, such as paying landowners to maintain existing forests and the benefits those forests provide. These programs provide money to a government, community or landowner based on verified results that the forest is being protected over time.

And yet, despite these and many other efforts, the world is falling short on its commitments to protect tropical forests. The planet lost 6.7 million hectares of tropical forest, nearly 26,000 square miles (67,000 square kilometers), in 2024 alone.

Law enforcement is not enough by itself. When enforcement is weakened, as happened in Brazil from 2019 to 2023, illegal land clearing and forest loss ramp back up. Programs that pay landowners to keep forests standing also have drawbacks. Research has shown they might only temporarily reduce deforestation if they don’t continue payments long term.

The problem is that deforestation is often driven by economic factors such as global demand for crops, cattle and minerals such as gold and copper. This demand provides significant incentives to farmers, companies and governments to continue clearing forests.

The amount of money committed to protecting forests globally is about US$5.7 billion per year – a fraction of the tens of billions of dollars banks and investors put into the companies that drive deforestation.

Simply put, the scale of the deforestation problem is massive, and new efforts are needed to truly reverse the economic drivers or causes of deforestation.

In order to increase the amount of funding to protect tropical forests, Brazil launched a global program on Nov. 6, 2025, ahead of the annual U.N. climate conference, called the Tropical Forest Forever Facility, or TFFF. It is an innovative approach that combines money from countries and private investors to compensate countries for preserving tropical forests.

As an environmental law scholar who works in climate policy development, including to protect tropical forests, I believe the design of the program has real promise. But I also see room to improve it by bringing in states and provinces to ensure money reaches programs closer to the ground that will pay off for the environment.

What makes the Tropical Forest Forever Facility different?

The Tropical Forest Forever Facility seeks to tackle the deforestation problem by focusing on the issue of scale – both geographic and economic.

First, it will measure results across entire countries rather than at the smaller landowner level. That can help reduce deforestation more broadly within countries and influence national policies that currently contribute to deforestation. It focuses on the amount of forest area protected rather than estimating the amount of carbon in the trees.

Second, it seeks to raise billions of dollars. This is important to counter the economic incentives for clearing forests for agriculture, livestock and timber.

The mechanics of raising these funds is intriguing – Brazil is seeking an initial $25 billion from national governments and foundations, and then another $100 billion from investors. These funds would be invested in securities – think the stock and bond markets – and returns on those investments, after a percentage is paid to investors, would be paid to countries that demonstrate successful forest protection.

These countries would be expected to invest their results-based payments into forest conservation initiatives, in particular to support communities doing the protection work on the ground, including ensuring that at least 20% directly supports local communities and Indigenous peoples whose territories often have the lowest rates of deforestation thanks to their efforts.

Finally, the Tropical Forest Forever Facility recognizes that, like past efforts, it is not a silver bullet. It is being designed to complement other programs and policies, including carbon market approaches that raise money for forest protection by selling carbon credits to governments and companies that need to lower their emissions.

What has been the reaction so far?

The new forest investment fund is attracting interest because of its size, ambition and design.

Brazil and Indonesia were the first to contribute, committing $1 billion each. Norway added $3 billion on Nov. 7, and several other countries also committed to support it.

The Tropical Forest Forever Facility still has a long way to go toward its $125 billion goal, but it will likely draw additional commitments during the U.N. climate conference, COP30, being held Nov. 10-21, 2025, in Brazil. World leaders and negotiators are meeting in the Amazon for the first time.

How can the Tropical Forest Forever Facility be improved?

The Tropical Forest Forever Facility’s design has drawn some criticism, both for how the money is raised and for routing the money through national governments. While the fund’s design could draw more investors, if its investments don’t have strong returns in a given year, the fund might not receive any money, likely leaving a gap in expected payments for the programs and communities protecting forests.

Many existing international funding programs also provide money solely to national governments, as the Amazon Fund and the U.N.’s Global Environment Facility do. However, a lot of the actual work to reduce deforestation, from policy innovation to implementation and enforcement, takes place at the state and provincial levels.

One way to improve the Tropical Forest Forever Facility’s implementation would be to include state- and provincial-level governments in decisions about how payments will be used and ensure those funds make it to the people taking action in their territories.

The Governors’ Climate and Forests Task Force, a group of 45 states and provinces from 11 countries, has been giving feedback on how to incorporate that recommendation.

The task force developed a Blueprint for a New Forest Economy, which can help connect efforts such as the Tropical Forest Forever Facility to state- and community-level forest protection initiatives so funding reaches projects that can pay off for forest protection.

The Tropical Forest Forever Facility is an example of the type of innovative mechanism that could accelerate action globally. But to truly succeed, it will need to be coordinated with state and provincial governments, communities and others doing the work on the ground. The world’s forests – and people – depend on it.

About the Author:

Jason Gray, Environmental Attorney, Emmett Institute on Climate Change and the Environment, University of California, Los Angeles

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Jay Gulledge, University of Notre Dame; University of Tennessee 

You might not know it from the headlines, but there is some good news about the global fight against climate change.

A decade ago, the cheapest way to meet growing demand for electricity was to build more coal or natural gas power plants. Not anymore. Solar and wind power aren’t just better for the climate; they’re also less expensive today than fossil fuels at utility scale, and they’re less harmful to people’s health.

Yet renewable energy projects face headwinds, including in the world’s fast-growing developing countries. I study energy and climate solutions and their impact on society, and I see ways to overcome those challenges and expand renewable energy – but it will require international cooperation.

Falling clean energy prices

As their technologies have matured, solar power and wind power have become cheaper than coal and natural gas for utility-scale electricity generation in most areas, in large part because the fuel is free. The total global power generation from renewable sources saved US$467 billion in avoided fuel costs in 2024 alone.

As a result of falling prices, over 90% of all electricity-generating capacity added worldwide in 2024 came from clean energy sources, according to data from the International Renewable Energy Agency.

At the end of 2024, renewable energy accounted for 46% of global installed electric power capacity, with a record 585 gigawatts of renewable energy capacity added that year — about three times the total generating capacity in Texas.

Health benefits of leaving fossil fuels

Beyond affordability, replacing fossil fuels with renewable energy is healthier.

Burning coal, oil and natural gas releases tiny particles into the air along with toxic gases; these pollutants can make people sick. A recent study found air pollution from fossil fuels causes an estimated 5 million deaths worldwide a year, based on 2019 data.

For example, using natural gas to fuel stoves and other appliances releases benzene, a known carcinogen. The health risks of this exposure in some homes has been found to be comparable to secondhand tobacco smoke. Natural gas combustion has also been linked to childhood asthma, with an estimated 12.7% of U.S. childhood asthma cases attributable to gas stoves, according to one study.

Fossil fuels are also the leading sources of climate-warming greenhouse gases. When they’re burned to generate electricity or run factories, vehicles and appliances, they release carbon dioxide and other gases that accumulate in the atmosphere and trap heat near the Earth’s surface. That accumulation has been raising global temperatures and causing more heat stress, respiratory illnesses and the spread of disease.

Electrifying buildings, cars and appliances, and powering them with renewable energy, reduces these air pollutants while slowing climate change.

So what’s the problem?

In spite of the demonstrated economic and health benefits of transitioning to renewable energy, regulatory inertia, political gridlock and a lack of investment are holding back renewable energy deployment in much of the world.

In the United States, for example, major energy projects take an average of 4.5 years to permit, and approval of new transmission lines can take a decade or longer. A large majority of planned new power projects in the U.S. use solar power, and these delays are slowing the deployment of renewable energy.

The 2024 Energy Permitting Reform Act introduced by Sens. Joe Manchin, a Democrat from West Virginia, and John Barrasso, a Republican from Wyoming, to speed approvals failed to pass. Manchin called it “just another example of politics getting in the way of doing what’s best for the country.”

An even bigger challenge faces developing countries whose economies are growing fast.

These countries need to meet soaring energy demand. The International Energy Agency expects emerging economies to account for 85% of added electricity demand from 2025 through 2027. Yet renewable energy development lags in most of them. The main reason is the high price of financing renewable energy construction.

In many developing countries, wind and solar projects cost more to finance than coal or gas. Fossil projects have a longer history, and financial and policy mechanisms have been developed over decades to lower lender risk for those projects. These include government payment guarantees, stable fuel contracts and long-term revenue deals that help guarantee the lender will be repaid.

Both lenders and governments have less experience with renewable energy projects. As a result, these projects often come with weaker government guarantees. This raises the risk to lenders, so they charge higher interest rates, making renewable projects more expensive upfront, even if the projects have lower lifetime costs.

To lower borrowing costs, governments and international development banks can take steps to make renewable projects a safer bet for investors. For example, they can keep energy policies stable and use public funds or insurance to cover part of the lenders’ investment risk.

When investors trust they’ll get paid, interest rates drop dramatically and renewable energy becomes the cheaper option.

Without international cooperation to lower finance costs, developing economies could miss out on the renewable-energy revolution and lock in decades of growing greenhouse gas emissions from fossil fuels, making climate change worse.

The path ahead

To avoid the worst effects of climate change, countries have agreed to cut their greenhouse gas emissions over the next few decades.

Achieving this goal won’t be easy, but it is significantly less difficult now that renewable energy is more affordable over the long run than fossil fuels.

Switching the world’s power supply to renewable energy and electrifying buildings and local transportation would cut about half of today’s greenhouse-gas emissions. The other half comes from sectors where it is harder to cut emissions — steel, cement and chemical production, aviation and shipping, and agriculture and land use. Solutions are being developed but need time to mature. Good governance, political support and accessible finance will be critical for these sectors as well.

The transition to renewable energy offers big economic and health benefits alongside lower climate risks — if countries can overcome political obstacles at home and cooperate to expand financing for developing economies.

About the Author:

Jay Gulledge, Visiting Professor of Practice in Global Affairs, University of Notre Dame; University of Tennessee

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Michael Oxman, Georgia Institute of Technology 

Some major oil companies such as Shell and BP that once were touted as leading the way in clean energy investments are now pulling back from those projects to refocus on oil and gas production. Others, such as Exxon Mobil and Chevron, have concentrated on oil and gas but announced recent investments in carbon capture projects, as well as in lithium and graphite production for electric vehicle batteries.

National oil companies have also been investing in renewable energy. For example, Saudi Aramco has invested in clean energy while at the same time asserting that it’s unrealistic to phase out oil and gas entirely.

But the larger question is why oil companies would invest in clean energy at all, especially at a time when many federal clean energy incentives are being eliminated and climate science is being dismantled, at least in the United States.

Some answers depend on whom you ask. More traditional petroleum industry followers would urge the companies to keep focused on their core fossil fuel businesses to meet growing energy demand and corresponding near-term shareholder returns. Other shareholders and stakeholders concerned about sustainability and the climate – including an increasing number of companies with sustainability goals – would likely point out the business opportunities for clean energy to meet global needs.

Other answers depend on the particular company itself. Very small producers have different business plans than very large private and public companies. Geography and regional policies can also play a key role. And government-owned companies such as Saudi Aramco, Gazprom and the China National Petroleum Corp. control the majority of the world’s oil and gas resources with revenues that support their national economies.

Despite the relatively modest scale of investment in clean energy by oil and gas companies so far, there are several business reasons oil companies would increase their investments in clean energy over time.

The oil and gas industry has provided energy that has helped create much of modern society and technology, though those advances have also come with significant environmental and social costs. My own experience in the oil industry gave me insight into how at least some of these companies try to reconcile this tension and to make strategic portfolio decisions regarding what “green” technologies to invest in. Now the managing director and a professor of the practice at the Ray C. Anderson Center for Sustainable Business at Georgia Tech, I seek ways to eliminate the boundaries and identify mutually reinforcing innovations among business interests and environmental concerns.

Diversification and financial drivers

Just like financial advisers tell you to diversify your 401(k) investments, companies do so to weather different kinds of volatility, from commodity prices to political instability. Oil and gas markets are notoriously cyclical, so investments in clean energy can hedge against these shifts for companies and investors alike.

Clean energy can also provide opportunities for new revenue. Many customers want to buy clean energy, and oil companies want to be positioned to cash in as this transition occurs. By developing employees’ expertise and investing in emerging technologies, they can be ready for commercial opportunities in biofuels, renewable natural gas, hydrogen and other pathways that may overlap with their existing, core business competencies.

Fossil fuel companies have also found what other companies have: Clean energy can reduce costs. Some oil companies not only invest in energy efficiency for their buildings but use solar or wind to power their wells. And adding renewable energy to their activities can also lower the cost of investing in these companies.

Public pressure

All companies, including those in oil and gas, are under growing pressure to address climate change, from the public, from other companies with whom they do business and from government regulators – at least outside the U.S. For example, campaigns seeking to reduce investment in fossil fuels are increasing along with climate-related lawsuits. Government policies focused on both mitigating carbon emissions and enhancing energy independence are also making headway in some locations.

In response, many oil companies are reducing their own operational emissions and setting targets to offset or eliminate emissions from products that they sell – though many observers question the viability of these commitments. Other companies are investing in emerging technologies such as hydrogen and methods to remove carbon dioxide from the atmosphere

Some companies, such as BP and Equinor, have previously even gone so far as rebranding themselves and acquiring clean energy businesses. But those efforts have also been criticized as “greenwashing,” taking actions for public relations value rather than real results.

How far can this go?

It is even possible for a fossil fuel company to reinvent itself as a clean energy operation. Denmark’s Orsted – formerly known as Danish Oil and Natural Gas – transitioned from fossil fuels to become a global leader in offshore wind. The company, whose majority owner is the Danish government, made the shift, however, with the help of significant public and political support.

But most large oil companies aren’t likely to completely reinvent themselves anytime soon. Making that change requires leadership, investor pressure, customer demand and shifts in government policy, such as putting a price or tax on carbon emissions.

To show students in my sustainability classes how companies’ choices affect both the environment and the industry as a whole, I use the MIT Fishbanks simulation. Students run fictional fishing companies competing for profit. Even when they know the fish population is finite, they overfish, leading to the collapse of the fishery and its businesses. Short-term profits cause long-term disaster for the fishery and the businesses that depend on it.

The metaphor for oil and gas is clear: As fossil fuels continue to be extracted and burned, they release planet-warming emissions, harming the planet as a whole. They also pose substantial business risks to the oil and gas industry itself.

Yet students in a recent class showed me that a more collective way of thinking may be possible. Teams voluntarily reduced their fishing levels to preserve long-term business and environmental sustainability, and they even cooperated with their competitors. They did so without in-game regulatory threats, shareholder or customer complaints, or lawsuits.

Their shared understanding that the future of their own fishing companies was at stake makes me hopeful that this type of leadership may take hold in real companies and the energy system as a whole. But the question remains about how fast that change can happen, amid the accelerating global demand for more energy along with the increasing urgency and severity of climate change and its effects.

About the Author:

Michael Oxman, Professor of the Practice of Sustainable Business, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Divya Mahajan, Georgia Institute of Technology 

Artificial intelligence is growing fast, and so are the number of computers that power it. Behind the scenes, this rapid growth is putting a huge strain on the data centers that run AI models. These facilities are using more energy than ever.

AI models are getting larger and more complex. Today’s most advanced systems have billions of parameters, the numerical values derived from training data, and run across thousands of computer chips. To keep up, companies have responded by adding more hardware, more chips, more memory and more powerful networks. This brute force approach has helped AI make big leaps, but it’s also created a new challenge: Data centers are becoming energy-hungry giants.

Some tech companies are responding by looking to power data centers on their own with fossil fuel and nuclear power plants. AI energy demand has also spurred efforts to make more efficient computer chips.

I’m a computer engineer and a professor at Georgia Tech who specializes in high-performance computing. I see another path to curbing AI’s energy appetite: Make data centers more resource aware and efficient.

Energy and heat

Modern AI data centers can use as much electricity as a small city. And it’s not just the computing that eats up power. Memory and cooling systems are major contributors, too. As AI models grow, they need more storage and faster access to data, which generates more heat. Also, as the chips become more powerful, removing heat becomes a central challenge.

Cooling isn’t just a technical detail; it’s a major part of the energy bill. Traditional cooling is done with specialized air conditioning systems that remove heat from server racks. New methods like liquid cooling are helping, but they also require careful planning and water management. Without smarter solutions, the energy requirements and costs of AI could become unsustainable.

Even with all this advanced equipment, many data centers aren’t running efficiently. That’s because different parts of the system don’t always talk to each other. For example, scheduling software might not know that a chip is overheating or that a network connection is clogged. As a result, some servers sit idle while others struggle to keep up. This lack of coordination can lead to wasted energy and underused resources.

A smarter way forward

Addressing this challenge requires rethinking how to design and manage the systems that support AI. That means moving away from brute-force scaling and toward smarter, more specialized infrastructure.

Here are three key ideas:

Address variability in hardware. Not all chips are the same. Even within the same generation, chips vary in how fast they operate and how much heat they can tolerate, leading to heterogeneity in both performance and energy efficiency. Computer systems in data centers should recognize differences among chips in performance, heat tolerance and energy use, and adjust accordingly.

Adapt to changing conditions. AI workloads vary over time. For instance, thermal hotspots on chips can trigger the chips to slow down, fluctuating grid supply can cap the peak power that centers can draw, and bursts of data between chips can create congestion in the network that connects them. Systems should be designed to respond in real time to things like temperature, power availability and data traffic.

Break down silos. Engineers who design chips, software and data centers should work together. When these teams collaborate, they can find new ways to save energy and improve performance. To that end, my colleagues, students and I at Georgia Tech’s AI Makerspace, a high-performance AI data center, are exploring these challenges hands-on. We’re working across disciplines, from hardware to software to energy systems, to build and test AI systems that are efficient, scalable and sustainable.

Scaling with intelligence

AI has the potential to transform science, medicine, education and more, but risks hitting limits on performance, energy and cost. The future of AI depends not only on better models, but also on better infrastructure.

To keep AI growing in a way that benefits society, I believe it’s important to shift from scaling by force to scaling with intelligence.

About the Author:

Divya Mahajan, Assistant Professor of Computer Engineering, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Jack Barkenbus, Vanderbilt University 

In 2025, 1 in 4 new automotive vehicle sales globally are expected to be an electric vehicle – either fully electric or a plug-in hybrid.

That is a significant rise from just five years ago, when EV sales amounted to fewer than 1 in 20 new car sales, according to the International Energy Agency, an intergovernmental organization examining energy use around the world.

In the U.S., however, EV sales have lagged, only reaching 1 in 10 in 2024. By contrast, in China, the world’s largest car market, more than half of all new vehicle sales are electric.

The International Energy Agency has reported that two-thirds of fully electric cars in China are now cheaper to buy than their gasoline equivalents. With operating and maintenance costs already cheaper than gasoline models, EVs are attractive purchases.

Most EVs purchased in China are made there as well, by a range of different companies. NIO, Xpeng, Xiaomi, Zeekr, Geely, Chery, Great Wall Motor, Leapmotor and especially BYD are household names in China. As someone who has followed and published on the topic of EVs for over 15 years, I expect they will soon become as widely known in the rest of the world.

What kinds of EVs is China producing?

China’s automakers are producing a full range of electric vehicles, from the subcompact, like the BYD Seagull, to full-size SUVs, like the Xpeng G9, and luxury cars, like the Zeekr 009.

Recent European crash-test evaluations have given top safety ratings to Chinese EVs, and many of them cost less than similar models made by other companies in other countries.

What’s behind Chinese EV success?

There are several factors behind Chinese companies’ success in producing and selling EVs. To be sure, relatively low labor costs are part of the explanation. So are generous government subsidies, as EVs were one of several advanced technologies selected by the Chinese government to propel the nation’s global technological profile.

But Chinese EV makers are also making other advances. They make significant use of industrial robotics, even to the point of building so-called “dark factories” that can operate with minimal human intervention. For passengers, they have reimagined vehicles’ interiors, with large touchscreens for information and entertainment, and even added a refrigerator, bed or karaoke system.

Competition among Chinese EV makers is fierce, which drives additional innovation. BYD is the largest seller of EVs, both domestically and globally. Yet the company says it employs over 100,000 scientists and engineers seeking continual improvement.

From initial concept models to actual rollout of factory-made cars, BYD takes 18 months – half as long as U.S. and other global automakers take for their product development processes, Reuters reported.

BYD is also the world’s second-largest EV battery seller and has developed a new battery that can recharge in just five minutes, roughly the same time it takes to fill a gas-powered car’s tank.

Exports

The real test of how well Chinese vehicles appeal to consumers will come from export sales. Chinese EV manufacturers are eager to sell abroad because their factories can produce far more than the 25 million vehicles they can sell within China each year – perhaps twice as much.

China already exports more cars than any other nation, though primarily gas-powered ones at the moment. Export markets for Chinese EVs are developing in Western Europe, Southeast Asia, Latin America, Australia and elsewhere.

The largest market where Chinese vehicles, whether gasoline or electric, are not being sold is North America. Both the U.S. and Canadian governments have created what some have called a “tariff fortress” protecting their domestic automakers, by imposing tariffs of 100% on the import of Chinese EVs – literally doubling their cost to consumers.

Customers’ budgets matter too. The average price of a new electric vehicle in the U.S. is approximately $55,000. Less expensive vehicles make up part of this average, but without tax credits, which the Trump administration is eliminating after September 2025, nothing gets close to $25,000. By contrast, Chinese companies produce several sub-$25,000 EVs, including the Xpeng M03, the BYD Dolphin and the MG4 without tax credits. If sold in America, however, the 100% tariffs would remove the price advantage.

Tesla, Ford and General Motors all claim they are working on inexpensive EVs. More expensive vehicles, however, generate higher profits, and with the protection of the “tariff fortress,” their incentive to develop cheaper EVs is not as high as it might be.

In the 1970s and 1980s, there was considerable U.S. opposition to importing Japanese vehicles. But ultimately, a combination of consumer sentiment and the willingness of Japanese companies to open factories in the U.S. overcame that opposition, and Japanese brands like Toyota, Honda and Nissan are common on North American roads. The same process may play out for Chinese automakers, though it’s not clear how long that might take.

About the Author:

Jack Barkenbus, Visiting Scholar, Vanderbilt University

This article is republished from The Conversation under a Creative Commons license. Read the original article.