There is an increasingly inescapable sense that an energy transition of enormous proportions is taking place. The number of 'bans' announced on Internal Combustion Engine (ICE) vehicles is growing, even if governments are placing them relatively far out on the political horizon.
More and more car manufacturers are taking note and shifting R&D spending into Electric Vehicles (EVs), a move which has profound implications for the development curves, and thus future cost, of EVs versus ICE vehicles.
In October, US automaker General Motors said that it would launch two new pure electric models in 2018 and a further 18 by 2023.
Its competitor Ford announced the creation of a new internal team to "think big and move fast" in order to accelerate the electrification of its auto production. Both are some way behind their European counterparts.
It is not hard to see why such decisions are being made now. While the number of EVs on the road remains just a fraction of the total parc, global sales are growing by about 40% year-on-year, making EVs the biggest growth story in the auto market in decades.
And, if governments are going to regulate against ICE vehicles and subsidize EVs, thereby changing the consumer choices which otherwise might be made, then what other path is there to tread?
What has rocked the car world most has been a potential ban on ICE vehicles in China. Talk of such a move may be overblown as nothing has been said yet by the country's top policy-making body, the National Development and Reform Commission, but just floating such an idea in China is significant.
The country is both the world's largest car market and the world's biggest maker and consumer of EVs -- not just passenger cars, but also electric buses and trucks.
Moreover, there is some meat behind the speculation. Beijing has promoted EVs heavily to date.
It is cutting back on passenger car subsidies, but has also announced that car makers in China producing or importing more than 30,000 cars a year must ensure that, by 2020, 12% of them are all-electric, plug-in hybrid or hydrogen powered.
If a company wants a stake in the world's largest car market, then, at the very least, it will have to offer consumers a choice of both EV and ICE vehicles.
Urban air pollution and security of supply are key issues in this equation.
Coal stands alone among the fossil fuels as the only one for which China has avoided a burgeoning import bill, owing to the expansion of a huge domestic mining industry.
But this has come at the price of chronic urban air pollution, the three primary ingredients of which are coal-fired power generation, heavy industry and ICE vehicles, the latter being particularly noticeable given China's rapid urbanization over the last 20 years.
China's leaders therefore have a series of tough, interlinked problems to resolve.
They need to reduce the country's reliance on heavy industry as the engine of economic growth and on coal-fired electricity generation as the backbone of the electricity system; and they need to deliver on the growing demand for transportation that the process of urbanization promotes while at the same time reducing air pollution.
China's Relationship With Oil
The idea of an ICE ban in China is clearly at odds with some aspects of Chinese industrial policy and observers have been quick to note the obvious tensions with the country's massive expansion of its refining capacity.
China has thrown billions of dollars into this industry over the past two decades, just as it has into becoming the world's largest ICE car manufacturer. Chinese refining capacity rose from 4.2 million b/d in 1996 to 8.5 million b/d in 2006 and 14.2 million b/d in 2016.
Yet the expansion of Chinese refining has been a game of constant catch-up; refinery throughput has never quite matched oil product consumption, and domestic crude output has fallen far behind demand, owing to the country's limited domestic oil reserves.
The success of Chinese refining is that it has minimized the bill from oil product imports, capturing within the domestic economy the refining margin, but this will only ever be a modest gain given the expense of growing crude imports.
These imports cost China somewhere in the region of $134 billion in 2016 and a whopping $1.9 trillion over the past decade in 2016 dollars.
It is a massive outflow of capital, and the supply chains involved leave China vulnerable to price and physical supply shocks that can have serious repercussions for its export industries.
Moreover, the country is quickly heading in the same direction with natural gas, imports of which rose from next to nothing in 2006 to 72.3 Bcm in 2016.
Fossil Fuel Dependence
Dependence on fossil fuel imports is an economic vulnerability, but more often than not a sign of economic strength rather than weakness.
It reflects the capacity of an economy to add value to raw material inputs through manufacturing and processing.
The world's strongest and most diversified economies are all net fossil fuel importers.
But the outflow of capital spent on fossil fuel imports must be balanced by the export of value-added goods.
An economy dependent on raw material imports must also be an export economy, and China has long recognized that this creates a second weakness; it is dependent on extended international raw material supply chains on the one hand, and the health of export markets on the other.
Both are factors beyond China's control, as it discovered with the rise in oil and other commodity prices from 2004, and then, in terms of export demand, during and after the global financial crisis of 2007/08.
Beijing has gone a long way to rebalance its export-oriented economy over the past decade, boosting domestic consumption and services at the expense of further expansion in export-oriented industry.
Services accounted for 51.6% of Chinese GDP in 2016, compared with 44.1% in 2010, while industry's share fell from 46.4% in 2010 to 39.8% last year.
However, it wants to go further and at the same time address the problem of air pollution.
It can only do this by embracing the New Energy Economy, based upon renewables and the electrification of transport.
Developing EVs and renewables in tandem cuts pollution and redresses the issue of capital outflows and supply insecurity, while at the same time capturing more value-added internally, strengthening the domestic economy vis-a-vis the export-oriented economic model of the past.
Solar power has been an extraordinary success for China.
The industry has benefited from what has in effect been multiple layers of subsidization -- at home through state assistance for building and deploying production capacity, as well as R&D spending, and abroad as governments in a number of Western and other countries have sought to incentivize renewables as a growing part of the energy mix.
These subsidies are being reduced, but largely because they are no longer needed -- solar is competitive with fossil fuels for power generation in an increasing number of countries.
Moreover, the reduction of subsidies spurs innovation in what has become a cut-throat business.
As a result, China's solar industry is entering a new phase in which it is focused on innovation and making its huge solar deployment capacities more economically efficient.
A number of recent studies, such as Stanford University's The New Solar System, show that the West has misconceived the nature of the solar industry in China.
It is not a subsidized monolith on the verge of financial collapse, and it is increasingly innovative.
Notably, Trina Solar has achieved the world efficiency record for laboratory scale multicrystalline-silicon solar cells.
This technology dominates the global market for solar power, making up 70% of global PV production in 2016.
However, in terms of the New Energy Economy, it is the direct link that has been created between manufacturing and energy generation that is significant, challenging supply chains based on mining and oil and gas extraction.
China is now able to leverage its manufacturing capacities and low wage costs in the generation of energy.
Rare Earth Elements
China's venture in to the New Energy Economy is backed by its natural resource advantage in Rare Earth Elements.
REEs are used in multiple applications from medicine and defense to electronics, but some are specifically used in batteries for hybrid and fully electric cars.
Their use in permanent magnets also means they are required for wind turbine generators, as well as numerous electrical and electronic components. Like lithium and cobalt, they are key ingredients in the New Energy Economy.
REEs are not, despite their name, that rare, but they are distributed in low concentrations, which makes economic recovery difficult.
However, China is far and away the world's number one producer of REEs.
The concentration of REE production in China may be a cause for concern for other countries, as is the concentration of cobalt production in the Democratic Republic of Congo, but for China it means that an important part of the new supply chain is kept in-house.
Similar factors apply to EVs. Here again the idea that Chinese industry is not innovative is misguided.
According to research by McKinsey, Chinese consumers can already choose from about 75 different EV models made by both domestic and foreign manufacturers, more than any other country in the world.
As with solar, some foreign observers have concluded that China's EV industry is unsustainable because of the level of subsidy -- China currently subsidizes about 23% of the total EV price in various ways.
However, as with the solar market, increased competition and a reduction in subsidies will force more efficient use of resources and increase the focus on innovation and manufacturing gains.
China is already a significant innovator in this sphere. BYD, China's principal EV manufacturer, uses its own lithium iron-phosphate (LFP) technology, underlining that China's EV industry is not dependent on Western technology or intellectual property.
Moreover, by many measures BYD is far in advance of iconic US EV maker Tesla, which uses lithium nickel cobalt aluminum-oxide battery technology.
BYD has twice the battery production capacity of Tesla and more than eight times the battery storage technology deployment.
Its passenger car sales are higher and it has already commercialized e-buses and e-trucks, which Tesla only hopes to do around 2020.
While LFP batteries have lower energy density than Tesla's, their stability allows faster charging and greater durability.
According to Wood Mackenzie, BYD recharges its buses at 300 kW without cooling, faster than Tesla's superchargers, formerly the fastest recharging system in the world.
EVS and Solar Combined
China's investment in EVs is as significant as its investment in solar power, where it dominates the market.
According to Germany's Fraunhofer Institute, China and Taiwan accounted for 68% of solar PV module production in 2016, compared with 4% in Europe and 6% in Canada and the US combined.
For China, EVs and solar are both policies designed to strengthen the domestic economy and combat air pollution.
In combination with other renewables, such as wind and hydro, they are designed to create a New Energy Economy, which retains maximum value within the domestic economy and reduces its exposure to external shocks.
Despite China being the biggest market for solar power and EVs, both are still small in terms of electricity consumption and generation.
However, the number of EVs on the road in China now exceeds 1 million, according to www.EV-volumes.com, split between 634,794 passenger vehicles and 362,120 heavy vehicles, mainly buses.
The figures include both pure EVs and plug-in hybrid electric vehicles.
According to S&P Global Platts calculations, China's fleet of EVs consumed about 20-25 TWh of electricity in 2016, accounting for less than 0.5% of total electricity generated in China that year.
China's solar power generation in 2016 was 66.2 TWh, about 1% of electricity generated, so in a slightly surreal sense China's EV fleet was powered entirely by solar power.
EV electricity consumption rose by 143% (15.7 TWh) in 2016, while solar power generation grew by 72% (27.7 TWh).
China's EVs will also be displacing close to 300,000 b/d of oil products demand, primarily diesel, by end-2017, assuming continued growth in e-HDV sales, which reached 205,886 last year, and about 40% year-on-year growth in light-duty EVs.
At end-2016, China's EV fleet was displacing just over 180,000 b/d of oil products, more than 90% of which was accounted for by e-HDVs.
China is by no means alone in pursuing change, but it is better positioned and more motivated to achieve it than most other countries because of its reliance on fossil fuel imports, huge manufacturing capacities and air pollution problems.
There are concerns that the implied rise in electricity demand as a result of transport electrification will overwhelm the capacity to deploy and integrate thousands of gigawatts of additional renewable generation capacity into China's electricity grid.
China may be forced back into reliance on coal to power its growing fleet of EVs, thereby offsetting the impact of reduced vehicle emissions with higher power plant emissions.
This could prove a self-limiting factor that encourages more gradual change in what will, in any case, be a decadal process.
However, the lesson to be drawn from China's massive refining expansion is not that it represents an immovable barrier to the uptake of EVs, but that when Beijing puts its mind to a vast industrial endeavor, it generally delivers.
Nonetheless, the implications for oil exporting countries of a gradual decline in Chinese crude oil imports are major.
China has been by far the single largest factor in oil demand growth over the last 15 years.
It is far more important to international markets than the US, which has managed to increase its own oil production and reduce its import bill -- effectively keeping the hydrocarbon economy in-house, which itself may prove a barrier to change in the US.
A peak in oil demand, which has been predicted before 2040 by some oil companies and forecasters implies a concentration on only the cheapest oil production, which remains the Middle East. Higher cost producers will suffer.
There would be little incentive, for example, to develop the remaining reserves of the North Sea, or to head off further into the Barents and Arctic, a direction still thought inevitable only a few years ago.
Declining stakes in oil and gas production might reduce the barriers to change in other countries, which may, as in Europe, be more highly motivated to adopt EVs by the desire to combat global climate change.
Europe, like China, is dependent on fossil fuel imports and therefore has every reason to pursue economically viable alternatives.
Certainly other countries would seek to emulate China's lead. India notably is leaping into renewables generation, although primarily as a means of reducing its own reliance on coal-fired generation, but it is also pursuing industrial policies to redress its relative lack of manufacturing capacity.
Emulation of China would provide Chinese companies with new opportunities for the export of EVs and other renewable technologies, just as it has with e-buses and solar panels.
China's adoption of the New Energy Economy would be a win for both its domestic economys and its export industries.