Seeing a $1 Trillion Market, China-U.S. Greentech Initiative Could "Take Over the World"
Ahead of possible agreements between the U.S. and China at Copenhagen, official partnerships have been challenged by trade tensions and acrimony, with both countries floating protectionist threats, and China, like India, demanding that the U.S. pony up billions to help it fight climate change.
But a big initiative launched today isn't listening to that. Taking the private sector approach -- while hoping for good government engagement -- it seeks to pair U.S. expertise with Chinese manufacturing to boost the cleantech sector in China.
"This is a coming-out party for China's 'greentech' initiatives," Ming Sung, of the Clean Air Task Force, told the Guardian. "China and the US can takeover the world on low-carbon technology."The U.S. International Energy Agency has estimated that holding climate change to just a 2 degrees Celsius increase over the next two decades will require $9 trillion in extra spending. But a $1 trillion per year market in solutions that replace existing technologies while minimizing environmental impact changes that equation.
We already have one good example of US-China greentech hand-holding this week: First Solar's new 2000 MW Inner Mongolian solar array.
Earlier this year, Hilary Clinton paid a visit to a promising venture by GE in Beijing: a trigeneration electricity plant that cuts 1.5 million metric tons of CO2 per year.
US-China Greentech Strategy and Report
The strategy for greentech investment was drawn up by leading industrialists, entrepreneurs and financiers from the world's two biggest polluting countries, involving companies like Boeing, General Electric, the PV maker Suntech and BYD, the battery company that now manufactures hybrid and electric cars.
The development strategy could become part of a bilateral climate agreement that is expected to be signed by the two governments when Obama visits China in November.
China has set a target of deriving 20% of energy from renewable sources by 2020. And the country's wind power capacity has doubled for four consecutive years since 2005, with China now ranking fourth in the world and representing 10% of total installed capacity.
The extensive report that accompanies the new partnership identifies areas in which China is already taking a lead, including wind power adoption, solar and hot water heater manufacturing, vehicle fuel economy and emissions, and energy efficiency.
Pragmatic Focus: Clean Coal and Gassification
But one disappointing sign of the initiative is its emphasis on old-fashioned coal, which both the U.S. and China depend upon for the majority of their electricity generation.
Focusing on "clean coal" -- capturing and storing of carbon dioxide emissions -- sounds good, especially for a country so dependent on coal. But it's a dicey approach, and not only because it means dirty and dangerous extraction. As a new Stanford report (pdf) says, the prospects for clean coal in China are so limited by regulatory and market inertia, that it's a "non-starter."
And then there's the initiative's emphasis on coal gasification (aka Integrated Gasifcation Combined Cycle, or IGCG) and underground coal gasification. Among other things, coal gas doesn't do much to reduce the carbon emissions of cars and could slow the move to alternative fuel vehicles. The Chinese government had put all coal-to-liquids projects on hold last year due to their dirtiness and cost, but some trial programs are continuing.
Huge Market Size for Greentech in China
The potential size of the market for greentech, says the report, is between US$500 billion and US$1 trillion annually, or as much as 15% of China's forecasted GDP, in 2013. That size equals the total revenues green technology solutions could achieve "if they were attractive to adopters vis-à-vis conventional alternatives."
Making greentech attractive to Chinese industry is the hard part. There is limited awareness of the availability and benefts of greentech -- a building developer unaware of the potential cost savings of insulated windows, for instance -- and underdeveloped value chains, like the lack of natural gas lines connecting reserves to demand centers.
The biggest trick the initiative could pull off is working with China's national and local governments to better encourage greentech.
Through programs like its RMB4 trillion stimulus package, the government has provided incentives for renewable energy projects. But there is some confusion over the size of payouts, timing and eligibility. There are also, of course, serious issues with monitoring and enforcing compliance of existing environmental policies. Finding ways to improve transparency in the name of strong business partnerships will be key.
And if they can wean Chinese government planners away from concentrating green industries in only certain geographic markets, they might improve efficiency and innovation.
Also key will be finding ways to encourage continued national efforts to expand green tech while discouraging China's protectionist policies. Basically, demonstrating that good green growth shouldn't just mean benefits to domestic companies. Says the report:
For example, in China's early push to promote wind power, regulators used policies to direct China's existing conventional energy generating enterprises into the wind sector, yet excluded foreign wind farm developers from national concession projects and limited the extent to which foreign turbine manufacturers could supply national projects. While this approach may have enabled China to build up its infrastructure rapidly with a view towards optimizing its operations in the future, it contributed to China's early wind farms being less efficient and requiring higher ongoing maintenance costs than those in other countries.
"The private sector has a key role to play in delivering the required investment at the scale required to avoid dangerous climate change. But it will only do this if there is a clear, long-term policy framework to underpin prospects of a reasonable return," said Richard Gledhill, global leader of Climate Change & Carbon Market Services in London for PricewaterhouseCoopers, a consultancy that helped head the research
Whatever happens in Copenhagen, China and the U.S. will both need to reduce emissions, and stand to make a lot of money doing so.
If companies in both countries can do it together with the encouragement of their governments -- that is, as efficiently as possible -- and do so keeping in mind the many costs of continued coal development, citizens and investors alike could be seeing a lot more green.
More on China Cleantech at Treehugger
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