Last year, China walked away from the Copenhagen climate change summit as a villain. It had shot down any attempts to introduce binding carbon emission targets. Chinese diplomats even insisted on taking off the table emission cuts meant only for advanced economies, reportedly sending then-Australian prime minister Kevin Rudd banging his microphone on the table as Germany’s Chancellor Angela Merkel threw her arms up in despair.
Yet, for all the anger it provoked, China is now the world’s leader in green energy investment. Beyond the pollution and the black smoke rising from its coal plants, there are labs working on advanced battery technology, manufacturing plants pumping out solar panels, and fields of wind turbines. Five years ago, China pledged to cut emissions by 10 per cent, and by the end of 2010, it announced it had reached the target. In 2009, China shelled out $34.4 billion for clean energy, nearly double the $18.5 billion spent by the United States, and more than 10 times what Canada forked out, according to the Pew Charitable Trust, a non-profit based in Washington. In short, “China won this round of the race for clean energy,” says Ang Li, a Greenpeace campaigner based in Beijing. And, she adds, the country is well-positioned to become the next superpower of green.
Since 2006, Beijing has been sending a “stable political signal to develop clean energy,” says Li. But the politburo’s drive to plant windmills and set up solar panels is not a crusade against global warming—China is still the world’s biggest emitter of greenhouse gases. The government’s main concern is energy security, says Dickon Pinner, a partner at McKinsey and Company, a consulting firm. Faced with the scenario that its energy demands will double by 2030, Chinese officials are scrambling to promote efficiency and diversify away from coal, which now accounts for 70 per cent of the country’s energy supply. The push for green energy is also part of China’s effort to develop global leaders in high-growth, technology-intensive sectors, says Pinner. Finally, Chinese leaders seem to care little about things like the health of polar bears and the state of the ice caps, but Pinner says that they are eager to alleviate domestic water and air pollution.
While long-term energy regulation has created fertile ground for growth in the sector, China’s green industry has flourished thanks to a generous showering of public money. And Beijing’s investments have dwarfed anything seen in the West. The U.S. devoted $37.8 billion of its 2009 stimulus package to green energy projects. China’s green stimulus that year was $220 billion. If Americans, who have a median income of about $52,000 a year, buy an electric car, they get $7,470 from Uncle Sam; when Chinese consumers, whose average income is about $861 in the countryside and $3,153 in cities, buy one, they get $8,760 from the government, which, according to McKinsey, can add up with local government incentives to as much as $20,000. Coming on top of low manufacturing costs, state subsidies have also made China the world’s leading exporter of solar photovoltaic panels, solar water heaters, and wind turbines.
But China’s rise to the top of the green rankings is also the result of declining investment in the U.S. and Europe. U.S. clean energy investment plunged 40 per cent in 2009 compared to the previous year; in Spain it was down more than 50 per cent. In part, the slowdown reflected the impact of the economic crisis, which depressed overall energy demand, dried up credit markets and dug deep into state coffers, says Evan Juska, senior policy manager at the Climate Group, an international organization that encourages businesses and governments to cut emissions.
Though America still accounts for the largest share of private investment in green industry, frustration at Congress’s inability to pass overarching regulation on climate change has venture capitalists contemplating mass emigration. “They’re asleep at the wheel on climate change,” Kevin Parker, head of Deutsche Bank’s asset management division, told Reuters last summer. “You just throw your hands up and say, we’re going to take our money elsewhere,” he added.
“Elsewhere” mostly means China. And along with investors, many Western green-tech businesses have set up shop there, too. But clean energy enterprises settling in China often run up against obstacles. Non-Chinese businesses are mostly barred from competing for lucrative public contracts and face provincial governments keen on propping up local industry. It doesn’t help that protection of intellectual property rights is still lax.
Still, there are signs of U.S.-Chinese co-operation. The two countries have already poured $149 million into a joint Clean Energy Research Center, funded in equal parts, based on both sides of the Pacific and featuring researchers working side by side on projects including energy efficient buildings, green cars and clean coal. It might be a first step toward turning the race for green into a team game.