Posted in: HPRgument Blog

China In The Lead

By | June 27, 2010

(Crossposted from the Apollo Alliance Blog)

It’s easy to forget that global warming has sparked a global response when the stalemate in Congress over national climate legislation continues, even despite the fact that the latest consequence of our fossil fuel addiction – the “worst” environmental catastrophe in America’s history – flickers across televisions nightly.

Yet the global clean energy industry could be worth $2.3 trillion by 2020, according to a December 2009 report by the World Wide Fund for Nature (WWF). Who capitalizes on these new markets depends on governments’ willingness to establish favorable clean-energy policies – and everyone except Congress seems to know it.

China, moving rapidly into the void left by U.S. inaction, is poised to leap beyond the U.S. and seize control of the emerging clean energy economy. China’s overall clean energy investments surpassed the United States for the first time in 2009, with nearly $31 billion compared to just under $17 billion.

The Center for American Progress (CAP), fresh from another visit to China, released a memo on Capitol Hill yesterday reaffirming the widening transpacific clean-tech gap in the wake of its latest report. The memo comes on the heels of a comparative analysis done by the Pew Charitable Trusts and Bloomberg New Energy Finance which also concluded that America’s clean-tech leadership is slipping. Without comprehensive clean-energy legislation focused on investment, innovation and infrastructure to match that of its competitors, CAP argues, the United States will forfeit the chance to be a major player in the global clean-energy economy.

Investment

China anticipates 2.88 million new clean-energy jobs by 2020 – just by meeting its national demand. Already, thanks to robust national commitment, it has the most installed renewable energy capacity in the world – even though its economy is a third of the size of America’s. This unprecedented growth can be directly traced to China’s regulatory policies that create stable markets to encourage clean-energy investment.

One of China’s smartest policies, its renewable portfolio standard (RPS), requires utilities to generate 15 percent of their energy with renewables by 2020, with additional provisions that could reach double their target. Germany has a goal of 20 percent by 2020, and Spain aims to achieve 30 percent by 2020. Here, while 24 U.S. states already have RPSs, Congress has yet to pass a national standard (although one is included in the current draft of the American Power Act).

In addition, the Chinese government is aggressively pursuing feed-in tariffs, which most people in the United States haven’t even heard of. Feed-in tariffs set prices for utilities to buy renewable energy that producers feed into the grid, and their incredible success across Europe and in a few U.S. cities is well documented. Together with the RPS and fuel economy standards that are more than a third higher than ours, China’s feed-in tariffs reflect the country’s realization that market-expanding national clean-energy policies matter to global clean-tech investors trying to decide where to place their bets.

Innovation

America is also losing its clean-energy innovation edge, which is crucial to generate more efficient renewable energy technologies.Applied Materials, the world’s biggest solar manufacturing supplier, isrelocating its chief technology office from Silicon Valley to China and constructing the largest solar research center ever built in Xi’an. One of its stated reasons for the move: China’s concrete commitment to a renewable energy future.

The sustained, programmatic R&D funding from the Chinese government looks to eclipse the U.S., where ad-hoc stimulus funding ($6.8 billion from the American Recovery and Reinvestment Act) doesn’t amount to the long-term support required for good R&D.

China’s national Science and Technology plan contains what CAP’s memo described as “tangible benchmarks” like patent and citation quotas through 2020 and specific clean-energy targets designated by the Ministry of Science and Technology in transmission, wind turbine, and efficiency development.

Infrastructure

CAP representatives also noted that China’s infrastructural commitment left a “particularly deep impression” during their visit – especially the “impressive, tangible, and breathtaking” $300 billion Beijing has allocated for railway expansion through 2020. Coupled with what will be the largest urban rail system in the world, and a vast network of ultrahigh-voltage grid transmission wires, this concrete investment will facilitate rapid movement of people and goods across the burgeoning Chinese economy.

The U.S. Congress, in stark contrast, hasn’t even started talking about a new surface transportation authorization bill, even though the last one expired in September 2009. The Department of Transportation is operating on a series of temporary extensions that barely cover operating costs. Revitalizing the U.S. transportation infrastructure to meet environmental and economic pressures requires cohesive, national leadership which short-term stimulus funding cannot replace.

All too often, critics try to dismiss China’s edge in the clean energy marketplace by referencing that the Chinese passed the U.S. in absolute emissions in 2006, that they build “two coal plants a week,” etc. The emerging work on China’s headlong rush toward alternative energy indicates the opposite. As President Obama heads to the June 26-27 G-20 meeting, he should keep in mind how much we have to learn.

–Will Rafey

Read The New Yorker’s excellent exposé on Beijing’s 863 program here to get a clearer idea of the magnitude of their innovation drive.

To see the analysis by the Breakthrough Institute and Americans for Energy Leadership of the American Power Act’s impact on U.S. economic competitiveness, go here.

Graph courtesy of the Pew Charitable Trusts (“Who’s Winning the Clean Energy Race?,” p. 17)

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