The "China Price" of Going Green

Whenever I tell people I’m moving to Shanghai, their first question is “how are you going to deal with all the pollution?!?” My usual response is an awkwardly defensive, less that substantive response citing the millions of yuan that are being invested in clean-tech and energy efficiency. At the 2008 Olympic Games Beijing proved that it could clean up its act for two weeks. But China has yet to prove its economy can support a sustainable green revolution. It remains the world’s largest source of carbon emissions. But it is also becoming a leader in developing green solutions that are both innovative and economical.

Unlike many of the options discussed at Copenhagen this week, China is doing more than throwing money at the problem. China is pressuring the U.S. and other developed nations to curtail emissions and increase subsidies to developing nations’ efforts to adopt clean energy technologies. Perhaps most importantly, Chinese engineers are creating cost effective technologies to bring green tech to the world’s fastest-growing industrial economy.

Chinese wind-turbine makers are being exported at ever increasing rates and China holds a 30% share of the global market for photovoltaic solar panel production. The sheer size of China’s market has helped to decrease the costs of implementing solar and wind energies, hydrogen fuel cells and electric car batteries. The “China Price,” meaning the combination of cheap labor and capital that overhauled manufacturing, is being applied to green technology, specifically for renewable energies used in capital-intensive industries. The Chinese government has pledged to replicate the success of its special economic zones, which have turned small fishing villages into industrial centers, attracting extensive foreign investment. Plans are in place for preferential policies on low carbon centers that promote clean factories and exports. Following its current low-cost model, the risk is that Chinese export zones may become centers of cheap green manufacturing, rather than innovative clusters.

This ambitious mission, if accomplished, will transform business in China and around the globe. However, these lofty goals face equally difficult obstacles.  China and the U.S. are responsible for 44% of the world’s coal reserves.  According to forecasts, world coal use could increase nearly 50% by 2030 if a feasible renewable energy source is not secured. For every dirty power plant it shut down in a two-year cleanup campaign, Beijing added the capacity of roughly two more. The biggest gains in the fight against global warming will be made in reducing carbon from coal-burning power plants. Using capture technologies, China is taking steps in the right direction. But critics claim that subsidizing these technologies via cheap loans from state-controlled banks is dumping excess supply overseas, which may hurt the industry as a whole. The question is whether the Chinese market can inspire longer term innovation and competition in the sector.

To combat perceptions about China’s air, I’m going to start carrying around a photo in my wallet of the Pu River at dusk (see picture above) to show them how beautiful the city is once the smog rolls out.  And yes, the Pu River is an endless source of immature jokes. Don’t be shy about posting yours below. ;-)