Will China Win the Clean Energy Race With the US?

In April 2009, President Obama said, "The nation that leads the world in twenty-first-century clean energy will be the nation that leads in the twenty-first-century global economy." Will China or the United States win the race for clean energy technology and future economic predominance? Here is an update with some personal impressions from Beijing.

The United States government has allocated more than $38 billion to renewable energy projects in the economic stimulus program passed last year. It strengthened fuel efficiency standards for cars for the first time in more than a decade, and asked the Department of Energy to prepare more aggressive efficiency standards for household appliances.

Promoting clean energy and energy efficiency makes as much sense for China as it does for the US. According to the World Bank, China counts 16 from among the world's 20 most polluted cities. The country pays a horrendous price for this pollution in terms of public health and economic losses. Like the Obama administration, the Chinese government has identified clean energy as a core sector of industrial policy. It hopes that a shift from energy-intensive towards knowledge-intensive sectors will reduce pollution and allow the country to climb up the economic value chain at the same time.

China's investments and policy measures are extremely ambitious. The country is on track to improve its energy intensity by 20% under the current five-year plan. Its renewable energy law has set the world's most aggressive, legally binding target. By 2020, 15% of all energy is to come from wind, biomass, solar and small hydropower projects. China's wind power capacity has doubled every year since 2006, and is on track to exceed its target for 2020 before the end of the year.

The Christian Science Monitor, The New Yorker and Grist have published detailed accounts of China's impressive achievements in promoting clean energy. As Peter Ford reports in the Monitor, China is manufacturing six times as many solar cells than the US, is selling the world's first mass-produced plug-in hybrid car, and is developing cutting-edge technologies to gasify coal. China, the New Yorker story tells us, is also installing the world's most efficient transmission lines, produces half the world's solar water heaters (including our own), and will operate the lowest-emission coal fired power plant from 2011.

The success factors of China's clean energy revolution are a huge market, which even offers export opportunities for US companies, cheap labor, easy access to capital, and strong government support for research, development and implementation. According to the New Yorker, R&D expenditures have grown faster in China than in any other big country, climbing about 20% per year for two decades.

China's impressive progress should not blind us to some harsh ground realities. Just as the US remains hooked to gasoline, China's rapidly growing economy remains hooked to dirty coal. Inherent limitations are hampering the Chinese green leap forward. Central planning does not encourage an efficient allocation of resources. An estimated 20-30 percent of the newly generated wind power goes to waste because the electric grid has not been able to keep up with the expansion of wind turbines.

More fundamentally, a bureaucratic state does not stimulate innovative thinking, and scientific progress is hampered without freedom of expression. Nature pertinently asked in 2008 "whether a truly vibrant scientific culture is possible without a more widespread societal commitment to free expression. The right to challenge authority, and to doubt everything, is central to scientific enquiry."

Our daughter experiences this contradiction in school every day. She learns more in math and science in Beijing than she did in Berkeley. Yet while her school in Berkeley greatly encouraged her creative thinking, her education in Beijing is based on a lot of drill and discipline. Tellingly, the Chinese character for learning, xue, also means to imitate or copy.

The bias against independent thinking hinders China from successfully creating and marketing fashionable consumer items. But I don't think this bias will necessarily hinder technological progress. On the global level, many transnational corporations are successful not because they are innovative, but because they buy the innovators in their sectors - typically small firms which run out of capital when they need to expand.

China has for two decades been such an attractive market that Western companies have transferred their technology under very favorable conditions. Today, Chinese companies, like Western transnationals, simply buy innovators or license their technology when they need them. And if they are skilled at copying, they are also good at learning from other experiences, and at making the technologies that others have developed affordable.

Goldwind Science and Technology Company appears as the shining star of China's green revolution in recent media articles. The wind turbine manufacturer has more than doubled its output for eight consecutive years, and has become a successful competitor on the world market. Goldwind started by licensing a design from Germany's Jacobs Energie, and acquired its key technology by buying 70% of Germany's Vensys in 2008. It is now deploying German technology in a large windfarm project in Texas. As Peter Ford comments in the Monitor, the deal points to "a key ingredient in Chinese firms' strategies: If they don't have time to develop technological proficiency, they will use their financial clout to get ahead."

We often wish we could combine the creativity of our daughter's school in Berkeley with the academic ambition of her school in Beijing. A similar merger now seems to be happening in the renewable energy industry. "No single nation is likely to dominate the clean-energy economy", comments Evan Osnos in The New Yorker. "No nation has yet mastered both the invention and the low-cost manufacturing of clean technology. It appears increasingly clear that winners in the new-energy economy will exploit the strengths of each side." While I suspect most of the jobs - and increasingly, the value added - of this model will be in China, this cooperation is good for the environment.

Peter Bosshard is the policy director of International Rivers. This blog originally appeared in the Huffington Post. Peter’s blog, Wet, Wild and Wonky, appears at www.internationalrivers.org/en/blog/227