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Green China? You'd better believe it

By Yanrui wu
ABC News
April 15, 2011

A recent report by the Pew Charitable Trusts shows that China was the world’s number one investor in green energy in 2010.

With a total investment of $54.4 billion, China was well ahead of second-ranked Germany ($41.2 billion) and the US in third place with $34 billion invested, not to mention Australia with $3.3 billion and ranked 12th.

In terms of installed capacity, China’s wind power sector alone doubled every year between 2005 and 2009. According to the latest statistics from the Global Wind Energy Council (GWEC), China added 18.9 GW of new wind power capacity in 2010, thus overtaking the US with the most installed wind power capacity in the world.

China’s parliament, the National People’s Congress (NPC), recently considered a 'New Energy Industry Development Strategy’ which is to be adopted as a major policy document by the State Council (some changes are expected due to the Fukushima nuclear plant disaster).

According to this proposed development strategy, during 2011-2020, China will invest about $800 billion in seven green energy areas, namely, wind, solar, nuclear, bio-energy, hydro, coal cleaning and smart power grid.

China’s green energy is expected to generate 290 GW power (wind 52 per cent, nuclear 24 per cent, bio-energy 10 per cent, solar and others 7 per cent each) in 2020. This would be equivalent to 17 per cent of China’s total generation capacity and 15 per cent of the country’s total energy consumption.

In contrast, Australian green energy would only have a share of 12 per cent in power generation and 8 per cent in total energy consumption by 2029/2030 (ABARE research report 10.02).

China’s rapid growth in green energy has been driven by two key factors. First, green energy development in government policies has been promoted as a strategy of providing energy security for the country’s rapidly-expanding economy in the future. Energy prices have gone up rapidly in recent decades. It would be a challenging task to fuel the Chinese economy which overtook the Japanese economy in 2010 and is expected to surpass the American economy within a decade. Competition for energy will be fierce as resources in the world are disappearing quickly and in the meantime, another Asian giant, India is rising too.

Second, as the world’s largest carbon emitter, China has been under tremendous pressure to reduce emissions and show leadership in fighting global climate change. Domestically a rapidly-rising middle class also demands for the improvement in environmental quality. In response to these pressures, two goals are set in the proposed green energy strategy, that is, to reduce carbon emission and the use of fossil fuels.

According to the proposed development strategy, by 2020 China’s carbon emission per unit of GDP will fall by 40-45 per cent relative to the level in 2005. To reach this target, the Chinese government has launched many energy efficiency programs and industrial restructuring projects in addition to the ambitious green energy development strategy.

Globally green energy development provides a $2.3 trillion business opportunity during 2011-2020 according to the Pew Charitable Trusts report. Chinese government policies are well supported by the country’s private sector which is being rewarded with hefty profits from an early entry into the market.

China’s major white good producers such as Meidi, Haier and Geli have been active in developing green energy products such as solar-powered refrigerators, televisions and air conditioners. To promote its businesses, for example, in 2010 Changhong, a large TV producer, donated over 20,000 solar-powered digital TVs to herdsmen on the Tibetan plateau.

Having gone through decades of catch-up with their advanced counterparts in traditional manufacturing, Chinese producers are in the same level playing field as western manufacturers in terms of green energy. It seems that Chinese producers have so far not only excelled in manufacturing but also led the world in green energy innovation. China is now the world largest supplier of wind turbines and solar modules.

Chinese policy makers have also seen the benefits of the private sector playing the major role. Green energy businesses lead to new sources of growth for the Chinese economy which is being transformed from a factor-intensive, export-oriented one to a skill-intensive, consumption-driven economy. It is predicted that, by 2020, 15 million green jobs will be created due to green energy development in China.

While Australian politicians are arguing what to do about climate change control, Chinese policy makers have moved quietly and leave us well behind. Our business sector dominated by big resource exporters is not so helpful either. While they may enjoy handy profits from exporting resource commodities now and in the near future, they will definitely lose out in the long run due to lagging behind in innovation and missed opportunities in new businesses.

The world has long been concerned with the possibility of a wealthy China adopting American consumerism and hence depleting the earth’s resources. What China has so far achieved in green energy can certainly release some of the fears. It is postulated that green energy development would lead to a new industrial revolution in the world just as steam engines, electricity and computers did in the past. Demand for clean energy could act as a catalyst for future economic growth in China as well as rest of the world.

China’s economic reform in the last three decades has been successful due to pragmatism (instead of endless ideological debates). It seems pragmatism wins again this time. With a greener Chinese economy, it is certainly good news for the world.

Yanrui Wu is professor at UWA Business School. This article is based on outcomes of an Australian Research Council discovery project (DP1092913).