Is China Winning the Energy Race?

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If the energy bill dies in 2010 -- as it almost certainly will -- climate change reform enters an indefinite purgatory, and the United States' broken energy policy rolls along, fuming all the way.

When I expressed sadness at the prospect of the American Power Act's death, commenters noted that we can't expect to reduce global emissions without getting big countries like China on board. They're right. It made me wonder whether China might be "on board" with green tech and carbon pricing already.

To know more, I spoke with Julian Wong, an expert in Chinese energy policy at the Center for American Progress. An edited version of our conversation follows:

My readers are always asking how climate change legislation in the U.S. could impact China's energy policy. In broad strokes, how is China moving on green energy already?

It's across the board. In China they have for several years already realized that their direction is not sustainable. They have undertaken some of the most ambitious programs in energy efficiency and renewable energy deployment in the world. They've created medium and long term plans and set national numerical targets, such as producing 100 to 150 Gigawatts of wind energy by 2020. There is a national goal of reducing energy consumption per unit of GDP over the 2005 to 2010 term by 20 percent. In the run-up to Copenhagen they promised to achieve a 40 percent reduction in carbon intensity.

Have they kept up with their promises in the last few years?

Well, we saw great progress between 2006 and 2008. But the financial crisis forced them to respond with a stimulus package that allocated a lot of money to infrastructure projects that had the result of stimulating heavy industry. That caused energy efficiency to decrease. But the central government has taken that setback very seriously.

We're having trouble convincing lawmakers to pass significant energy legislation in the States because many of them don't see an upside in aggressive legislation. What good does China see in all these energy plans?

Five things. The number one concern is energy security. China is already a net importer of coal, despite conventional wisdom that they have abundant coal resources. That's because a lot of the supply is in remote areas while the demand is more on the coast, and there's inadequate logistics capacity to move the coal around. Also, they already import 50% of their oil. Their auto market is the biggest in the world, yet it's just getting started. Car penetration rates are a fraction of the U.S. As it continues to grow, China will see increased demand for petroleum products.

Second, pollution is a factor. Local pollution incidents create social disruption that has led to citizens' unrest. This is important because the Chinese' mandate in power is predicated on social stability. Three, China sees the investment in green tech as a driver of innovation and economic growth. They need to conserve resources and are looking for less resource intensive sources. Fourth, tech innovation will create jobs and lift the nation. Fifth, they feel international pressure to start acting on mitigating climate change and they want to be seen as a partner in this field.

What evidence have you seen that China is acting on these bold plans?

One thing is you can see their investment in overseas markets.

Like China's investment in high speed rail in California?

Yes, like their interest in bidding for the California project. They're also exporting technology to Brazil and Turkey. They're producing clean coal technology like supercritical and ultra-supercritical power plants, which are essentially ultra efficient coal power plants. They're making inroads in high voltage transmission wires which send energy across remote areas and large distances while mitigating energy loss. They've always used hyrdo-power as a way to engage other countries by using their expertise and technologies. And they're the fastest growing nuclear power market in the world, attracting a lot of businesses and massive contracts to start deploying nuclear energy in a big way.

I know my first question was how U.S. policy could push China. Would it be more accurate to say that China is moving more aggressively in green tech than we are?Well they don't exactly have a national carbon pricing policy yet, but they are actively exploring it. And they're running some local carbon trading experiments in Beijing and Shanghai.

I would say that that their vision and the way they're thinking about green energy is more advanced that the U.S. It's their ability to think and plan for the long term. We're paralyzed by short term and special interests. But they're not great at creating radical new technologies, only improving them. On the other hand, we can create. But there is a risk that if trends continue and they continue to pour all this capital into resources in the green tech sector, the gap will shrink.

How would the United States passing something like the American Power Act encourage other countries to act?If America shows its seriousness with a national strategy to develop green tech and cut emissions and put a price on carbon, that will remove a lot of the excuses for countries who've been inactive. We can't reestablish leadership in the international climate talks without legally binding domestic policies. Until we do that, we're in a really awkward position where we're getting developing countries to act while we're historically the largest emitter of gases. It's hypocritical. But the moment that we act, it removes the excuses and I think it will have a positive impact.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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