China has a triple incentive to become a "green superpower": environmental problems, growing energy needs, and a desire to underpin its leadership of the globe with a powerful green tech sector.

China meets most of its energy demands by burning coal--but that is quickly changing. The government is considering slapping higher taxes on and limiting credit to heavy polluters while reducing taxes and extending favorable loans to green companies. Highly conscious of the dangers rising sea-levels could pose for low-lying cities such as Shanghai, the Chinese government has set a goal to reduce carbon intensity, the amount of CO2 produced per unit of GDP rather than reducing overall emissions.

"China is getting much more serious about the environment," said Tom Miller, managing director of the Dragonomics research firm in Beijing. "If industry is not energy efficient, it's costly for economic growth. You have to import more oil and burn more coal."

China leads the world in renewable energy (including wind and solar energy, energy efficiency, and battery technology, but excluding run-of-the-river hydropower), according to the World Wildlife Fund's Clean Economy report. Its clean technology sector saw sales grow by 30 percent to $71 billion in 2011--or 1.7 percent of GDP--leapfrogging the EU, with $59 billion. The US had $46 billion in sales. The report found China success due not only to "its lower labor and capital costs, but also because of its stable government policies, strong applied R&D and well-developed supply chain."

China also gets just under a quarter of its energy from hydroelectricity, with an installed capacity almost twice as large as the next biggest producers Canada and Brazil. Expertise gained from building more than half China's dams is also driving global expansion, with state-owned Sinohydro working on projects in 55 countries. In 2010, Sinohydro poured enough concrete to fill 20,000 Olympic-sized swimming pools and moved enough dirt to fill London's Royal Albert Hall 184 times, according to the Financial Times.

Yet at the moment, much of the major domestic energy changes are being made only by bigger firms, keen to meet international business standards. Development executives say many small and medium-sized (SMEs) companies are often unwilling to pay upfront for greener technology because they already operate on very low margins. The World Wildlife Fund's report recommended Chinese companies adjust their business practices to boost domestic demand for cleantech products. Some of China's proposed tax changes address these concerns.

Some signs of improvement are visible in pilot zones, such as the Tianjin Economic Development Area near Beijing, where recycling companies are building professional recycling centers and introducing initiatives such as Industrial Symbiosis (IS), the first such project in Asia. The UK-pioneered scheme encourages companies to use other companies' waste, preventing the need to dump waste or consume new resources, which saves money and creates new jobs.

With economists repeatedly claiming that China's era of easy growth is ending, the government has responded by successfully kick-starting a world-leading cleantech sector -- one set to keep growing. It must now do more to ensure that the market for its technology is domestic, as well as international, by pushing Chinese companies to abide by greener environmental norms. At stake is not just China's global reputation, but perhaps these businesses' very survival.