How to Drive U.S. Clean-Energy Job Growth? Collaborate With China

With the clean-technology race intensifying, collaborating with China in developing a Sino-American clean energy alignment provides the best chance to create jobs in both countries

Small homes are a part of the character of San Francisco. So when the owners of the largest residential lot in the city announced their plans to increase the footprint on their nearly one acre property, the neighbors went to battle.  Located in Monterey Heights, the "Asian Beverly Hills" of San Francisco, the home belongs to the Chinese Consulate, and is therefore afforded special protections by the Vienna Convention on Diplomatic Relations.  The diplomatic mission could do as they pleased.  Still, they pursued a diplomatic solution to help appease their neighbors, and soon after began construction on a seven-bedroom, two-bathroom, two-sitting room and two-tearoom add-on to the compound.

The neighbors didn't know that the expansion of the Consulate was only one sign of an increasingly close relationship between the city of San Francisco and China.  In particular, the city of San Francisco has been pursuing a thoughtful policy to recruit Chinese clean technology companies to headquarter themselves in the city.  San Francisco's approach stands in stark contrast to the tenor of many recent U.S. gestures towards China.

An increasing number of voices in the U.S. are ratcheting up the rhetoric on China's domestic clean technology investments, in the hopes of creating a domestic groundswell for U.S. leadership.  New York Times columnist Tom Friedman writes, "[China] sees the future trends and is betting on them. Indeed, I suspect China is quietly laughing at us right now." Elizabeth Lynch, in Foreign Policy Digest, writes, "In today's globalized economy, rising powers like China are willing and readily able to capitalize on America's missed opportunities." Senator Charles Schumer (D-NY) has said that "there's no question that China is ignoring trade rules in order to cheat themselves into first place in the clean energy manufacturing race."

But these voices, pulling upon traditional jingoistic impulses in the American public, are playing a dangerous game.  Clean technology advances will require global investments, and the future economic success of the United States in this arena will require collaboration not competition. Joshua Green quotes the need for 13,000 new gigawatts of clean energy installed in the next thirty years in order to keep us at a level of carbon in the atmosphere of 450 ppm. That's basically like installing a thousand large wind turbines or a nuclear power plant every day across the world.  Today we're not moving at a fraction of that rate. And that gets us to the heart of the issue.  If we assume that climate change is not just a national business opportunity, but an existential challenge for humanity, can we fight this challenge with national agendas alone?  After all, it doesn't matter whether coal is being burned in Arizona or Guangzhou, the CO2 is everyone's problem.

It's true that China is developing its energy infrastructure at a breath-taking speed.  As China's population demands greater energy availability, their internal clean tech market may reach $500 Billion to $1 Trillion by the year 2013. According to Keith Bradsher, China is on track to produce more than fifty percent of the world's solar panels this year.  The Chinese government pumped $7.3 Billion in funding towards creating a SmartGrid in 2010, according to ZPryme research.  According to a report by the Breakthrough Institute, Rising Tigers, Sleeping Giants, the governments of China, South Korea and Japan will invest $519 billion in clean technology between 2009 and 2013, compared to $172 billion by the U.S. government.  China helps domestic firms that are developing their cleantech industry by giving them favorable land use rights, low interest loans, placing export restrictions on raw materials, and providing speedy administrative review and approvals.  Some of these actions are undoubtedly trade violations, and China will need to open its markets wider if it hopes to collaborate with the U.S. and protect itself from the wrath of senators and unions.  Despite these barriers, it's hard not to be optimistic that China is jumping to the front of the clean energy parade.  More than thirty years after Jimmy Carter put solar panels on the White House, it finally appears that the time has come for clean technology.

According to Rich Lechner, Vice President for Energy and Environment for IBM, we should move beyond the rhetoric.  "We shouldn't view this as a competition," he tells me after announcing a new energy-management program by IBM at the West Coast Green conference. "We ought to learn from each other."  His view is that the most important condition for success of industries and nations will be operational efficiency, and clean technology stands at the forefront of the conversation.  "It's less about competing for advantage, and more about the long term viability of your company and industry," he says.

With a large and vibrant Chinese community, San Francisco has comfortably pursued China as a key economic development partner.  San Francisco is a sister city to Shanghai, and has deep ties to China dating back to the Gold Rush. San Francisco Mayor Gavin Newsom has spearheaded the effort, launching repeated trips to Shanghai with San Francisco business leaders.  Back at home, the city has hosted "speed-dating" events where Chinese companies looking for U.S. investment meet potential investors.

Solar Enercorp, a solar panel manufacturer that attended a recent city event, wants to be known as a "U.S. company that does its manufacturing in China."  San Francisco offers a local Payroll Tax Exemption for up to 10 years for clean energy businesses with more than 10 employees.  San Francisco's Green FinanceSF offers a program where property owners can finance energy saving projects on their property by repaying the cost of the project through their property taxes.  San Francisco has also set up ChinaSF, a public-private program organized by the San Francisco Center for Economic Development. ChinaSF has attracted  ten Chinese companies to San Francisco, including Suntech America based in Wuxi in Jiangsu Province, one of the world's largest solar cell makers; and Yingli Green Energy headquartered in Baoding in Hebei Province, a leading photovoltaic product manufacturer. Both Suntech and Yingli have since moved to open up manufacturing facilities in Arizona and Texas respectively, creating additional American jobs.

San Francisco has got it right.  Collaborating with China in developing a Sino-American clean energy alignment provides the best chance to create jobs in both markets and to exploit the strengths in our respective economies.  The Marshall Plan strengthened both the European and American economy.  Maximum employment in Europe would not have been possible without bringing down trade barriers and strengthening institutions that managed that trade.  China is rapidly changing from the world's factory to the world's largest market.  And in this transition China and the U.S. will increase their dependencies.  Chinese companies will rely on U.S. partners with critical intellectual property, capital, and know-how.  These partnerships will provide greater access to the Chinese markets, and eventually a higher regard for intellectual property in China.

Attacks on Chinese entrepreneurialism are nothing new in the United States.  In 1882 President Chester Arthur signed the Chinese Exclusion Act, which kept out new immigrants as the gold rush slackened and the post Civil War economy faltered.  Now is not the time for nationalism.  With a growing global middle class, diminishing resources and climate change on the horizon, we need to do everything we can to speed the adoption of clean technology globally.  China could learn from the U.S. innovation and venture investing framework; the U.S. could learn from China's planning and infrastructure investments.  We need China, and China needs us, now, more than ever.