Wednesday, February 14, 2007

The East Could Be Green

When China launched its first satellite in 1970, it broadcast a simple recorded message around the world: "The East is Red." China has changed a great deal since then, becoming more mercantilist than communist. It is now effectively one enormous, dirty factory: consuming vast coal reserves to become the low-cost exporter to the world, and spewing out billions of tons of soot and greenhouse gas in the process. An article in yesterday's Wall Street Journal suggests a very different approach to energy could be in the offing within China. The potential impacts on China of the negative consequences of climate change are apparently gaining the attention of China's more foresighted leaders. If they connect the emissions spawning climate change with outcomes that impede their economic growth, water management, and the other paramount concerns of the state, things could shift quickly.

Because of its rapid growth and reliance on coal, China is on a path to exceed US greenhouse gas emissions within a few years. Although a signatory to Kyoto, it is not bound by emissions reduction targets, and its preferred metrics for comparing emissions--on a per-capita or economic-output basis, rather than in absolute terms--suggest that it doesn't see an obligation to cut its current emissions to make up for our past emissions. Unfortunately, that viewpoint sets up as much of a losing game for the world as the one in which the US and China eventually face off over a shrinking pool of internationally-traded petroleum, to fuel our respective, growing oil-import needs. China seems much likelier to address its emissions if it sees an advantage in doing so, and a large-scale push on renewable energy that drives these technologies rapidly down their cost curves could be just the ticket. The country's Renewable Energy Law, which went into effect last year, represents a modest but important starting point.

It's worth recalling how post-war Japan absorbed the teachings of manufacturing-excellence gurus such as W. Edwards Deming, and turned them into the means of beating American industry on its home turf. Any number of experts and pundits are making the case now for renewable energy as a strategic, rather than merely tactical response to problems of energy security and climate change. While hardly ignored here, these ideas mesh well with two key Chinese advantages in implementing them faster: extensive state intervention in the economy, facilitating a much quicker re-prioritization of national effort, and a rapidly growing infrastructure network, into which renewable energy could be deployed without having to compete with incumbent suppliers or old, fully-amortized facilities. It's hard enough to compete with China's low labor costs, though we can rationalize that they will eventually have to rise. What if they also had renewable energy technology that gave them both lower emissions and lower energy costs, and a head-start in deploying it?

I find the comparison of China's rise with Germany's a century ago fascinating: two large, vigorous countries, each having emerged from a period of internal consolidation, and each challenging the established leader of a globalized world. We know how Germany's competition with Great Britain ended; China's challenge to us needn't to turn out the same way, particularly if the basis of competition turned toward an inherently stabilizing field without a winner/loser dynamic: greener energy.

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