25 march 2010

FINANCE: China leads major countries with $34.6 billion invested in clean technology

E&E News (03/25/2010), Lisa Friedman, E&E reporter

[4C Note: E&E's title for this article would appear to represent only private spending of the past five years, while planning in the context of the Chinese economic stimulus project is said to be 34% of $586 billion, plus another 100 billion for upgrading rail and transmission grid systems: altogether about $300 billion. This is not only far more than private sector spending. It's also far more than anything being contemplated in the West, with the effect on climate discourse noted in the article.]

China, Brazil and other developing countries are pouring billions of dollars into efforts to reduce carbon emissions and build up renewable energy markets, a trend that some experts say has turned the traditional climate change debate on its head.

A growing body of studies detail the government subsidies, regulatory policies and private investments that have sent money flowing into the clean energy sectors of some of the leading developing countries. The most recent report, out today from the Pew Environment Group, finds that China for the first time now leads the United States and all other major countries in green energy markets. Its private investments of $34.6 billion over the past five years are almost double America's.

Advocates of U.S. climate change legislation say the foreign buildup is a sign that America is falling behind in a global clean energy race. But many also feel it has blunted some of the sharpest demands from both rich and poor nations in the climate fight -- specifically developing countries' insistence that the West pay for any shift to low-carbon energy economies.

"The industrializing poor countries themselves have suddenly, in the space of two years, left that argument behind. It's been invalidated by their own behavior," said David Wheeler, a senior fellow at the Center for Global Development.

Brazil and India step up investment pace

China aims to spend 34 percent of its $586 billion stimulus package on green projects, as well as $100 billion to upgrade the rail and transmission grid systems that one report calls the "backbone of China's clean energy economy." Brazil has invested more than $11 billion into ethanol production and has created a $1 billion conservation fund to help meet its 36 percent emissions reduction pledge.

Meanwhile, India, Wheeler pointed out in a report, is poised to demand that the country's utilities buy a minimum of 5 percent of their grid purchase from renewable energy sources this year, with an increase to 15 percent by 2020. The incremental cost: $50 billion. That, others note, is on top of India's unilateral pledge to reduce its carbon intensity by 24 percent.

"India's intransigent negotiating posture has conveyed the impression that it will not accept any carbon emissions limits without full compensation by rich countries and the adoption of more stringent carbon limitations by those countries. This impression is simply wrong," Wheeler wrote, adding in an interview, "Suddenly, I think we're in a new game."

Jake Schmidt, international policy director at the Natural Resources Defense Council, agreed. He said the unilateral emission targets that China, India and other major developing countries have taken on -- combined with their government investments in clean energy -- make it difficult for U.S. lawmakers to still contend that America will be put at an economic risk by cutting carbon.

"That argument is extremely dated these days," Schmidt said. "It's kind of hard to say, 'We should move only if China and India move,' because that would mean we should move right now."

Competition issues still worry Congress

But it's less clear whether that shift in thinking will resonate in Congress, where lawmakers hashing out a new climate bill continue to worry about losing a competitive edge to China.

"I don't want to see us export jobs and export more carbon emissions by China making more steel and making more glass and making more chemicals and making more paper and making more cement," Sen. Sherrod Brown (D-Ohio) said last week (E&E Daily, March 12).

Last week, 14 Midwestern utility companies asked Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joseph Lieberman (I-Conn.) to study how a cap on emissions would affect unemployment and regional jobs if China and India fail to take comparable cuts. Many conservatives argue that those countries' intensity targets are either too low or simply represent a business-as-usual scenario.

Bill Tyndall, Duke Energy Corp.'s senior vice president for policy, said he doesn't believe changes in China and elsewhere have alleviated the strong concerns among lawmakers over losing hometown jobs.

"Those stories are getting out, they're being considered," he said. "But this whole issue around competitiveness remains very visceral."

At the same time, he and others said, members of Congress are concerned about winning the clean technology race.

To that end, environmental and other liberal groups have released a slew of reports this month that push the creation -- and potential loss -- of green jobs as a top reason for enacting climate legislation.

U.S. investments down 40% from 2008

The Pew report out today finds that for the first time in five years, the United States has lost the top spot among the Group of 20 wealthy countries in clean energy investment to China. American investments, which totaled $18.6 billion, were down 40 percent from 2008 levels. The authors attributed the dip to an absence of renewable energy standards and other regulations.

"Policy really matters," said Phyllis Cuttino, who directs Pew's global warming campaign. "While Congress is dithering and debating about what to do, China isn't debating. They know what to do, and they're doing it."

"Where there are strong policies, the money tends to follow," agreed Ethan Zindler, head of North American research at Bloomberg New Energy Finance.

But skepticism about the booming global clean-energy economy abounds.

Michael Levi, an energy expert and senior fellow at the Council on Foreign Relations, said it remains difficult to get a realistic picture of how ambitious developing countries are moving on clean energy.

Part of overseas push is to bring power to poor areas

"There's a lot happening, but it's sometimes less than the picture that people think," he said. Levi noted that manufacturing in countries like China is boosted by not only subsidies but also currency manipulation, and the technological innovation continues to come from America. Countries like India and Brazil are diving into efficiency and renewable measures to help solve their domestic energy problems, he said, but they hardly view themselves as competing in a global green competition.

"If there are countries that think they are in a clean-energy race, it's China," Levi said. "But if you're in India and you're looking at rural poverty and a level of unemployment in the country and you're looking at the scale of jobs that can be created in clean energy, the scale doesn't match up."

Marlo Lewis, a senior fellow at the Competitive Enterprise Institute, dismissed environmental groups' economic warnings entirely, calling it "sophistry ... in order to try to sell carbon prices and more market-rigging rules."

He argued that both the global renewable market and the U.S. domestic renewable market remain small, and what does exist is heavily subsidized.

"I find it just hilarious that China is going to 'eat our lunch,' as they say," Lewis said. "We're talking about capturing a large share of a very small percentage of the world's energy market. Capturing a share of a subsidized market is no way to grow your economy or revive it once it's been smashed by a financial crisis."

One area where the United States shone, according to the Pew study, was in innovation. The United States, it notes, remained the "overwhelming leader" in venture capital investment, particularly in next-generation biofuels, advanced solar, energy efficiency and smart grid technologies. Brazil, it said, came in a "distant second."

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