China Is Pulling Ahead on the Environment 22 comments
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This commentary originally appeared in Forbes.
When I first moved to China, in the mid-1990s, every time I went outside my throat felt like someone had taken sandpaper to it and my eyes burned in pain. At the time, 80% of the country's electricity came from coal, factories belched soot and grit into the air and I could count on one hand the number of times a year I saw blue sky. The World Bank had found that 16 of the world's 20 most polluted cities were in China.
China's neighbors protested that blankets of smog from factories invaded their territory. Even California, 5,000 miles away, detected Chinese contaminants in the air. And that was all before an increasingly wealthy Chinese populace made the country the largest auto market in the world. China's pollution problem a decade ago was very, very bad.
Is it still so dire? What about the future? Pollution is definitely still a problem: Levels of particulate matter in the air are far above safety thresholds--they're about 10 times as bad as New York's. However, there is reason for real optimism.
To begin with, the Chinese government recognizes that it has a severe problem and is doing something about it. This is a turnaround from just a few years ago, when the government argued that heavy pollution was a necessary part of economic development, Western countries having gone through it in the Industrial Revolution. The nation's rulers were more worried about feeding their citizens than about preserving their environment.
But today, most Chinese citizens have access to adequate food and shelter and are increasingly concerned about pollution's effect on their health.
Spiraling health care costs have also pressured the government. Unlike in the U.S., where private insurers control the market, most Chinese are covered by state health care programs. With mounting health care costs incurred by pollution straining an already unstable health care system, the government has realized it has to act.
Thus it has pushed the use of renewable energy and tried to reduce reliance on fossil fuels. The country has plans to provide 15% of its energy needs from renewable sources by 2020; it recently suggested that it will revise that goal upward to 20%. Most of that renewable energy will come from hydroelectric, solar and wind projects. Installed wind power capacity already jumped from .76 gigawatts to 12.21 gigawatts between 2004 and 2008. The government has announced it aims to have 30 gigawatts of wind power capacity by 2020; it will likely have closer to 100 gigawatts.
To get around the objections of the power brokers who benefited from the soot-belching status quo, the central government cannily used the 2008 Beijing Olympics and 2010 Shanghai World Expo to break down their resistance. Arguing that China would lose face in the international community because of its pollution problems, the government imposed more stringent automobile emission controls than those of the U.S., made stores stop giving away free plastic shopping bags and made capital investment harder to pursue in high-polluting and high-water-usage industries.
In Shanghai, public buildings are not allowed to set their thermostats below 78 degrees Fahrenheit in the summer. Some local officials have eased labor laws to spur economic growth during the economic crisis, but the government still won't green-light investments that run counter to China's green objectives.
The government is actively promoting private investment in clean technology. Despite the protectionism creeping into China's $586 billion stimulus package, it is even seeking out foreign investment. Why? Because it knows that multinational corporations can offer superior technology. Foreign companies like General Electric (GE) and Corning (GLW) have taken advantage of this situation to sell water- and air-purifying treatment products, generating new profits that offset weak sales in the U.S. and Europe.
Many Chinese entrepreneurs are launching new businesses in the field. Analysts often argue that Chinese companies are better at copying than at innovating, but that's not true anymore. More and more Chinese are studying in the West and gaining management and technical skills at multinational firms, then venturing out on their own. Look for more innovative Chinese firms to emerge and become world-class companies. The country is already fast becoming the world leader in clean technology innovation.
Venture capital and private equity businesses are noticing all this. My firm, the China Market Research Group, interviewed several dozen venture capital and private equity executives in the last three months, and more than 80% of them told us they expected to invest what adds up to several billion dollars in clean technology projects in China. Many have already put money into solar companies like LDK Solar (LDK) and Suntech (STP).
China's automobile manufacturers may be the most innovative in the world today. Unburdened by a legacy of factories, unions and gas stations, they are rushing to produce electric cars that are years ahead of anything from Ford Motor (F), General Motors (GM) or even Toyota (TM). BYD (BYDDF.PK), which is backed by Warren Buffett, is selling electric cars that not only reduce carbon dioxide emissions but are stylish too. Its sales have soared 183% this year to more than 200,000 cars.
Look for the boom in electric cars in China to continue as the government adds tax breaks and pushes taxi companies and government fleets to go electric. More than 20 million electric bikes have been sold in the last three years too. The technology is improving at both the low end and the high end.
China's economy is going to keep growing, and its growth will continue to strain the environment as wealth increases and more and more consumers demand packaged goods, cars and electricity to power their lives. The challenges that come with growth are very real, but so are the steps China is taking to mitigate the damage it causes while taking up the mantle as a global leader in clean technology.
It is too early to breathe a sigh of relief, but so far, the situation keeps getting better. For savvy individual investors and companies alike, China's legacy of terrible pollution translates into a wonderful opportunity for growth.
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This article has 22 comments:
Don't let the naysayers about China slow you down. There are many people in the US that just don't want to believe that a strong centralized government (a “benevolent dictatorship” as I have previously called the Chinese government) can be a better government than a democracy in certain situations. Now is one of those situations in the world, and especially in China. The world needs to transition from an oil and dirty-coal (we may be able to burn coal without pollutants and huge CO2) economy to an alternative energy electric economy. Only strong-arming vested business interests will accomplish this like you said “To get around the objections of the power brokers who benefited from the soot-belching status quo, the central government cannily used the 2008 Beijing Olympics and 2010 Shanghai World Expo to break down their resistance.”.
In the next 20 years, China is going to have a bigger gross domestic product than the US, and it will have leapfrogged the US in developing an alternative energy electric economy because its “benevolent dictatorship” government can make big changes happen that “gore the ox” of big interests. Sure, in 20 years, China will still be generating huge amounts of energy from coal, and it will be importing large amounts of oil, but it will be the world leader in alternative energy production and percent of plug-in electric vehicles, and it will be well on the path to a low-CO2, low-pollutant, renewable energy future. The US will be importing Chinese technology to catch up.
For those of you that think the alternative energy electric plug-in vehicle economy will be an economic burden that will slow down growth, you are too near-sited. It will be just the opposite. This is what the Chinese government seems to know that many in the US miss. Now that oil is expensive, there has been a big new push to develop alternative energy technologies. These technologies are advancing at a rapid pace, especially solar and battery technology. The Chinese are heavily promoting these technologies intending on being the leader in them just like the Japanese of decades ago promoted car technology and became the leader in it. Want proof? Look at the all the Chinese solar companies like STP, TSL, YGE, etc, that are driving down solar prices, and the uber-aggressive battery and car company BYD.
The question is will these very small clean energy projects become enough to overcome the damage already and what will be done in the future, poisoning the country to the point of no return?
The corruption in and out of the gov is so large RE isn't likely to make much difference for 30-50 yrs.
You ever been to China?
Thanks Shaun for giving some insight to the matter
> One hundred years ago, American cities were filthy dirty, with coal
> burning belching from everywhere too.
Not to mention horse exhaust ;^P
But we have resources to change and China has only very dirty coal and too many people. It just doesn't look good for them.
We will see if the central government can curb local corruption. My guess is they will to some extent because there is going to be a growing outrage about it.
On Sep 02 04:51 PM jerrydd wrote:
> The corruption in and out of the gov is so large RE isn't likely
> to make much difference for 30-50 yrs.
back to China & energy, basically they are moving away from reliance on coal, this year they approved an additional 12 nuclear power plants on top of the 25 already being built. Not going to get draged into a semantic argument on nuclear power, but it's certainly cleaner technology.
What I am saying by calling the Chinese government a “benevolent dictatorship” is that it is managing resources such to continuously increase the living standards of its citizens – all 1.3 billion of them (ouch). This is in great contrast to many democracies (supposedly the best form of government) around the world that mismanage their economies which leads to little increase in living standards for average people.
How about Mexico where highly corrupt one party rule has done little except waste its oil reserves to make a few people very healthy. Or how about India, another democracy, that is corrupt and bureaucratic to the bone. I saw a 60 Minutes report a number of years ago that estimated about 40% of the economy is black market. It is probably the same today. Hundreds of millions of people in India have no electricity. Is there any effort to alleviate this – no.
At least in China, the government has the power, will, and economic resources to progressively improve life for common people.
As for the Tiananmen Square Massacre. I believe (I have no hard facts on this) it was the wake-up call for the Chinese government. When they saw one man holding grocery bags standing down a column of tanks on world-wide television, they realized that they must invest in the future of average people or risk revolution.
This shows another thing about Asian cultures – maintaining “face” is huge. Just like how the Chinese government was embarrassed by Tiananmen Square, it was very motivated to put on a good face for the 2008 Olympics. The Chinese want very much to be a first world country.
On Sep 02 11:41 PM 1madboomer wrote:
> What was benevolent about the 'Tiananmen Massacre' or the bloody
> put down of the 'Xinjiang protests'? Does a benevolent government
> detain, imprison and execute dissidents for nothing more than opposition
> to policy? That being said, each time I have gone to China I have
> noticed an improvement in air quality. the water quality, however,
> leaves much to be desired.
Road runner, you have made good points. Chinese people work hard and save money. The irony is that there is a better climate for the small business in China than here. That alone is a condemnation of what is going on here in the USA.
The labels people use blind them to reality. Our government is also a seat of corruption. Our ancestors risked a great deal to come here and fought for the right to criticize and change governments.
The Chinese government has many challenges ahead of it. Local corruption is one of the worst. As people there gain access to the internet and information, there will be increased pressure to counteract this problem, among others.
I find it disheartening that we are dragging our feet on moving to alternate energies, making ourselves energy independent, and ending our support of people in the middle east who hate us.
Arguing about the "brutality" of the Chineese government is ridiculous. The issue is who will win the race to develop renewable clean technology. Given the U.S. ignorance re renewables and the well funded oil lobby, the U.S. is forced to run this race hopping on one leg.
First, local corruption is a big problem in China. I see it as the next focal point for dissention, protests, and possible riots. The earthquake a couple years back showed the world how bad local corruption is. Many were killed, especially children, from sub-standard construction allowed via local government kick-backs from construction companies. The Chinese government must start putting pressure on local corruption or face uprisings. It will be interesting to see if the central government has the will to battle with local government. The central government could risk opposition to its power from resentful organized local officials.
Second, the advent of personal communications via the Internet, cell phones, texting, etc. has made it difficult for central governments to suppress freedom of speech. Freedom of speech is a backbone principle of a democracy. Without it, a democracy can easily become a dictatorship that controls the media to promote the ruling party and “bad mouth” any opposition.
I believe this is what has happened in Mexico for decades and is happening with a vengeance now that the drug cartels seem to be running Mexico. I just heard another news story where a Mexican reporter was intimidated to flee to Canada. One of his partners in Mexico was killed.
Look at Iran for how personal communications is not allowing the sham election to be solidified by the news media in peoples minds as legitimate.
Personal communications is also letting it be known to many people in China that local corruption is a problem everywhere in China.
Go freedom of speech! Keep the pressure on the oppressors!
On Sep 03 01:09 PM oilsands wrote:
> Thanks for a good article, Shaun.
> Road runner, you have made good points. Chinese people work hard
> and save money. The irony is that there is a better climate for the
> small business in China than here. That alone is a condemnation of
> what is going on here in the USA.
> The labels people use blind them to reality. Our government is also
> a seat of corruption. Our ancestors risked a great deal to come here
> and fought for the right to criticize and change governments. <br/>The
> Chinese government has many challenges ahead of it. Local corruption
> is one of the worst. As people there gain access to the internet
> and information, there will be increased pressure to counteract this
> problem, among others.
> I find it disheartening that we are dragging our feet on moving to
> alternate energies, making ourselves energy independent, and ending
> our support of people in the middle east who hate us.
I like nuclear since out buddy to the north, Canada, has a good supply of Uranium. But, I hesitate on going full speed on nuclear because of the huge up front costs (like $10 billion a pop) and lengthy lead time (like 10 years). This is a huge financing burden for a utility. I don’t want another Bonneville Power debacle of 1983.
This financing issue is why I am looking forward to new nuclear power designs that are in development. Some are supposed to cost less and be faster to implement. There might even be some future investment opportunities in nuclear if a design catches on as the new best design.
On Sep 03 01:16 PM knight wrote:
> Only real way to do this is Nuclear energy. Wind and Solar are still
> decades away from being viable.
On Sep 02 11:56 AM notsosmart wrote:
> more bs.they increased their coal burning by almost 7%.fortunately
> the communist party high mucky mucks have to breath the same air
> or it might be even worse.
I BELIEVE WE WILL HAVE A GENERATIONAL CHANGE TO OUR APPROACH TO FUTURE ENERGY NEEDS[ THE LIFE BLOOD OF OUR CIVILIZATION] -- IN TRANSPORTATION, ELECTRICITY [ WITH NO POLLUTION AND NO CARBON FOOTPRINT] WILL EVENTUALLY POWER ALL OUR TRANSPORTATION. WHERE WILL ALL THE EXTRA ELECTRICITY COME FROM? NUCLEAR ENERGY IS THE ANSWER ALTHOUGH IT MAY TAKE ALMOST A GENERATION WITH LONG LEAD TIMES AND THE NEED FOR MORE EFFICIENT AND COST EFFECTIVE FACILITIES. IN THE INTERIM SOLAR ENERGY AND WIND AND GEOTHERMAL POWER WILL ALL HAVE A PIECE OF THE ACTION AND MAY PERMANENTLY ALWAYS HAVE A ROLE. COST EFFECTIVENESS AND SUPPLY WILL DETERMINE HOW LARGE THEIR ROLE WILL BE. IN THE NEARER FUTURE HYBRID VEHICLES WILL HAVE THEIR DAY FOR A SHORT PERIOD OF TIME. NATURAL GAS UNTIL SUPPLANTED BY NUCLEAR POWER WILL HAVE A BIGGER ROLE THAN BEFORE AS IT SUPPLIES CNG AS AN INTERIM TRANSPORTATION ENERGY FORCE AND WITH INCREASED SUPPLY PARTICULARLY IN USA WILL WHITTLE AWAY AT OUR USE OF OIL AND COAL AS THE PRIMARY SOURCE OF ENERGY FOR HEATING AND ELECTRICAL ENERGY GENERATION.
IN THE LONG GENERATIONAL ENERGY CHANGE, ELECTRICITY POWERED BY NUCLEAR ENERGY WILL RUE THE DAY.
UP TO NOW AMERICAN INGENUITY, INVENTIVENESS , AND TECHNOLOGY HAS PRODUCED THE MEANS TO EFFECT ENERGY CHANGE [ BOTH IN SUPPLY AND DEMAND] THAT HAS CONSTANTLY CHANGED THE FACE AND STRUCTURE OF OUR CURRENT CIVILIZATION. JUST TO MENTION A FEW LANDMARKS OF THE PAST-- THE ELECTRIC LIGHT BULB, THE TELEPHONE AND WIRE COMMUNICATION, THE STEAM ENGINE, THE INTERNAL COMBUSTION ENGINE, AND THE WIRELESS COMMUNICATION AND NETWORKING OF RECENT DEVELOPMENT.
ARE WE UP TO THE CHALLENGE THAT WILL BE NEEDED IN THE FUTURE TO CREATE A RENEWABLE AND CLEAN ENERGY SOURCE? I HOPE SO.
I am very pro-american, and was never anti-chinese-people but anti-china when it was a brutal dictatorship. I now find myself cheering for the chinese people to win....that being to force the central government to adapt to change. It appears that may be happening and I will be the first to applaud it's success if it works in todays world, where American technology tbrought about through the American system of freedoms, has brought us to a point where it is possible to change the world. We have gotten the world, safely, this far along.
That being said, if reforming the chinese central government, whether it is to put on a fresh face for the world, responding to the needs of the chinese people, or both, can lead the way out of this global crisis, then let it happen. If it happens to show that a socialistic government can be more effective than a capitalistic one, now that the technology is finally available to cater to the true needs of people, then so be it.
I have to agree that the political left and right extremism, special interests, and the power of wealth not willing to compromise, is handcuffing our government's ability to change as quickly as may be needed to continue to lead the world in this new war, that of people-needs inherent in our constitution.
Clean air and water. Healthy food and shelter. A good place to start. But never forget that the US is a combination of capitalism and socialism, and will under any circumstance re-emerge as world leaders.
In any event....it is time to go ball-to-the-wall Green.