How to Profit From China's Environmental Woes 14 comments
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Money isn’t the only thing flowing through China right now. Pollution has filled the streets, contaminated the rivers and clouded the skies.
About 600 to 700 million people - half of China’s population - drink water contaminated by human and animal waste. In fact, 1 billion tons of untreated sewage is dumped into the Yangtze River each year. And according to a recent study conducted by the World Bank, air pollution causes more than 400,000 premature deaths every year.
With the health of its population fading and global opposition to carbon emissions rising, China has no choice but to address its pollution epidemic. And thanks to a blistering economy and a stockpile of cash reserves, throngs of investors are eager to help Beijing wash away its troubles.
Cleantech Group LLC, which recently hosted an energy conference in Beijing, estimates that China will attract $700 million in venture capital funding for clean technologies in 2008, Reuters News Agency recently reported. Total investments could reach $2 billion by 2010.
"In the last few years we have dramatically accelerated the deal sizes and went exclusively into the clean-tech sector," Christoph Loeslein of London Asia Capital told Reuters..
Dried Up and Wasted
Beijing is hoping that the nation’s renewable energy consumption will rise from 8% now to 10% in 2010, and to 15% in 2020. Right now, 80% of China’s energy comes from coal.
That leaves a lot of room to work with, but according to a Cleantech Network report and industry insiders attending the clean energy forum in Beijing, water treatment and energy efficiency projects boast the greatest investment potential.
Of the two, water may be the most pressing concern. China’s water supply is both polluted and inefficiently managed. As a result there is no shortage of opportunity for anyone willing to wade waist-deep into the dirty business.
In addition to the problems posed by droughts and a lack of viable sources, a great deal of water in China is actually being wasted. In an article published by InterFax, Guo Youzhi, general secretary of the China Desalination Association, said that only 20% of industrial wastewater in China is efficiently re-utilized. That directly contradicts government statistics, which place the figure at a much-higher 75%.
The little water China does manage to circulate is of terribly poor quality. At the Cleantech conference, Liu Junjie, general manager of Duoyuan Global Water-Operation Co. Ltd., said 80% of China’s surface water and 40% of the country’s groundwater is polluted.
The greatest obstacle to solving the nation’s water crisis is economics.
"Artificially low water prices, as well as lack of preferential policies from the central government, mean that it doesn’t make economic sense for companies to adopt costly technologies to improve water usage efficiency and re-utilize wasted water at the moment," Guo told InterFax.
Liu corroborated Guo’s story, pointing out that China’s water prices are only one third of average global prices, despite a government pledge to increase the cost of water by 10% annually.
Where there are high water prices, such as Tianjin, there is also increased foreign investment in seawater desalinization technologies. Approximately 40,000 tons of the 600,000-ton daily desalinization capacity is the product of foreign investment from companies such as General Electric Co. (GE) and Veolia Environment (VE).
It costs around $0.54 to desalinize a ton of seawater. According to Guo, it costs between $0.20 and $0.27 to treat and re-utilize a ton of industrial wastewater with current technologies. If Beijing keeps its word and the price of water rises, the tide of investment will rise as well.
Mother Nature Does the Work… and You Profit
The second biggest environmental concern for China is the nation’s suffocating air pollution. So far, China has relied heavily on coal-fired power plants to power its rapid industrial expansion.
Between 2003 and 2006, worldwide coal consumption increased as much as it did in the 23 years prior. China was responsible for 90% of that increase. China used 2.5 billion tons of coal in 2006, more than the next three highest-consuming nations combined. The country is home to more than 2,000 coal-fired power plants, and a new one goes into operation every week.
Those plants produce massive quantities of hazardous carbon emissions. Early last year, China surpassed the United States as the world’s top emitter of greenhouse gases. The smog-filled skies have resulted in acid rain, desertification, dust storms and declining health.
The nation’s climate-change program has set a target of reducing greenhouse gas emissions by 950 million tons over the next two years.
"China is already the world’s factory," Yang Ailun, climate change program manager at Greenpeace China, told Bloomberg News. "It could be and should be the manufacturing hub of clean technology for the world as well."
China-based manufacturers of alternative energy technologies are already taking off in a big way. Companies specializing in alternative energy have seen their stock prices soar. Suntech Power Holdings Co. (STP) saw its stock price skyrocket 142% in 2007. Solarfun Power Holdings Co. (SOLF) jumped 208%.
Three Chinese companies struck it big in their initial public offerings (IPOs) last year as well. The stock price of JA Solar Co. (JASO) has launched 280% since its February IPO. Yingli Green Energy Holdings Co. (YGE) has climbed 199% in its first six months. And LDK Solar Co. (LDK) is up 64% in its first six months as well.
Solar power isn’t the only clean energy industry showing promise either. China became the world’s sixth-largest generator of wind power last year. Now, the country’s largest manufacturer of wind turbines is planning to raise $244 million dollars from its IPO. In a statement to the Shenzhen Stock Exchange, Xinjiang Goldwind Science & Technology Co. Ltd. outlined plans to sell 50 million shares at about $4.88 a share.
According to KGI Securities Co. Ltd., Goldwind has 33% of China’s wind power equipment market.
"As China’s wind power sector takes off, we think Goldwind is well positioned to become a major beneficiary, thanks to its strong brand and first mover advantage," Steven Liao, a KGI Securities analyst, told Bloomberg.
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This article has 14 comments:
> jack
> scott
Another backdoor way to play the wind energy business is HOLI. They are in the automation control systems. They specialize in control systems for industrial manufacturing, rail and subway. They recently won a contract for a new high speed rail line. They also are the only Chinese company authorized to provide control systems for nuclear power plants. They have studied the wind energy business and have designed wind turbine control systems. They feel the equipment is very similar to other industrial applications. The Chinese government is mandating that Chinese wind turbines contain 70% Chinese made components. This law won't be implemented for a couple of years but Chinese manufacturers will likely line up Chinese sources. HOLI is negotiating with Goldwind now and expects to make a deal soon.
Bobwins
seekingalpha.com/artic...
Website: jstusa.net
An interesting website is SYMX. It doesn't stop at coal, but can be used
for all sorts of feed stock.
User127104 seems to think the impact of sirfisup's view is simply an increase in the price of a TV set. Think more along the lines of an increase in the cost of every item you buy, magnified many times by the mark up at each stage of the product production process (since energy fuels each stage of the process).
China ahead in carbon race - comment
When the Olympics torch is lit tonight, through the expected smoggy haze, China's "questionable" environmental credentials will be talk of the town.
But as is so often the case, there will be only a loose relationship between the "perception" surrounding this vexing question and the "reality" that isChina today.
There's no escaping the fact that China is the largest greenhouse gas producer, accounting for a quarter of all carbon dioxide emissions.
Far from being an environmental miscreant, China is also well ahead of the curve in terms of tackling this looming challenge.
Two measures highlight the flipside of China's environmental dichotomy. It is the largest producer of renewables globally, with more than 150 gigawatts of installed capacity. And it's also the largest generator of certified carbon credits.
And contrary to everything you'll hear, China is also proving itself to be an increasingly efficient consumer of energy, despite its aggressive industrialisation. It has cut the energy intensity of each unit of GDP by more than 60 per cent since 1980 - and is targeting another 20 per cent reduction by 2010.
Independent think tank the Climate Group has just published a detailed analysis of the state of play in China. Titled China's Clean Revolution, it outlines how this expanding economy has tackled being part of a broader economic problem by being a key contributor to the solution.
"In the move to a low carbon economy, we believe that China will no longer be a developing country following where others have led, but a pioneer leading the way," the Climate Group concludes.
It's important to understand that China's status as the leading emitter owes far less to any operating inefficiency and much to its sheer population base. Per capita emissions in 2007 were just 5.1 tonnes, compared with more than 19 tonnes in the US.
With an eye on the future, China is spending big on renewables. Last year it invested $US12 billion in new projects. This is set to match the global renewables leader, Germany, in absolute terms and on a percentage of GDP committed.
By next year China will be a clear leader. It's scheduled to spend more than $US33 billion a year between now and 2020 as it moves to lift the share of renewable energy from around 8 per cent of total energy to 15 per cent.
The Chinese government has received support for this stance from some unlikely quarters. Greenpeace energy spokesperson Liu Shuang told Scientific American that ultimately "renewable energy can provide 50 per cent of energy needs in China".
Greenpeace recently reviewed China's Olympics effort, observing that "no nation has a more important role to play . . . in making the urgent transition to sustainable development". While it delivered an overall mixed report card, it did make a number of pertinent observations.
"The environmental Olympic initiatives and investment made by Beijing in some cases far exceed those of many developed and developing countries with vast experience of managing environmental issues, such as Sydney and Athens".
It's not just in the use of renewables that China is providing a lead. It is second only to Japan in terms of solar photovoltaic technology manufacture and is set to become the world's leading exporter of wind turbines by 2009.
China has also emerged as the leading player in the global carbon offset market.
While a signatory of the Kyoto agreement, as a developing nation it has embraced the carbon offset market without any mandated requirement to cut emissions.
As a result it's at the forefront of the carbon credit structure established under Kyoto and administered by the United Nations.
The UN's clean development mechanism (CDM) created a framework for the generation of tradeable credits known as certified emission reductions (CERs).
The intrinsic value of CER credits that are generated will be determined by market forces. Last month, CERs for December 2008 delivery were trading at EUR21.11 on the European Climate Exchange.
CERs flow from a range of carbon offset projects. These are accessed by emitters that will face potentially high abatement costs.
A majority of these offset projects have been established in the developing world, with China dominating.
But CDM projects have not only attracted interest from carbon emitters. Investment funds such as Peony Capital, backed by the Bill and Melinda Gates Foundation, have been set up to fund these projects. Peony raised EUR400 million ($676 million) to invest in Chinese CDM-sanctioned projects.
A recent review of global carbon markets by Lehman Brothers found that some 3500 of these projects have entered the CDM review process. Of these some 376 have so far received offset credits.
China has dominated this process. Its projects accrued 47 per cent of all CERs that were issued in the second quarter of this year. Cumulatively they have accounted for more than 31 per cent of all CERs issued.
Carbon offsets suit China. Not only is it a preferred destination for global investment into carbon offset projects, but ultimately it will be home for a significant portion of these offsets. Chinese industry will continue to face growing pains. Its carbon footprint will inevitably grow. But with a strong and comprehensive "low carbon" policy framework in place, expect it to handle the challenge well.
www.ftek.com/pdfs/TPP-...
Take a look at the before and after pictures on page 11!
No Greens have not domintated the debate. I would argue that the exact opposite is true, at least in America. We are innundated with propaganda from the conservative side, trying to convince us that renewable energy can't replace fossis fuels. Totally untrue. Fox news for instance has a talking head, telling us that solar energy couldn't propell a small boat, never mind contribute meaningfully to the energy grid, and no one at Fox (or Faux) news questions this assumption. We are told that the intermittency of solar and wind are huge problems with no solution in sight. Meanwhile, Denmark has 20% wind energy. Where's the intermittancy dilemna there? Maybe it's because an oil lobby doesn't control the debate and legislation in Denmark. In this day and age, anyone who isn't an environmentalist is just plain ignorant. Sorry if that offends anyone, but it is the plain truth.
Some of us have been in the ute business for a long time. We have families just like everyone else. We believe the US needs to have a balanced fuel source for power generation, and that includes coal and nuclear. We have become accustomed to being called killers and maimers of children. Meanwhile, the electricity we generate in a reliable manner and delver at a reasonable cost is daily saving lives and making people's lives healthier and safer in many ways. I am not a part of some oil lobby or uninformed on either energy policy or environmental issues, both of which I deal with regularly.
As for being an environmentalist, I consider myself a conservationist and a person who treasures clear air and water as much as anyone, perhaps more than most, since I have a 30% lung capacity due to childhood polio.