In Clean Energy Race With China, Both Countries Come Out Ahead

Published on
by
The Washington Independent

In Clean Energy Race With China, Both Countries Come Out Ahead

by
Andrew Restuccia

China established itself years ago as one of the world's leading producers of solar energy equipment. (Imaginechina/ZUMApress.com)

In a last-ditch effort to build support in the Senate for a
comprehensive climate bill this July, President Obama told the White
House press corps that a failure to pass the legislation could help
cement China’s position as the world clean energy industry leader.

"We can’t stand by as we let China race ahead to create the
clean energy jobs and industries of the future,” he said. “We should be
developing those renewable energy sources, and creating those
high-wage, high-skill jobs right here in the United States of America.”

Conjuring up images of the Cold War, the race metaphor has become a
go-to talking point for American politicians during the last year. By
all accounts, the United States is getting lapped in the race for the
so-called clean energy economy. During the last year or so, the Chinese
government has made huge strides in reducing its carbon dioxide
emissions and, above all else, making the country a veritable testing
ground for research, development and large-scale deployment of wind and
solar technology.

The United States, on the other hand, has failed to pass even
scaled-back energy and climate change legislation. The Obama
administration is betting that there is still hope — that the clean
energy race is not yet won and the United States can come out on top.

But some experts say that while competition is essential, the
metaphors used to describe our relationship with China on energy and
climate change fail to account for a number of nuances, including the
fact that the global supply chain makes any one country’s border less
clear. In a sense, America and China are more like partners in a relay
race, where each country’s advances helps the other get ahead.

Edward Steinfeld, a political economy professor at the Massachusetts
Institute of Technology and director of the school’s China program,
argues that framing the relationship between the United States and
other countries as a race is “sort of divorced” from the way technology
is developed and deployed. The parts necessary to manufacture a wind
turbine, for example, are likely produced all over the country by
multinational corporations.

“We’re talking about complicated systems,” he said. “We’re not
talking about a shoe. Usually these systems involve constellations of
companies, in most cases global companies. In the end, it’s really hard
to identify exactly what flag is on any given product.”

Because China has positioned itself as a clean energy leader, many
companies are looking to China to conduct necessary research and
development. In order to bring costs down, research and development
must be done in the location where the product can be deployed on a
massive level. Right now, Steinfeld said, that place is China.

But although technologies are fine-tuned in China, they are not
always manufactured by Chinese companies. For example, several years
ago, as part of a massive effort to reduce greenhouse gas emissions
from the country’s rapidly growing industrial sector, the Chinese
government declared that all coal plants must install technology that
keeps sulfur dioxide from entering the atmosphere.

“Out of nowhere, the world’s biggest market for smoke-stack scrubbers was in China,” Steinfeld said.

Though local technology companies came forward to design the
scrubbers, the Chinese government opted to use designs from Europe,
Japan and the United States, partly because there was little confidence
in the skills of local companies and partly because the foreign
technology was more developed, Steinfeld said.

The same thing is now happening with other Chinese policies. The
country is looking outside its borders, and foreign companies,
including many in the United States, are eager to step up to the plate.

“If you’re an American company, of course you’re going to go to
China,” Steinfeld says. “Where else are you going to go? You need to
team up with the people that are going to let you develop the
technology.”

Because companies are able to use China as a testing ground for
their clean energy technologies, the price of solar panels and wind
turbines has gone down.

“I think the most tangible impact of China’s energy policies is that
we’re now buying not just wind turbines, but solar panels from China,”
said Sierra Club Director of International Climate Policy John
Coequyt, “and the price of those products is very competitive.”

Therein lies the problem for many in the Obama administration and
elsewhere. Though in some ways it’s good that Chinese development has
made the cost of parts for wind turbines and solar panels cheaper, it
makes it much more difficult to develop a domestic clean energy
manufacturing base here in the United States.

The United Steelworkers, in a September petition to the Obama
administration, argue that China is unfairly subsidizing exports to
encourage companies in the country to send their clean energy products
around the world. At the same time, the union accuses China of limiting
the exports of certain rare-earth minerals necessary to produce solar
panels so that foreign companies will settle in the country.

Both of these charges would be violations of international trading
rules, and the United Steelworkers are hoping that the Obama
administration will raise the issue in front of the World Trade
Organization. “I do think they will take up some of this because some
of it is so obvious,” said Linda Andros, legislative counsel on trade
law issues at the United Steelworkers. “They don’t have to. They have
discretion. But on the merits the case is there. The blatant stuff
you’ve just got to take up.”

But some experts argue that regardless of whether the United States
can compete with China on clean energy manufacturing, expanding U.S.
reliance on wind and solar will create local jobs that can’t be
exported to China.

Lutz Weischer, research analyst at the World Resources Institute,
says many solar facilities create a significant number of local,
American jobs. “If you look at job creation in the solar industry, most
jobs are in construction, installation and maintenance,” he said.
“Those jobs have to be local. If you import panels that are cheap,
you’re able to install more panels and create more local jobs.”

“That’s the thing you have to weigh. It’s pretty likely that you’ll
have less manufacturing jobs in the United States,” he said. “But you
have to look at the entire supply chain. You’re gaining jobs
elsewhere.”

Weischer also says that Chinese manufacturing has helped to lower
the cost of solar panels, which fell in price by some 40 percent in
2009 as compared to 2008. “Even though this decline has a number of
reasons — including technological progress, less demand due to the
recession and changing policies in Spain, etc. — it would not have been
possible without China producing large quantities of low-cost
modules,” said Weischer.

The Chinese market is also important because it often functions as a
“laboratory” to test new technology. Because the United States has
lagged behind other countries in developing a stable investment
environment for the wind industry, for example, General Electric has
focused much of its attention on China. It recently announced a
partnership with Harbin Power Equipment, a Chinese company, to expand
its presence in the country, which currently has the largest wind
market in the world.

For these reasons, Weischer says the race metaphor might not work
for the relationship between China and the United States on clean
energy. “The problem with the race image is that it suggests that only
one country can win,” he says. “But if you look at wind, every country
that has decided to focus on wind has won. You win if you decide to
play.”

Like other experts, Barbara Finamore, China Program Director at the
Natural Resources Defense Council, said the clean energy race metaphor
oversimplifies the way global supply chains work. “Race is not
necessarily the right term here,” she says. “Because of the way supply
chains are interconnected, you can’t win the clean energy race by
banning technologies from other countries or by banning investment
because it hurts U.S. companies.”

There are a number of examples of Chinese companies coming to the
United States and creating jobs for American workers. Suntech, a
Chinese solar company, began production this month at a solar
manufacturing facility in Arizona, the first in the country. The
facility will create almost 100 American manufacturing jobs.

At the same time, despite initial resistance, the United
Steelworkers signed an agreement in August with A-Power Energy
Generation Systems, a Chinese company, to allow the construction of a
wind power plant in Texas and a wind turbine manufacturing plant in
Nevada. Despite the fact that the company is Chinese, the thinking
goes, the jobs created will be American.

Finamore says there are a number of reasons that China is eclipsing
the United States in terms of its clean energy development. But at the
end of the day, the main reason is because the United States has not
enacted policies that create a stable investment climate.

“The countries that establish strong national policies to reduce
greenhouse gas emissions and incentivize renewable energy are the ones
that are establishing strong positions in the clean energy economy,”
she said.

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