Green Wars?

The launch of the Sputnik I satellite in 1957 ushered in the “space race” between the US and former USSR, a period of new political, military, technological, and scientific developments, including the missile defense program that was to be known as “star wars.”  As the space race has slowed, nearing a halt, the race in other technological fields has recovered from the recent financial turmoil to regain their earlier momentum.  The People’s Republic of China has quickly emerged as the Soviet analogy in the race to develop commercially viable green technologies. 

In the world of “green” – all things cleaner and/or more efficient – former titans of green innovation, the US, Japan and EU, are quickly being eclipsed by China.   The Chinese manufacturing capacity for green products is no surprise, given their current dominance in nearly all other manufacturing sectors.  Recently, China overtook the US to become the world’s larger manufacturer of solar panels.   However, the Chinese government’s investment in green technology R&D is beginning to bear fruit in significant ways. 

An article in last month’s New Yorker chronicles China’s rise to engineering prominence in high-growth markets like solar, wind and “clean” coal.  Most interesting is the author’s comparison of the innovation policies of the Chinese and American governments. 

Given China’s recent rise from manufacturing epicenter to burgeoning R&D hub, one might be perplexed by the Chinese position at last month’s Climate Change talks in Copenhagen.  It is still too early to speculate about what results the “Copenhagen Agreement” will produce.  The negotiations, however, showcased China’s continuing reluctance to curb greenhouse gas (GHG) emissions, despite what is now apparent as their capacity to finance, design, and manufacture their own emissions reducing technologies. 

Chinese green technologies have proven to be highly-competitive and are ripe for global deals and licensing royalties.   China stands to gain the lion's share of manufacturing activity resulting from a new "green" economy, regardless of the origin of the design.  So, why China’s hesitation to encourage other countries to adopt policies that would further open markets for green technologies – before relevant Chinese patents, trade secrets and other competitive advantages lapse?  It has been reported that 95% of solar thermal water heating patents are held by Chinese entities. 

One possible explanation is a fear of “clean” coal technology, e.g. Carbon Capture and Sequestration (CCS), not proving to be commercially viable or environmentally sound.  Over 65% of China’s electricity demand comes from coal, and the majority China's coal is needed for for industrial, i.e. manufacturing, purposes.  China is currently the world’s largest consumer of coal, with consumption expected to rise at an unbridled 3.5% per year through 2030 to meet Chinese manufacturing and global consumer demand.  Alternative energy is far from being a viable alternative to China’s coal-based energy needs.  Moreover, current levels of funding for green technology development and deployment are not expected to be sufficient to reduce GHG emissions to non-catastrophic levels.  

However, China is not alone in their coal-based energy needs.  The US alone accounts for 48% of the coal consumed by all OECD countries (which does not include China or India).  The US department of energy (DOE) expects coal-based electricity production to decline from 49% in 2006 to 47% by 2030, while growing at 0.7% per year.  The US and China each have two of the three the largest national coal reserves in the world.  The World Bank expects that much of the world's GHG reduction by 2050 will be attributed to CCS technology coming on board.

Both the US and Chinese governments are funding R&D in CCS technology, to varying degrees.  In what might become the “Green Wars” - to design and develop viable CCS and other green technology - it appears that, in a reversal of historical roles, China has taken the lead designing and developing the needed technology.  Government R&D funding has waned since the days of the space race, allocating much of the responsibility to the private sector.  Indeed, General Electric, a dominant force in US wind-turbine technology, is also active in developing CCS, but results have been limited.  The Obama administration has vowed to reignite R&D in the US, taking many first steps through allocations of Stimulus Package funding, which will hopefully bear fruit.

The New Yorker relates that, drawing on 20% increases in R&D funding for the past 20 years and a research system modeled on the US’s NIH (health) and DOD (defense), China has developed a far superior coal-gasification technology and plans to unveil the worlds first coal-fired, near-zero emissions plant in 2011.  The project, "GreenGen," was originally slated to begin operation in 2009.  Plans in the US for similar plant, “FutureGen,” were withdrawn near the end of the Bush era, in what a Congressional investigation revealed to be a “public relations ploy for Bush Administration officials to make it appear that the US was doing something to address global warming.”  

However, Chinese scientists have come under great scrutiny for proven allegations of falsified data.  In fact, a recent joint venture was announced between China and Peabody Energy, a US corporation, for the "GreenGen" project, perhaps indicating more difficulty than anticipated was encountered by Chinese officials in developing the necessary technology for CCS.

Could the development of a viable CCS platform by only China or the US tilt the balance of power such that consensus on a Climate Change agreement with legally binding commitments or meaningful emissions reductions obligations would be near impossible?  Or rather, is certainty regarding the feasibility of CCS required for any binding or meaningful commitments?

Even if it does not, this scenario is still yet another strong argument for the fruits of publicly funded R&D being exempt from patent protection, given the underlying rationale of patents to stimulate investment.  Or even yet, perhaps CCS is an excellent area for a collaborative joint-venture between the US and Chinese governments, similar to the symbolic Apollo-Soyus Test Project, which culminated in the docking of a US and Soviet spacecraft in orbit in 1975.  Placing our eggs in one basket, like Peabody Energy, is a risky move for the US government, considering the global public good nature of our environment.

Comments

[Baskut Tuncak]

China’s Labor Edge Overpowers Obama’s ‘Green’ Jobs Initiatives http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adIdrmtTtyw8

[Property in Turkey]

Great post. I enjoyed reading thanks.