Category Archives: Greening BRICs

Profiting From China’s Green-Tech Movement

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Money Morning investigates the green tech opportunities flowing from the problems in China.

Money isn’t the only thing flowing through China right now. Pollution has filled the streets, contaminated the rivers and clouded the skies.

Half of China’s population – 600 people to 700 million people – drinks 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.
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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.
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Both Guo and Liu agree that 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.
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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.
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The nation’s climate-change program has set a target of reducing greenhouse gas emissions by 950 million tons over the next two years. Last week, at the U.N. climate conference in Bali, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said China’s investment in renewable energy would reach $20 billion this year.

“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.”
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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) has seen its stock price skyrocket by 137% this year. Solarfun Power Holdings Co. (SOLF) has jumped 125%.

Vcs are already there. Large companies like GE are building desalination plants. Suntech’s technology was developed in Australia. More entrepreneurs are looking to China for growth in this area. For individual investors, ETFs can be a possibility. However, figuring out the right value at this time is tough. And there is always the need for people who can understand China and the green tech sector!

Michael Norster on China, India and Alt Energy

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From the Eureka Report:

Will China’s growth impact on your investment decisions?

I think China is an absolute powerhouse. The world has underestimated China for far too long even though there are all these platitudes now about how important China will be in the global economy. America has a serious problem because China will emerge as a global power. They have high educational standards and are hard-working people. Their biggest issues will be their inefficient use of resources and a big pollution problem. China is a well of opportunity for energy, which is what my speciality has been, and the energy sector up there has massive potential. I’ve got contacts working in China and I’m constantly monitoring its economic growth. The reason why I haven’t invested to date is that firstly, I don’t have enough money to play in the game up there and secondly, the risk of doing business up there is heightened by the lack of a proper legal system. I think this poor legal system has been their Achilles heel and has really impeded their growth. Compare that with the US, parts of Europe and Australia, which are very rules-based.

What about India?

I think India has huge potential but is a very different scenario to China. It has a very large middle class and an English legal system, which has served them well. It has the same type of potential and issues as China in relation to resources and pollution. I think the biggest problem with India (and this is also happening in Australia) is their huge paper-based bureaucracy.

Businesspeople and entrepreneurs just hate red tape with a passion and the bureaucrats want you to fill in forms all day.

What’s your view on alternative energy investments in Australia like wind farms and solar energy?

Alternative energy is quite limited in Australia because we don’t have the regulatory or economic climate to encourage investment in that direction. We have some of the cheapest electricity in the world down here and that gives no incentive to begin any large-scale alternative energy projects. My experience with the wind farms is a case in point. But on a global scale there are massive opportunities in the sector. I’ve been looking at solar energy and the feeling seems to be that it’s nearly there as an investment opportunity. There are lots of countries getting into alternative energy (including solar), like Brazil, parts of Europe, Germany and Holland. These will turn out to be great investments because people will start to deliberately buy their energy needs from alternative and green sources.

The Sydney Declaration

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The Australia hosted APEC summit in Sydney has come to an end with 21 world leaders agreeing to “aspirational targets” for cutting down greenhouse gases, and this non-binding agreement is called the “Sydney Declaration”.

Even though condemned by some as lacking any strict targets I think the declaration is meaningful. Considering the scale of change required it is not easy to convince 21 countries to do anything, especially international co-operation on uncertain effects 75 years into the future.

The declaration has the following actions:

In summary, and without prejudice to commitments in other fora, we have decided to:
• highlight the importance of improving energy efficiency by working towards achieving an APEC-wide regional aspirational goal of a reduction in energy intensity of at least 25 per cent by 2030 (with 2005 as the base year);
• work to achieve an APEC-wide aspirational goal of increasing forest cover in the region by at least 20 million hectares of all types of forests by 2020 – a goal which if achieved would store approximately 1.4 billion tonnes of carbon, equivalent to around 11 per cent of annual global emissions (in 2004);
• establish an Asia-Pacific Network for Energy Technology (APNet) to strengthen collaboration on energy research in our region particularly in areas such as clean fossil energy and renewable energy sources;
• establish an Asia-Pacific Network for Sustainable Forest Management and Rehabilitation to enhance capacity building and strengthen information sharing in the forestry sector; and
• further measures in trade in environmental goods and services, aviation transport, alternative and low carbon energy uses, energy security, the protection of marine biological resources, policy analysis capabilities and a co-benefit approach.

It has for the first time made possible for China and the US to agree to some targets and importantly, to work under the current United Nations Framework Convention on Climate Change (UNFCCC); thus not creating another rival framework. (Incidentally, China played a major role in this)

John Howard’s experience in the last decade in managing Australia’s greenhouse gases through agri-management has provided the impetus for forest cover targets. In fact, the Stern review has suggested that forestry management (afforestation and reducing deforestation) is a good way to tackle climate change. Considering the costs of changing current economic systems, in the short term this is a valid strategy.

The effort on improving energy intensity is a good one. Even though this may not ultimately reduce actual consumption it will improve the efficiency of all countries involved. The importance of trade of economic and social development is well known. These principles are being supported in the declaration.

This declaration is also a good step forward because it acknowledges that “differences in economic and social conditions among economies” and that this would mean “differentiated responsibilities”. Also the emphasis on adaptation is important. As Schelling has suggested,

The sooner Malaysia can become like Singapore, the sooner it can worry less about the impact of climate change on health, comfort, and productivity.

In that sense, trade and economic development is the key to adaptation for climate change.

More importantly, Schelling talks about inputs and outputs.

One striking contrast between NATO and the Kyoto Protocol deserves emphasis: the difference between “inputs” and “outputs,” or actions and results. NATO nations argued about what they should do, and commitments were made to actions. What countries actually did — raise and train troops; procure equipment, ammunition, and supplies; and deploy these assets geographically — could be observed, estimated, and compared. But results — such as how much each NATO nation’s actions contributed to deterring the Warsaw Pact — could not be remotely approximated.

The Sydney declaration takes a small step towards “inputs” — energy intensity, forest cover, trade barriers, clean technology — and this makes it a valid strategy as it is not possible to guarantee the exact emission reduction (outputs) in 10-15 years.

Overall, I think that the Sydney declaration is a good step forward in tackling climate change.

China: Give us development space

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Chian’s need for development rights in view of climate change:

China said Tuesday it was working hard to increase its use of renewable energy, but needs to be given some leeway in the global effort to reduce greenhouse gasses.
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“I hope the international media will give us some development rights, some development space and not overly blame us,” said Chen Deming, vice chairman of the National Development and Reform Commission, China’s top planning agency.
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However, Chen said China shouldn’t be held overly accountable because its has only recently become a major producer, contributing just 9 percent of global CO2 emissions between 1950-2000. China’s per-capita rate of CO2 production also remains low given its population of 1.3 billion, he said.

Chen also reiterated a goal of producing 15 percent of total energy supplies from renewable sources such as wind, hydropower and biofuels by 2020.

A similar argument can be made for India. Thomas Schelling made a strong argument for current economic growth and development as the adaptation plan for developing countries. (Check this link and go down the article where he mentions Singapore)

China’s Green Incentives

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Incentives matter. China has been promoting and rewarding its local officials around the country based on GDP growth figures. This incentive model has played a part in the creation of the great Chinese growth miracle of the last two decades.

The Age reports that China has changed its incentive model:

CHINA has announced a new promotion system under which local officials’ careers will be judged by their performance in meeting environment protection and energy efficiency targets. The move comes as fears China’s surging economy is overheating and domestic unrest about environmental damage mount.

The State Council, China’s cabinet, is working on an environmental veto system under which green performance will be decisive in determining the futures of Government and Communist Party officials, a senior policymaker has told China Daily, the Government’s English-language newspaper.

This is a good major step taken by China. Even though with a communist background China has been clever enough to use some of the most important principles from Capitalism to drive its economic growth.

It goes back to the idea which Schelling talks about that government’s even though wanting to meet targets and deliver outcomes; the best they can and should do is concentrate on inputs and direction. In this case, the energy efficiency targets set by the central government will be supported by the green incentives to the party members. Hopefully this deliver the required outcomes. The bottomline is that this is a better model than mandating targets.

Green China and Young China

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Pan Yue at China Dialogue writes a two part series on the need and possibilities of sustainable development in China.

From Part 1:

What do we mean by the phrase “green China”? We mean a China that is sustainable, democratic, fair, harmonious and socialist. This conclusion has been reached after many years of struggle. Each word is the distillation of the blood, sweat and tears of several generations. We want to build a green China because green is the colour of life, of sustainability. For something to be called “green” it has to be sustainable – and currently China has yet to achieve sustainability.

The model of economic development that we are currently pursuing is unsustainable. Our energy consumption per unit of GDP is seven times that of Japan, six times that of America, and even 2.8 times that of India. China’s labour productivity is less than 10% of the world total, and yet our emissions are over 10 times higher than the global average.

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Development is a good thing in itself. But it must be integrated development across all areas, not just economic development. Only all-round, coordinated development is a good in itself. We have always taken “development” to mean economic development alone, and this to mean the simple accumulation of wealth. As a result, the pursuit of wealth has become the sole aim of society. In theory, the value of all resources is determined by the market price, but the latent value of scarce resources such as land, water, the environment, and biodiversity has been ignored. Many social resources have been absorbed by projects designed to help people “get rich quick”.

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There are four different ways of approaching the issue of environmental protection: it can be seen as a specialised and isolated field in itself, as an economic issue, as a political and sociological issue, or – at the highest level – as a cultural and ethical issue. In China, we have always looked at the environment as an isolated subject, whereas abroad it is already being treated as a political and sociological issue. In the last few years, the conflict between the environment and the economy has become unprecedentedly intense – the environment has begun to place limits on economic growth, and economic growth has destroyed much of the environment; this has led to our conservation work being rapidly elevated to the economic level.

From Part 2:

Why is environmental protection considered a cultural issue? One of the core principles of traditional Chinese culture is that of harmony between man and nature. Different philosophies all emphasise the political wisdom of a balanced environment. Whether it is the Confucian idea of man and nature becoming one, the Daoist view of the Dao reflecting nature, or the Buddhist belief that all living things are equal, Chinese philosophy has helped our culture to survive for thousands of years. It can be a powerful weapon in preventing an environmental crisis and building a harmonious society.

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A Chinese saying goes: “a sparrow may be small, but it has all five organs.” Similarly, the field of environmental protection is a microcosm of the issues facing China today. Attempts to solve these problems would be useful experiments for transforming China in a wider sense. For example, coming up with an answer to the problem of green production would also help to solve the problem of core competitiveness. Solving the problem of environmental compensation would provide experience for the solution of societal injustices. Establishing a system for democratic environmental decision-making would open paths for reform of the whole system of government. Solving problems of environmental culture could provide a vibrant new ideological system suited to the rise of a green China. It is for these reasons that I say that environmental protection is not a specialised, isolated issue, but an issue that concerns economy, society, politics and culture. It is, in short, a “global complex”. Only by placing the issue in an elevated position can we gain a wide enough visual field to truly understand the importance of environmental protection in today’s China. Only in this way can we understand the need to build a green China and how to go about its construction. One must learn how to participate in public life through a wide variety of channels.

Keith Hudson on China, US and Global Warming

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In his Sapientia, a daily newsletter, Keith Hudson tackles some of the toughest questions facing us with a depth and understanding generally un-common. This time he tackles the 4th strategic dialogue between China and the US.

Excerpts from today’s, DAILY QUOTE 471:

…what of global warming? This is already the major concern of Western European countries. But so far there isn’t the faintest scintilla of evidence that either America or China is yet persuaded that man-made carbon dioxide is the major cause of it. It may be that industrial growth is of such huge importance to both countries that they are in ostrich-like denial about any possibility of cramping their style.

It may also be the case that, because some very eminent climatologists still have doubts about the man-made cause of global warming, politicians and administrators are waiting for conclusive evidence. Contrariwise, it may also be that they are indeed already convinced, but that the likely higher sea levels, swamping of seacoast cities, ecological adjustments, human migrations and so forth are judged to be economically bearable while the era of cheap oil and gas reaches its peak during the next 40 years or so. After then it may be calculated that world-wide economic growth will be forced to decline as we move into much more expensive mined-coal or highly expensive solar technologies in order to generate electricity or make transportation fuels.

Some economists — and eminent ones, too — certainly believe that any money likely to be spent on reducing carbon dioxide emissions would be better spent — at least at present and the foreseeable future — on other matters, such as raising the educational standards of all countries.

My own view is that senior administrators in both America and China probably believe that anthropogenic carbon dioxide is making some contribution to global warming even if there are other more fundamental but as yet unknown climatological changes taking place. Furthermore, that there are insufficient energy and other resources in the world that will allow anything more than a fraction of the world population to even approximate to the way of life of, say, half of Americans, half of Western Europeans, most of the Japanese and the middle-class in the coastline provinces of China now enjoy.

All this is quite apart from global warming. Whether this continues or not, the world has already reached its maximum of food production due to freshwater constraints. Furthermore, as noted in a recent Sapientia posting, there is strong evidence from several research groups that there are sufficient minority metal resources of a crucial nature — such as uranium or germanium — to take all the countries of the world into the advanced technologies and the way of life that some in the West (and the coastline of China) already enjoy.

Dealing with Climate Change in China

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In the current climate change discussions, China and India raise red flags everywhere. The general points are that they are the fastest growing developing countries and hence, their emissions need to be decreased or the growth of emissions needs to be decreased. In fact, Australia and the US claim to not signing the Kyoto Protocol due to the lack of emission reduction targets on China and India.

China and India on the other hand claim their per capita emissions, their poverty and the need for economic development as the drivers for not accepting to targets for CO2 reduction.

One common reason suggested for the worry is that China will eclipse the United States as the leading greenhouse gas emitter soon . The developed countries are looking into the future. However, if you look at the past, it is clear who bears the responsibility. A good way to understand this is the cumulative emissions of countries from 1900 to 2002.

The linked graph shows the cumulative CO2 emissions from 1900 to 2002. CO2 cumulative by country

Writing on the logic of doing it, the author suggests:

It does make sense to look at the sum of all CO2 emissions because the lifetime of the greenhouse gases like CO2 in the atmosphere is between 50 and 200 years. The current global warming is an effect of all greenhouse gases put in the atmosphere during the last 100 years, global warming is not just caused by the greenhouse gases emitted this year or last year! This is also one of the reasons why immediate action is required to reduce the emission of greenhouse gases like carbon dioxide, because the effects of the greenhouse gases will last for about 100 years.

A better way to understand the issue is to concentrate on the Top 10 producers of all time.

Top 10 Cumulative Emissions

The US is responsible for 41% of all the emissions for the last hundred years produced by the top 10 countries. China only 11%. India 3%. This puts things in perspective.

(Click the link below for the rest of the entry)

Continue reading →

Dealing with Climate Change in India

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Chandrashekhar Dasgupta, a Distinguished Fellow at TERI, writes a sensible op-ed in Business Standard on India and Climate Change.

Climate change is not a big issue in India at this point in time. The sheer size of the poverty issue overrides any other program. Combine that with the economic development policies, foreign policy (e.g. Kashmir issue), internal terrorism (e.g. the Maoists) and it is clear that climate change is not on the top of the agenda. This is rightly so.

In this op-ed, Dasgupta outlines the issue of climate change, the IPCC report, effect on India and possible policy actions.

He points out that “the wealthy, industrialised countries are responsible for causing climate change, the main victims will be the world’s poor. Developing countries are more vulnerable because they lack the financial and technological resources needed to cope with and adapt successfully to climate change”.

In this scenario, the first task of the government is adaptation and this can only be based on rapid, sustained development and poverty eradication.

Adaptation will require a wide range of responses, including a shift to drought resistant plant varieties, economical use of water resources, water conservation measures, watershed management, protection of coastlines and disaster management. Low-income countries will be unable to implement these measures on an adequate scale.

The second goal is to moderate the use of greenhouse gases through measures which will be economically beneficial and the funds are not diverted from poverty reduction and economic development needs. This is important because funds for development are scarce in India.

There are many areas where such possibilities exist. Cost-effective energy saving and energy efficiency programmes serve our development goals and also result in lowering emissions. Policies designed primarily to reduce local environmental pollution (such as the substitution of diesel by cleaner fuel in some of our major cities) can also lead to reduced greenhouse gas emissions. The promotion of nuclear, wind and solar power not only serves our energy security interests but also results in lower greenhouse gas emissions. In all these cases, measures designed primarily to promote our developmental objectives also yield important co-benefits for climate change mitigation.

Additional programs can be achieved through the Kyoto Clean Development Mechanism and Joint Implementation.

According to Dasgupta, the third leg of the strategy should concentrate on managing the rising expectations of industrialized nations to force India to cut down on its emissions.

If the demands of these developed countries are conceded, funds will be diverted from our national priority goals of development, poverty eradication and progress on local environmental issues like air and water quality. The rate of growth of the economy will be slowed down, with the result that India will remain highly vulnerable to the impacts of climate change.

To counter the argument of high greenhouse gases emitted by India due to its population he suggests a analogy based on food consumption.

This is like arguing that India should restrict its food consumption because its total calorie consumption is very large, even though the per capita intake is inadequate! India’s per capita carbon emissions are only one-eighth that of the EU and one-twentieth that of the US. The total figure is high only because India is a very large and populous country, with a population exceeding the combined total of the US, the European community, Russia and Japan.

As with everything in India, population exacerbates the climate change issue.

China and India – Climate Change is Clear and Present Danger

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The Financial Times discusses the need for China and India to face the climate change challenge.

The world’s two fastest-growing large economies are growing increasingly conscious of the global warming in which their rapid development is playing a part.

The UN report signals a decisive shift in the debate, drawing attention not just to overall levels of carbon emissions released into the atmosphere over time – largely from industrialised countries, led by the US – but also to the rising flow of greenhouse gases from big developing nations.

The article compares the “cumulative emissions” of China and India vis-a-vis the US and the OECD countries.

Although China and India acknowledge their emissions are rising, they argue that, per capita, they remain a tiny fraction of those from developed countries. Moreover, China’s cumulative emissions are only one-third of those of the US and one-sixth of those of all the developed countries grouped in the Organisation for Economic Co-operation and Development, according to the World Bank. The cumulative emissions of India, which has a higher energy efficiency rate than China, are about one-tenth those of the US.

What if Australia had the population of China?

Gao Guangsheng, the director of China’s Climate Change Coordination Office, pointedly singled out Australia, population 20m, at a recent conference in Nairobi, saying that if it had as many people as China’s 1.3bn, its carbon emissions would total 8.6bn tonnes a year. China’s emissions are now about 1.3bn tonnes a year.

The Indian Finance Minister talks about India’s right to develop.

We are prepared to assume our share of the responsibilities and obligations, provided the world recognises we have a right to grow and that means that we will consume large quantities of energy and, second, that we need to be given access to clean technology, including civilian nuclear energy,” he says. “If these two points are recognised, I have no doubt that India and other developing countries will come forward to assume their share of the responsibilities. But we are not the largest polluter: our carbon emissions are still very small.”

At the end of the day whatever be the situation, India and China both face increasing environmental issues due to Climate Change.

Both China and India suffer from acute air and water pollution. In 83 Indian cities for which air quality monitoring data are available, more than 84 per cent of the population was in 2004 forced to inhale poor, bad or dangerous air. Only 3 per cent had access to air that was rated good. China is home to 16 of the world’s 20 most polluted cities, with dirty air causing the premature deaths of 400,000 people a year. About 340m people, about one-quarter of the population, do not have access to clean water.

Still, both China and India are clearly concerned about climate change for their own sakes, let alone the impact on the rest of the world. In China, scientists warn that the impact of rising temperatures on the Qinghai-Tibet plateau could alter the amount of water flowing into the Yangtze and Yellow rivers, which originate in the region. The same sort of impact may be felt in key Indian river systems.

India’s agricultural productivity, already flagging, is thought likely to suffer because of high temperatures, drought, flood and soil degradation. The Chinese media have cited similar scenarios, including a fall in grain output by 10 per cent a year from 2030. Such threats run counter to the maintenance of food security, which both governments prize.

If the issue is not acknowledged then China and India will increasingly face water, food, resources, pollution and other problems. Adaptation and change is better for both.