Politics: Should We Stop Freaking Out About China and Clean Tech?

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US President Barack Obama, right and Chinese President Hu Jintao. Credit: Brendan Smialowski / Getty Images

As I wrote earlier this week, energy and climate were going to on the agenda when Chinese President Hu Jintao and President Obama met in Washington. The countries are the number one and two carbon emitters in the world, major energy consumers and global leaders in clean tech manufacturing. If the world is going to come to grips with the climate challenge—and shift towards cleaner sources of energy—the U.S. and China are going to have to lead the way.

Now that the Washington lovefest is done and the poached Maine lobster has been eaten, however, how much was really accomplished on climate and energy? Not so much, suggests Ben Jervey of GOOD:

For all the anticipation, though, it seems that military and economic issues have dominated the talks, and the potentially tense discussions of energy and climate have been back-burnered.

Yesterday, the two leaders released a joint statement saying that they “view climate change and energy security as two of the greatest challenges of our time.” Well, obviously.

Business leaders from China and the U.S., though, took advantage of the summit to announce a series of energy deals, including a $7.5 billion collaboration between the aluminum maker Alcoa and China Power Investment Corp., and a partnership between American Electric Power and China Huaneng on carbon-capture technology. Energy Secretary Steven Chu took the chance to advance energy research partnerships with his Chinese counterparts that have been ongoing for the past year. Collaboration is a must, as Chu wrote in the Huffington Post:

Cooperation with China on clean energy is good for Americans and good for the world. As the world’s largest producers of energy, consumers of energy and greenhouse gas emitters, the energy and climate challenge cannot be solved without the United States and China. What we do — or do not do — in the coming decades matters to the entire world.

Additionally, by collaborating with China on clean energy research and development, we can bring down the costs of clean energy technologies for families and businesses. We can promote export opportunities for American companies, creating new jobs here at home. And we can help ensure that the United States leads in clean energy innovation, which is critical to our prosperity in the 21st century.

Both the United States and China recognize that we can make more progress by working together than by working alone. Each country brings complementary strengths to the table. The United States remains the leader in the most innovative technologies, with our world-leading research universities and national laboratories, pioneering businesses and entrepreneurs, and well-developed financial and legal infrastructure. China has experience and expertise with rapid, large-scale deployment of technologies. As the world’s fastest and largest growing energy market, China can serve as an important global testing ground for new technologies.

But nothing is ever that simple between China and the U.S. Even as he is arranging research partnerships in Beijing, Chu is warning that the U.S. faces a “Sputnik moment” on clean tech, with China investing heavily in solar, wind and other renewables with an eye towards cornering the market for what could be the next big global industry. The United Steelworkers union has accused China of illegally subsidizing its clean tech industry at the expense of American workers, and according to the AFL-CIO, the American trade deficit with China on clean energy products cost the U.S. 8,000 jobs in 2010. It’s rare to find anything that most Americans appear to agree on any longer—the NFL playoffs, maybe—but it seems to be a fairly universal opinion that China is eating our lunch when it comes to clean tech.

Michael Levi, though, has his doubts. The energy expert at the Council on Foreign Relations has a piece in Foreign Policy questioning whether China really is leaping past the U.S. on clean tech. He doubts it, arguing that the perception is fueled by a misunderstanding of the way the Chinese economic and research system really works—and by an underappreciation of American strengths:

Yes, China spent more money buying wind turbines and solar panels than any other country last year. But consumption does not necessarily translate into technological leadership — if it did, the United States would have little to worry about in most product categories. Massive deployment of clean energy will give the Chinese government leverage with foreign firms (because Beijing will be able to demand concessions in exchange for market access) and provide opportunities for incremental innovation. But the cutting edge is, in most cases, far away: The Chinese innovation system still has enormous difficulty moving ideas from the laboratory to commercial application…

The purported Chinese dominance in high-tech exports, meanwhile, is the product of statistical sleight of hand. Chu’s figures describe the total value of Chinese exports. That gives China credit for the full price tag of every product it exports — even if it’s only responsible for its final assembly. (If China imported a Mercedes and painted it green, it would rack up tens of thousands of export dollars.) A careful analysis would focus instead on value added, which is what drives profits and wages. And on that score, the United States is still firmly in the lead.

I agree with Levi that we tend often tend to make too much of the Chinese “threat,” which isn’t as monolithic as it seems. We may constantly moan about the failure of Congress and wish for enlightened leaders who actually seem capable of planning beyond the next election cycle, but the wise men of Beijing aren’t as omniscient as they can seem from afar. Smart technocratic policy from the top often gets watered down as it makes its way to the provinces, where corruption and mismanagement are still widespread. (There’s a reason the phrase “the mountains are high and the emperor is far away” is so oft-quoted.) We focus on the fact that China’s total economy is poised to pass us sooner or later—but forget the fact that per-capita income in China is less than a fifth what it is in America. We worry about the legions of scientists and engineers that China is  churning out—thanks in part to scarily intense parenting, I suppose—but neglect the fact that Chinese universities are light-years behind America’s best, while Chinese academia is often stultified. Just as we fretted about imaginary “missile gaps” with the Soviets—used by the military to push for more spending—we shouldn’t overstate China’s advantages over us.

None of that is to suggest that the U.S. has nothing to worry about from China—on clean tech or anything else. Sheer numbers and entrepreneurial spirit mean that China will pose much tougher competition than Japan and the Soviet Union—the last two big bads—ever did. But as Levi argues, if we respond to Chinese competition with protectionism and paranoia, there will be an economic, political—and environmental—cost:

Fears of China lead quickly to calls for protectionism, through steep barriers to clean energy imports or to Chinese investment in U.S. clean energy projects and firms; investment and imports are currently relatively small, but have great potential to grow. Such moves hurt support for Washington’s efforts to open up foreign markets (including Chinese ones) to U.S. firms. They slow the flow of clean energy technology across borders, stifling innovation and delaying much-needed cuts in the cost of green technology. They starve capital-hungry U.S. firms of investment, while depriving U.S. consumers of access to cheaper sources of pollution-free power. At the same time, the Sputnik rhetoric is bound to sap lawmakers’ enthusiasm for the sort of clean energy cooperation with China that President Barack Obama will push for during Hu’s visit. This will hobble the development of cheaper sources of clean energy, delaying the much-needed expansion of clean energy markets and increasing costs for U.S. consumers.

Indeed, if we really need to drive the cost of clean tech down to the “China price” in order to save the planet, then a lot of that manufacturing is probably going to be done in China, where costs simply are lower. And as Levi points out, the U.S. can still benefit economically from that relationship, dominating the high-tech, high-value parts of the clean tech manufacturing chain. Break that chain, however—and that’s likely the aim of many protectionists—and you’ll be hurting the fight against climate change as well.

Of course, environmentalists have been promising for years that an effective clean tech policy will lead to millions of new green jobs here in the U.S.—not in China. The economist Edward Glaeser explained in the New York Times why that’s not likely, noting that public subsidies for investment rarely work, and that the future of U.S. employment will be in ideas, not large-scale manufacturing:

As long as solar panels are getting cheaper, we shouldn’t worry about where they are being produced. We should continue financing research on solar technology as long as that research continues to produce cost-cutting breakthroughs, like “string ribbon” technology, but we shouldn’t pretend that cheaper solar energy will end up employing millions of our less-skilled citizens.

That’s great—unless you happen to be one of those “less-skilled citizens.” (And as Levi notes in a blog post, China isn’t playing fair on trade and manufacturing on its side.) Will there ever be enough “idea jobs” for the millions of Americans who need them? I doubt it, and as Jim Tankersley writes in a key—if depressing—story for the Atlantic, it’s far from clear where those jobs will come from, and if they’ll ever come back. Maybe Jeff Immelt will save us all—but don’t count on it.