Catching Up, Falling Behind: China’s Green Growth Strategy and the U.S. Michael T Rock Samuel and Etta Wexler Professor of Economic History Bryn Mawr College

Global Climate Change Negotiations Stuck on a stark trade-off between climate mitigation and growth foregone Inability to come to agreement on system of burden sharing, measured in growth foregone, make it impossible to conclude climate treay

Wrong Model: Not Consistent with CO 2 Mitigation Experience in Northeast Asia Japan, Korea, and China all view energy efficiency and energy security in stridently nationalistic terms CO 2 intensity falling rapidly in all three Total CO 2 emissions stabilizing in Japan and Korea

CO 2 Intensity: China and the U.S.

Total CO 2 Emissions Japan

China, Korea and Japan Groping Toward a Green Growth Industrial Development Strategy Need Different Conceptual Framework for Climate Mitigation: One that Focuses on Industrial and Technology Policy

China’s Emerging Green Growth Strategy: Rooted in Model of Technological Catch Up with West Policy elements include: 1. Openness to trade and investment and domestic market liberalization 2. Promotion of small number of large leading firms in critical sectors 3. Promote import, adoption, and adaptation of OECD technologies—some imitative, some innovative

Technological Catch up and CO 2 Savings in Cement Eve of reform (1977) 2/3 cement output (50 MMT) by small scale cement plants 1995 cement output 400 MMT—85% by small Plants Small plants: low quality cement, economically inefficient, produce 1 MT CO 2 per MT of cement

Technological Catch Up Policies in Cement Open sector to trade and investment, liberalize domestic market Close small plants Shift production to large scale rotary plants Invest in energy efficiency

Chinese Vertical Shaft Kiln

Rotary Kiln

Cement Production and CO 2 from Cement in 2008: Saved 520 MMT CO 2 by 2008, 720 MMT CO 2 by 2030

Iron and Steel Baosteel, national steel champion: Built two state of the art Corex process plants for making iron—cooperative project with Siemans AG—project reduces CO 2 by 30% Expensive joint R&D venture Baosteel, Siemans and POSCO, pioneering breakthrough technologies for making steel

Baosteel

Corex C-3000 Ironmaking Plant, Baosteel, China

Electric Vehicles Transport sector dominated by vehicles consume 35% oil imports, could rise to 55% by 2030 If 30% vehicles on road in 2030 are electric, save 700 million barrels of oil (301 MMT of CO 2 ) MOST allocating 60% research budget to commercialization of electric vehicles

Electric Vehicles 300, 000 electric vehicles on the road State Electricity Grid building 75 re-charging stations in 27 cities Several companies produce electric vehicles, Some in joint ventures with OECD firms, one expects to export them to California in 2010

Electric Power: Renewables Supply 15% Electricity by 2020 Wind energy supported by reduction VAT, concessions model, and power company buy provisions Solar—China pioneers solar water heaters on roofs—save 84 MMT CO 2 in 2010 Applied Materials, major American solar panel R&D and producing firm from Silicon Valley moves to China to be near market

China's Potent Wind Potential Wind power plants in Xinjiang, China. Credit: Chris Lim; Monday, September 14, 2009

China: Solar Water Heaters

An Applied Materials research lab in Xi’an, China. The Santa Clara, Calif., company is the largest supplier of the equipment used to make semiconductors, solar panels and flat-panel displays (Source NYT March 17, 2010)

Green Industry Model Looks similar to industrial and technology policies followed by Japan, Korea and Taiwan Polices are selective (industry and sector specific) Tied to technological catch up and energy independence

Green Industry Model Guided by industry/sector specific technology support institutions Political elite policy champions Quantitative improvement goals from national to local level, monitored and tracked Use local experimentation; drop those that fail; scale up those that succeed

Criticisms of China’s Green Growth Strategy Many serious technological, engineering and economic problems to overcome given China’s weak R&D base Hard to pick winners Is this sufficient to mitigate climate change Administrative decentralization and overlapping bureaucratic jurisdictions result in excessive bargaining re policies Strategy of nurturing large lead firms not totally successful

How Might the U.S. Respond? Use explicit industrial and technology polices to promote energy independence by 2035 Man on the moon project Defense Department

How Might U.S. Respond? Stabilize the Price of Oil

Put a Low Price (Tax) on Carbon and Raise It Incrementally Over Time