The Clean Energy Battle: U.S. vs. China

The Green Gloves Are Off

Written by Brian Hicks
Posted December 22, 2009

A word of advice to the developed world: stop making China the climate scapegoat.

I might even broaden that advice to include emulating the Middle Kingdom in some ways.

You see, the developed world is always quick to point out China's vast emissions and lackluster approach to sustainability.

I would submit to you, though, that in many ways the U.S. falling drastically behind its Asian counterpart when it comes to numerous issues involving emissions and the adoption of clean technology.

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The Emissions Thing

It's generally been the United States' position that China should commit to reducing its emissions as prerequisite to domestic action.

What we (as a nation) fail to realize, however, is that per capita (the amount of emissions per person), emissions in China are far less than in the U.S. And if that surprises you, wait 'til you see these other comparisons...

Both China and the U.S. have set emissions goals for 2020:

  • The U.S. has proposed a 17% cut in emissions from 2005 levels

  • China has proposed a 40% to 45% reduction in carbon intensity (per person) from 2005 levels

The World Resources Institute has said those two efforts would have about the same outcome.

But here's the kicker: China's goal is official policy. Ours is simply a goal announced by the White House, though the EPA now has the authority to act independently.

So who's more committed?

The Energy Thing

Last year, China got 9% of its energy from renewable resources. It has committed to raise that number to 15% by 2020. But recent reports show that if the current expansion rate continues, solar power alone could reach five or ten times the 15% target.

The most recent U.S. data comes from 2007, when we received 7% of our energy from renewable resources. A 15% by 2020 target has been passed by the House, but the Senate has yet to act. If passed, state governors could reduce the target to 12% if they increase efficiency targets.

Who's more committed? Who's making more progress?

The Efficiency Thing

Three years ago, China pledged to improve energy efficiency 20% by 2010. They are on target to reach that goal and to create a more stringent goal for 2020.

The U.S. — while committing a few billion for efficiency projects in the stimulus — has set no firm targets. The Waxman-Markey bill that has passed the House mandates a paltry 5% by 2020.

Who's more committed?

The Auto Thing

After a big U.S. push to increase Corporate Average Fuel Economy (CAFE) standards, the blanket target efficiency is 35.5 miles per gallon.

China is also beating us in this arena: in 2008, average fuel economy for new cars was reported at 36.7 miles per gallon.

The Disclaimer Thing

Of course, I can't put forth such a rosy Chinese sustainability picture without a few caveats.

The country is building coal plants at an alarming rate.

China is home to some despicable industrial practices that cause dangerous levels of chemical pollution.

And yes, they are the world's leading overall emitter of greenhouse gases, with dangerous levels of pollution still clogging numerous cities and rivers. (We'll get to their behavior in Copenhagen in another article.)

So yes, there are still serious problems in China... but we can't ignore the positive steps they're taking to address them — nor can we ignore the profit implications those steps will have for green investors.

The Reality Thing

The reality is pretty scary.

Think back a decade, to the height of dot-com expansion. Who were the leaders?

Sun Microsystems. Yahoo!. Google. eBay. Amazon. All U.S.-based companies.

Now think about the present day...

My best gains this year came from Chinese companies. And they came from multiple sectors.

Chinese solar producers are undercutting their European and American counterparts. Companies like Canadian Solar, Trina Solar, Suntech Power, and JA Solar have begun to show great strength.

The Chinese wind industry has also turned into a juggernaut, with multiple multi-gigawatt projects announced or under construction. American Superconductor (NASDAQ: AMSC) has been the way to harness those strides.  And what about A-Power's (NASDAQ: APWR) monster run?

The Middle Kingdom has also become a breeding ground for battery and electric vehicle companies. Hong Kong Highpower (NASDAQ: HPJ) and China BAK Battery (NASDAQ: CBAK) have offered legendary gains this year.

It's hard to find a cleantech sector without at least one dominant Chinese player.

We should all keep this in mind as we form our investment strategies and policy opinions for next year.

China, while it still has a way to go, may not be the monster it's made out to be. Their ambitious approach thus far, coupled with their penchant to be seen favorably by the world, will make for even more gains in 2010.

Green Chip will continue to cover policy advancements and investment opportunities both here and abroad, bringing you the best information and analysis available.

Have a great holiday,

Nick Hodge

Nick

P.S. There's one Chinese company in particular that I've been keeping a very close eye on.  It's a small car manufacturer, but it's getting ready to take the electric vehicle and battery market by storm.  Some reports claim its technology could make this outfit bigger than Toyota in the very near future.  Click here to learn all about the company, and how much investors stand to make as China greatly expands its cleantech reach.