CAN THE MARKETS PREVAIL?
Some Western analysts still believe a markets-oriented
approach works best and will ultimately prevail.
They argue that subsidised inputs will result in a less
efficient industry, more focused on volume than cost and
quality. "The best solutions come out of a competitive
environment," said the Carbon Trust's Sykes.
The focus on adding new capacity has also run ahead of grid
connections, meaning many Chinese turbines may never actually
"They will look like wind farms, and they may spin like wind
farms, but there's no guarantee that they will actually work
like wind farms," said Michael Liebreich, chief executive of the
research firm Bloomberg New Energy Finance.
Moreover, some in the West believe the United States still
has an advantage in innovation. The owner of patents, not
factories, will likely earn the biggest profits and win the
In a Reuters poll of 41 U.S. venture capital investors, more
than three-quarters of respondents said the United States would
be the best market for cleantech over the next five years, and
88 percent believed America was the best place to base this
business in the same time period. China ranked as the second
best market (with 16 percent of the total). [ID:nLDE60O2AC]
"The world has absolutely no hope of making any substantial
impact on global warming without major scientific breakthroughs,
almost all which will come from United States' innovation," said
Robert Nelsen, co-founder and managing director of Arch Venture
An undeniable edge for China is its huge pile of foreign
exchange reserves. The nation's clean energy industry has
recently benefited from Beijing's aggressive economic stimulus,
which included funds for energy-efficient buildings.
Signs of an overheating Chinese economy may turn that tap
down for a spell. By contrast, Western economies are expected to
spend much of their green recovery cash this year and next.
(Global planned green stimulus funding:
In recession-battered Western nations, and in China, the
prime motives for promoting clean technology are jobs, profits
and energy security -- not climate change. That leaves no
guarantee that there will be enough investment to fight global
An estimated $150 billion invested globally last year was
only about half what is required annually by 2015 to avoid
dangerous climate change, the International Energy Agency
"There is a big funding gap. I would say we need at least a
doubling by 2015," said Cecilia Tam, citing draft estimates the
IEA published in June.
If over the next 20 years the world is to boost renewable
power, build greener buildings and roll out more fuel-scrimping
cars including hybrid and electric models, it must invest more
than an additional $500 billion annually, according to Tam.
Many forms of renewable power are expected to be more
expensive than their fossil fuel counterparts for at least
(Estimated costs of different energy technologies in 2020:
Given the incompatibility of communist-style targets with
western democracies, how can free markets mobilise more green
Western nations could boost clean investor returns with a
tax on fossil fuels or guaranteed higher prices for renewable
power. And aside from market levers, governments could adopt
standards to make clean tech more attractive -- requiring homes
to install smart meters, for example -- but rapid deployment
doesn't seem politically palatable at the moment.
"It's worthwhile learning from the Chinese that these big
transformations do require some exercise of public power," said
James Cameron, vice-chairman of green investors and advisers
Climate Change Capital.
Dutch pension asset manager APG has about 2 billion euros
allocated to green investments, by the "broadest definition",
said Rob Lake, head of sustainability. That compares with total
assets of 206 billion euros.
"The reality at the moment is that investment in oil and gas
is still attractive," said Lake.
But pension funds and other institutional investors can do
more. Even if they don't put more of their own money into clean
tech, they can use their clout to encourage more conventional
energy companies to clean up, said Marcel Jeucken, head of
responsible investment at the Netherlands-based, 86 billion euro
PGGM pension asset manager. [ID:nLDE60J2CM]
Jeucken said his fund is "in constant dialogue" with Royal
Dutch Shell, the oil major with a major investment in Canadian
oil sands -- where oil production entails more carbon emissions
than conventional oil fields.
"We used our shareholder rights wherever possible," he
added. "Climate is one of our focus areas, and within that we
are working on oil sands. We initiated a trip to the oil sand
fields last year."
A discouraging sign for investors who were hoping
environmental markets would soon take off is the cloudy future
of cap-and-trade plans. Such schemes force coal plants and other
polluters to buy carbon emissions permits. They add to the cost
of electricity, and are proving a hard sell in the United
Opposition to cap-and-trade among U.S. Republicans and some
Democrats could block the roll-out of a federal trading scheme
which would limit the further growth of global carbon markets,
valued at around $125 billion last year.
Furthermore, last month's U.N. summit in Copenhagen was
expected to unveil an expansion of global trade in carbon
offsets between rich and developing nations, but in the end they
won no explicit mention in a weak, final declaration.
What all that means for traders is clear: "To tell you the
truth I'm starting to look towards other commodities --
uranium," said Laurent Segalen, head of emissions trading at
Does all this suggest China is destined to win the clean
tech race? Hardly, though it does seem to have a little more
forward momentum than do its rivals these days.
But it's still very early goings, and there's more at stake
than business success.
(Additional reporting by Chris Buckley in Beijing and Larry
Aragon and Peter Henderson in San Francisco; Editing by Jim
Impoco and Sara Ledwith)