05 August 2010

Learning From China

Lei Fung poster
The Chinese were famously exhorted, in a campaign in the 1960s, to "Learn from Comrade Lei Feng". Maybe the time has come for nations around the world to begin to learn from China.

Much of the news about China's growing leadership in clean technology and green markets is due to China's size. It has huge and growing markets and manufacturing capacity for everything, including wind turbines, solar panels, electric vehicles, green buildings and other low-carbon technology.

Every day news items note China becoming the biggest in this, a leader in that. Here are some recent item headlines from Daily Green Brief, just over the past few weeks:
  • US slips to second behind China for new wind power in 2009
  • China 'leapfrogs US to become biggest energy user'
  • The State of New Energy Investing ("There is little doubt about the most striking 2009 New Energy (NE) and Energy Efficiency (EE) statistic: Investment in China grew 53%. The world invested $119 billion in NE/EE in 2009 and China got $33.7 billion of it.")
But other items reveal China's aggressive development of new energy and environmental policies and programs.
  • China may launch environmental tax trial
  • China to invest $15 billion over 10 years for green autos
  • BSG hybrid expected to be standard for cars in China
  • China May Spend $738 Billion on Clean Energy Projects
  • GM to get boost from China's fuel-efficient vehicle incentives
  • Environment tribunals hammer polluters with legal accountability

Breaking the policy deadlock

Policy responses to the challenges of global climate change have ranged from "none" to "feeble" to "serious". Especially in the great free-market democracies the process has been uninspiring. Traditional carbon-intensive energy sources are so well entrenched, and generate so much money and political power, that any measures that might trim their profitability are, it seems, impossible.

China has its own problems with entrenched political power centers, and its policymaking can be criticized from many angles. But it begins to look like China is pushing forward with creative policies, incentives, taxes, regulations and programs that could become guides to other nations.

Many Chinese policy options will be unavailable or unattractive to other nations. Few jurisdictions would threaten to execute gross polluters, environmental exploiters and others who put profit above social responsibility. Fewer still would carry out such executions. But China does use this approach to focus the mind of potential scofflaws.

China's monolithic single-party system of government can also act faster than many more democratic institutions. (Although this system alone does not guarantee economic success or social benefits--witness The Democratic People's Republic of Korea.) Even in China's own recent past the power of the party has led to policy disasters, like the Great Leap Forward. Of course no political system is immune from policy blunders, even government-caused catastrophes.

Will there be followers?

The leaders of China seem to have found an approach that enables both great central control and powerful business and individual enterprise. Its leaders seem to be willing to try policies and evaluate their impact, and then adjust them as needed. This approach should generate a wealth of policy experience useful to governments around the world.

China could be a leader in imposition of carbon taxes and other means of bringing the cost of externalities home to polluters. Carbon taxes have been tried in only a few other jurisdictions (British Columbia and Denmark come to mind). Anything that could conceivably be called a tax is politically impossible in the USA. Carbon taxes have many technical advantages as ways to shift the allocation of resources without micromanagement from the center.

Taxes and incentives seem to be more attractive to Chinese policymakers than carbon markets, although they will try both. Markets are potentially more efficient, but they are politically difficult to create. The carbon markets created so far seem highly distorted by free allocation of permits to the politically powerful and other tinkering that robs them of much of their efficiency. And of course the great beacon of free markets, the United States, which invented pollution markets, can't establish them in the current political climate.

China's transportation policies make a stark contrast with India's, for example. While China is building more and more high-speed trains and rail lines, India can barely keep its current rail system rolling. China is encouraging the development of electric and hybrid cars, while India seems happy with more cars of any kind. These policy decisions will have major impacts on the future emissions of both nations.

If others around the world see, over time, apparent success in China's moves to reduce carbon intensity, control environmental pollution, improve public health, and build green industries they may wish to imitate them. Will that imitation extend to emulation of China's political system as well as its specific policies?

A new beacon?

If China can demonstrate that the right to develop does not necessarily require the right to pollute, and that economic prosperity can go hand in hand with carbon reduction, its leadership on climate policy among the emerging economies will be enhanced. In any event it seems obvious that the policy approaches of the U.S., Russia, Australia and some other leading nations are unlikely to be found worthy of emulation.

The EU and some of its members can still claim some successes, and could provide another source of climate policy wisdom. Brazil may do the same, but Brazil just isn't as big as China, and lacks its global political clout.

Few countries have China's great wealth, resources, and markets, so none can follow its approaches exactly. But many will carefully study its example.


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