Monday, October 4, 2010

Clean energy race - China plays to win

Renewable energy jobs can give significant boost to any economy, including US economy, but China is the one that is getting the lion's share out of it. If we look at the current numbers we can see that China has more than million people working in its renewable energy industry. If we translate this into the production number it means that China produces half of the world's wind turbines, supplies half the world's hydropower projects and fabricates three-quarters of the world's compact fluorescent light bulbs. The situation on US front is quite the opposite, and many manufacturers of solar panels and wind turbines are cutting jobs and closing factories in the United States.

The difference between the US and China in clean energy race is the fact that China plays to win at any cost. As some energy experts point out China is even breaking the trade rules that the rest of the world follows in order to continue its supremacy in production of clean energy. The situation has become critical, and it looks almost certainty that China will replace US dependence on foreign oil with a dependence on foreign renewable energy technologies.

In recent years China has also severely restricted the export of rare earth materials essential for renewable-energy technology by using the well known principle „if you want some go get some“. Such policy forces foreign renewable energy manufacturers to move to China in order to get access to these rare materials, and once getting there, China requires foreign manufacturers to transfer their technology to Chinese partners. The end result of this is that research and development paid by U.S. taxpayers ends up in China, creating more renewable energy jobs for Chinese.

And of top of it all China sells its renewable gear and other products overseas at artificially low prices. Some calculations point out that Chinese government spends $1 billion a day on currency in order to make Chinese products more affordable to the rest of the world. Undervaluing domestic currency (yuan) makes U.S. exports more expensive, and thus more difficult to sell in China. This is the reason why US market balance with China looks so bad.

Perhaps we will soon see some change as two congressional committees are about to hold hearings on China's currency manipulation. Undervaluation of yuan should also be among hot topics at upcoming meetings of the International Monetary Fund and the G-20 nations. These games work perfectly for China, and China will likely follow this pattern as long as possible. In the meantime US needs to work fast to stay in race. President Obama has already committed $80 billion for clean energy, including generation of renewable energy sources, expanding domestic manufacturing capacity of renewable energy goods and advancing efficiency of vehicle and fuel technologies. This looks very good but US needs to straighten its trade policy so that this $80 billion will actually create renewable energy jobs in the United States and not ensure even more renewable energy jobs for in China.

No comments: