U.S.A and China: The rapport policy

The agenda of the next meeting of global climate change, scheduled next December in Copenhagen, focuses on negotiating global agreement for reducing greenhouse gas emissions meeting will include representatives from 200 countries who will gather in this capital. Many analysts in the international community believe that the U.S and China, the world’s dominant producers of carbon emissions, should play a major role to set the agenda for global climate efforts

Certainly, the road to Copenhagen is not rosy; they do not know what kind of questions they may face. The scope of opportunities that cooperation on clean-energy development could create a partnership between the two countries before December 2009, as they are responsible for about 40 percent of global emissions every year, therefore they are in deep trouble.

As proof, the U.S and China have large coal components to their economies. The U.S relies on coal for about 50 percent of its power, while China for about 70 percent of its power. Generally, burning coal generates a substantial amount of carbon dioxide emissions, so the questions should be, how to control, or specifically how to find ways to capture that carbon dioxide and render it innocuous in terms of climate change.

In fact, both countries have very complementary sets of capabilities in this field, in technology advancement side as well as the engineering one. Thus, if they can work together to develop this technology, test it and work out business models, then they can bring this work much more rapidly than either of any one can do alone. This cooperation would reflect the kind contribution they can make together toward addressing climate change. However, many suspect that Copenhagen meeting will get a final agreement on a new framework.

The U.S President Barack Obama is planning to meet with his Chinese counterpart Hu Jintao late this year in Beijing, with an international expectation of a possible official partnership between the two countries to be signed. The partnership will make Energy as its top priority since it is the core of each economy.
The problem lying in this partnership is that both countries have serious doubts about the long-term intentions of the other side. It is hard to find a high-level official or an intellectual in China who does not believe that sooner or later the U.S will try to slow down or stop China’s rise. While in the U.S, there is a concern that if China reaches its full potential, it has on its agenda to marginalize the U.S and Asia relationship.

China has 220 local energy centers set up around the country, which serve the country’s strategy to increase energy efficiency. However, there is no one at any of those centers who knows how to do an energy audit. It is just not a skill that they have mastered. On the other hand, the U.S has a lot of capabilities in terms of energy audits. They can train Chinese people at their centers and the cost will be little, but the payoff will be huge. The rapidity of the change and attitude on this issue of clean energy and the possibility to cooperate has been absolutely startling.

Potential of clean-tech partnership
The two countries have adopted aggressive programs to reduce oil imports, create new clean-energy industries and jobs, and generally improve the environment. Unless the two work together to provide the scale, standard, and technology transfer necessary to make a successful and promising yet expensive new clean energy technologies, momentum to curb global warming could stall and neither country will maximize its gains in terms of green jobs, new companies, and energy security. The risk is real, electric vehicles, carbon capture, and concentrated solar power, among other emerging “green tech” sectors, will need massive investment, infrastructure, and research to get off the ground. Since the Chinese and U.S governments, along with private investors, are currently pursuing all of these technologies, formally or informally, if both countries work as a group dedicated to climate change, this would boost the technologies and deliver benefits that would accrue to all nations. Clean energy solutions are critical for reducing the amount of harmful greenhouses gases produced not only by the two highest emitting nations but also by more countries worldwide. For instance, if the majority of vehicles become hybrids and battery – powered ones by 2030, they would generate 42 percent fewer emissions than if all cars continue to run on today’s gas and diesel engines. But such reductions will not occur unless China and the U.S lay the groundwork to make it vital.

A farewell to crude oil
A global electric-car sector must start in China and the U.S, jointly creating an environment for automotive investors to scale their bets across both nations. Private companies in both countries will certainly compete to make the products, including electric-drive (or hybrid) vehicles, batteries, charging stations… etc. The two governments could pick matching cities in China and the U.S for electric vehicle pilots that could be used to collect standardized data on real electric–vehicle consumer adoption, infrastructure costs, and driving conditions that could be shared with companies in both nations.

This new sector will lead to a quick decrease in oil consumption; China imports about 50 percent of fuels used in vehicles, while the U.S imports around 80 percent. Such movement would also spark Europe into competing in a global electric vehicle industry.

Focusing on the solar power, a joint action by the U.S and China would create a brighter energy future through the usage of solar power plants. As an emerging technology, it requires technical progress and massive investments that only the largest economies can fund and support. The relevant technology uses sunlight to create and store steam power to drive turbines that transmit electricity on a larger scale. If clean concentrated solar power is scaled to generate 22 percent of total power in China and the U.S by 2030, it could create over half million-job opportunities in each country. Government subsidies have played a prominent role in the growth of solar power. Producers of renewable energy in the U.S receive tax credits for example, and Germany requires electricity distributors to pay market rates for electricity generated from renewable sources. Without such policies, the high cost of generating solar power would prevent it from competing with electricity from traditional fossil – fuel sources in most regions. But the sector’s economies are changing.

Over the last two decades, the cost of manufacturing and installing a photovoltaic solar – power system has decreased by about 20 percent with every doubling of installed capacity. The cost of generating electricity from conventional sources, by contrast, has been rising along with the price of natural gas, which heavily influences electricity prices in regions that have large numbers of gas –fired power plants. These regions include some states like California, Texas and the Northeast, as well as, Italy, Japan and Spain. The extent and speed of this emerging sector’s growth will depend on its ability to keep driving down the cost of solar power. No single player or set of players can make that happens on its own.

There are other benefits to a joint action between the two super powers (i.e. China and the U.S) on clean energy besides reducing oil imports, cleaning up the air. It will not be easy for countries to work in common to make these technologies real. The challenges to cooperation are numerous. Companies in both countries will be wary about what information they share with partners and competitors. Real cooperation between the two countries on technology initiatives is limited.

By Mostafa Mabrouk
Chairman Assistant for Economic Affairs, Ganope


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