Green Opportunities For North American Firms
China’s 11th Five Year Plan – Green Investment of $175 Billion makes the PRC a leading player in Global Green Technology
Compiled by Thomas E. Walsh, Jr.
East West Bridge Inc.
It is no secret that China is suffering from acute environmental toxicity. Unrestrained plundering of their natural resource base, high-density population, and heavy reliance on outdated technology, and uninhibited urban and industrial expansion has taken a heavy toll. In response to this situation, the Chinese government has generated a storm of environmental legislation, shut down thousands of small, dirty factories, and decreed by 2010 the country will reduce its polluting discharges and energy consumption.
One of the serious negative consequences of the People’s Republic of China’s rapid industrial development has been increased pollution, smog, and degradation of natural resources. Much solid waste is not properly disposed of. Water pollution is a source of health problems across the country, and air pollution causes up to 1,750,000 premature deaths each year. China’s polluted environment is largely a result of the country’s rapid development and consequently a large increase in primary energy consumption, which is generally provided by coal power plants. China has pursued a development model, which prioritizes exports-led growth (similar to many other East Asian countries). In early 2006, Forbes Magazine reports that all 10 of the 10 most polluted cities in the world are in China.
The Xinhua News Agency has quoted an environmental official, Wang Jinnan, as saying that more than 410,000 Chinese die as a result of pollution each year. The Financial Times said a World Bank report, entitled Cost of Pollution in China, (prepared with the cooperation of the State Environmental Protection Agency) found up to 760,000 people die prematurely each year in China because of air and water pollution. High levels of air pollution in China’s cities leads to 350,000-400,000 premature deaths, it said. Another 300,000 die because of indoor air of poor quality. The newspaper article, quoting World Bank advisers and Chinese officials, also said that the report omitted research showing that there are 60,000 premature deaths each year because of water of poor quality.
As a result, the Chinese government has placed a greater concern on environmental issues. In 2004, the central government instituted the Green Gross Domestic Product project, in order to determine the true gross domestic product, adjusted to compensate for negative environmental effects. The results were so much worse than projected that the program was suspended entirely in 2007. In 2005, the eleventh five-year plan contained special emphasis on the nation’s environmental degradation. In his annual address in 2007, premier Wen Jiabao made 48 references to “environment,” “pollution,” or “environmental protection.” In addition, the Chinese government attempted to hold national “No Car Days” throughout nearly 100 cities, including Beijing, in which cars would be banned on central roads. However, it was largely ignored.
Jiahua Pan writing in the Telegraph reports that, “In China’s 11th five year plan (2006-2010), a more ambitious environmental target is set to reduce key pollutants by 10 per cent while keeping the economy growing at a relatively fast rate of eight per cent or more. Recent statistics show that China is well on track to meet the environmental targets set in this plan.
The central government is ready to match their goals with cash. The amount of new construction and upgrades to existing facilities has created enormous demand for related equipment, consulting, and technology. This is good new for North American companies looking to export products and services to China.
However, North American companies face stiff competition from Japan, Germany, France, and other European countries. However, high-tech U.S. and Canadian products in this field are of excellent quality and reasonable price, which should help these producers capture a sizable market share in China.
In fact, the U.S. exportation of water monitoring devices to China has shown a steady increase over the past decade, quadrupling in sales over that span, while gas, liquid, and electrical monitoring has tripled.
Nevertheless, in spite of the overwhelming problems, China has achieved some significant improvements to its environment during the recent years. According to the World Bank, ‘China is one of a few countries in the world that have been rapidly increasing their forest cover. It is managing to reduce air and water pollution.’
As part of US$498 billion economic stimulus package of November 2008 (the largest in China’s history), the government plans to enhance sewage and rubbish treatment facilities and prevent water pollution, accelerate green belt and natural forest planting programs, and increase energy conservation initiatives and pollution control projects. This initiative cannot be accomplished through domestic resources alone. China must rely on imported technology and expertise to accomplish these aggressive goals. There is low-hanging fruit in reach for firms that are positioned to enter the China market.
$175 Billion to be spent on Pollution Control
China plans to spend 1.4 trillion yuan ($175bn) over the next five years on protecting its environment. The sum – equivalent to 1.5% of China’s annual economic output – will be used to improve water quality, and cut air and land pollution and soil erosion.
China has some of the world’s most polluted cities and waterways. Beijing has often overlooked protecting the environment in the rush to develop its economy – but now it is paying the price, a BBC correspondent says.
“A chemical spill in a river near the city of Harbin last year drew international attention, as water supplies to almost four million people had to be suspended for nearly a week.”
Under the stimulus plan, sewage treatment plants will be built in 10 river valleys to reduce the harmful impact of wastewater from cities. Money will also be spent on cutting levels of sulphur dioxide and dust in large cities.
The state-owned Xinhua news agency said money would be used to curb soil pollution, which has contaminated agricultural produce. The agency quoted Zhou Shengxian, director of the State Environmental Protection Administration, as saying that every year 12 million metric tonnes of grain were polluted by heavy metals that had found their way into the soil.
Efforts to control China’s pollution problem have become a top priority of the Chinese leadership. The State Environmental Protection Administration (SEPA) was officially upgraded to a ministry-level agency, reflecting the growing importance the PRC Government places on environmental protection.
Beginning in 2006, the government greatly expanded expenses into environmental protection, and a series of new laws have been passed. Enforcement of these laws is also being expanded. The PRC has strengthened its environmental legislation and made some progress in stemming environmental deterioration. During the 11th 5-Year Plan (2006-2010), the PRC plans to reduce total emissions by 10% and bring China’s energy efficiency up by 20%. Beijing in particular is invested heavily in pollution control as part of its campaign to host a successful Olympiad last year. Improvements to the capital city’s environment controls continue under the 5 year plan. Some cities have also seen improvement in air quality in recent years. In the first half of 2007, China’s total energy consumption per unit of output improved by 2.8% and China’s sulfur dioxide emissions fell by 0.6%, showing that these new measures have the potential to slow down pollution growth.
Within the current 5 yr plan the central government has set ambitious goals. The two major targets are; Providing safe drinking water for 100 million people and treating 70% of sewage generated by 2010. So far the results have been underwhelming. Sewage alone is estimated to grow to 64 billion tons by 2010.
Again, the central government is ready to match their goals with cash. The amount of new construction and upgrades to existing facilities has created enormous demand for related equipment, consulting, and technology.
China is setting the standard for other nations to follow. China’s green technology market could grow to $1 trillion, or 15 percent of GDP by 2013, according to a report by the China Greentech Initiative (CGTI) reported by Guo Lu in Dalian.
“The China Greentech Report 2009 focuses on 125 green technology solutions across seven sectors, including cleaner conventional energy, renewable energy, integrated electric power infrastructure, green building, cleaner transportation, cleaner industry and clean water.
World’s Larget Market for Green Technology
The report makes clear that the country will grow into one of the world’s largest markets for green technologies, products and services. The country is already laying the proper foundation for future development, said the report.
Renewable energy utilization is growing at a double digit rate from a year ago, while intensive energy usage has been declining for decades, according to the report. ‘China is positioned as a leading player in green technology,’ says Richard Gledhill, an analyst with Climate Change & Carbon Market Services at PricewaterhouseCoopers LLP.
‘The combination of continuing economic growth, its technological and manufacturing capability and strong government commitment, driven by growing concerns about climate change and other environmental threats, are creating real momentum in the green technology sector,’ he said.
‘The country has the potential to get a jump on its global competitors, with an early transition to a lower carbon economy and more sustainable long-term growth,’ Gledhill noted.
According to the US government, the clean technology market in China will amount to US$186 billion in 2010 and US$555 billion in 2020. China’s environmental protection and renewable energy market offers enormous opportunities for US businesses, said David Bohigian, the U.S. Assistant Commerce Secretary.
The Chinese government’s policies, such as targets for renewable energy use and the newly passed circular economy law, will create new business opportunities for US firms, said Bohigian.
China passed its circular economy law on August 29, which is aimed at boosting sustainable development through energy saving and the reduction of harmful emissions. When the law comes into force on January 1, industrial enterprises will be required to adopt water-saving technologies, strengthen management, and install water-saving equipment in new buildings and projects. The new law will boost the development of China’s clean technology sector, something that overseas clean technology companies hope to cash in on.
Bohigain said US companies with clean coal and carbon capture technologies are better positioned to succeed in China, as the nation currently uses highly polluting fuel to satisfy around 70 percent of its energy needs. Meanwhile, renewable energies such as solar and wind power also have great market potential in the nation.
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