Globalist Perspective

Green China — Part III: The Big Push

Will the abundance of renewable energy sources make resource wars a thing of the past?

Credit: Arkadymar/Shutterstock.com

Takeaways


  • Green development is a "no regrets" strategy. It offers a range of tangible benefits apart from its savings in terms of carbon emissions.
  • The big disadvantage of green technologies is that they generally cost more than conventional, dirty, fossil-fuelled technologies.
  • The development of green industries can generate rural employment and livelihood as much as urban, thus contributing to balanced development.
  • Finance is the heart of capitalism. Yet it has been largely absent from discussions of how to find and fund solutions to global warming.
  • In the 21st century, a green Big Push is likely to lead to the creation of ever-expanding "islands" of green economy businesses.

The Chinese scholar Hu Angang, a member of the Chinese Academy of Social Sciences and highly influential with the Chinese leadership, has been arguing for several years that green development is “the inevitable choice for China.”

He argues that China is being forced to adopt an alternative to the model of industrialization that the West was able to pursue because:

  China is a latecomer and faces an international energy situation that is already crowded,
  It is lagging in conventional fossil-fuelled technology, but can leapfrog to the lead with green technology,
  It has such a huge population for which the traditional model will not scale,
  It cannot pursue resources abroad through colonialism and armed conquest — unlike its Western predecessors, and
  Basing its development model on increasing resource intensity will come up against inevitable resource constraints (for example, the peaking of oil and coal supplies).

Any one of these reasons alone would suffice as a reason to search for a development alternative. Taken as a group — and combined with the prospect of facing increasing international pressure on carbon emissions — these reasons are overwhelming in their power.

Indeed, they make green development “an inevitable choice for China” — and, by extension, for Brazil and India as well. Green development has to be seen, then, as the necessary industrialization path forward for the BICs.

The alternative is relentless resource wars, terrorism, increasing insecurity, and dependence on fuel imports whose price will inevitably rise. By contrast, a green development strategy offers several advantages, including:

  It taps into energy resources that are abundant, and calls for the development of sophisticated technologies that can then serve as the core of new export-oriented industries.
  Renewable energy resources are abundant and widely dispersed, so that the BICs cannot be held to ransom by fossil fuel powers and can generate abundant power to drive their industrial strategy without concern for fuel costs.
  The renewable resources are dispersed across all countries (but particularly tropical countries) and so international tensions are reduced.
  The possibilities for leapfrogging in renewable energies and low-carbon technologies are there to be captured, particularly if implemented with strategies that exploit indigenous standards and the domestic market.
  The development of green industries can generate rural employment and livelihood as much as urban, thus contributing to balanced development.
  Green development through circular economy initiatives (such as recycling) offer the best prospect for reducing dependence on resource imports and strains on the balance of payments.

This list does not even mention the advantages that green development offers in terms of reducing carbon emissions. In this sense, green development is a “no regrets” strategy. It offers a range of tangible benefits apart from its savings in terms of carbon emissions.

Even if the dangers of global warming turn out to be overstated (itself highly unlikely), China (and the BICs generally) would in any case accrue enormous advantages by adopting green development strategies, simply in terms of greater reliance, resilience and security.

The case of Mongolia is a good example. Here is a country sharing a major border with China that has had unprecedented flows of inward foreign investment from companies like Rio Tinto to build its coal export industry — much of that coal going to power China’s black industrial revolution.

But at the same time, Mongolia is seeing the development of vast wind farms that promise a genuine green revolution.

Newcom, led by its charismatic, English-speaking CEO Bayanjargal Byambasaikhan, has created a huge new wind farm at Salkhit — just outside the capital, Ulan Bator — where 31 wind turbines are being brought online to generate 5% of the country’s power needs. (Mongolia is currently totally dependent on coal.)

But this is only the start. Newcom and Mr. Byambasaikan see a future in which Mongolia’s wind resources can be harnessed to power not only its own development, but much of China’s and Asia’s electrification as well.

This would come about through an Asian super-grid — modeled on the Desertec proposal championed by Germany as a means of Europe tapping into the solar energy resources of North Africa — to the mutual benefit of all sides.

In Seoul, at the Global Green Growth summit in May, the Japanese businessman Masayoshi Son, now a fervent anti-nuclear activist in the wake of the Fukushima disaster, announced plans to link Japan, Korea, China and Mongolia into a vast, transnational super-grid.

His goal is to power the grid with renewable energy, and particularly by wind power from Mongolia. Mr. Son told me that this is the inevitable course to be taken, and that companies such as Newcom would play a vital role once governments gave the green light for this kind of development.

The role for “green” finance

The big disadvantage of green technologies is that they generally cost more than conventional, dirty, fossil-fuelled technologies — at least at the current stage of exploitation, before peaking effects really kick in.

That is where strategy comes in. The BICs and other countries looking for an alternative to the conventional development model have to find ways to bridge the gap.

This gap, for now, exists between the current costs that exceed those of fossil fuels and the anticipated revenues that will dwarf those to be generated by the declining conventional technologies and industries.

Finance is the heart of capitalism — the engine room, as it were. Yet finance has been largely absent from discussions of how to find and fund solutions to global warming, and powering a new kind of green development strategy.

We can envisage a finance sector where trillions will be issued in the form of bonds that label themselves as being dedicated to financing green infrastructure.

They will be so labeled partly because of the demand for such “green” finance or “climate bonds” from the pensions and insurance sector, and partly because they will provide a source of finance that will be cheaper than “generic” finance that can be utilized for any purpose, including the building of fossil fuel infrastructure.

The issue for all such investments in a new branch of industry, or new industrial sector, is this: The revenues anticipated will be enormous, but they are exceeded initially by the costs.

We can think of the green development strategy in terms of the “Big Push” model of Paul Rosenstein-Rodan and other development economists in the 1940s and 1950s. These economists thought of development not as an incremental process, which would fail for lack of critical mass and interconnections. Instead, they saw it as a state-financed “big push” across several industrial sectors simultaneously.

On development then, and on green energy now, this would have the effect of creating critical mass and building sectoral interconnections that would further stimulate growth. That idea is now being applied (in practice, but not explicitly) by China — with great success.

But the idea doesn’t need to be limited to China. It can — and should — be put to work in building green energy sectors around the world as the instrument of countries’ development ambitions, but as a means for curbing global warming.

In the 21st century, a green Big Push is likely to lead to the creation of ever-expanding “islands” of green economy businesses.

These will likely generate increasing returns (revenues) from their links with each other that propagate and grow like a chain reaction — rather than from their links with the conventional fossil fuel economy.

They will form supra-firm structures like clusters and virtual eco-industrial parks that will focus and concentrate their efforts, enabling entrepreneurs to capture otherwise unrealized profit opportunities.

So green development indeed promises to produce a different kind of industrial capitalism. But it is one that looks more practicable and likely to be achieved than the fossil-fuelled “business as usual” pathway of today.

Sound like a long shot? Just ask yourself which is more realistic: a world clinging to its fossil-fuelled past, with countries fighting each other over dwindling supplies?

Or a world that has learned to harvest abundant energy supplies from renewable sources, and to recirculate those resources through a circular economy, thereby creating conditions for international tolerance?

Read the third part of this article: A Model for the World?

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About John Mathews

John Mathews holds the Chair of Strategy at the Macquarie Graduate School of Management at Macquarie University, Sydney.

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