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China leads 'global green shift'

17 November 2017

China's push for renewable energy is driving down costs worldwide, and creating massive business opportunities, argues John Mathews.

Evidence is mounting that a global 'green shift' is underway – a transition away from fossil fuels and toward clean, renewable sources of energy. But, contrary to popular perception, this shift is not being led by the United States, the European Union, or Japan. It is, says Professor John Mathews of Sydney's Macquarie University, driven by China. And what is more, China's motivation is not solely to clean up its cities, but equally to secure its energy supply.

"China is industrialising at a scale that is unprecedented in history, and if it were to follow the conventional fossil fuel pathway that every other industrialised country followed, then it would run up against impossible limits," says Mathews, a China specialist who teaches at the Macquarie Graduate School of Management.

And not just resource limits, but geopolitical limits. Pursuing a fossil-fuelled, business-as-usual growth strategy would increase dependence on some of the world's most volatile regions, such as Ecuador, Nigeria, South Sudan, and Venezuela, he says. China would then face insoluble crises involving oil wars, terror, and distracting geopolitical entanglements.

"So, the scale of development is forcing China to adopt a green strategy, and in doing so it is setting trends that become available around the world."

As evidence, Mathews points to OECD data showing that manufacturing is shifting East, with the share of global value-added manufacturing in non-OECD countries (read China) now standing at 50% – up from 18% just two decades ago.

" In terms of manufacturing, we are already living in a Sino-centric world."

Mathews says that some 34% of China's electric generation is from renewables – up from 20% in 2007. The country now generates 496 GW from hydro, wind, solar, and bio sources, making it the world's renewables superpower. By comparison, the United States generates 202 GW from these sources, and Germany just 97 GW.

China now invests more than the European Union in clean energy, both per capita and as a percentage of GDP.

"There is no getting away from the fact that China has a black, coal-fired system, but year-on-year it is greening," says Mathews.

Wind power generation has outstripped generation from nuclear plants as part of the clean power mix there since 2010, he says. And the gap is set to widen, despite the claims by some Western commentators that China will opt for a nuclear future. Wind and other renewables will prevail for two reasons, he says: they have a low marginal cost, and, more significantly, as a product of manufacturing, they give China energy security.

Mathews says the US retreat from clean energy under the regressive policies of the Trump administration has made it much easier for China to take world leadership in strategic emerging markets for renewable technologies such as electric vehicles and energy storage.

"China isn't commenting publicly on this – they are too smart to do that. But behind the scenes they are hugging themselves.

"In a sense, it is a tragedy for the United States that it has had easy oil for the past decade through fracking. That is hailed as an energy revolution, but it is not. It is the end game of fossil fuel."

As China builds its renewable energy infrastructure – and alongside it a circular economy to enhance its resource security – it is driving down costs worldwide.

"This green shift is creating vast opportunities in power generation, transport, industry, agriculture. These are all areas where New Zealand can become involved," says Mathews.

"Notice that I haven't mentioned carbon emissions, because renewables are not about reducing carbon emissions – that is a fortunate side effect. They are about the fact that they are manufactured, and so benefit from a learning curve and cost reduction. And that makes them the winners in today's great industrial dynamics battles."

Professor John Mathews spoke about ‘China as driver of the global green shift’ in September 2017 as part of the Business School's Energy Matters speaker series. This series brings together some of the world's foremost researchers and commentators to inform the energy debate in New Zealand.

Visit the Global Green Shift website

 

John Mathews

John Mathews is Professor of Strategic Management at Macquarie University's Macquarie Graduate School of Management.

john.mathews@mgsm.edu.au

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