Green Investment Opportunities in China

Investments by the Chinese government are creating a wealth of green sector opportunities. China's huge business and consumer base is creating demand for everything from renewable energy to green buildings.

A good illustration of the profit potential afforded by China's green market comes from Chan Han Meng, executive director of Nature Elements Capital. According to Chan, Green buildings offer a 30 - 50 percent price premium while additional construction costs are only five per cent.

China is investing $736-billion in sectors like wind and solar. Targeting the best entry points to invest in the Chinese green market involves paying close attention to the sectors that, with government support, can compete with traditional sources of power.

Chinese Government incentives in the wind power sector have reduced the cost to between 0.5 RMB and 0.7 RMB per kilo watt hour. Renewable sources of energy like wind power will skyrocket once the cost per kilo watt hour matches coal, currently about 0.4 RMB per kilo watt hour.

China's green energy economy hinges on making clean energy competitive with coal. The Chinese government is waiting for the Parliament to approve measures that will provide loans, grants and tax breaks that will help make renewable energy cost competitive with coal. To help with this goal, China may even impose tariffs on energy derived from coal.

Up to half a trillion US dollars in clean energy investment capital will be required to meet China's proposed green targets over the next five years. This affords opportunities for investors who want to earn significant returns while helping to green the earth.

© 2011, Richard Matthews. All rights reserved.

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China's Most Recent Five Year Plan

China’s most recent five year plan (FYP) covers the period 2011-2015, and China’s National People’s Congress (NPC) is expected to approve the final version in March 2011. This FYP is expected to shift China’s development agenda towards sustainable growth.

The FYP will strengthen China's energy efficiency in key sectors such as heavy industry, construction, and transportation. China will also support the development of energy efficiency technologies. In addition, management on supply and demand sides will be improved including national utility demand-side management (DSM) .

China may further boost prices of fossil fuels, as well as levy carbon, environmental and resource taxes.

China plans to implement a domestic carbon-trading market to reduce carbon emissions and promote clean-energy industries. A cap-and-trade market in China may be in place by 2020 and could begin targeted applications as early as 2013.

China will support the development of clean energy technologies and boost its domestic clean-tech market. China may invest up to US$1.5 trillion over the next five years in seven strategic industries, such as alternative energy, alternative-fuel vehicles, and environmentally friendly technologies. Approximately US$300 billion will be invested in the construction of smart grid in China in the same time.

China is also planning on paying more attention on its coastal waters. China's marine ecological restoration is focusing on measuring the amount of organic pollutants found in surface water by monitoring chemical oxygen demand. They are also limitating emissions of nitrogen and phosphorus which causes eutrophication. New coastal construction will be strictly examined to ensure they are not adversely impacting the environment.

© 2011, Richard Matthews. All rights reserved.


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China can School the US About Green Growth

America is often viewed as the preeminent world leader, but when it comes to growing the green economy, the US can learn a lot from China. Although China is often criticized as being the world's largest CO2 emitter, it has an average emissions per capita well below those of wealthy economies.

Both China and the US have set emissions goals for 2020. The US has proposed a 17% cut in emissions from 2005 levels while China has proposed a 40% to 45% reduction in carbon intensity (per person) from 2005 levels. The World Resources Institute has said those two efforts would have about the same outcome.

However there is a major difference, China's goal is official policy, America's goal, although announced by the White House, is not official policy, nor has any legislation been passed to attain that goal.

China is making real progress in developing renewable power. In 2008, China got 9% of its energy from renewable resources. It has committed to raise that number to 15% by 2020. But recent reports show that if the current expansion rate continues, solar power alone could reach five or ten times the 15% target.

In 2007, 7% of US energy came from renewable resources and with any hope of legislation crushed by Republican gains in the midterm elections, that number is not likely to significantly increase in the short term.

Three years ago, China met its 20 percent energy efficiency goal and in 2010 and they are creating more stringent goals for 2020. The US has set no firm targets.

When it comes to fuel economy, China is also leading the US. In 2010, America set new Corporate Average Fuel Economy (CAFE) standards at 35.5 miles per gallon, while China achieved an average fuel economy of 36.7 miles per gallon back in 2008.

The Chinese solar, wind and EV industries are leading the world. On the stock market, some of the best gains are coming from Chinese cleantech companies which are present in almost every sector.

As reported in YaleGlobal Online, a comparison of Chinese and US firms indicate that America has lost its competitive edge. In 1998, the US owned 25 percent of worldwide high-tech exports while China’s was less than 10 percent. By 2008, China’s share was 20 percent, with America’s below 15 percent.

The most revealing statistics come from a Bloomberg survey, created in collaboration with the UN Environment Program. This study indicates that China became the largest recipient of renewable energy financing in 2009, attracting more than 20 percent of the US$162 billion invested worldwide in wind, solar, biomass, small hydro, biofuel and marine energy. While such investment in China grew by 53 percent, in the US it shrank by 45 percent.

A study published by the Harvard Kennedy School’s Belfer Center found that, unlike the US, China coordinates and supports energy R&D through government owned enterprises.

By some estimates, investments in renewable-energy assets may total US$2.3 trillion by 2020. If America is to compete with China for the lucrative green market and all the jobs that come with it, the US will need to develop a much more coordinated approach.


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Government Incentives are Growing Renewable Energy

The evidence indicates that government investments have significantly helped the US renewable energy market. The American Recovery and Reinvestment Act (ARRA) of 2009 provided $94.8 billion for clean energy. The program was established under section 1603 of ARRA, and provided cash grants covering 10% or 30% of the total cost of developing new renewable energy facilities.

ARRA investments also funded research projects to develop next generation renewable energy technologies. These types of innovations create a cost competitive alternative to dirty sources of electricity while simultaneously creating long-term economic growth.

Due in large part to ARRA, the renewable energy industry survived the worst financial crisis in decades and is making significant progress toward attaining its goal of doubling renewable generation capacity over two years.

According to Gisela Kroess, a director at UniCredit SpA (UCG.MI), "[ARRA incentives have] spurred a lot of the growth we've seen," she said at a renewable-energy finance conference.

Despite Republican opposition, the US Department of the Treasury's 1603 cash grant program for the solar and wind industries was extended through 2011 as an add-on to the 2010 Tax Relief bill. The extension provides incentives so that developers of new solar and wind farms will continue investing in new projects beyond those already slated for construction.

ARRA Report Card: Two Years Later, is the latest industry study from market research publisher SBI Energy, it examines the ARRA clean energy investments and their impact on the various clean energy markets within the power, transportation, and building sectors.

Solar Energy

The report card indicates that according to forecasts from the Council of Economic Advisors (CEA), ARRA investments will help the domestic manufacturing capacity for solar photovoltaic (PV) modules to grow from less than 1 GW per year in 2008 to nearly 4 GW per year in 2012. Solar EnergyARRA investments are also accelerating the rate of innovation in solar photovoltaics and will drive down the costs of solar panels over the next five years by as much as 50 percent. According to the Solar Energy Industries Association, ARRA has supported more than 1,100 solar projects in 42 states, creating enough new solar capacity to power 200,000 homes. ARRA has resulted in nearly 40 percent growth in the solar power market in 2009 and nearly double in 2010.

Wind Energy

Despite weak economic and investment conditions, US wind power capacity grew 40 percent in 2009 compared to 2008. In July 2010, the CEA reported that ARRA was responsible for approximately 6 GW of wind capacity installation that might not otherwise have occurred in 2009.

Geothermal Energy

An April 2010 U.S. Geothermal Energy Association (GEA) survey indicated a 26% increase in new projects under development in 2009 and concludes that the stimulus funding played an important role in propelling geothermal growth amidst recessionary economic conditions.

Combined Renewable Energy

The Energy Information Administration (EIA) estimates that US renewable generation capacity will increase 32 percent more than without ARRA, reaching 155 GW in 2015.

The results of this report card clearly indicate that government investment has significantly increased America's renewable generation capacity.


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The Growth of the Green Market

The green market has been growing fast and shows no signs of slowing. The global environmental industry is presently worth almost one and a half trillion dollars and it is expected to double in the next decade.

Even in an economic environment marked by widespread declines, the green market showed steady growth. In 2007 the green market grew 8%. In 2008 as the wider economy began feeling the effects of the most serious downturn since the Great Depression, the green market managed to grow a remarkable 3%.

Forecasts published in July 2009, by US trade publication Environmental Business Journal (EBJ) expected a 2009 growth rate 0.6% for the US environmental industry. However, the EBJ described 0.6% growth as a significant achievement given that the prevailing estimates expected the US gross domestic product (GDP) to contract by 2-4% in 2009.

On June 17 2010, the Dubai Chamber of Commerce & Industry released a newsletter that indicates the global market for environmental products and services will double by 2020.

Established in 1965, the Dubai Chamber of Commerce & Industry is a non-profit public entity, whose mission is to represent, support and protect the interests of the business community in Dubai by creating a favorable business environment, supporting the development of business, and by promoting Dubai as an international business hub.

The Dubai Chamber of Commerce and Industry's Centre for Responsible Business (CRB) has released this year's fourth issue of its bi-monthly newsletter, CSR Al Youm. The newsletter addresses the opportunities, competencies and complexities of the Green Market. According to the newsletter, the green market will double from $1.37 trillion a year in 2010 to $2.74 trillion by 2020.

The news that the green market will double in the next decade adds to the growing number of reports that point to vast opportunities.
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