Fears of inefficiency hit green revolution

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To address global climate change and over-reliance on fossil fuels, China has pledged to be a leader in low-carbon, eco-friendly technology.

But some analysts are worried that China's great green leap forward may be hobbled by undisciplined investment, mismanaged research and development, uncontrolled urbanization and unbridled industrialization.

"The nation's massive investment may be inefficient and not economical," said Wu Changhua, president of Climate Group in China. "More voices from different points of view are needed to help make more rational and appropriate decisions."

China announced at the end of 2009 that it would reduce carbon dioxide emissions up to 40 percent from 2005 levels, measured as a proportion of gross domestic product.

To underscore that goal, China's allocated 14.5 percent, or 48 billion yuan (US$8.5 billion), of its 4 trillion yuan economic stimulus package for green programs, including energy savings, emissions reduction, ecological construction and innovative research, according to the Ministry of Environmental Protection.

The output of green industries is expected to reach 1 trillion yuan by the end of this year, said Wan Bentai, the ministry's chief engineer.

"China has shown strong willingness and has taken firm action to invest in the green economy," said Anil Srivastava, chief executive officer of French-based energy company Areva's renewable business. "We can see the Chinese government and banks are increasing efforts to provide credit lines to relevant industries."

China has taken action, while in the United States, the scope and direction of investment in green policies are still bogged down in controversy and debate.

That may allow China to steal a march in the green technology revolution, analysts said. However, authorities need to monitor how money is spent and where money is spent so that waste and inefficiency don't erode that advantage.

Already there are signs of overcapacity in some industries. Wind power is a prime example.

China's wind power generation capacity, including onshore and offshore installations, totaled 22 million kilowatts last year, ranking it third behind the US and Germany. Capacity in China is expected to hit 30 million kilowatts by the end of this year, overtaking Germany, said Zhang Guobao, vice minister of the National Development and Reform Commission.

But a number of wind turbine farms, notably in Inner Mongolia, have been forced to suspend operations because of overcapacity-related problems.

Inner Mongolia's vast steppes have attracted large investments in wind power turbines. The local grid, however, can't handle all the power being generated in a region also rich in coal and coal-fired generators.

Wind surplus

Nationwide, grid-connected wind capacity totaled 16.9 gigawatts at the end of 2009, compared with estimated installed capacity of 25GW. That means about a third of wind farms currently aren't connected to the grid.

"China's supporting infrastructure hasn't developed as fast as capacity expansion," said He Jiankun, director of Tsinghua University's Laboratory of Low Carbon Energy, at a sideline at International Youth Summit on Energy and Climate Change. "So the government has to improve overall planning and coordinate development between different regions and industries."

The green revolution is also hampered by a gap in research and development.

In 2009, China invested US$35 billion in low-carbon policies, nearly 22 percent of global investment in that field, according to Bloomberg New Energy Finance.

"China has led in several areas, but it still lacks investment in early technology," said Michael Liebreich, chairman and CEO of Bloomberg New Energy Finance.

Liebreich pointed to solar energy development as one example. Chinese equipment makers staked a strong claim on the global photovoltaic market, focusing on silicon-based cells - the current generation technology. Meanwhile, US laboratories are doing a research and development on next generation thin film and solar cells.

"There are more breakthroughs and cutting-edge technology in the United States, while China perfects current processes," said Liebreich.

"If the future trend develops on silicon-based cells, China could maintain its advantages," he added. "Otherwise, it will be another story where the US is more likely to take the lead."

Rapidly increasing demand for power presents a significant challenge to China's green ambitions.

Energy-intensive industries, including electricity generation, steel making, petrochemicals and metallurgy, keep growing at double-digit rates amid a boom in industrialization and urbanization.

Although China aims to increase the proportion of renewable and new energies to 15 percent by 2020, compared with 7.8 percent in 2009, consumption of fossil fuels is expected to rise at faster rates to meet demand.

"As China's economy keeps enjoying high growth, the problems encountered by advanced countries after 200 years of industrialization are catching up with China," said Xie Zhenhua, vice chairman of the National Development and Reform Commission, China's top economic planner.

"If these problems were not properly tackled, resources will fall short, environmentalism won't endure and social and economic development may not be sustained," Xie said.

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