China opportunity for Europe’s doldrums

• Carbon taxes on Chinese imports cannot solve Europe’s weakness in greentech
• Real opportunities are in urbanisation projects in China and worldwide

A Global Times article on May 4th outlined China’s new initiative in greentech. Vice premier Li Keqiang told a China-European Union (EU) meeting in Brussels on May 3rd his country will invest more than 5 trillion yuan (US$795.5 billion) in energy saving and environmental protection projects and called for closer collaboration between China and the EU. 

He outlined key targets for this massive spending, starting with the fact that more than 75% of buildings in China’s cities are not energy-efficient and need retrofitting. Calling urbanisation the most important internal driver for the Chinese economy, Li said it will also generate investment opportunities for Europe with its debt crisis.

This comes at a key moment for Europe’s struggling greentech sector – unable to deal with Chinese competition and enforcing “carbon dumping” tariffs on imports of key greentech equipment and consumer products from China, as shown by France’s new minister for industrial recovery, Arnaud Montebourg. In a May 21st speech, Montebourg called for a quick introduction of carbon taxes on industrial product imports to Europe.

This proposal is, in fact, not new. It had been set as a potential programme by the European Commission since 2008, but was severely criticised by leading European politicians, including Matthias Machnig, the former German environment minister who dismissed it as “ecological imperialism”. Only Italy has given political support to this French initiative.

Cooperation, not tariffs

To be sure, countries such as Italy and France are struggling with heavy national debts and budget deficits, and previous laissez-faire policies have sped up their loss of industrial capacity to produce what their citizens want at affordable prices. High trade deficits on manufactured goods and imported energy are endemic across Europe, with the exception of Germany. 

The fast developing skyline of Chongqing, China. Vice premier Li Keqiang calls urbanisation the most important internal driver for the Chinese economy, and a source of investment opportunities for Europe (photo credit: istockphoto)

Also, European attempts to develop and coordinate greentech industries have been hindered, as in the US, by liberal and laissez-faire policies that permit explosive speculative growth of companies in the greentech sector, followed by an inevitable collapse when or if subsidies are taken away. In several EU27 countries, including Germany, this boom-and-bust profile for greentech is an alarming trend, but blaming it all on China is the easy way out.

In addition, European national action in greentech, heavily dominated by renewable energy and often excluding promising sectors like urbanisation, transport, food production and water, has featured competition by numerous and small, under-capitalised greentech companies with small national-only markets. The quick exhaustion of the “low-hanging fruit” has been a common trend creating fragile and unsustained growth for a sector which claims to be inventing, developing and producing sustainable technology for a sustainable future. 

Tariffs of any kind, including carbon taxes levied against Chinese imports and those from other emerging countries – all of which use less energy per capita than EU27 countries – are unlikely to remediate Europe’s industrial weakness in greentech.

Real opportunities

The Chinese initiative is massive and is also focused on urbanisation, with all that it encompasses. In fact, developing and servicing urban areas covers all economic sectors. United Nations data shows that 51% of the world’s population who are urbanised use more than 70% of the world’s energy.

Urban food, water, building materials and transport demands are already enormous and will grow. Addressing urban issues is, therefore, the best and most rational path to enduring sustainability, as the Chinese leadership recognises.

These urban issues are all linked and together can either facilitate economic development and the satisfaction of human needs – or hinder them, if they are not treated as an interdependent bundle of challenges and opportunities. Not only in China, other Asian countries and the other emerging economies, but worldwide and including Organisation for Economic Co-operation and Development (OECD) countries, urban development has been dominated by outdated and inefficient, energy-wasteful and resource-wasteful concepts, operating methods and technologies. This can be treated as a “legacy” problem due to OECD dominance in previous urban development, which was set in the 1950–1980 period and is now obsolete; in that period, energy and construction materials were cheap, and environmental concerns were neglected. 

For the OECD countries, including the EU27 states, this legacy is a handicap, and breaking out of this problem is a key area for China-overseas cooperation.

Besides redeveloping energy- and resource-inefficient older cities and city centres, which the Europeans and Americans also need to do, China also has to develop new kinds and types of sustainable cities. These projects will then serve as models for action not only in other Asian countries, but also in Africa, where legacy technology – left over from European colonial regimes – is today a major handicap to solving Africa’s urban problems.

The Chinese initiative comes at the right time: Europe (and the US) are tempted by trade tariffs and protectionism, disguised as “carbon correct” but this is a wrong turning. The scope for cooperation is immense, but both time and finance are limited – making it vital to get the right technologies and programmes together. 

Editor’s note: Read how Singapore has taken the lead in helping China urbanise more sustainably: goo.gl/I61Qt