Benefits for All

By Yu Shujun

China has become a leader in green investment and finance， pushing forward the global transformation to a low-carbon future and creating business opportunities， said experts at a recent panel discussion in New York.

The discussion， titled Business and the Greening of China， was held by the China Institute on November 27， ahead of the UN Climate Change Conference in Katowice， Poland.

Although the worlds largest single source of carbon emissions， China is able to move away from its reliance on coal and it has really determined to a large extent the future of a climate fight， said Barbara Finamore， author of Will China Save the Planet and founder of the China Program at the nonprofit advocacy group Natural Resources Defense Council. Finamore has nearly 30 years experience in environmental law and energy policy in China.

She added China has redefi ned whats in a countrys own interest to develop sustainability and clean energy for the ben efi t of all.

Driving down costs

China has identifi ed solar panels and electric vehicles （EVs） as strategic industries and poured a tremendous amount of money into them， mostly in subsidies， but also in research and development， said Finamore， adding that over the past decade， Chinas investment in the solar industry is estimated to reach $46 billion with fi nances for the EV market topping $58 billion.

“To me， the most important point， from the climate perspective， is that Chinas massive investments have brought down the cost of solar panels worldwide by 70 percent in the last decade. And now theyre doing the same thing with EVs，” said Finamore. China has already brought down the cost of EV batteries， the most expensive component， by two thirds in just fi ve years， she said.

To show the impact of Chinas investments， Finamore cited Bloomberg New Energy Finance reports， which estimate that solar power may become the cheapest source of electricity worldwide in as little as five years and EVs may become cost com- petitive with gasoline engines in eight to 10 years.

The UN Intergovernmental Panel on Climate Change （IPCC） issued a special report on global warming in October， which highlights a number of climate change impacts that could be avoided by limiting global warming to 1.5°C above pre-industrial levels.

To limit rising global temperatures to less than 1.5 degrees requires “a fundamental transformation throughout the world in the way that we obtain， use and store energy，”said Finamore. “This could never happen if it wasnt for the massive investments by China， the worlds largest investor in renewable energy.”

Mobilizing capital

Incentivized by the investments， “the amazing sheer entrepreneurial zeal of Chinese solar companies” has been alive in China in a way which we dont really see in the U.S.，” said Finamore.

In terms of green finance， China developed the green bond market only two years ago， but its already the second largest in the world， said Finamore. “Its just like the solar and EVs， you see how fast these new products are growing.”

But its still just a tiny percentage of the total and everything needs to be scaled up， including the green bonds， Finamore added.

The new IPCC report estimates that the world will have to invest $2.4 trillion a year in low-carbon technologies between now and 2035 to avoid the worst impacts of climate change， which is a seven-fold increase from what was spent last year. Governments cant provide all of that. Something like green bonds can mobilize private fi nance in that direction to help fi ll that gap， she said.

Damien Ma， a renewable energy expert and Associate Director of the Chicagobased think tank Paulson Institute， pointed out that a lot of clean energy financing came from the private sector， including private equity， venture capital and private companies.

“That area is actually a lot more dynamic，” said Ma. The clean energy sector is going to see a lot of fi nancing in the form of private equity and venture capital， as well as investment from foreign capital， ac- cording to Ma.

Finamore added that China needs innovative fi nancing mechanisms and there are possible opportunities for U.S. investors and Chinese private companies to get involved.

As China tries to scale up its development of distributed-generation rooftop solar panels， which is lagging far behind that of the utility-scale solar farms， the fi nancing model in the U.S. where companies build solar panels on residents roofs and lease them can be borrowed by China， she said.

The right transition

Finamore pointed out that it is a fundamental shift for China to make the transition away from an economy that was built on coal. Clearly its in Chinas best interest， although its not easy， especially amid an economic growth slowdown.

“China recognized it has to keep its economy humming， but this new normal of slower but higher-quality economic growth is the right approach for China，”said Finamore. “Making that transition to renewable energy and to cleaner transportation is the way that China is going to get through economic diffi culties.”

“What China really needs to do is overhaul incentives—the so-called GDP fetish. I would venture to make a call that in the next 10-15 years the PM2.5 target will be more important than the GDP target， and thatll lead to some fundamental changes.”

Addressing concerns on high-carbon infrastructures involved with the Belt and Road Initiative， Finamore said that China wants the massive Belt and Road Initiative， which will be the largest infrastructure investment program in the history of the world， to be green and low-carbon.

Those countries involved in the Belt and Road Initiative dont want fossil fuel technology， in order to achieve the pledges made at the UN Climate Change Conference in Paris in 2015， she added.

The good news is that the costs of solar and wind power are plummeting to the point where they are increasingly becoming competitive with coal， and the energy storage， part of the equation， makes it possible to use these renewable energy sources at any time， said Finamore.