China Becomes a ‘Powerhouse’ in Clean Energy, U.S. Trails Behind

In 2009, the money China invested in clean energy reached $34.6 billion, far surpassing any other major economy in the world. Photo: Flickr/betta design

A recent report shows that China has exceeded the United States in green energy investments by $16 billion, enabling the Asian nation to become a “powerhouse” in a new environmental field.

In 2009, the money China invested in clean energy reached $34.6 billion, far surpassing any other major economy in the world.

In the same year, the U.S. investment in clean energy was a little over half the amount China spent at $18.6 billion. The results of this report represent the first time in five years that the United States, widely considered to be one of the most affluent countries in the world, has lost the No. 1 slot in clean energy investment.

Though China’s economic growth in the last decade has enabled the country to take the lead in green energy investment, it remains one of the worst offenders in terms of carbon emissions. The nation has also been criticized for playing a difficult role at environmental gatherings, most notably the UN climate summit in Copenhagen, which took place in December.

Jeff A. Miron, an American economist and the Director of Undergraduate Studies at Harvard University’s economics department, interprets these reports from a different point of view. He disagrees with the belief that the United States should be investing more money in green energy.

Rather, he believes that the arguments employed by such reports attempting to justify the relevance of green energy are not only highly overrated but also limiting in that they ignore alternative cost-effective solutions to reducing fossil fuel use.

Professor Miron tackles the problem from what he cites are the three main answers people give as to why fossil fuels are no longer a relevant source of energy. The first answer is that people desire energy independence and want to live comfortably knowing their oil is not imported from Middle Eastern nations.

To this, Professor Miron says, “The energy independence argument is greatly exaggerated. Oil exporters cannot eat the oil. They have to sell it somewhere. So they cannot withhold it or use it as a weapon for any significant period of time without hurting themselves. Plus, oil does come from many countries, and oil is only one kind of fossil fuel. So, I put little weight on this consideration.”

The second answer people give for encouraging clean energy investments seems on the surface like an obvious one, that using green forms of energy will produce less pollution than burning fossil fuels. Professor Miron points out, however, that green energies are currently more expensive than fossil fuels.

“This means green energies use more resources, so even if they produce less pollution, they still are inferior to fossil fuels unless the pollution or global warming costs are sufficiently great to offset the difference in private costs,” he says. “This is possible, but by no means guaranteed, and does not appear to be the case in practice. Indeed, in many instances, green energies are actually more polluting, or contribute more carbon, than fossil fuels.”

Professor Miron is also skeptical when it comes to whether green energies actually reduce the rate of global warming, the third and final answer people in support of clean energy investments offer. He explains that the real solution is not to put a country’s money in a cause that as yet has yielded uncertain results but rather to focus all efforts on discouraging the use of fossil fuels.

“The best method is simply to tax fossil fuel. This raises the price and gives markets a clear incentive to develop alternatives that economize on fossil fuel. The existing approaches – subsidies for clean energy, fuel efficiency standards – might reduce fossil fuel, but in this and other instances, these approaches have proven difficult to monitor, enforce and hold accountable,” Professor Miron says.

He adds, “For example, doling out government research dollars for green energy development might encourage that activity, but it can also just create lots of projects that purport to develop green energy but that either do nothing or are focused on other ideas, dressed up to look like green energy research.”

Professor Miron further explains that the objection to carbon taxes is not so much economic as it is political. He says, “People do not like higher taxes. So politicians want to dress up the green energy policies in ways that sound like more of a free lunch. Alas, these do not seem to work.”

Donald R. Davis, the Kathryn and Shelby Cullom Davis Professor of Economics and International Affairs at Columbia University, shares a similar sentiment on the results of these reports.

“The important point for the United States is to get the cap and trade system in place,” he explains. “This will make it more costly to continue with carbon-based dirty technologies and raise the prices for green technologies, which should encourage the right transition.”

In addition to ranking the clean energy investments of the world’s major economies, the report states that while President Barack Obama has shown interest in pursuing greater action towards reducing global warming, he has not pushed climate legislation in the Senate.

Other leaders of countries such as Australia and Japan have openly promoted climate change action, although none have devoted enough national effort to significantly reduce emissions.

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