Will China lead the green revolution?

For anyone who watched the recent speeches by U.S. President Barack Obama and Chinese Premier Hu Jintao at the United Nations, the difference between the character of their content was remarkable. Obama failed to give specific promises on just about anything. Instead, he boasted that his stimulus package had returned the U.S. to a leadership role in the global climate change debate. How's that? It showered $80 billion in U.S. funds on cleaner technology development and production facilities, he said.

Hu was more concrete, saying China would plant 150,000 square miles of trees, an area roughly the size of Montana. He also said renewable sources would produce 15 percent of the Middle Kingdom's energy by 2020, according to the AP. What's more, Hu also pledged to slow the growth of China's emissions. Although this last pledge was a bit squishy, it looked positively robust compared to Obama's lack of specificity on things green.
China's political and economic star has been rising for some time. The UN Climate Summit that precedes the big climate-change summit in Denmark later this year has led observers to ask whether China will lead the green revolution and leave the U.S. in the dust?

It certainly is beginning to look more that way. According to a McKinsey report, China reduced carbon dioxide and greenhouse gas emissions for every unit of GDP output by 4.9 percent per year on average over the past 15 years. That compares to a much smaller 1.7 per cent per unit decrease by the United States. China achieved this through government initiatives and industry-wide efforts that can only be achieved through a command economy.

Or can they? A quick look back through U.S. history clearly shows a number of massive infrastructure initiatives that changed the economic course of this country. The Homestead Act, a huge subsidy for pioneers willing to stake a claim far from population centers on the Atlantic Coast in the 19th century, created a population diaspora that later shaped the rural landscape of America.

In the wake of World War II, President Dwight D. Eisenhower mandated the construction of a massive highway system with nearly 50,000 miles of pavement covering the landscape in all 50 states. The goal of the system was to enable the U.S. to easily move troops and equipment across the country. The net effect, however, was to create an economic artery system that allowed for the easy transport of huge quantities of goods via trucks, a key growth driver for the U.S. economy.

Cut-rate leases on large tracts of federally controlled land and sea, as well as other government bennies, have spurred the development of the current U.S. energy infrastructure, a system that still, by some measures, favors coal and oil producers. These producers get greater subsidies than their cleaner, greener counterparts in solar, wind and geothermal.

And then there was the Internet, a large program sponsored by the U.S. Defense Advanced Research Projects Agency. This early computer network later morphed not only into a national Internet, but also provided a model for the global Internet that girdles the world in a river of valuable information.

Granted, these examples are selective. But they do imply that perhaps free markets are not the best mechanisms for achieving the wrenching structural change. That's essentially what's required to move away from an oil-based economy and towards renewables that don't rely on politically unstable or hostile trading partners.

Hu definitely gets that part. The Chinese government has offered massive subsidies to municipalities mounting solar energy power plants. Such subsidies, in part, are why China, and not the West, is boasting some of the largest renewable energy installations. China will also be an early adopter in things like clean coal technology, a field where U.S. utilities have trailed the Middle Kingdom, as they awaited more firm information from the government on carbon credits markets and cap-and-trade laws.

Legal uncertainty can be better than command economics that lead down a blind alley. And subsidies do encourage inefficiency. But China, with its enormous foreign currency kitty and massive trade surplus, can afford to play around.

The U.S., running massive deficits and paying for two expensive wars, has already voted with its wallet by fighting Al Qaeda phantoms and propping up failing banks rather than investing money in a new green power grid. The weaknesses in the U.S. political system are also on full display in this arena. Riven by bipartisan bickering, the U.S. Congress has significantly lagged other countries in its ability to pass meaningful climate-change legislation.

This is why Obama was unable to offer up any real plan before the UN this week. In the past, a politician like Eisenhower would have been able to convince Congress that a big highway spending bill (the federal government covered 90 percent of the original cost) was, in the long run, good for everyone. Those days appear to be gone.

Meanwhile, Prime Minister Hu has no problem whatsoever, not only communicating, but also following through. For that reason, it is entirely possible that China, and not America, will lead the world towards a greener future -- and possibly speed the ongoing hegemonic power shift from west to east.
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