The realpolitik behind China's renewables push

State power has nurtured the wind and solar industries to the point Chinese firms now stride the world stage. But climate change does not really figure in Beijing's renewables push.

It is now widely acknowledged that China has become the world’s largest and most important promoter of renewable energies and circulation of commodities via its national goal to build a 'circular economy'. It is doing this even as it builds the world’s largest fossil-fuelled energy system and scours the world for resources.

While there are many players in these vast new industrial systems in China, there is an over-arching rationale, and that is energy and resource security. In a troubled world, where many of the wars of the 20th century were provoked by the quest for oil and other commodities, and violent conflicts in the 21st century threaten from the same reasons, China’s leadership seems to have taken a 'safety first' approach in building energy security through promotion of renewables.

Think about it. You are the Minister for Energy in a fast-developing country with leadership aspirations. Are you going to put your faith in oil and gas deposits far from home, in politically troubled locations that call for military support for every barrel of oil shipped – or in building wind turbine and solar photovoltaic cell manufacturing industries at home that enable your country to generate virtually unlimited power from its renewable wind and solar resources?

This is the aspect of the renewables debate that has escaped close attention by energy specialists – but not by China’s leadership. It is not the costs of renewables that matters (of which more in a moment) but the fact that they offer energy security because their expansion depends on a capacity to expand manufacturing industry and supply chains.

This is where China excels. It knows how to kick-start new industries and use its state power to protect the industry in its first years while a supply chain for components and materials is allowed to become established. This is what China did for the wind power industry, utilising the smart policy of a reverse value-added tax that provided exemption for firms that produced components in China. This is what it did for the solar PV industry – driving costs down as shown in Figure 1. As these costs decline, they bring 'grid parity' closer and accelerate the diffusion of solar power. Now these solar and wind power industries are established and have produced companies that are striding the world stage. And they produce the manufactured devices that promise power from the wind and the sun – without the need for military convoys stretching to Saudi Arabia, or Nigeria or Venezuela.

Figure 1: PV experience curve

Graph for The realpolitik behind China's renewables push

Source: Bazilian et al (2013)

Likewise with resources. While China is assiduously building a global supply network (that includes farms and mines bought in Australia) it is also building its domestic economy in the model of a Circular Economy, where outputs from one firm ('wastes') are turned into another firm’s inputs in typical industrial ecology fashion. This enables China to envisage a time where its claim on the world’s resources will peak and then start to fall.

So the rationale for China’s actions is not hard to fathom – it is the search for energy and resource security. It is driven in the short-term by the shocking state of the country’s rivers and skies – blackened by the past decade’s coal-fired rush for growth.

Climate change does not really figure in these debates in China. It is indeed convenient that an economy powered by renewables and recirculated resources is one that places less stress on the environment and imposes a smaller ecological footprint. And the more that China’s renewables and Circular Economy initiatives bear fruit, the stronger can we expect to see its advocacy of carbon-neutral and carbon-saving mandates at international negotiations – such as in Paris in 2015 over a treaty to replace the failed Kyoto effort launched in 1997.

It is indeed a convenient truth that China’s policies directed toward enhancing its energy security and promoting its own industrial development via green industries can also play a role in mitigating global climate change.

*This is the third part in a four-part series. Part one discusses China's genuine green revolution. Part two discusses China's new strategies of industrialisation. The final part looks at China’s development model as a standard for the world.

John A. Mathews is professor of strategic management at the Macquarie Graduate School of Management, Macquarie University, Sydney.

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