US-China energy talks

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A little more than a year ago, the US and China agreed to work on an array of joint research projects for clean energy. Today, that good will and mutual cooperation seems to have fizzled. Anchor Marco Werman speaks with Derek Scissors, China specialist at the Heritage Foundation in Washington, about US-China energy cooperation.Download MP3

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Marco Werman: Also on the agenda of Presidents Hu and Obama will be clean energy.  A little more than a year ago, the two leaders announced an array of joint projects on energy research.  They agreed to promote work on electric cars, efficient buildings, and clean coal technology.  Now it seems that good will and mutual cooperation have fizzled.  Joining me on the phone is Derek Scissors, an economist and China specialist at the Heritage Foundation in Washington. So U.S./China cooperation on energy is high on the agenda for the two leaders this week.  What can they really accomplish, though?

Derek Scissors:  Well, it’s funny, because U.S./China energy cooperation has been high on the agenda for the last few years, and it’s always been the easy thing.  Now even clean energy is subject to this sort of contention.  I’m not sure we can get a lot at this point out of the summit meeting, even on clean energy.

Werman:  Well, China does support clean energy, clearly.  I mean, here in Massachusetts, we lost a major builder of solar panels.  The company Evergreen Solar is closing up shop here and moving its operation to China, and the CEO of Evergreen said that he was leaving because it’s simply cheaper to work in China, and the Chinese government gives them more support for renewables.  How can the U.S hope to compete with low-wage Chinese workers in renewable energy?

Scissors:  Well, I’m not sure it’s low wages, but I do think the U.S. has a real problem trying to compete with Chinese subsidies.  Remember, our firms are independent.  They do what they want; our banks do what they want, as we’ve seen.  Chinese firms and banks do what the government wants.  If you want a big loan, if you’re in solar you can get it in China, and they have.  Same thing with wind.  The government, U.S. government, can’t organize that kind of lending.  It’s going to be very difficult to battle China on subsidies.  I think the way the Obama administration is going is the correct way, which is to try to reduce Chinese intervention in the green energy sector in their own economy.  If the U.S. tried to imitate China, we’re going to all be spending a lot of money to run in place.  And I, I feel for American companies, because it’s absolutely true they cannot get a billion dollars in loans that they don’t have to pay back, which is what their Chinese competitors can get.

Werman:  What’s motivating China in their push toward renewables?  Is it environmentalism or capitalism?

Scissors:  Oh, it’s capitalism.  Environmentalism, if you look at the Chinese environmental record, it’s now by far the largest carbon emitter in the world and is pulling away, and when Chou [sp?] is on these issues, China says that economic development comes first.  That’s a reasonable answer, but they’re mobilizing to take advantage of green consciousness and the green energy push in Europe and the U.S. the way they sell other products to Europe and the U.S.

Werman:  It sounds almost as if China wants to eventually become kind of the world’s monopoly of solar panels.  Is that the case?

Scissors:  I think that’s probably their goal.  You know, and the question is, “How do you defend against that?” and environmentalists might tell you, “You don’t need to.”  They’re making cheap solar cells, and we need the solar power.  That’s a good thing.   On the economic side, you defend against it by constantly innovating.  If you’re trying to just compete with China on price, you’re going to have a lot of problems right now, because of the heavy Chinese subsidies.  Now, China won’t subsidize green energy forever.  They move from one industry to another.  But right now, you can only compete with China because your technology is better.  You’re not going to be able to compete with China on price because their subsidies are so heavy, and in that case China’s going to grab more and more of the market.

Werman: Derek Scissors with the Heritage Foundation in Washington.  Thanks so much for your time.

Scissors:  Thank you.

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