Barbara Finamore, founder of the China Program at the Natural Resources Defense Council, and Damien Ma (left), Associate Director of Paulson Institute’s Think Tank, attend a panel discussion on Business and the Greening of China, moderated by Bloomberg’s sustainability editor Eric Roston, at the China Institute in New York on November 27 (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 panel discussion—Business and the Greening of China—held by the China Institute in New York on November 27. 

Although the world’s largest single source of carbon emissions, China has declared it wants 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 Natural Resources Defense Council. Finamore has nearly 30 years’ experience in environmental law and energy policy in China. 

She added China has redefined what’s in a country’s own interest - to develop sustainability and clean energy for the benefit of all.  

Driving down costs 

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

“To me, the most important point, from the climate perspective, is that China’s massive investments have brought down the cost of solar panels worldwide by 70 percent in the last decade. And now they’re 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 five years, she said. 

To show the impact of China’s 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 competitive 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.  

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 wasn’t for the massive investments by China, the world’s 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 don't really see in the U.S.,” said Finamore. 

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

But it's 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 catastrophic climate change, which is a 7-fold increase from what was spent last year. Governments can’t provide all of that. Something like green bonds can mobilize private finance in that direction to help fill that gap, she said. 

Damien Ma, a renewable energy expert and Associate Director of the Chicago-based Paulson Institute’s Think Tank, 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 financing in the form of private equity and venture capital, as well as investment from foreign capital, according to Ma. 

Finamore added that China needs innovative financing 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 financing model in the U.S. where companies build solar panels on residents’ roofs and lease them can be borrowed by China, she said.       

Staff examine wind power equipment at a power plant in Xinjiang Uygur Autonomous Region on October 22 (XINHUA)

Making 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 it’s in China’s own best interest, although it’s not easy, especially amid an economic 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 difficulties.” 

Ma said that although China’s per-capita GDP is as low as that of Colombia, China has recognized that it’s not a typical developing country.  

“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 PM 2.5 target will be more important than the GDP target, and that’ll lead to some fundamental changes.” 

A Green Belt and Road 

As for international concerns on high-carbon infrastructures involved with China’s 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) don’t want fossil fuel technology, in order to achieve the ambitious pledges made in the Paris Climate Accords, she added.  

The good news is that the cost of solar and wind 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 (solar and wind power) plants at any time, said Finamore. 

 (Reporting from New York) 

Copyedited by Craig Crowther 

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