speri.comment: the political economy blog

Resource security and energy abundance

Unless Western countries intervene in their economies to build green energy and resource systems, they will continue to go down to defeat in this field to China

John Mathews, Former Visiting Fellow at SPERI & Professor of Strategic Management, Macquarie University, Sydney

John MathewsWhy is China becoming a renewable energy superpower – even as it becomes the world’s largest carbon emitter?  This is surely one of the more interesting and challenging questions in international political economy and has been taken further in a recent SPERI Comment posted by Matthew Paterson.

The issue of renewables is burdened in the West by expectations of lower carbon emissions. The advance of clean technology is viewed as the front line in dealing with global warming and has been characterised by leading economists like Lord Stern as the great moral challenge of our time.  But renewables play on a broader stage than decarbonisation.  Seen from the perspective of China, renewables promise energy security and avoidance of geopolitical tension, as well as immediate relief from particulate pollution from the burning of coal that is making the air of cities like Beijing unbreathable.

Seen from the perspective of Beijing, renewables promise a pathway to energy generation, utilising the products of manufacturing – wind turbines, solar cells – rather than (or in addition to) resorting to fossil fuels with all the geopolitical complications of sourcing them from places like Sudan, Nigeria, Iran or Venezuela.  By contrast with the civil wars, revolution and terror triggered by these fossil-fuel bonanzas that China could help foment with a ‘business as usual’ (that is, fossil-fuelled) pathway, renewables offer a source of energy security that is bounded only by manufacturing capacity and technological development.

This is the argument advanced in my book Greening of Capitalism, reviewed so sympathetically by Patterson, and in the article that Hao Tan and I published in Nature in September 2014.

In responding to Patterson I wish to broaden the argument.  Renewables are burdened by this idea that they are essential to the fight against global warming, and that this is a moral challenge that the West has created and to which it must respond in the first instance.  Such an argument enables the newly industrialising giants like China to escape primary responsibility for the threat of warming – but ignores the real reasons that China is actively pursuing renewables, as well as resource efficiency, via the Circular Economy.

The essential feature of renewables is that they are products of manufacturing and, as such, are limited only by the build-up of manufacturing capacity and the resources needed to feed that capacity.  The more that countries adopt an approach to resources that places highest priority on their recirculation (as China is doing through its prime developmental goal of creating the Circular Economy), the more the resource limitations on manufacturing fall away.

Building renewables systems and the energy security they promise then becomes more and more a matter of building manufacturing capacity. It becomes an economic imperative.

Generalising this argument so that it applies to the West as well as to industrialising giants like China, we might say that greening strategies can be founded on manufacturing activities devoted to producing energy conversion devices and that policy should preferably be directed towards promoting such activities, as well as resource recirculation.  It is then a highly convenient truth that, as energy security is enhanced through building renewables, so carbon emissions are reduced.

Such a strategy can be pursued in the name of energy abundance and resource security – very different goals from the usual appeals to restrictions on energy and resource consumption. There is in fact no need for the West to reduce energy consumption – provided the energy is generated from renewable sources.  And there is no need for the West to seek to reduce resource consumption – again, provided the resources are recirculated.

These are both simple yet profound goals and imply simple yet profound changes to capitalism.  They are simple in that they can be expressed in a formula: ‘resource security and energy abundance’.  But following through on the policies needed to effect such an approach would imply a commitment to industrial strategy that is decidedly unfashionable in the twilight of the neoclassical era.

It is for this reason that I argued in Greening of Capitalism that Asia (and in particular China) is taking the lead in driving this next ‘great transformation’.  In the terms of a detective novel, China has both motive and means to build a new green growth system.  It has abundant motives in the appalling pollution problems it has created through its three and more decades of unbridled growth. (These problems are reviewed in telling detail in the YouTube sensation ‘Under the Dome’ by Chinese journalist Chai Jing).  And China has the means in the form of a strong state which is prepared to intervene in the economy to drive the promotion of the manufacturing industries that are producing green energy and resource devices.

Unless Western countries are prepared to intervene in their own economies to build green energy and resource systems with the same determination as shown by China, they will continue to go down to defeat in international competition over the emergence of the clean-tech economy.  In solar photovoltaic cells, for example, China now dominates global production of first-generation crystalline silicon solar cells – as is a common experience for an industrial latecomer utilising smart catch-up strategies.  But second-generation thin film solar cells should be a different matter entirely, because there is as yet no dominant technology.  In these circumstances smart industrial strategies in the West could set off a new technological trajectory where advanced companies could maintain a lead for years until China’s firms catch up through pursuing another round of industrial strategies.

Capitalism is the vibrant technoeconomic system that enables such industrial dynamics to be pursued.  There really is no secret as to why China is pursuing energy abundance and resource security through its highly targeted industrial strategies.  The only mystery is why the West allows it to win in the competition unleashed in the international political economy. Changing the emphasis of policy so that it engages direct with the economy through industrial strategy, and changing the rationale for renewables to building energy security through their manufacture, would go a long way to restoring some balance.

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Categories: China, Climate change, Economics, Environment, SPERI Comment, Sustainability, trade | Tags: , , , | Leave a comment

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