This article is part of our special report Wind Energy.
Europe is ahead of China in the green technology race, says Nick Mabey, CEO of climate consulancy E3G. But if it wants to stay there, its political class has to rediscover the confidence to compete with China at its own game, he told EURACTIV.
Nick Mabey is the founding director of the E3G climate consultancy and an environmental advisor to successive British governments. He is also, with Dr Shin Wei Ng, the co-author of 'Chinese Challenge or Low-Carbon Opportunity? The implications of China's 12th Five-Year-Plan for Europe'.
He was talking to EURACTIV's Arthur Neslen.
How would you evaluate China's 12th five year plan?
I think the broad outcome shows that China is taking the low carbon and clean energy model seriously as a key driver of its economic modernisation. China has an overwhelming need to increase sophistication and the added value of its industries, to move from being a low-cost labour destination to a technology hub.
Is there anything that you think the EU could learn from China?
Yes. Firstly, China is integrating its energy and climate change policies at a time when the EU seems to be fragmenting its own – from the high point of the 2008 package. We have had a disjointed year in Europe with three different roadmaps and a plethora of policies, none of which add up to a coherent plan for energy and climate security.
Secondly, they're putting their money where their mouth is. Where China has allocated many billions to support new industries, and the research and development and infrastructure needed to drive them, Europe's flagship energy sustainability programme remains unfunded. Its strategic priorities for infrastructure smart grid investment remain unfunded. Its programme on electric cars remains unfunded.
The irony is that where China is building a super and smart grid using European technologies and monies, Europe is not.
What do you see China's real environmental priorities as being?
China has clearly identified energy security and local air pollution as priorities and it wants to get its energy use and carbon emissions under control. This is a transitional five years for China, where it's looking to control and plateau its emissions and give a better understanding of the potential for reducing them over the longer term.
How important is wind power to those plans? The five-year plan aims to make 15% of China's energy mix renewable by 2020.
I think it's critical, and along with solar is the sector where china has been growing fastest and making a concerted effort to build domestic manufacturing capacity, often causing controversy with European and American manufacturers over technology transfers.
In the next five years, wind power will make up the bulk of the country's non-hydro renewable energy shift. The question is how quickly and in how sophisticated a way they can move up the technology curve and get to global best practice for wind.
Last year, China overtook the US as the global leader in installed wind capacity. What are the implications of this for Europe's wind power industry?
I think Europe is still going to be bigger than China on wind. There are different numbers for Europe as a whole. I think it's a huge opportunity and a huge challenge. The opportunity is that by growing the global wind market and driving down prices, China will help wind power look more affordable and credible, and create new markets in India and Brazil and Indonesia, which European companies are very well positioned to take.
As a challenge it will put pressure on European manufacturers that are currently world-leading manufacturers.
China will buy up specialised companies in Europe for critical components – such as gearboxes, which they've already done. They'll have a more aggressive overseas technology purchasing strategy to move ahead in wind.
In the short term there might be some pinches in the supply chain which will drive up prices for some components. But that will be more of a short-term issue as we build a much higher-volume global supply chain.
I think the critical thing for Europe is that it still has a technological edge and it needs to give certainty to its core manufacturers on the growth of the market, and support for more cutting edge technologies such as very large offshore turbines where it still has a one or two generation lead over China. The Chinese want to be purchasers of those technologies and that equipment.
The Chinese government is also reportedly looking to reduce carbon intensity to 40-45% of 2005 levels by 2020. This is not a measurement we have in Europe, but do you think it goes far enough?
It depends how you measure 'enough'. Is it far enough to get the world onto a two degrees (global warming by the end of the century) trajectory? No. Is it a significant move away from business as usual? Most analysts think it is – and that China may actually go a bit further in reality.
They're keeping a bit of flexibility but it is near the edge of their potential envelope of action. It is certainly not business as usual. Perhaps it is nearer to the EU moving to 25% [emissions reductions by 2020] in equivalent terms of effort. In terms of carbon saved, it will make a much larger contribution to global climate change than the EU even moving to 30%.
So is China positioning itself as a climate leader of the developing world?
I think you have to be very careful applying the word 'leader' to China because they have a calibrated policy. They like to be a leader in the developing world but avoid being seen as somehow taking 'developed country'-level responsibilities.
Because it is between being a developed and developing country, it has both characteristics. So China will look to build its industrial and economic leadership while being very cautious about its role in political leadership, in case that ends up with it having to take more responsibility than it wants to at the moment.
How much is this really to do with the Durban summit and a successor agreement to Kyoto?
It is, but this action is stimulated by both international and domestic forces. It's stimulated by a need to be seen as a good global citizen – if not too much of one – and wanting to put pressure on the US. China is climate-vulnerable and it knows it has to push the US to act.
Despite what people say, it is also stimulated by the Chinese thinking that the world is going toward at least a lower-carbon trajectory following Copenhagen, and that opens up a huge multi-trillion dollar market for goods and services where Western companies haven't got a current monopoly.
There's space for new companies and countries like China to move in, so they're betting on at least a partial success for the global climate change regime.
So when people say that global climate treaties change nothing, China wouldn't have this five-year plan if they didn't believe that there was going to be concerted global action on climate change. It wouldn't make sense.
If they thought the world was just worried about energy security, they would be gearing up their coal power station builders to export and looking at monopolising coal reserves globally, not looking at exporting wind farms and solar panels.
What are the political implications for EU in terms of its own aspirations to global leadership on climate change?
Europe has to start living with the success of its own climate diplomacy. It wanted other countries to act and this is what them acting looks like. There was an illusion that everybody would just want to buy European technology but guess what? Other countries want to make renewable technology too.
So Europe needs to take some confidence from the fact that China is essentially following its lead and investing in its own low-carbon industries and transition to raise the stakes again. Now China has made its move, Europe has to say: 'OK, double or quits. We're going to move to stay ahead.'
In that way, both of them will send a very clear message to the US that 'you're behind and now you're going to fall further behind and you're going to come back and buy our technology in ten years time'. That's the game we're in and European leaders have to show confidence to compete with China – at our own game.
It's a game we're ahead in and our feeling is that European companies and entrepreneurs and financiers are completely ready to move if they were to get some significant and inspirational leadership from a political class that currently seems to be internally focussed on the past and not the future.
Technologically also, with all its investment, do you think that China is poised to eclipse the EU as the green powerhouse of the future, maybe even exporting energy?
China will definitely export renewable energy technologies and energy efficient technologies, particularly to other emerging countries because it produces reliable kit cheaply. But for the most part, it has yet to match European standards, apart from areas like Mint (wireless) technology and some types of coal power station.
It's a race and we're mostly ahead. China has a couple of slim leads in some sectors but it is catching up fast and learning. But it's a lot harder to do real innovation than it is to play catch up.
So people who're fatalistic and say 'oh China's just going to sweep past us' are inevitably not learning the lessons of every single other emerging economy over history, which is that they tend to catch up very fast but they only compete globally in a few key sectors. No country is completely competitive across all of them.
We could give up and say 'we've lost already' and let the Chinese take over. They'd be very happy to! Or we can realise that there's plenty of market for both of us and redouble our efforts to stay in front by improving our domestic policies and turning the EU budget into a driver of research and development.
We're about to spend a third of a trillion euros on agriculture subsidies and not fund any of our low-carbon research and development and infrastructure developments. It seems ridiculous at this point of the European budget cycle. The key issue in Europe is not our technological systems or companies, which are world class. It's the confidence of our political class.
The Chinese have confidence and weak innovation systems. We have strong innovation systems and a lack of confidence. It's much easier to build confidence than an innovation system, so we should be able to stay in front if our politicians will increase the energy of our companies.
Some people would argue that the EU should be looking to protectionist measures to help its industries compete in an increasingly aggressive international market.
I think that the call for protectionism is a classic symptom of a lack of confidence in the EU leadership. We should call for aggressive reciprocity of access, so if they exclude our firms, we shouldn't look to exclude theirs. We should encourage China to drop their restrictions in some sectors, and that's what we're doing.
No way does Europe win by closing down energy markets, because we are essentially an open, rules-based economy. If we get into a strategic fight with China and the US and Brazil, in the end Europe loses because they are countries and we are not. We require rules, they do not, and so it's in our long-term interest to make sure that we have a global trade and investment system around these issues.
If you were advising the Chinese government today, what would you tell them?
I would tell them that they've made a good start and that they would gain more if they took a stronger leadership role. That would put more pressure on the US and be more economically advantageous and I would focus them – to be honest they know this themselves – on the challenge of moving to the next stage of true innovation.
They need to make some of the really innovatory policies – like the low-carbon zones, which cover over 350 million people – really work. They need to forge a really constructive relationship with the EU on trade, investment and the co-development of technology.
Between them, Europe and China can drive the global low-carbon economy and set its standards. We have more in common with China as a large energy importer and consumer than we have with most of the other countries in this area. It's time to forge a real partnership.
How would you describe the problems that China's wind power industry faces around issues like grid connectivity?
As with most countries, China finds it easier to make kit than it does to build clever infrastructure. While they can churn out turbines and put them up, their ability to make those investments really useful by building a strong grid falls far behind.
The issue of controlling the grid, the real challenge for China in the next few years, is to move from quantity to quality and from products to systems, because that requires much stronger levels of governance, planning and openness.
The Chinese modernisers know this and see areas like carbon zones as ones where they're going to pioneer. But they don't think and we shouldn't think that it is going to be easy, because China has been doing things one way for a long time and like any country, finds it hard to change. It will be a bumpy ride.