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Happy Year of the Snake!

I have some major catching up to do so let me begin here with a link to my book which the Wilson Center launched on September 24, 2012.  (Note: if you want to download the PDF of the book, just right-click and use the Save As option).

Book Cover

More 2012/3 updates to follow in rapid sequence.

Thanks for hanging in there,

This is the first of regular weekly Cooketop News blog posts (scheduled to appear each Monday).

By reviewing the previous week’s top stories involving — broadly speaking —  China clean energy, the idea is to identify and comment on a particular  emerging trend/issue which points forward and can help illuminate news-in-the-making for the week(s) ahead.

By radio analogy, the commentary is meant to cut through static in the general coverage of whatever’s the issue at hand and present a clear frequency and better ‘signal-processing’ for helping to tune in on an enduring news issue.

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THIS WEEK’S COMMENTARY — HUNTSMAN, REPUBLICANS  & CHINA

Last week was the Iowa caucus and Tuesday of this week the New Hampshire primary.  The related questions which these contests have raised are what have Jon Huntsman’s China connections and qualifications done for his campaign effort and what are the implications for China given the current crop of Republican candidates.

Let’s start with the second question.  Liz Economy from the Council of Foreign Relations has done a better job than anyone at assessing the remaining field of candidates through the lens of their public positions on China.  To borrow liberally from her analysis, here’s what we’re looking at:

Mitt Romney says it’s all about the economy, stupid: Mitt Romney’s China policy is all about trade measures —keeping counterfeits out, protecting intellectual property, levying sanctions against unfair trade practices, pressing China on its currency, etc.  The question for an anti-“Big Government” candidate is who does all this work if not the government.

Ron Paul wants to make love, not war: Ron Paul appears to want to “go along to get along” with China:  stop intrusive surveillance, reconsider the Taiwan Relations Act,  drop the idea of import tariffs in retaliation for Beijing’s currency manipulation, and mute protestations over human rights issues.  As Economy has put it, there’s little doubt that “candidate Paul …would be Beijing’s pick for top dog.”

Jon Huntsman is long on experience but short on traction:  No surprise that the expertise in China policy is with former U.S. Ambassador to China Jon Huntsman. Huntsman has all his facts in line. You can agree or disagree with his specific positions — opposing a China currency bill or engaging to promote political change in China—but you have to admit he knows his stuff.

Newt Gingrich jettisons balance to keep ship afloat:  Gingrich’s initial positions in the campaign were balanced and reasonable, calling on the U.S. to do the right thing and take action on the home front in order to be more competitive.  As his electoral options have narrowed though, his positions appear to be veering in a more extreme direction.  Stay tuned for his advertising campaign in South Carolina to see if he starts demonizing China.

With Rick Santorum, the question is  ‘Where’s the beef?':   Despite having a lengthy book and a Senatorial career in the public record, there’s almost nothing to go on to explain how Santorum would approach China if elected President.  He did make a quote about going  “to war with China” to “make America the most attractive place in the world to do business.”  Huh?.

Rick Perry talks the talk but doesn’t walk the walk:  “Communist China is destined for the ash heap of history because they are not a country of virtues. When you have 35,000 forced abortions a day…, when you have the cyber security that the PLA has been involved with, those are great major issues both morally and security-wise that we’ve got to deal with now.”  His actions?   Courting Huawei, a problematic company, to invest in Texas.

So, on to the related question, what has Jon Huntsman’s Mandarin-speaking ability and Ambassadorial command of the issues meant for his election prospects?  The answer, like a Rorschach, depends entirely on who you talk to.  His proponents invariably cite it as a positive (see NY Times article) and his detractors cite it as a liability (see story from last Thursday below).  Where’s the traction?  Answer: there’s maybe some but not much.

Fault-lines have been exposed in the body politic over these questions.  There’s no question that one of Ron Paul’s supporters went way, way over the line by insinuating Huntsman was questionably ‘American’ because he and his wife keep their adoptive children from China and India exposed to cultural traditions from those two civilizations, but nonetheless ideological conservatives generally seem to view his competence with China as itself  a cause for suspicion.

The first generation of Mandarin competent statesmen drew heavily from the offspring of Christian missionaries who grew up in China, people like the late Ambassador James Lilley.  Huntsman represents a second wave of high-level U.S. government officials who have Mandarin-competence through their two years of  Mormon service abroad.  (Tim Stratford, a former Assistant U.S. Trade Representative for China, is another example of this group of experts).  The third wave will come from younger Americans who, in step with China’s opening to the world, have been able to burrow deeper into language and cultural expertise.  They are making their way up the ladder of the U.S. government.  I can only hope that the American electorate — and the Republican Party — can find a way to value the knowledge they bring to public service.  The top rank of challenges which the U.S. faces will simply not be solved without constructive and effective engagement with China — and that requires people who understand, respect, and can operate in the sphere of Chinese language, culture and values.

(Disclosure: I have worked at various points in my career for Jim Lilley, Jon Huntsman, and Tim Stratford.)

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LAST WEEK’S COOKETOP NEWS

Here’s a listing of  some of the top stories covered in Cooketop News for Week 1 of 2012 (with hyperlinks):

Monday, January 2, 2012

Foxconn enters solar
Chinavasion’s High-capacity  Solar Charger
Protest in China – Ripple or Wave?
Bridge construction as economic development lever
10 Predictions for Cleantech in 2012

Tuesday, January 3, 2012

Top 20 Green Building Innovations of 2011
USDOC Sec. Bryson Faces a China Challenge
Cleantech Start-ups to Watch
Is China’s Solar Industry Entering Eclipse?
Public Housing Key as Export Machine Slows

Wednesday, January 4, 2012

‘Culture Campaign’ Dents Programming
Green Cars & Clean Energy: The China Angle
Cleaner Technology in Global Arctic Oil Race
Chinese Philanthropists Join to Protect Nature
China’s IPOs Top World’s Exchanges Despite Slump

Thursday, January 5, 2011

Air Pollution Hazardous for China’s Economic Health
Drought Drying out Poyang Lake in Jiangxi Province
Rustbelt Cities Go Green to Strengthen Economies
China’s Corporate Debt Issuance Soars in 2011
Huntsman’s China Cred No Boost to his Prospects 
Econ Ties to China Key Issue in Taiwan Election 

Friday, January 6, 2011

10 Emerging Sustainable Cities to Watch
Solar Turbine Makers Turn to India & China
U.S. Manufacturers of Steel Wind Towers Cite China
LDK Solar Snags $64mm from PRC  for U.S. Projects
China Announces Plan to Levy Carbon Tax by 2015 

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That’s it for this week.  I hope you find this of some value to your own pursuits.  Give me a holler — either by leaving a comment below or by email — to let me know what you think, positive or negative.  For anyone with a driving passion to get each day’s edition of Cooketop News (minus the summary listing and commentary that I provide in this weekly post), you can subscribe by going to the Cooketop News site at http://paper.li/mterrycooke/1324752421 and clicking on the upper-right Subscribe button.  There is also an Archive feature on the site (upper-center) which allows you to look up any previous edition.

Oh, before signing off, I owe you an answer to the question in the title.  Jon Huntsman’s name in Chinese? 洪博培.  (And by the way, if you try searching for the name on China’s Twitter clone — Weibo — when you’re in China, you’ll likely find the name has been blocked).

In the spirit of sharing news while it’s fresh, I’m copying verbatim a report on the gold nugget in the pile of dross that has passed for this year’s national budget process.

 For those of you who took in (in person or digitally) the Philadelphia’s 21st Century Energy Opportunity event I convened with the Academy of Natural Sciences and the T.C. Chan Center for Building Simulation & Energy Studies on October 11th,  the win is obvious — for the City and the region, for the national effort for cleaner energy jobs and investment, and for our global engagement.  For U.S./China clean energy cooperation, this budget victory also solidifies the framework of U.S./China Clean Energy Research Centers CERC) in building energy efficiency (Lawrence Berkeley Lab), electric vehicles (University of Michigan) and clean coal (University of West Virginia).

Kudos to Mark Muro and Bruce Katz for their success in keeping this ball moving down the field.  Here’s the report from late yesterday afternoon.

Mark Muro and Devashree Saha
December 19, 2011 | 4:10 pm

Notwithstanding the bleak outlook surrounding federal clean energy policy detailed in our recent report “Sizing the Clean Economy,” the FY 2012 omnibus spending compromise hammered out last week actually contains several reassuring affirmations of the value of recent institutional experiments.

One winner is the Advanced Research Projects Agency-Energy, perhaps the Department of Energy’s most popular program.

Although the program is funded at just $275 million–about half the level President Obama had requested–many will probably be relieved that the program has now survived, which hasn’t always seemed a certainty. Moreover, the deal improved on earlier bills that have circulated, suggesting that the cause of the government fomenting disruptive innovation using “outside-the-box” investments in venturesome technology ideas may be gaining traction. That’s good news.

So is another happy surprise in the deal: the authorization of two new DOE Energy Innovation Hubs, one specializing in rare earths and energy-critical materials and one for energy storage technologies. To be sure, the Obama administration had originally asked for eight of these hubs, and settled for three before this year requesting funds for three more in 2012. However, congressional appropriators weren’t convinced that there was a need for a hub focused on smart grid technologies, as reported Darius Dixon in Politico, and so the nation now has two more of them, for a total of five of these special purpose-driven, multidisciplinary centers for accelerated collaboration between corporations, universities, and government labs.

Yet we’ll take it. Having long argued that the nation has been making do with an obsolete energy research paradigm excessively oriented toward individual academic investigators, on the one hand, and the siloed and bureaucratic efforts of the DOE’s energy laboratories, on the other, it is gratifying to watch the slow but continuing rollout of a true network of well-funded, multi-sector regional innovation centers. Congress is doing the right thing by creating–hub by hub–a set of sizable new institutes charged with “winning the future” in energy technology.

More Articles On: Department of Energy

On October 11th, Mark Muro, Policy Director of The Brookings Institution’s Metropolitan Policy Program, presented the national-level chapter of the story of ‘Greater Philadelphia’s 21st century Clean Energy Opportunity’ at an event I organized in Philadelphia for the Academy of Natural Sciences of Drexel University and the T.C. Chan Center for Building Simulation & Energy Studies of the University of Pennsylvania.

According to Muro, Philadelphia enjoys key advantages due to: (1) its position as #5 top-performing cluster nationally, (2) its participation in a national trajectory of fast-growing, high-quality jobs, (3) its profile of balance with middle-skill, middle-wage ‘green collar’ jobs; (4) its breadth of clean economy segments (air & water purification, lighting, nuclear, mass transit, professional energy services, solar PV, solar thermal, and wind); and (5) its location in the middle of the most vibrant clean economy corridor in the country (from Albany NY and Boston MA down to Washington DC and northern Virginia).

Future posts will help tell the other chapters of this story, including the City of Philadelphia perspective (Alan Greenberger, Deputy Mayor for Economic Development), the regional perspective (Mark Hughes, Task Leader for Policy, Markets & Behavior at the Greater Philadelphia Innovation Cluster for Building Energy Efficiency (GPIC), the global perspective (Amy Fraenkel, UN Environmental Programme Regional Director for North America) and the U.S./China strategic opportunity (Terry Cooke, Founding Director of the China Partnership of Greater Philadelphia.

Stay tuned for more!

Note 1:  If you want to be sure you see each of these upcoming posts reliably and promptly, please click the “Follow” button on the WordPress toolbar immediately above this blog’s heading and an email will automatically be sent to you as soon as each post appears.

Note 2:   See   Brookings Backgrounder  for additional information on:  (1) the Brookings Institution’s Metropolitan Policy Program initaitive for clean energy clusters; (2) the intellectual antecedents of this policy work in the work of Michael Porter at Harvard University; and (3) how David Sandalow and Brookings helped translated this thinking into U.S. Government policy through the closely-connected Energy Innovation Hub (EIH) program and the U.S.-China Clean Energy Research Center (CERC) program (via the John L. Thornton China Center at Brookings).

Note 3: If you want to help push for Philadelphia’s emergence as a 21st century clean energy leader, please tweet or Like on Facebook or +1 this on G+, using the sharing tool below.  Thanks.

I was asked today what accounts for China’s outsized role in solar PV , amounting currently to roughly 50% of global share of production despite having a Lilliputian share of global consumption.  It comes down to three inconvenient truths.   That said, the degree of inconvenience of each truth varies with the point of view (e.g., ‘panda hugger’ vs ‘dragon slayer’ in the U.S. vs  ‘patriotic netizen’ in China) of who you happen to be talking with :

(1) Post-WWII, Asia (and notably China since 1982) has had clear advantages of cheaper land, cheaper labor and cheaper facilities relative to manufacturers in higher per capita income markets in the West. Since solar panel production has some basic similarities to the manufacturing process for computer memory chips (which in the 1990s were the basic ‘rice’ commodity of the IT boom in Asia), solar manufacturing has benefited from the natural ‘cluster effect’ of decades of chip manufacturing know-how of Chinese, Taiwanese and other investors on the mainland.

(2) The barriers to entry for solar manufacturers are lower than the earlier tech waves of integrated circuits and bio-technologies so national and local
government in China has seized on it to bootstrap their economies to a higher rung of the global value chain. This has meant various government subsidies (on the producer side) to the point of a casino mentality — more than 100 solar manufacturers in the single town of Dezhou in Shandong Province. (The Chinese government also rounded up and ramped up polysilicon supply when that key input for solar PV production tightened in 2010/11);

(3) There’s not yet an established market for solar products in China so almost everything is exported to Western markets — especially to those national
markets like Germany and Spain and state markets in the U.S. such as New Jersey that have been subsidizing the industry (on the consumer side). [Note: World Trade Organization rules tend to allow/encourage consumer-side subsidies and to sanction producer-side subsidies, hence the recent trade action by the 7 Western solar firms against China. However, these actions take time to work their way through the ‘python’ of WTO process).

As a wrote almost a year ago ( click here for link ), there’s a global boom/bust going on in PV solar and China is in the thick of it.

Premise

The Fukushima disaster in March has prompted all major nuclear powers to pause and reexamine their nuclear development programs. Germany and Italy reached decisions to phase out their nuclear programs.  In the U.S., stirrings of interest in a nuclear revival were silenced.  In China, however, all indications are that a national program to establish China as a global leader in nuclear power remains on track.

 Discussion

The first commercial nuclear power plant in the U. S. was installed in 1958. Today, 104 commercial reactors produce almost 20% of the nation’s total electric generation. By comparison, China’s first nuclear plant, Qinshan, near Shanghai, became operational in 1991. Today, 13 plants are in operation supplying just over 1% of China’s total electricity. However, this freeze frame comparison misses the contrast in momentum for the nuclear industry in the two countries. Of the 52 nuclear power plants that were either under construction or in advanced planning in America and China in late 2010, months before the Fukushima disaster, 50 of those plants were being planned and built for the Chinese market.

source: U.S. Energy Information Administration

As the above chart from the U.S. Energy Information Administration shows, nuclear generation has plateaued  in the U.S. and Europe but is rapidly growing  in China, India and the rest of the developing world. While active plants in the U.S. are approaching the end of their licensed lifetime without planned replacement,  new nuclear installations in China are set to increase roughly ten-fold over the next ten years.

Following 1979’s Three Mile Island incident, the experience for the U.S. nuclear industry has been new order cancellation, new construction abandonment, premature shutdown of plants or extension without plans for replacement. Although improved design and technology advances have brought about significantly improved safety performance, public opposition to nuclear power — periodically galvanized by highly publicized international incidents such as Chernobyl and Fukushima and persistently bedeviled by the nuclear waste disposal problem– has kept the U.S. market virtually off-limits to new nuclear installations for three decades. China, by contrast, is the world’s most active site for new plant installations. National planning calls for nuclear power to provide 6% of China’s total electrical generation by 2020. This will require a net increase in installed capacity of 60-70 GW, comparable to the entire 63GW of currently installed nuclear capacity in France, one of the world’s most active users. By 2030, China plans to match the nuclear output currently provided by all 104 U.S. installations.

The bottom line:  Chinese authorities clearly know how to throttle back a prestige industrial development project, as shown after July’s high-speed train collision in Zhejiang Province.  After the Fukushima nuclear disaster, however, no such bureaucratic braking of China’s nuclear program has been apparent.  Additional safety reviews have been instituted, but the scale and speed of China’s nuclear program remains essentially unchanged.

 

(This piece has been reprinted from G+ Insights, a publication series of the Gerson Lehrman Group at www.gplus.com.  The G+ piece, in turn, has been adapted from Sustaining U.S.-China Cooperation in Clean Energy,  a book publication authored by Terry Cooke forthcoming from the Kissinger Institute of the Woodrow Wilson Institute in November 2011).

 

I was asked during the UNEP Symposium in Philadelphia yesterday how I thought shale gas and ‘tight gas’ projects — which are at an early stage of operation in various parts of the world such as the United States, China  and Argentina — may affect the development of existing renewable energy sources, such as geothermal, biomass, wind, solar, tidal.

There are different dynamics in advanced economies versus emerging economies as each responds to the shale gas opportunity.

In the advanced economies, the values framework for evaluating shale gas tends to emphasize the environment at the expense of economics.  This is the so-called “3 C’s” orientation of carbon and climate change.  Under this framework, shale and tight gas are only somewhat less carbon-intensive in comparison with traditional fossil fuel sources and their extraction entails media-ampliflied but not yet proven environmental risks associated with ‘fracking’ et cetera.

In the developing world, the tendency is instead to focus on economic and energy security benefits — the “3 E’s” of economics and energy exploitation.  From this viewpoint, the positives of shale gas — a relatively cheap and abundant and lower carbon energy source for a country like China — far outweigh negatives of as yet unproven environmental risk.  In any case, under the Chinese framework of development, industrial growth and wealth creation come first, and clean-up from the environmental impacts of fast growth come later.

The hard truth is that these the viewpoints in North America and East Asia should not be so divergent.  In a world of finite resources and global pollution, we can ill afford to be seeing different problems and talking past one another.  The common denominator and linchpin is long-term energy efficiency .  Efficient energy utilization is environmental stewardship at the same time that it is good business and the basis for good economic policy.  Efficient and diversified energy utilization promotes jobs, investment and a sustainable environment.  Neither the advanced world nor the developing world should be sequencing energy and environmental policy or prioritizing between them.  Both the U.S. and China could be pursuing a common approach, based on energy efficiency and designed to yield both economic and environmental benefits simultaneously.

By splitting the difference between the “3 C’s” and the ‘3 E’s” both countries could reframe the challenge as the “3  D’s” of diversified energy sources, dollar-accountability, and developmental sustainability. And by re-framing objectives on a realistic and common basis, strategic efforts such as the U.S.-China Shale Gas Resource Initiative may be able to get better global traction.

In the real world, it’s not shale gas versus renewables.  It’s shale gas and renewables balanced together for economic and environmental sustainability.

In 2008 China could be seen rapidly closing the gap with the traditional wind market leaders – the U.S., Germany and Spain. By 2009, China, riding a massive post-GFC stimulus program, became the world’s largest buyer of wind turbine equipment. In that same year, the U.S. managed to maintain its strong pace of wind installations but Spain and Germany started falling off the global pace as post-GFC austerity forced them to drop governmental price supports (so-called “feed-in-tariffs” or FiTs) for wind installations. Finally, in 2010, China surpassed the U.S. in wind-power installations (18.9GW vs. 5.6GW) and emerged as the clear global front-runner for wind-energy purchases and installations.

But three caution flags are now waving for China:

(1) For the moment, there is still a huge asymmetry in the number of installations which GE has made in the Chinese market (over 1,000 in China alone, over 14,000 worldwide ) versus the number of installations Chinese wind-power companies have made in the U.S. market (3 installations, as of December 2010). Moreover, lingering tight credit strongly favors established market leaders when it comes to wind energy projects and, for now at least, financing costs are currently prohibitive for new entrants.  This is a substantial market hurdle for Chinese entrants to the lucrative U.S. market, not a government barrier.

(2) In a mid-summer 2011 settlement announced by the Office of the U.S. Trade Representative, the Chinese government agreed to stop subsidizing its wind power manufacturers. This put an end to a six-year, WTO-inconsistent effort known as Notice 1204 and led by National Development and Reform Commission, to favor Chinese suppliers in the manufacture and installation of Chinese wind-turbines.

(3) Earlier this week, China’s government adopted stricter regulations in anticipation of an expected “bloodbath among turbine producers” as reported by the Financial Times on October 24th.

It’s a marathon, not a sprint to the wind-energy future. Far too early to proclaim China the winner.

A personal note:

The Greater Philadelphia region stands on twin thresholds  — as the new national innovation center for research and commercialization of energy efficient buildings in the U.S. and, potentially, as an economic partner to China in this priority sector under that country’s new 12th Five Year Plan (2011-5).  What’s the bottom line for the region if it manages to sync with the speed and scale of China’s transformation of its commercial and residential building infrastructure?  Delivering for our region the extraordinary levels of foreign direct investment (FDI), high-value exports, and jobs which Chicago secured six weeks ago through Hu Jintao’s visit.

What’s needed?

First, the context: The article below describes the state of play – involving both market opportunity and political risk – for the U.S./China clean energy sector at the time of Chinese President Hu Jintao’s visit to Washington DC in January 2011:  Clean Energy: U.S.-China Cooperation and Competition (The full collection is available for download at FPRI )

Second, the megaphone: The China Business Network is in the final count-down for launching its Green Development Channel. Check out here to see how the site is looking on the launch-pad and how it will help amplify the message about opportunities for clean energy engagement with China once it is launched.

Third, the  springboard: There are some exciting events upcoming in the region this year focusing on China, Tianjin and 21st c. energy opportunity. Events in the early summer (June) and fall (Sept-Oct) will be announced soon. Stay tuned.

Finally, the moment: As I’ve described fully in my forthcoming book  Sustaining U.S.-China Clean Energy Cooperation (Woodrow Wilson Center/Kissinger Institute), the action with China clean energy is now moving from politically-driven Washington D.C. to commercially-driven regional economies – principally, Greater Philadelphia & the Bay Area (for energy-efficient buildings) , Ann Arbor/Detroit (electric vehicles) and West Virginia (clean coal). It’s a good time for Greater Philadelphia — a prime beneficiary of this trend —  to focus on this opportunity now that our economy is strengthening.  My book provides, hopefully, a clear and straight-forward read — just 120 pages — of the current landscape of U.S./China clean energy cooperation and competition.  It gives equal attention to technology developments, investment opportunity/risk, and policy dynamics.

These twin, intertwined strands of opportunity — regionally-based energy innovation connected to global market opportunity through China — are my full focus.  My goal is to provide a clear and concise ‘wiring diagram’ of the regional, national and global ‘connection points’ associated with this opportunity.  My partners in this effort are The China Business Network,  The T.C. Chan Center for Building Simulation & Energy Studies (UPenn/Tsinghua), The Foreign Policy Research Institute, The Greater Philadelphia China Center for Culture & Commerce, Gerson Lehrman Group, Capitol Project Partners, and GC3 Strategy.

I welcome your involvement and support.

What are eco-cities in China? Why are so many popping up in China’s second-tier urban locations? What are the main drivers for this trend and what makes a sound eco-city development project or zone? Finally, what opportunities exist for foreign companies? TCBN Green Channel Editor Terry Cooke interviews Piper Stover, strategic advisor of China Dynamics, LLC, on China’s eco-cities initiative.

Background

China policy on eco-cities:
• The 11th 5 Year Plan included goals of lowering energy consumption per unit of GDP, specifically, energy consumption per unit of GDP should have decreased by 20 percent in 2010 compared to 2005.

•The draft for the 12th Five-Year Program (2011-2015), with additional policy overseeing eco-city development, will be finalized by China’s National People’s Congress in March, 2011.

China Eco-cities in the news:
Eco-city development projects have been announced in over 100 cities across China, however not all have been officially endorsed by China government regulatory authorities. Tongi University has conducted research citing nearly 170 self-proclaimed eco-cities.

China’s National Development and Reform Commission (NDRC) launched a national low-carbon province and low-carbon city experimental project in Beijing in August, 2010. The project is being implemented in five provinces: Guangdong, Liaoning, Hubei, Shaanxi and Yunnan, and in eight cities: Tianjin, Chongqing, Shenzhen, Xiamen, Hangzhou, Nanchang, Guiyang and Baoding.

Notable China Eco-city or Sustainable Community projects also include:
• Tangshan Caofeidian International Eco-city

• Sino-Singapore Tianjin Eco-city

• Chongming Dongtan Eco-city (currently inactive)

• Shenzhen Guangming Eco-city, Guangdong Province

• Yangzhou Eco-city, Jiangsu Province

• Nanjing Eco-city, Jiangsu Province (several eco-cities and eco-business parks are under development)

• Huaibei Eco-city, Anhui Province

• Langfang Eco-city, China (outside of Beijing)

• Mengtougou Eco-city (outside of Beijing)

• Meixi Lake Eco-city, Changsha, Hunan Province (there are several additional eco-cities planned for this region)

• Rongcheng Eco-town and Weihai City, Shandong Province

• Huangbaiyu (currently abandoned)

• Chengdu, Sichuan

• Xiamen Eco-city “retrofit”

• Guiyang, Guizhou

• “US-China Eco-city Initiative” between the US Department of Energy (DOE)and China’s Ministry of Housing and Urban-Rural Development (MOHURD). Both sides are developing guidelines and policies to support the integration of energy efficiency and renewable energy into city design and operation. January, 2011.

Research and policy development
• Tongi University has conducted research citing over 160 eco-cities in China. UNEP-Tongji University Institute of Environment for Sustainable Development

Useful Eco-city Case Studies:
• Sino-Singapore Tianjin Eco-city Project, released by World Bank on January 11, 2011

• Asian Development Bank’s overview on Eco-cities in China, “Eco-City Development: A New and Sustainable Way Forward?: November 2010

2011 Eco-city Events:
• The World Eco-city Summit, Montreal 2011, held August 22-26, 2011
www.ecocity2011.com

Interview Transcript

Terry Cooke: This is Terry Cooke, editor of TCBN’s Green Development Channel. I’m here with Piper Lounsbury Stover. Piper’s been active in China for the last 20 years working with companies on the ground. On recent years she’s had involvement with a number of eco-city projects. Piper, welcome.

Piper Lounsbury Stover: Thanks, Terry.

TC: We’re talking about eco-cities in China. For starters, can you just let us know what eco-cities are and why they seem to be popping up at a fast rate?

PLS: Sure. “Eco” – meaning ecologically sustainable cities. I think in the late – well, early to mid-90s, the Chinese Ministry of Environmental Protection started to develop these ‘eco-city’ guidelines, which were really a series of key performance indicators (KPIs) to try to reduce greenhouse gas emissions and to conserve energy and water resources in several cities across China, starting as pilot project, and now expanding to hundreds of cities.

The main drivers to this development – China is facing massive migration right now. Almost 50% of China’s population currently lives in over 600 cities in China. Nearly 300 million will move from rural areas to Chinese cities in the next ten years, so this is a massive influx of people and China’s going to have to invest up to $3.6 trillion in urban infrastructure to handle that migration by 2020.

So with that, there’s going to be a growth of 2nd tier cities to handle the migration. And with that growth there is going to be continued strain on resources. So to conserve energy needs China’s has to implement policies. China will be increasing energy needs by 150% by 2020 and will have water issues. Water reclamation and water policies are going to be important because China, for its populations, has only a fourth of the world’s average water per capita. So it’s a big issue that the China Daily started reporting on in 2005 or 2006; we are seeing more and more domestic reports on water issues.

TC: And currently there’s a drought right now.

PLS: Exactly. So to address this from a policy perspective, the 11th Five Year Plan and the 12th Five Year Plan have advocated objectives to promote sustainability in these eco-cities. And that means opportunity – opportunity for companies, and certainly land and real estate developers to try to meet the challenge.

TC: Well we’ll get to that investment and commercial opportunity in just a moment. Before we do, Piper, could you just say a word about where these eco-cites are which are the biggest?

PLS: Sure. I mentioned the 2nd tier cities earlier. I think it’s important because when we think of the 1st tier cities in China we think of Beijing, Shanghai, Hong Kong, areas, but these 2nd tier cities are growing, and provides opportunities for real estate development that did not exist previously. The biggest ones right now are occurring in these 2nd tier areas. We have two greenfield projects that are the largest – 30 sq km areas. One in is Tangshan, called the Caofeidian International Eco-city. I believe that is an eco-city in coordination with the government of Sweden. There is the Sino-Singapore Tianjin Eco-city – that’s a 30 sq km also sq area in Tianjin. And then there was the Kingdom Chongming Dongtan Eco-city. That was a really big eco city planned for an island off of Shanghai that hasn’t really gone anywhere, as I do not think the investment and the original plan worked out. While those are the obvious biggest, I have a whole list of others that I’d be glad to post after the call, including some in Shenzhen, in Jiangsu Province, in Anhui Province. There are many.

TC: Ok Piper. And you were just talking about the real estate development angle. You mentioned three premier projects, two of which seem to be moving forward well and one that seems to be stalled. From a project development and investment standpoint, what makes a sound eco-city project? What are the signs investors should look for?

PLS: Sure, there are probably five signs that I would look for if I were looking at a project. One would, obviously, be significant local and central government level support. You want to make sure the Ministry of Environmental Protection (MEP) or the Ministry of Housing and Urban Development (MOHURD) are backing these projects with key performance indicators approved by these two organizations to make sure they’re on track with national standards.

And of course the land acquisition. That’s important. You want to make sure that these projects are not encroaching on farmland or other areas where inhabitants are living, and certainly converting non-arable wasteland has been one way to look at better utilizing land.

TC: Just to clarify that one, Piper, there’s a risk that if the local government has misappropriated land there would be political risk attached to that.

PLS: Certainly. That is one key issue, but also it is a higher cost in some areas to actually to move people. It’s very costly. So for those two reasons it is important to find out how the land was acquired and how it will be used (for the whole system).

And then there is location. You want to find out how far away these eco-cites are from an old city center – whether transportation is going to be convenient or not. Some of these eco-cities are located very close to rail lines or high-speed rails planned for the future, so that of course would be of interest to me.

The fourth and fifth would include: at what speed would the purchasing power of these cities develop? I know for 2nd tier cities this can be questionable. You want to make sure the economy will continue to grow, and you want growth predictions to be based on sound plans.

The fifth would be competition in the same area. If your company is looking at either investing or moving into one of these eco-cities, what is the competition around you? What human capital talents exist? And what are either other cities nearby or neighboring counties also doing to attract similar industries, or even your own competitors?

TC: Good. Those are key points for an investor to keep their eye on. What about the opportunity more broadly, for foreign businesses across the board to participate in and benefit from this trend of eco-cities throughout China?

PLS: Certainly with an opportunity to pursue either a green field investment or rehabilitation of some cities, opportunities exist for green building, green technology companies, green energy – renewable wind, solar, CHP, and other types of renewable energy technologies, as well as water and waste technologies. For all of these eco-cities. With already nearly 170 of these so-called eco-cities popping up around China, imagine the opportunity for green technologies in each of these cities.

So that is one area: products and services in the sustainable building sector. The other would be finance and investment opportunities – for R&D and start-ups. I could imagine incubators/ R&D facilities established in some of these areas outside of larger cities, depending on the location in China.

And then third – knowledge-based economy opportunities: in new media, computer networking, IT/ back office outsourcing-types of IT services, and problem solving and consulting. Certainly with the growing concern that China has scarce resources, there is a natural and understandable inclination to try to move from industrialization and heavy machinery/heavy energy and water-using industries to higher-value, knowledge-based services. The eco-cites would be targets to offer or create such knowledge-based service opportunities for companies looking for such.

TC: Piper you commented on the investment outlook and also the commercial opportunities. What about the durability of this trend in China from a business standpoint?

PLS: I would say that certainly we all understand the top-down policies either promulgated from the 11th or 12th Five Year Plan (to be reviewed in March 2011), are central to understanding where growth will happen, and that funding will be diverted to these eco-cites to make them a success, so can trust in that. However, at the same time we need to think about the greater economy and health at the local or regional level where these eco-cites are located, as well as the national level.

And because eco-cities are a more expensive operation to create (to meet stringent KPIs), you’ve got some very sensitive systems that do need management and attention. There is a danger that some shortcuts would be made to save money. I’ve heard one story in the past couple years where in an eco-city in a more remote location, the energy was considered expensive and so the lights were basically turned out during the winter to meet KPIs. In general, looking at the five or six points I mentioned earlier about making sure you’re researching the right eco-city and ensuring it is in a location that is sound and associated with strong economic growth, things should be okay.

TC: Piper earlier in our talk you identified three particular projects and then ticked off the names and a couple others that you will post to the TCBN website. One project that I did not hear you mention was the Chicago-Shanghai Eco-city agreement. Could you tell us a little bit about that particular agreement?

PLS: Well it’s a bit of a different animal, but I’m glad you mentioned that. I think, dating back to the Clinton administration, there was an effort to create a more cooperative information exchange, particularly between the DOE and China’s counterparts. I think that in the 2010 September timeframe, the DOE announced a new Chicago-Shanghai Eco-city. It’s basically a way for the two cities to trade best practices and to work together to develop standards and to help each other understand what could be possible in cities located throughout not only China but also the United States. So I think in this effort, if I’m not mistaken, there are 7 or 8 cities in the US and in China that may be paired together in this US-China-India Integrated Cities Initiative that is being coordinated by the US Department of Energy via the Brookhaven National Lab. It will help not only create more transparency and understanding of some of the standards that could evolve, but also to provide more of a quality control so that companies can have a bit of political cover in understanding which eco-cites are going to be considered sound and which are not.

TC: All right, well time’s drawing to a close, but in closing, Piper, let me just ask whether there’s just one project you’d like to highlight as a case study?

PLS: You know, in some of the research that I’ve done, I found one report to be very useful, which has made me think that this particular eco-city could be a success: the Sino-Singapore Tianjin Eco-city. A case study written by the World Bank, or I believe prepared based on a grant application that the Tianjin Eco-city had submitted to the World Bank. It is on the web and available to the public, and I think the study is the most recent comprehensive report I’ve found on eco-cities in China.

TC: Well great! Piper, thank you for your thoughts and your insights. We’ll possibility try to get back to you in a year or so and see how the progress with eco-cities has been.

PLS: Sounds great, Terry. Thanks. And I will post those cities for everyone to take a look at.

TC: Thank you. Bye bye.

TCBN’s Green Development Channel Editor Terry Cooke is the Founder of GC3 Strategy Inc., helping U.S. technology and investment firms since 2002 to create and sustain commercial partnerships in Greater China and India. >>See more on his profile>>

Piper Lounsbury Stover is the Principal for China Dynamics LLC, based in Vermont. She has nearly 20 years of experience in China business and policy.

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