Project Proposal

Two issues — the global economic crisis and climate change – have risen to the top of the U.S. national security threat-list as well as to the top of the global agenda.  The U.S. and China are at the epicenter of both these challenges.

As the world’s largest deficit and surplus economies, the U.S. and China have interdependent interests at stake in the current systemic imbalance of the global financial system; and they share mutual responsibility, as the world’s largest and fastest growing economies, for reshaping that system for a more sustainable future.  Similarly, with the climate change issue, the U.S. and China are, respectively, the largest historic and current emitters of carbon dioxide. As
such, the two nations share responsibility for assuming global leadership to combat climate change.  Under the Obama Administration, these two objectives – bilateral rebalancing of exchange rates and capital flows and sharing leadership in the global effort to reverse climate change – have become the twin tracks for moving the U.S.-China relationship forward.

The research project proposes to examine various aspects of linkage between these twin policy objectives.

First, a feature of global economic imbalance highlighted by the global downturn has been volatility of energy prices generally and greater use of Sovereign Wealth Fund vehicles in China to secure energy resources.  How are these developments affecting the investment dynamics underpinning clean energy innovation and investment on both sides of the Pacific?

Second, a feature of the global economic crisis in the U.S. market has been a changing relationship between public investment and private investment.  The changing relationship is especially pronounced as it relates to so-called Alternative Investment vehicles of private investment — venture capital, private equity, hedge funds.  These investment vehicles are facing new regulatory restraint in the U.S. at the same time that global stock exchanges
and capital markets are evolving in response to the economic downturn.  What will be the likely impact for clean energy innovation and investment arising from proposed regulatory changes in the U.S. and to evolving capital markets globally?

Finally , what role is Alternative Investment likely to play as the U.S. economy enters into economic recovery?  Is AI poised to remain a principal vehicle for trans-Pacific investment in alternative energy and sustainability technology?  Since AI is still a relatively new player on the scene, the AI perspective is currently not well represented among traditional USG mechanisms of policy input and formulation, particularly those relevant to implementing the US-China climate change roadmap (e.g., USG inter-agency process, including NGOs, trade association and corporate lobbying, and input from economists, academics and
the scientific community). Systematic research into AI expertise on these
issues can lend policy coherence to a perspective that is not now well defined
or organized.

The research project will systematically tap the knowledge-base of CEOs, Chief Strategy Officers, and Chief Economists of leading private equity and hedge fund companies. It will also draw on the institutional data resources of those
companies (and their trade associations).

The goal is to better inform a growing area of policy debate (over the bilateral economic impact — sector by sector – of investment scenarios for implementing various sustainability technologies over 2-, 5- and 10-year timeframes). More
generally, the goal is to explore how a non-traditional knowledge base might add to the existing policy discourse to help advance the U.S.-China climate change roadmap process.