U.S.-China Energy Dealmaking

Recent Presidential Summit Yields Solid Results

What shouldn’t be missed about Chinese President Hu Jintao’s visit to the United States this week are the deals cut on clean energy among U.S. and Chinese companies and continuing collaboration between the two countries. Cooperation on clean energy between the world’s two largest economies represents a win-win for the two countries. The clean energy agreements on technologies such as carbon capture and sequestration and natural gas provide billions of dollars in sales and export content. They benefit large and small U.S. companies while helping China grow in a more sustainable manner.

While this collaboration is undoubtedly good, the United States is slowly losing its competitive edge in clean energy technology. HSBC bank projects that the global low-carbon market will triple to $2.2 trillion by 2020 as investor uncertainty is replaced with optimism that governments around the world will seriously begin to tackle climate change. But it points to the United States as a “significant outlier” in establishing low-carbon growth policies because of its failure to pass clean energy and climate legislation amid conservative attacks in Congress, which threaten to roll back existing authority to limit pollutants through the Clean Air Act.

Lack of U.S. clean energy policies and threats to rollback existing regulations increase investor uncertainty and reduce domestic demand for these technologies. This threatens clean energy technology innovation in our country—to the extent that we may well miss this next industrial revolution. The United States can’t afford to fall behind in innovation and lose job-creating opportunities. We must strengthen and enact clean energy policies to drive demand and innovation so that we can remain competitive in this emerging worldwide market and boost domestic economic growth. China, Germany, and other countries are surging ahead in the clean energy race.

In short, the United States is falling behind. Cooperation with China is a positive step, but it isn’t enough. We also need to compete by matching the carbon-related reforms now being undertaken by other nations.

U.S.-China agreements total $45 billion in increased exports

Before detailing those imperatives, however, let’s look at what we gained this past week. Leading up to President Hu’s visit, U.S. and Chinese companies approved cooperative agreements, many of which accelerate clean energy technology. They are worth over $45 billion in increased exports. General Electric Co., for example, signed a joint agreement for gas turbines in China resulting in $500 million in sales and generating $350 million in U.S. exports.

The commercial agreements coincided with the expansion of partnerships on clean energy and climate between the United States and China that were announced in November 2009. Notable is the signing of joint work plans that establish a research agenda for the $150 million U.S.-China Clean Energy Research Center focusing on energy efficiency, clean coal, and clean vehicles.

U.S.-China clean energy collaboration will generate economic growth

The White House estimates that the recently announced U.S.-China deals will help support 235,000 jobs in the United States. But there are many other opportunities for job creation through cooperation.

The Center for American Progress, for example, found that U.S.–China cooperation to accelerate deployment of carbon capture and sequestration technology could create as many as 940,000 direct and indirect jobs in the United States by 2022.

A recent “U.S.-China Clean Energy Cooperation Progress Report” by the U.S. Department of Energy summarizing cooperation with China underway concluded, “Our clean energy partnership with China can help boost America’s exports, creating jobs here at home, and ensure that our country remains at the forefront of technology innovation.”

The United States risks losing more of the clean energy market share to China

But the United States needs to do more at home. Ernst and Young ranks China as the world leader in the global renewable energy market. This is in large part because of its clean energy policies that are rooted in an understanding that investments in low-carbon technologies will lead to economic prosperity and energy security.

The United States does not have these kinds of policies in place. We need an energy policy with a strong manufacturing component to maintain our leadership position in technology innovation. This is critical to economic growth and job creation. Private investment in low-carbon technologies and business growth won’t happen without demand for clean energy. A clean energy standard or Environmental Protection Agency regulations can provide that demand.

Some want to move us in the opposite direction, however. The Republican Study Committee, for example, is proposing several damaging budget cuts, including ending the Manufacturing Extension Partnership program, or MEP, to save $125 million annually. This is short-sighted. MEP helps small and midsize companies enhance energy efficiency and creates or saves 50,000 manufacturing jobs per year. Similarly, conservatives want to gut applied energy research at the Department of Commerce and block the Environmental Protection Agency from keeping our air clean.

Policies that would keep us the leader in the clean energy race

Instead of killing MEP, cutting innovative research and turning back the clock on environmental laws, Congress should maintain, extend, and enact policies that will give the United States a competitive edge in the worldwide low-carbon market.

These include but are not limited to the following:

  • Increase funding for the MEP program
  • Extend the manufacturing tax credit, or 48c, with an additional $5 billion in tax credits to help manufacturing companies become more energy efficient
  • Eliminate wasteful tax breaks for oil companies and spend the $45 billion saved on research, development, and deployment of clean energy technologies
  • Create a Clean Energy Deployment Administration, or “Green Bank,” to reduce the risk of clean energy investment and accelerate the manufacturing and deployment of clean energy technologies
  • Establish CLEAN contracts incentivizing investment in renewable energy generation with long-term fixed-rates contracts
  • Preserve demand certainty for clean energy technologies through the Environmental Protection Agency’s regulations of greenhouse gases and other pollutants
  • Restore funding to the Department of Energy’s loan guarantee program, which is necessary for the development of clean energy technologies

Taking these steps would ensure not just a more competitive U.S. economy and robust future jobs growth but also a cleaner planet.

Rebecca Lefton is a Policy Analyst at American Progress.

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