How Chinese President Xi Jinping will Foster Clean Tech Growth: Hank Paulson

The biggest priority in China under President Xi Jinping is rooting out and punishing those who have fostered a culture of corruption. The second-biggest priority? Cleaning up the dirty air and water in Chinese provinces, said Hank Paulson, former Treasury Secretary and chair of the Paulson Institute at the University of Chicago.

Paulson spoke about his views on China, Xi’s priorities and the way anger among China’s residents over environmental pollution will eventually lead to clean technology development during a recent fireside chat at the Asia Society in New York City. Paulson is promoting his book, Dealing with China, which discusses many of his experiences working with leaders over the past 25 years.

According to Paulson, the air in China has been so befouled by pollution that the skies are “dark at noon,” he said during his interview with New Yorker journalist Evan Osnos. Xi and other like-minded reformers in China are determined to address concerns about the environment.

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“[Xi] has been very smart in picking the things that the Chinese people really care about,” Paulson said. “And there’s also been a growing and sincere interest in not just the air but in conservation more generally.”

According to Paulson, the U.S. government should care about Chinese issues – particularly the economic growth and the environment – because China is the second largest economy in the world. Plus, half of new buildings erected in the world are being erected in China, he noted. Major Chinese cities are expected to see an influx of 300 million people over the next 25 years, which will dramatically impact global economic systems.

“What happens in China really matters to all of us,” Paulson said.

In addition to concerns among the Chinese over environmental pollution, the Communist Party in China – of which Xi is the head – views unrest over the issue as a political risk, and a drag on the country’s economy, he added.

Paulson said studies have shown that life expectancy in China is five years less for those who live in coastal regions where pollution is the heaviest, and that people are “very, very angry about it.”

Indeed, a 2013 study co-authored by Michael Greenstone of the Massachusetts Institute of Technology, Yuyu Chen of Peking University in Beijing, Avraham Ebenstein of the Hebrew University of Jerusalem, and Hongbin Li of Tsinghua University – all economics professors – found that Chinese policies had resulted in roughly 5.5 years lower life expectancy for the 500 million residents of Northern China.

As a result of mounting evidence of the deleterious effects of pollution on the lives of those living in China, politicians have dramatically shifted their rhetoric, Paulson said. In past years, when Paulson would meet with party secretaries, mayor or governors, they would give him a list of economic statistics as evidence of how China had grown its GDP, minimized scandal and created jobs. Such evidence helped politicians get promoted. Now, said Paulson, officials tout air and environmental statistics because they know that’s how they’re being evaluated.

“You could hardly see the sky and even they were saying the air was 12% better,” said Paulson, describing his interactions in one of the most polluted provinces in China in mid-March. “I was very polite; I didn’t say, ‘listen, when you’re boiling in oil it doesn’t make much difference if it’s 180 or 190 degrees – you’re still boiling in oil.’”

Yet, despite the misplaced enthusiasm he saw in those circumstances, Chinese leaders overall are serious about improving the pollution problems in the country, said Paulson.

For his part, Paulson said “climate change is the biggest economic risk on the planet today,” and noted that China produces 28% of global carbon emissions. He added that he was optimistic about improvements in the region, mainly because Chinese officials have been systematically shutting down dirty manufacturing plants while simultaneously investing in clean technologies.

The World Bank revealed in a report published late last year, “Building Competitive Green Industries: The Climate and Clean Technology Opportunity in Developing Countries” that the clean tech market in China is expected to reach $415 billion over the next decade, an amount greater than expected numbers in both Latin America and Sub-Saharan Africa. The investments will likely span wastewater treatment, onshore wind, solar, electric vehicles, geothermal technologies, biomass and small-scale hydro.

The Paulson Institute has gotten involved as well. The institute and the China Center for International Economic Exchanges awards a $50,000 prize every year to a China-based project that fosters “environmentally sound development.” New financing solutions, green building ideas, energy innovations, water treatments and new technologies are eligible. The contest is open until June 15.

In addition, last March Beijing’s economic planning agency announced that it would shut down the last of the city’s four main coal-based power plants by 2016. The most recent closing is an 845-megawatt power plant owned by China Huaneng Group Corp., Bloomberg reports. Previously three other plants were shut down.

In addition to shuttering plants and investing heavily, Paulson said China has some initiatives on tap that are easily accomplished. For instance, China tends to build “very inefficient buildings,” said Paulson. Yet, half of the new buildings erected “on Earth are going up in China,” he said. The Paulson Institute, the Rocky Mountain Institute and the Lawrence Berkeley National Laboratory are currently working with Chinese officials on building energy efficient buildings, he said.

“They couldn’t be more serious,” said Paulson.


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