Plugging into China’s Clean Energy Future

Ask a Canadian what’s going on over in China these days, there’s a good chance they’ll cite the country’s off-the-charts smog. They might even mention recent reports that traces of this air pollution are starting to show up on North American shores.

But ask a Canadian politician, and you’ll likely hear a drum beat of talking points about China’s voracious energy appetite and the imperative to ramp up our oil, gas, and coal exports.

There’s no doubt that China offers a vast and growing market for these fuels. But they also lie at the root of the country’s deepening air-quality crisis. They feed an energy system that the country has clearly signalled it intends to transition away from.

Beijing is acutely aware of its energy challenges, which include dependence on international energy markets, price volatility, regional energy shortages, climate change and deteriorating ecosystems. Beyond these challenges, China has also seized upon the economic opportunity that clean energy technologies and services offer in the global marketplace.

This confluence of forces has led China to implement a wide range of policies supporting a transition to clean energy—from feed-in-tariffs for renewable power, to electric vehicle incentives, to market-based policies to reduce carbon pollution. As a result, between 2010 and 2020 the Chinese market for clean energy products and services is expected to triple.

In its most recent Renewable Energy Country Attractiveness Index, global management consulting firm Ernst and Young had the United States once again maintaining its top ranking as the most attractive country in the world to invest in renewable energy, followed close behind by China. Meanwhile, Canada dropped from seventh to eighth position in its ranking (France edged us out thanks in part to a proposed cap on carbon pollution).

Deploying renewable energy here in Canada is not just about cleaning up our power grids, but also about developing the technologies and services needed to do so. Ontario’s inclusion of domestic content requirements in its Green Energy Act—since revised as a result of a successful World Trade Organization challenge—explicitly sought to not just deliver clean energy electrons, but to build up its renewable energy manufacturing sector. And it worked.

American competitiveness in clean energy isn’t an accident either, but a key element of President Obama’s desire to strengthen the American economy and tackle climate change. Clean energy sits at the nexus of those ambitions. As President Obama has said, “As long as countries like China keep going all in on clean energy, so must we.” The results are impressive: for example, jobs in the solar power sector south of our border have been growing ten times faster than national average employment growth, now employing more than 142,000 individuals, with 23,000 of these jobs added in 2013.

So why isn’t Canada going all in on clean energy? It would seem that our political leaders are afflicted with a certain malaise. They assume we possess no competitive advantage in the sector, and have been lulled into complacency by virtue of our abundant fossil fuel resources.

But a variety of signs and signals indicate that this malaise, while relatively inconsequential in the near term, could hamper Canada’s mid to long-term economic competitiveness. Should we ever truly reign as an energy superpower, our glory will be short-lived.

The irony is that Canada is actually very well-positioned to compete in clean energy.

A recent study produced by McKinsey for Natural Resources Canada found that Canada has clear advantage in unconventional oil and gas, plus traditional hydro. But we also have an opportunity to enhance our competitiveness in next-generation automotive technology and advanced trains and jets, and could take the lead in emerging markets with solar photovoltaics, bioenergy, unconventional hydro and energy efficiency.

A Canada-China Economic Complementarity Study completed by the Department of Foreign Affairs, International Trade and Development similarly found that significant opportunities exist for Canadian cleantech companies involved in bioenergy, renewable energy, and energy efficiency—including green building solutions.

That study also found that Canadian clean energy firms face challenges related to their size (many are small and medium-sized enterprises), such as access to capital, and concerns around protection of intellectual property.

Canadians support the idea of boosting clean energy trade, too. A recent poll for the Asia Pacific Foundation found that a majority (51 percent) of respondents felt that the potential risks to the environment of transporting oil and gas to Asia outweigh the potential economic benefits. Meanwhile, 68 percent of respondents felt Canada should prioritize cleantech and renewables in promoting energy exports to Asia.

Canada is blessed with abundant energy resources and we have, and will continue, to prosper from them. But energy markets are evolving under our feet. We are moving from a system built upon commodities—think oil, gas, coal—to one built upon clean energy services and technologies.

If our political leaders don’t evolve their understanding and get with the program, then our energy prosperity will be as finite as the non-renewable resources they tout.

This op-ed was originally published in the February 10 edition of the Hill Times.

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