China’s Green Push
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For years China has contributed to global waste by emphasizing the need for rapid growth among local governments. They rewarded regional leaders with promotions within the party when they could demonstrate tangible growth, often leading to these local politicians to spend more than they have, to create more than they need, and to waste raw materials rather than recycling those that have already been extracted. The infamous developments resulting from this practice are labeled all across the internet as “ghost cities.” Photographs of some of these ghost cities can be found in the footnote below.
Recently, particularly since the election of Donald Trump, China has attempted to act as a foil for the United States. While Republicans push for “Energy Independence” by investing in coal mines, and Shale gas, China has begun to push green energy, in an attempt to become a world leader in renewables.
While China still is a leading contributor to waste and carbon emissions, they have taken concrete steps to not only reduce their carbon footprint, but to one day reach a point where they solely utilize renewable energy. In June, one of its largest industrial regions, home to 5.2 million people, ran exclusively on renewable energy. While China is not at a point where it can solely utilize clean energy, this performance demonstrated their technology is at a point where they can begin a substantial transition to a greener grid.
The issue is, China has sent out conflicting messages to its local governments. While it currently promotes clean energy, the party still holds total control of the government and still rewards its local leaders based on growth. In order to combat this conflict, China’s ruling party is attempting to redefine its measure of success. Rather than only looking at output, and rewarding those who spur the most growth, they are attempting to incorporate penalties for carbon emission, and rewards for clean growth.
An article in the Wall Street Journal states this policy has short comings. The main one being the lack of trust between the local leaders and the national government. While this new index to measure success has been implemented, leaders seem skeptical about how true the party will be in following it. If, for example, a leader were to fully invest in clean energy, would they in fact benefit the way this new index says they would, or would they be held accountable for possibly underperforming another regional leader who did not invest in clean energy, but produced more output.
While this policy will take time to kick in, and create trust between regional governments and the national party, it possibly demonstrates China’s commitment to its clean energy goals. China has not been quiet about its plans to become a clean energy leader, and while it still emits more CO2 than any other country, its current trajectory is promising; China has now had 4 consecutive years of zero or negative growth in carbon emissions.
Views expressed are the opinions of Jeffrey Goldfarb and the Financial Advisors at Goldfarb Financial and not necessarily those of Raymond James. Opinions expressed are as of this date and subject to change without notice at any time.