China's Cleantech Spending Blows Past United States

Last Updated Mar 25, 2010 12:12 PM EDT

Yesterday I wrote that China is working to dominate the nuclear industry, based on the country's plans to add about 70 reactors by 2020. But China's efforts don't end there, it turns out. Shortly after my post the Pew Charitable Trusts, a non-profit think tank, released a report showing that China is also on the verge of becoming the most active country in the cleantech sector, based on watts of energy installed.

China is already the world leader in spending on clean energy, as it turns out. Last year, the country spent $34.6 billion, while the United States spent less than half as much, $18.6 billion. The next-closest spender was the United Kingdom, which put $11.2 billion into renewables (a full graph is at the bottom).

The United States isn't losing its dominant position because it's spending less on clean energy. Rather, China is spending significantly more than it has in the past, increasing its funding by almost half last year alone. American spending, by contrast, has struggled to rise in the face of the recession.

Pew's report takes the US to task for failing to bump up spending. From the report:

There are reasons to be concerned about America's competitive position in the clean energy marketplace. Relative to the size of its economy, the United States' clean energy finance and investments lag behind many of its G-20 partners. For example, in relative terms, Spain invested five times more than the United States last year, and China, Brazil and the United Kingdom invested three times more... the Unites States is on the verge of losing its leadership position in installed renewable energy capacity, with China surging in the last several years to a virtual tie...

Ambitious, mandatory targets for wind and solar power and the ample availability of credit in China have been the primary engines of that nation's clean energy growth. Having built a strong manufacturing base and export markets, China is working now to meet domestic demand by installing substantial new clean energy generating capacity to achieve its renewable energy targets.

Why try to keep up? For starters, the cleantech industry has shown a strong tendency to go where its devices are being installed, whether they're solar panels, wind turbines or something else. For now, China is losing a lot of money on its investments. But in the future, with the industry consolidated within its borders, China could act as an energy technology salesman to the rest of the world -- a position the US should desire.

The difficulty in catching up is that the US is a developed economy that isn't growing much, while China is growing fast and has plenty of money to play with. In the US, old entitlements like Medicare and the military lock up much of the budget; in China, energy spending is becoming an entitlement of its own, gathering and ever larger percentage of the country's GDP.

But China is still a smaller economy than the US; we do have the ability to compete, unlike a country like Spain, which would like to but is too small to raise its spending.

Pew's study thus gets at an important point, one that has already been harped on by commentators like Thomas Friedman in the New York Times: that the issue of renewable energy spending should be detached from global warming, which is a political flashpoint. A large percentage of the population doesn't understand or believe in climate science. But everyone can appreciate the spirit of competition.

[Photo credits: Ancient chinese coins by jimmiehomeschoolmom / Flickr; graph by Pew Charitable Trusts]