Green transition boosts national and global economy

China's rapid shift toward a green economy will be a boon both to its domestic market and the global economy as the country's greening process is creating new business opportunities worldwide.

"There is no doubt that the Chinese market is very interesting for us. The Chinese have all the good intentions to move ahead in the field of energy efficiency," said Niels B. Christiansen, president and CEO of Danfoss, a Danish company that manufactures energy-efficient devices and systems.

Danfoss is making a 400-million-yuan (64-million-U.S. dollar) district heating network in Anshan in China's northeastern Liaoning province.

The Danish company is replacing a number of old boilers with larger ones that are connected to a steel plant and supply more than 1 million local residents with heat generated at the factory.

The heat previously had simply been dumped but now it is utilized as an inexpensive, efficient means of warming area households.

"So we have here a win-win situation. It is a good example of moving toward a green economy, and doing it in a very profitable way," Christiansen said.

GREEN GROWTH OFFERS NEW CHANCES

China is refurbishing its economy in a green manner through the ambitious 12th Five-Year Plan that's in place for the 2011-2015 period.

Key goals in China's greening process include replacing coal-fired plants with ones run on renewable sources such as wind energy and solar power.

The goals also involve better insulation of homes and offices to cut heating bills, combined urban heating and power networks, and more recycling. Improving the energy efficiency of production facilities and developing alternative-fuel cars also are among the plan's objectives.

China already is the world's largest market for wind power and is expected to be the largest market for sustainable energy by 2014.

The Chinese government, as the world's biggest investor in sustainable energy, is ready to invest 3.6 trillion yuan (573.2 billion U.S. dollars) in the green sector during the 12th Five-Year Plan.

Denmark and its Nordic neighbors, trailblazers in the global green growth arena, could stand to benefit commercially from China's rapid environmental transition.

"I believe a more sustainable growth in China can turn out to be an advantage to Danish companies because of the technologies and solutions we have developed in our effort to create a green economy," said Karsten Dybvad, CEO of the Confederation of Danish Industry (CDI).

Nis Hoeyrup Chirstensen, an advisor on Chinese affairs at the CDI and a researcher on China's renewable energy efforts at the Copenhagen Business School, sees green growth ahead.

"In China, there is a market and a clear horizon, which the Chinese government is pretty good at showing, as it puts up both short- and long-term economic goals," Chirstensen said.

Danfoss is now represented in more than 20 Chinese cities with around 5,000 employees after deciding seven years ago to develop China as its second home market.

The company's revenues in China rose 28 percent last year to 469 million U.S. dollars from a year earlier. Danfoss expects China to become its largest market by 2015.

"The estimate is that we are developing with the market and that we are maintaining or even gaining market shares in certain areas. It is obvious that while we are growing nicely in China, the general market in China is growing very nicely," said Christiansen, the Danfoss CEO.

NORDIC MODEL OF GREEN DEVELOPMENT

Environmental protection and sustainable development drive China's efforts to shift to a green economy - defined by the UN as one where "growth in income and employment should be driven by public and private investment that reduce carbon emissions and pollution, enhance energy and resource efficiency and prevent the loss of bio-diversity and ecosystem services."

Premier Wen Jiabao promised at the 2009 UN climate conference in Copenhagen that China would lower the intensity of carbon emissions per GDP unit by 40 to 45 percent by 2020 from 2005 levels.

Beijing also has pledged to increase the share of non-fossil fuels in China's total energy consumption to 11.4 percent in 2015 and 15 percent in 2020, up from 8.3 percent in 2010.

In fact, China managed to meet its stated goals on energy conservation and emission cuts under the 2006-2010 11th Five-Year Plan. It was during that effort that energy consumption per GDP unit dropped 19.1 percent while energy-saving efforts helped reduce carbon emissions by 1.46 billion tons.

China has also shut down small coal-fired power plants with a combined capacity of 76.8 million kilowatts. It also reduced 120 million tons of outdated iron production capacity, 72 million tons of outdated steel production capacity and 370 million tons of cement production capacity.

"For the economy to grow, energy consumption must grow accordingly. But energy consumption cannot grow indefinitely due to limited resources," said Andrei Ostrovsky, deputy director of the Far East Studies Institute at the Russian Academy of Science.

Ostrovsky said the only way out of the vicious cycle was to increase labor productivity and introduce energy saving technologies so that the same or larger volume of production could be achieved with relatively lower energy consumption.

In that regard, the Danish or Nordic model of green development could be adopted in China, as long as it is scaled-up and adapted to fit local needs.

The Danish economy, according to the CDI, has grown 78 percent since 1980 while keeping energy consumption almost unchanged. Carbon emissions also were cut during the period largely due to technological developments and conservation.

During a visit to Denmark in June, President Hu Jintao toured the Copenhagen harbor, one of a number of sustainable development and green living initiatives in the Danish capital.

Hu said China should learn from Denmark in protecting the environment and adopting clean energy for sustainable development.

Chirstensen said technology adoption and transfer would likely see Nordic firms work even more closely with Chinese partners to better understand and respond to the needs of China's green market.

"We definitely need China to succeed if the world is to succeed. Whatever China does will have global repercussions because a lot of the world's manufacturing is going on there," he said.

CHALLENGES FOR GREEN TRANSITION

It is always a challenge for a resource-dependent country like China to make a green transition because the process will require huge investments.

Christiansen, the Danfoss CEO, said China has very advanced infrastructure such as airports, trains and roads, but does not have high-quality and energy-efficient heating networks.

"Being able to finance, and put focus on heating infrastructure, to the same extent as other infrastructure, would be a very important step in making the transition work," he said.

Another thing is that too-low energy prices will make the transition slower because older technology would be used for a longer time.

"This challenge can be overcome, but it would mean that 'dirty' energy, or oil and gas based energy, are not subsidized, or even that there be taxes put on it, to push the transition," Christiansen said.

He also believed that China needs to change public behavior and make its population aware of the benefits of being more efficient with energy consumption.

At the same time, the Danish companies may face fierce competition from local players as well as the protection of intellectual property rights while marketing energy technologies in China.

Vestas, the world's biggest wind turbine manufacturer, shut down a factory in China's northern city of Hohhot in June to "phase out" the production of small kilowatt turbines because of projected low market demand.

The Danish wind giant also agreed to sell a tower factory in southern Denmark to Chinese tower maker Titan Wind Energy because the slumping global economy has led to cuts in wind farm investments.

However, Chiristina Boutrup, the author of "China Sweet and Sour," a book on Danish companies' experiences in China, said the firms still hold a competitive edge because they can meet China's increasingly tight environmental regulations.

At the same time, Christiansen said Danfoss has seen a few counterfeit products in China that misuse his company's name and brand.

An equipment company in Wenzhou in China's eastern Zhejiang province, last year was fined by a Chinese court 300,000 yuan (47,000 U.S. dollars) for infringing on a Danfoss trademark.

"It is a problem for the green transition and for doing business in general," Christiansen said. "My feeling is that the situation is improving although it is still happening (in China)."

Despite the challenges and difficulties, the CEO believes that there is already a more stable market for green technologies in China as the country moves toward a green economy with environment-friendly macroeconomic policies.

"The (12th five-year) plan is very harmonious with our business. It will help further the implementation of some these green actions and enforce the goals," Christiansen said.