In need of a green revolution

The Greening of Asia: The Business Case for Solving Asia’s Environmental Emergency. By Mark Clifford. Columbia University Press; 306 pages; $29.95 and £19.95.

The Asian economic miracle has lifted millions out of poverty, but at terrible cost. Deforestation and foul water are just two of the insults to nature resulting from breathless expansion. Air pollution in Beijing has been described by the American embassy as “crazy bad”. Asia is one of the biggest contributors to global warming.
Many blame economic growth, and the market forces and corporations that drive it, for this. So it is refreshing to see a clear-headed argument set out by Mark Clifford, a former editor-in-chief of the South China Morning Post, that markets and greenery can go together. Asian companies, he says, are ready to clean up.

Three conditions need to be met first. One is public engagement. In China a powerful independent documentary on pollution, “Under the Dome”, was viewed online by about 200m people before it was blocked by the authorities. From Korea to Kalimantan, the hyperactive use of social media by ordinary people is becoming a force for change.

The second factor is regulation. Richer countries in the region have cleaned up using policies such as emissions standards and road-congestion pricing. Mr Clifford praises the science-based approach that Singapore has taken to making buildings more energy-efficient. The campaign started modestly in 2005. By late 2013, it had increased the number of efficient buildings from 17 to nearly 1,700—about a fifth of the total building stock. The goal is to have four-fifths of buildings certified as green by 2030, with annual savings of $1.26 billion.

Most of the region’s other governments are laggards, though. Mr Clifford gives many examples of how the mispricing of resources leads to inefficiency and environmental harm. In China “land, labour and capital are all underpriced for its favoured industries,” he writes. Energy and water are used much more wastefully than if these resources were priced properly. Free electricity for farmers in India has led them to run “ever-deeper pumps that deplete water sources”. He contrasts poor government policy with progressive business efforts. Esquel, a Hong Kong textile firm, helps cotton farmers in Xinjiang, an arid Chinese province, fund water-saving drip-irrigation systems.

The author offers a sophisticated critique of China’s efforts to create green champions in renewable industries. The government’s willingness to spend money without concern for profit has benefited the environment. China invested $125 billion in clean energy in 2012 and 2013, he calculates, considerably more than the $101 billion that America spent. It is now the world’s largest manufacturer of wind and solar equipment; soon it will be the largest consumer of clean energy too.

But China’s approach also has deep flaws. Central planners could not stop local governments from lavishing subsidies on favoured local firms, so the country ended up with far too many manufacturers scrapping for business. The resultant wars sent Suntech, once the world’s biggest solar outfit, into bankruptcy.

The author makes a powerful case for phasing out all perverse subsidies, and for introducing muscular regulation that uses a mix of incentives and punishment to encourage green growth. America offers a good example: a successful trading system for sulphur-dioxide emissions solved America’s acid-rain problem by providing polluters with strong incentives to clean up; they could sell credits in the marketplace for a profit if they cleaned up beyond the minimum required by regulation.

The third element is the private sector. Unscrupulous companies deserve as much blame for the current mess as do lousy policies. However, this picture is changing fast. Leading Asian businesses are going well beyond regulatory requirements, showing that sustainable business practices can be profitable, too.

The Kadoories, a family of Iraqi Jews who landed in Hong Kong in 1880, are a good example. Best known for the Peninsula luxury hotels, they also control CLP Holdings, one of Asia’s largest energy companies. It owns mostly coal plants, making it one of the biggest polluters on the planet. A decade ago, sensing growing public concern and anticipating future regulation of carbon, the Kadoories took some radical decisions. The company vows to slash the carbon intensity of its power-generating businesses by more than three-quarters by 2050. By 2013 it was the biggest foreign investor in clean energy in China, and the biggest windpower developer in India.

Nor is CLP an isolated example. As Mr Clifford shows, companies like Hyflux, a Singaporean water-treatment and desalination firm, and Goldwind, a wind-energy titan in China’s far west, prove that innovative firms are helping to reverse decades of degradation. Manila Water provides three times as many people with safe and reliable supplies after privatisation as the government did before, at a fraction of the price. Infosys, an Indian outsourcing giant, is on its way to getting half its energy needs from renewables. As Mr Clifford writes: “It is well-run businesses that have the manpower, the money and the knowledge to reshape Asia’s approach to the environment.” There’s hope, then, for the future.v

The Economist 

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