America Risks Missing Out in Clean Technology

Asia's 'Clean-Tech Tigers' are out-investing the U.S. in renewable power and energy efficiency

By Rob Atkinson

Even before the Great Recession, policymakers were commonly asking, "Where are the new jobs going to come from?" Now with U.S. unemployment at 10%, that question has taken on a new urgency. And today's Mr. McGuire-like advice is as succinct as it was in The Graduate in 1967: "Green." Everyone from President Barack Obama to mayors of small towns are proclaiming that green industry is the savior of the U.S. economy, bringing jobs to the unemployed, needed economic activity to distressed industrial regions, and an overdue shot in the arm to U.S. industrial competitiveness.

This is not necessarily a vain hope. Global private investment in renewable energy and energy-efficient technologies is estimated to reach $450 billion in 2012 and $600 billion in 2020. These are hefty numbers, and attracting even a modest share of that investment will produce hundreds of thousands of jobs.

Yet these hopes are likely to remain unfilled unless the U.S. embarks on a very different course. A joint study by the Information Technology & Innovation Foundation, which I direct, and the Breakthrough Institute finds that Asia's rising "clean-technology tigers"—China, Japan, and South Korea—have already passed the U.S. in the production of virtually all clean-energy technologies. The report, Rising Tigers, Sleeping Giant, also finds that between 2009 and 2013, the governments of these nations will out-invest the U.S. three-to-one in these sectors­, or $509 billion to $172 billion.

china's growing clout

In fact, Asia's clean-tech tigers are already on the cusp of establishing a "first-mover advantage." China is exporting the first wind turbines destined for use in an American wind farm, a project valued at $1.5 billion. All three Asian nations lead the U.S. in the deployment of new nuclear power plants. The U.S. produces less than 10% of the world's solar cells, is losing ground on hybrid and electric vehicle technology and manufacturing, and lags far behind in clean-technology manufacturing.

While the U.S. historically has attracted the bulk of available private investment in clean energy, capital flows increasingly are being steered towards Asia's clean-tech tigers, and these nations' greater public investments are likely to attract much of the future private investment in clean energy technologies. From 2000 to 2008, the U.S. received $52 billion in private capital for renewable energy technologies, while China got $41 billion. China's share of global clean-tech investment is rising each year, however, and surpassed the U.S. for the first time in 2008.

This competitive edge hasn't emerged out of some kind of Ricardian comparative advantage that Asia possesses in green energy. Rather, it arose from conscious green innovation policies. As a recent study by Deutsche Bank (DB) states, "Generous and well-targeted [clean energy] incentives" in China and Japan will create a low-risk environment for investors and stimulate high levels of private investment in clean energy. These nations rely on a "comprehensive and integrated government plan, supported by strong incentives." In contrast, the investment firm calls the U.S. a "moderate-risk" country since it relies on "a more volatile market incentive approach and has suffered from a start-stop approach in some areas."

Korea's "Green New Deal"

The largest investments are being made by China, which is planning direct investments totaling at least $440 billion over 10 years.

Business Exchange

Track and share business topics across the Web.