China Institute, University of Alberta (CIUA)
Global Affairs Canada
Government of Alberta
Edmonton, Alberta, Canada
November 27-29, 2018
Whether in Canada or China, the quest for clean growth strategies and practices amid climate change, environmental pressure, and energy market turbulence has emerged as a key challenge of our age and ever-present in our national economic life. This context sets the stage for policy choices we make, for our tasks ahead in research, and for how and what new technologies and skills we will pursue, share, and deploy.
Moving these efforts forward has the potential to generate new opportunities for Canadians and Albertans at home. Through the energy transitions present and soon to come, well-directed dialogue within Canada and with Canada’s major partners, including China, will be crucial in the degree of progress we achieve that will be beneficial to multiple parties. Against this backdrop, the China Institute convened a high-level group of Canadian and Chinese officials, researchers, business representatives, and public policy advocates to consider pathways forward for Canada, with China, on issues of climate change and clean growth.
Alberta Economic Development and Trade Minister Deron Bilous, speaking at the Tuesday evening reception, drew attention to the intense interest among Albertan clean tech and energy sectors and his confidence that business development in China will expand.
During the opening remarks on Wednesday, Mr. Jason Krips, Deputy Minister of Economic Development and Trade, Government of Alberta, called attention to Alberta’s commitment to clean tech growth, low carbon electricity and climate leadership. Mr. Don Bobiash, Assistant Deputy Minister (Asia Pacific), Global Affairs Canada highlighted the Canada-China shared interest in a green economy, with China representing one-third of global renewable energy investment. China’s Consul General in Calgary, Mme. Lu Xu, noted China’s drive to address air pollution in sync with energy security and economic growth; she saw Canada’s firms and technology as well placed to contribute.
With the complementarity of goals and capacities between Canada and China, the conference benefited from scene-setters by Dr. Arthur J. Hanson, a Canadian advisor to the China Council for International Cooperation on Environment and Development and Dr. Junjie Zhang, Director Environmental Research Centre at Duke Kunshan University. Both highlighted the urgency at play that is driving work on climate change and other environmental issues, and thereby moving both challenge and opportunity. Clean energy is not an elective option anywhere today and this includes in China – it is an imperative.
Clean energy and the systems that sustain it are part of economic restructuring, part of the connectivity needed with other technologies and, in China, part of the aspiration to a modern G7-style economy and eventually to an “ecological civilization”. Public policy drivers in China today are: (a) environmental pollution rollback; (b) moving ahead with climate change goals by 2035; and (c) reduction of foreign energy dependence. At the same time, climate and other environmental issues require interdisciplinary approaches and new relationships and alliances to move agendas interactively among policy, industry and research communities. The transition from coal to gas and renewables will proceed in China, perhaps faster than elsewhere in the world. Yet, there are risks of a campaign-style short term focus diminishing sustainability and cost effectiveness of efforts made. Long-term strategies, plans, and sound management practices are needed as well as capacity to remove or work around impairments to diffusion and deployment of green technologies, for example, trade disputes or financing constraints.
With the foregoing as a context, the focus of this “Conversation” was on developing potentials and opportunities in China today for Canadians. Accordingly, the core conference was organized around three panels centered on the emerging context in China, the challenges facing Canadian firms in succeeding this dynamic marketplace, and the lessons learned and best practices evident at the ground level across a number of clean growth and environmental remediation fields.
The first Panel entitled “The Enabling Environment and Emerging Opportunities in China” examined the dynamics of the current energy and clean technology market in China against the backdrop of serious public concern over air pollution, water quality, and land degradation, and mounting impatience with the pace and effectiveness of remediation. As per the scene-setters, the panel stressed the transition to cleaner energy and eco-systems in China is increasingly well established and it is long-term.
The question is whether US-focused Canadian firms can position in a timely way, especially as the US steps back on climate change in particular. China is evolving, with substantial development observed in the areas of demographics, mass transportation, and a search for the most efficient technology, including smart grids, storage systems or even hydrogen. Such evolution and development will be necessary to manage emerging pressures of both energy security and clean energy as well as other eco-challenges such as surface water pollution and solid waste management. Transitions from coal to natural gas or renewables, for instance, wind or solar systems, challenge urban planning, and infrastructure renewal. Sustaining jobs and responding to consumer needs are sensitive dimensions – as is choosing investment in the most demonstrably cost-efficient, proven technologies.
As elsewhere, and as in Canada, China can and does face difficult trade-offs, including decisions whether and for how long to focus on more efficient coal systems if near-term phase-out is impractical. Collaboration and partnerships among diverse players, locally, nationally, and internationally are essential. In all scenarios, China is a dynamic marketplace, with complex platform and evolving tools of technology promotion and finance. But it is moving forward and growing – and becoming friendlier toward medium-sized enterprises (SMEs).
One speaker expressed concern that with the U.S. withdrawal from the Paris Agreement on climate change, combined with the slowing Chinese economy, there may be a risk that China will assign a diminished importance to the Agreement, and to meeting its own emission reduction goals. A speaker also expressed the concern that the creation of the new Chinese Ministry focused on environment and climate change might not have the same clout as when these responsibilities were lodged within the National Development and Reform Commission.
Shifting closer to home, the second Panel examined “The Enabling Environment in Canada: Helping Canadian Firms Succeed in China’s Market”. Is Canada adapting to a clean growth imperative and is it positioned to succeed in emerging economies such as China? Weaknesses and even market failures are present without doubt. It is unclear we have the “patient capital” sources for needed start-ups or the tax regime or government procurement practices that incent and sustain change. Other constraints include researcher mobility that would help enable the aforementioned, much-needed partnerships.
The record among Canadian firms in clean tech is mixed. Federal government support has been rising. On one hand, as one panelist pointed out, Canada is number one in the G20 and 78% of clean tech firms export – $12B in 2016. On the other hand, this is only 2% of Canadian exports. A case for more holistic approaches was implicit and sometimes explicit in the discussion – tax policy especially vis-à-vis commercialization, carbon pricing, streamlining access to government programs, international education/research partnerships, and credit market improvements – both availability and access. On the latter, partnering with Chinese entities holds attraction, both to facilitate and manage risk. Protecting intellectual property protection remains a preoccupation and an inhibition, as does contending with China’s difficult regulatory setting. Most firms need guidance in choosing local partners to manage this and other business risks. Firm agility and market intelligence are key to business planning as price relationships can change rapidly. The costs of producing solar power is decreasing at an incredible rate – with prices reduced by 50% every two years. The relative low cost of solar power today points to dramatic change on the horizon and a shift toward renewable/green energy puts China and Canada in ideal positions. Canada’s approach to China will be strengthened by a strong domestic market for clean technology.
In developing new energy markets, all communities must be engaged and their most pressing priorities addressed – and be seen to be addressed. As an important example raised at the panel, First Nations possess a traditional role as caretakers of the land. Climate change mitigation is part of that role. Development, whether in conventional or new energy, and trade and investment therewith, will benefit from their contributions – as it will by assurances of fairness and equality.
The third and final Panel entitled “Experience from the Ground”, surveyed the more practical aspects of developing business and research partnerships in China today, including strategies to seize opportunities in a timely fashion as well as to manage risks. While activity was picking up sharply and contacts expanding, substantive “breakthroughs” for Canadians in the China clean energy/tech sectors had been elusive to date. However, Canadians do have assets, and there is a popular interest in and a market for transformative technologies keyed to environmental improvement. Chinese entities are typically adept at incremental innovation, but less so on “game-changers” or system-wide upgrades. That is Canada’s opportunity “niche”; nevertheless, the solutions offered and the costs quoted must be right.
Contracts signed require care in design and implementation, with step-by-step approaches, for instance, attention to scaling and pacing. There are advantages of starting in targeted localities and building upon them at national level later and in a measured way. Firms are also encouraged to share experiences with other firms and strengthen intercultural competency. In both respects, continuous learning by doing is essential. “Gold rush” mentalities, such as seen in the promising but complex soil remediation subsector, require caution. Echoing a theme through the day, in this dynamic sector in general and in China in particular, “timing” is critical in terms of technology introductions and business engagement.
Due diligence in partner selection is important. Focus on outward-looking corporates – either state-owned enterprises (SOEs) or private firms, large or SMEs. Access to available capital for clean tech in China and funds are available, but the ability of Canadian firms to articulate and act on value propositions arguably even more so in mobilizing resources to get started and sustain expansions over time. It is important to learn who makes decisions in any Chinese entity and, as above, much care is advisable in designing deals. Again, while IP protection has improved as perspectives have shifted in China, care is still needed.
Dr. Hanson and Dr. Zhang rejoined participants for thoughts on “What’s Ahead” for our dialogue. Above all, the pace and scope of change in China is rapid and profound. Knowledge transfer of value will be more two way. Systems are changing with spatial and sectoral aspects. New fields of clean growth opportunity are appearing rapidly, not only electric vehicles (EVs), but also relatively newer fields like oceans in which Canada has expertise. Canadians can and should anticipate change will continuously unfold – including in how innovation is pursued and governed in China. Long-term planning horizons are advisable. Contrary to popular impressions, China is more open to advice and transformational change than given credit for – and comfortable with “liberal arts” approaches to commercial development. This is especially true in clean growth given the noted sense of urgency over climate change and environmental health. New technologies and systems will be tested in China for both operational and cost effectiveness, yet the speed of implementation for favoured initiatives can prove remarkably rapid. In choosing engagements by sector or partner, timing is everything in China.
Compiled by Ron MacIntosh, Senior Fellow, CIUA
With notes from Dr. Marija Pavleska and Dr. Scott N. Romaniuk, Postdoctoral Research Fellows, CIUA
Market Briefing and Best Business Practices
The conference program was supplemented by a “Market Briefing” for business and provincial government representatives by Canadian trade commissioner in attendance from missions in Beijing, Shanghai, Guangzhou and Chongqing. Noting the high-profile shifts in energy use projected and clean tech investments mandated by national policy – clean tech growing at 17.4% vs 6.9% GDP overall, trade commissioners highlighted the exponential scope and pace of growth potential. Cited were such sectors as non-fossil fuel tech such as hydrogen fuel cells, solar, nuclear energy – where China is now leading the world in deployment. The soil remediation market alone is expected to grow to $120B by 2020 as well as wastewater treatment also advances. The trade commissioners also advised on “best practices” in the pursuit of opportunities including the need to visit often, to know Chinese policies, to leverage government support effectively, to consider investing as part of business development, and to take care with good advice on intellectual property (IP) protection. The trade commissioners listed some eight major clean technology-related fairs and expos over the next 10 months that Canadian firms can attend. The Clean Growth Hub provides comprehensive information and helpful links for Canadian firms looking to reach trade commissioners, get involved in trade events, and more.
Energy Futures Roundtable
The following morning featured an “Energy Futures Roundtable” with specialized dialogue from University of Alberta experts who have experience on specific projects, including with Chinese partners. They covered selected fields of environmental and climate change remediation, including: (a) solar photovoltaic (PV) cells and their rapidly changing cost and price picture – and the premium in addressing storage challenges; (b) land/water remediation tied to agriculture and other resource industry activity; (c) smart grid design including engineering connects between “micro” grid and larger networks an drawing on software and artificial intelligence (AI); and (d) new materials for energy (biomass, among others). The advantages of a strong role for youth in project development was highlighted in these areas and the value of continuous communication and clear messaging in building projects was strongly emphasized. In this, the value of lobbying unfolds in several ways and foremost becomes a mechanism through which further involvement, particularly by youth and aspiring researchers and entrepreneurs, may be fueled.