Saturday, January 07, 2006

Connect the dots: Harpers on China, The Economist on GE

It's not all that hard to connect these two dots. The Economist reports that GE is making a huge bet on the importance of "green technologies":
The greening of General Electric | A lean, clean electric machine |

NEXT month General Electric's corporate bosses will drop a bombshell on the hard-charging managers of its global businesses. In future they will be judged not only by all the usual measures, such as return on capital, that investors typically care about: they will also be held accountable for helping to save the planet.

Every GE business unit will have to cut its emissions of carbon dioxide (CO2), the main greenhouse gas (GHG) behind global warming, by a different target.

... GE's new goal is to cut its overall GHG emissions by 2012 to 1% below their level in 2004. That might not sound ambitious, but if no climate policies are enacted, the company's projected revenue growth would increase its GHG emissions by 40% above 2004 levels.

... Jeffrey Immelt, GE's boss, is leading the effort himself, campaigning for it both inside and outside the company, as well as backing it with large amounts of new investment.

... Mr Immelt is so convinced that clean technologies will be the future of GE that, invoking the colour of American money, he has made his new mantra: “green is green”.

... The company vows to double its revenues from 17 clean-technology businesses, ranging from renewable energy and hydrogen fuel cells, to water filtration and purification systems, to cleaner aircraft and locomotive engines.

... Mr Immelt and other senior GE officials now publicly proclaim that global warming is real, and also call for American government regulations to deal with it.

... Back in the 1980s and 1990s, many blue-chip firms, ranging from DuPont and Dow to big French and British water companies such as Suez, forged into environmental services. Many were confidently predicting long-term double-digit growth and some invested heavily in developing-country markets.

Alas, by the late 1990s many of these firms had scaled back their investments...

Meanwhile, Harpers has published a long survey of China (emphases mine). It's sympathetic, bullish, and tries to avoid cliche and extreme simplification. Towards the end of the article it gets down to brass tacks (btw, multiply all numbers by 1.8 to include India and the rest of the industrializing world)...
Harpers: Scenes from China's Industrial Revolution

... It used to be said that the point of travel was to see your own home more clearly. So let's look. When you're standing in Shanghai, at the city's urban-planning exhibition, admiring the basketball-court-sized model of the city's future plan, with every skyscraper and apartment complex carefully detailed, you just viscerally know that there are two countries that really count right now. You just viscerally know that this is the story that will define the future. China and the United States are now the world's biggest consumers of raw material, and of food, and of energy. Are they therefore morally equivalent?

... Sometime between 2025 and 2030, China will pass the United States as the largest carbon emitter in the world - already it produces sixteen percent of the world's CO2 compared with our 25 percent. That is, they are now joining us in the task of undermining the planet's physics and chemistry.

... We have nearly the same number of cars as we have people. In China the number of automobiles is growing fast. But if the Chinese sell six million cars this year, that will be eleven million less than the United States - in a population more than four times as large.

In fact, the size of China's population queers every discussion of numbers.... Zhao Ang, my translator, has as much right to the sky as I do, which is to say as much right to a car or a big house. And measuring by people, in 2025 or 2030, when China passes the United States as the world's largest carbon emitter, the average Chinese will still be producing only a quarter as much carbon as the average American. And of course it goes deeper than that - the reason the atmosphere is filled to the danger point with carbon is because we've already been filling it for two centuries, burning coal and oil to get rich while the Chinese have been staying poor. As Ma Jun - a daring environmentalist who's taken big risks to write his books - told me one day, "Nearly eighty percent of the carbon dioxide has come from 200 years of the industrial world. Let's be realistic. Those historic burdens have to be shouldered by those countries that have enjoyed the benefits." In any just scheme, it's not morally required of the Chinese to help solve global warming, any more than it's your kids' responsibility to work out the problems in your marriage.

... it seems intuitively obvious when you're in China that the goal of the twenty-first century must somehow be to simultaneously develop the economies of the poorest parts of the world and undevelop those of the rich - to transfer enough technology and wealth that we're able to meet somewhere in the middle, with us using less energy so that they can use more, and eating less meat so that they can eat more.

... try to imagine the political possibilities in America of taking Chinese aspirations seriously - of acknowledging that there isn't room for two of us to behave in this way, and that we don't own the rights to our lifestyle simply because we got there first...

There's a rich history of mis-predicting ecological trainwrecks. Malthus got it wrong (ok, except for Rwanda where he got it right) because several breakthroughs in food production moved his collapse into the indefinite future. Worldwatch got it wrong yearly for the past 30 years because they way too confident about timelines (and thus earned both fame and infamy). If we do avoid this trainwreck, however, it will most likely be through new technologies -- not some dramatic enlightenment of the American (or European) troglodyte. GE is making a bet on a 5-20 year timeline in which those technologies will become fundamental.

I think it's a safe bet. If it doesn't pay off, market cap will be the least of our concerns.

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