Report Urges U.S.-China Cleantech Partnership, Not Competition

A breakthrough in U.S.-China relations on green technology that creates conditions for both superpowers to succeed is crucial if the world wants to curb global warming, argues McKinsey & Co. in a new report.

The report flips a common argument on its head -- that an all-out, U.S-China battle for cleantech is inevitable; that in a matter of years, one of the two will lead, while the other will lag; and that the lucky winner will get the green jobs and new companies, while the loser will get left out in the cold.

The truth may be very different.

"Unless the two work together to provide the scale, standards, and technology transfer necessary to make a handful of promising but expensive new clean-energy technologies successful…neither country will maximize its gains...

"They cannot achieve separately what they could jointly," the McKinsey Quarterly report, China and the US: The Potential of a Clean-Tech Partnership, says.

China and the U.S. will most certainly compete to make the products of the next great global industry. But that musn't come at the expense of cooperation. The two countries should, and can, collaborate to create a global market that is bigger and more attractive for both, says McKinsey.

Such an effort would also "deliver benefits that would accrue to all nations."

McKinsey highlights three specific areas for cooperation: electric cars, concentrating solar power and carbon capture and storage technology.

Electric Cars

If a majority of the world's cars were hybrids and battery-powered by 2030, they would spew 42 percent fewer emissions than if all cars continued to run on today's gas engines, according to McKinsey calculations. But,

"such reductions won't occur—won’t even come close to happening—unless China and the United States lay the groundwork to make it so."

What must the U.S. and China do? In the near term, the two should pick matching cities for electric car pilots. Longer term, they must

• Set coordinated product and safety standards across the two markets.
• Fund the rollout of infrastructure, sponsor joint R&D initiatives in select areas (such as new materials for parts).
• Ensure that trade policies support rather than hinder the development of a global supply chain for the sector.
• Provide consumers with financial incentives to buy the new models.

China and the U.S. are the two largest auto markets in the world. You can bet the effects of mass electric car adoption in both would ripple across the world. For one, oil consumption would fall dramatically, easing pressure on future global supply.

"One plus one would equal three. Such momentum would also likely spark Europe into competing in a global electrified-vehicle industry faster."

Concentrating Solar Power (CSP)

CSP plants use vast solar mirrors to concentrate the sun's rays to extremely high temperatures, producing steam to drive  turbines. Experts claim that deploying them on a sliver of desert 186 miles on each side could technically power the whole world.

The technology is ripe for exploitation. But massive investments are still needed on a scale that only the largest economies can support, says McKinsey. Because of that, CSP

"might not even have a future without joint action by China and the United States."

If both nations took the CSP plunge, the benefits would be huge. In fact, if CSP were scaled to generate 22 percent of total power in China and the U.S. by 2030, it could create over half a million jobs in each country.

What would it take? For starters, the nations would need to set common standards and co-invest in pilot projects and R&D.

Carbon Capture and Storage Technology (CCS)