Europe Pays for China's Wind Farms

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Global Trade, Macroeconomics

You have got to hand it to the Chinese they are nothing if not smart. In an article on China’s growing wind power market, the Washington Post illustrates the danger the US faces if it adopts a European style cap and trade carbon scheme. China is moving faster in its environmental efforts than almost any other major economy. It has set a goal of getting 15% of the country’s power from renewable sources by 2020, of which wind is to be 120 GW, four times the capacity that exists in the USA at present. Of course wind power has to be subsidized to be viable in China as it does in the US. The government has ordered the utility companies to pay subsidized prices, a project in Huanghua being developed in conjunction with America’s AES is receiving US$0.089 a kilowatt hour compared to $0.0525 for coal fired power stations in the same region. But here’s the clever bit, an additional 3 cents or so, enough to almost make up the full subsidy, is paid by European polluters whose greenhouse gas producing industry can buy offsets instead of reducing their own emissions. Last year a staggering 84% of Europe’s offsets came from projects in China.

Even as completed wind farms stand idle in Inner Mongolia, (China’s windiest region, most suited for wind power projects) the State Grid Corp, owners of 80% of the national grid, has not been able to connect them up to the national grid, as new plants are being built. This bottleneck in the development of the national grid probably doesn’t stop offsets in the turbine farms being sold on them though. One can’t blame China for playing the game, they didn’t write the ridiculous rules that mean Europe is subsidizing Chinese power production and the Chinese are doing a great deal more than most European countries to clean up existing power production by closing old power plants and building new and much cleaner plants using the latest technology. Even so, US consumers should take note, if cap and trade were to go through and the rules allowed offset in developing countries the US could find itself subsidizing China’s clean up while still suffering the ire of environmentalists for not adopting such technologies fast enough to reduce gross carbon emissions at home.

–Stuart Burns

Comments (4)

  1. Rod Clifton says:

    If the eco-cultists have their way, we will be living in caves.

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