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Monday, January 25, 2010

Wyden to Chu: Clean Tech Competitiveness Is the "Challenge of Our Time...Not Clear What the Strategy Is"

Originally Posted at The Breakthrough Institute

U.S. clean tech manufacturers are losing global market share to their international competitors. What is the federal government going to do about it?

That was the question posed last week to Energy Secretary Steven Chu as he testified before the Senate Energy and Natural Resources Committee. Chu was speaking on the central role that energy research and development holds in any successful effort to mitigate climate change.

During questioning, Senator Ron Wyden (D-OR) quotes an earlier statement by Secretary Chu, calling it "the challenge of our time":

"The only question is which countries will invent, manufacture, and export clean technologies, and which countries will become dependent on foreign products?"

Unfortunately, the United States is headed in the wrong direction. According to Senator Wyden, who chairs the Senate Subcommittee on International Trade, Customs, and Global Competitiveness, "80% of clean energy investments are going to take place outside the United States, even though global trade in environmental goods has doubled just in the last few years."

The Challenge of Our Time: Senator Ron Wyden (D-OR) asked about the U.S. government strategy to boost U.S. clean tech competitiveness, but wound up with more questions than answers.

A recently published report by Senator Wyden's office shows that global exports of environmental goods (the majority of which are associated with clean energy technologies) more than doubled to $215 billion from 2004 to 2008. While U.S. exports have certainly benefited from the major expansion in worldwide demand for clean tech products, it has steadily lost international market share as other nations move more aggressively to capture competitive advantages in the burgeoning clean energy sector.

In the United States, clean tech imports have grown faster than exports, and U.S. exports have not kept up with global demand or international competitors, leading to an erosion of market share for U.S. products. By contrast, other nations, particularly China, have dramatically boosted their exports over the five-year period with China experiencing the greatest value growth in clean tech exports of any nation in the world.

Key figures from the report include:

  • The United States is the largest import market of environmental goods (EG) as well as the fastest growing import market from 2004-2008 in terms of product value.
  • In the last five years, the U.S trade deficit in renewable energy products increased by 1,400% to nearly $5.7 billion.
  • The United States faces declining export market shares in virtually every regional market, while China has substantially increased its market share in every regional market, over the last five years.

"It appears," the report concludes, "that the U.S. is not fully seizing the economic opportunities that this situation provides."

The conclusions of the Wyden study are consistent with the findings in "Rising Tigers, Sleeping Giant," a recent Breakthrough Insitute/ITIF report on international clean tech competitiveness.

Rising Tigers: The United States is losing clean tech market share as Asian government's aggressively invest in clean energy. The U.S. lacks a strategy to compete.

That report finds that China, Japan, and South Korea have already surpassed the United States in the production of virtually all clean energy technologies and will out-invest the United States by 3-1 in clean tech over the next five years. Should this investment gap persist, notes the report, "the United States will import the overwhelming majority of clean energy technologies it deploys."

The report outlines a comprehensive strategy to regain economic competitiveness in clean energy built on three pillars: research and innovation, manufacturing, and domestic market demand. Chu alluded to the latter in a response to Senator Wyden:

"You need local demand to encourage the manufacturing of these products here...if there is no local demand and it's all abroad, they will build the factory abroad."

Spurred by massive government investment, the major demand for clean tech products in countries like China compels firms in the United States to construct facilities overseas. Chinese government investment in manufacturing and deployment led Applied Materials, the world's largest producer of solar manufacturing equipment, to build its new state-of-the-art solar R&D facility in Xian, China.

However, as "Rising Tigers" makes clear, the most successful national clean energy competitiveness strategy will include strong support not just for market demand - after all, America could simply meet demand by importing more foreign-produced products. Investments in research and development and manufacturing capacity are also critical to ensure continued American technological and manufacturing leadership.

Ultimately, the back and forth between Senator Wyden and Secretary Chu left as many questions as it did answers about the U.S. government's plans to remain competitive in clean tech markets. It is revealing, though, that with the Senate considering "comprehensive climate and energy legislation," such questions about a clean energy competitiveness strategy need to be asked at all. Clearly, Senator Wyden does not see the current climate bills, which are essentially pollution reduction plans proposed by DC-based environmental groups and negotiated with incumbent energy interests, as a replacement for a real national clean tech competitiveness strategy. Under the leadership of public officials like Senator Wyden, this critical issue may soon receive the kind of public attention it deserves.

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