The U.S. power market consistently has displayed cyclical characteristics of boom and bust over the last two decades. Today’s market environment has been directly and significantly impacted by the...
China's Quest for Energy
Cooperation and coordination will help the United States avoid an energy-policy confrontation.
flow into CDM projects at a healthy pace—an estimated $240 million in 2005.
In the Jiangsu Meilan Chemical plant example, the World Bank will finance the project, paying facility owners to install and operate the equipment and then selling carbon credits to various buyers. Not all such projects, however, are being financed by multilateral agencies. Six industrial facilities, producing steel, coal, gas, and electric power in the city of Chongqing in Southwestern China, signed an agreement with EcoSecurities in November to invest in capital improvements that will reduce their GHG emissions by more than 1.5 million tons of CO 2e/yr. EcoSecurities will pay the companies about $53 million between now and 2012, and will sell their carbon credits in the world market.
Because the United States has not ratified the Kyoto Protocol, U.S. companies cannot invest directly in CDM projects. They can, however, invest through foreign subsidiaries, or in unilateral deals where carbon credits are assigned to the host country. As U.S. carbon policies evolve toward greater harmony with the rest of the industrialized world, investment opportunities will become more attractive to American companies.
Looking Beyond Oil
Environmental considerations and rising fossil-fuel costs are driving both China and the United States toward long-term energy strategies that rely more on domestic resources. A third factor is adding momentum in the same direction: geopolitics.
Since the end of the Cold War, the United States has stood virtually unchallenged as the solitary world superpower. But China’s star is rising, casting a different light on America’s military and economic position. In particular, China’s approach to securing fossil-fuel supplies raises alarm bells in security-policy circles.
“China is not a market economy. They are seeking to own energy assets at the wellhead or the mine, to capture those resources and take them off the market,” says Mike Wessel, a commissioner with the U.S. China Economic & Security Review Commission. “As everyone’s energy demand increases, this puts us in competition for fewer reserves and creates enormous problems for end users.”
It also raises the stakes in an international gambit involving foreign policy, global trade, and political ideology.
“China’s strategic reach for energy is a huge issue for potential conflict with the United States,” says former CIA Director Woolsey. He cites China’s recent efforts to secure oil reserves in Venezuela, Iran and the Sudan—all countries that are at odds with U.S. foreign policy. Another example is the attempted acquisition of U.S.-based Unocal by state-owned China National Offshore Oil Co. (CNOOC), which prompted a political firestorm and Congressional hearings. CNOOC eventually withdrew its bid, but the episode exemplifies the tension between the United States and China over energy resources.
“It’s too early to tell what kind of threat China poses in the geostrategic equation,” Wessel says. “China has done a lot of things that are adverse to our interests. As China projects its power and pursues its energy acquisition strategies, the potential for conflict arises. We’re not there yet, and our goal now is to find a way to cooperate with China and manage these issues before they do become