BEIJING -- Much has been written about China's huge investment in alternative energy sources. China spends twice as much as the U.S. on clean energy, and critics of U.S. energy policy have claimed that Beijing is "steaming ahead" in the field. Beneath the headline figures, however, a more complex picture emerges, in which China is struggling to translate capital investment into tangible benefits.
To begin with, it is worth noting that the reason for China's superior spending on alternative energy is that its energy needs are far more acute than those of the U.S. and other major economies. China is already facing energy shortfalls and experiencing rapid environmental degradation, with both trends set to accelerate in the coming decade. While rising oil prices and greater awareness of green issues will inevitably shift the U.S. toward cleaner energy, China needs new energy sources immediately if it is to maintain rapid economic growth.
China's energy matrix has traditionally been dominated by coal, which accounts for more than 70 percent of domestic energy supply. Although at present rates of extraction China has around 200 years of reserves in place, coal is a notoriously polluting and inefficient fuel source. It is also expensive to transport, a particular problem given China's huge landmass and the geographical distribution of supply and demand.