Game-changing China (2)

In the second instalment of their report on disruptive innovation, David Tyfield, Jin Jun and Tyler Rooker consider seven Chinese case studies and the lessons they hold for policymakers.

In the Chinese game Go, a single unexceptional move may alter the direction of play such that it turns out to switch the game in a player’s favour, no matter the odds against him when it is played. This move is described as poju (破局), which literally means “game-breaking” and can be roughly translated as “game-changing”. The lessons from seven Chinese low-carbon game-changers could catalyse some even bigger changes towards low-carbon systems both in China and beyond. 

The Chinese “game-changers” have each developed a low-carbon innovation that has the potential to make a significant contribution to emissions reductions and the move to a low-carbon society. In five years time, five of these innovations could together be saving up to 66 million tonnes of carbon dioxide per year, while the other two will be important players in markets that could have total savings of 270 million tonnes of carbon dioxide per year, according to our calculations. These are equivalent to the greenhouse-gas emissions of 25 million and 100 million Chinese homes respectively, or 4% and 16% of total Chinese emissions in 2006. 

Introducing the game changers 

Global Environment Institute (GEI) is a Chinese NGO that has set up a full low-carbon agriculture system for poor farmers in the south-western province of Yunnan. There have been many national and international programmes to encourage the use of anaerobic biodigesters by Chinese farmers to produce methane from animal slurry that can then be used for cooking and heating. Many of these projects, however, have failed or have had only temporary effect because the use of the biodigester has not been successfully integrated into the farmers’ everyday practices. GEI has therefore established the necessary institutional mechanisms to make use of biogas socially sustainable, in the process also shifting these farms to organic agriculture with further emissions reductions. 

Himin is one of China’s largest producers of solar-thermal water tanks, a market that is in turn dominated globally by Chinese companies. The business strategy has been to produce low-cost solutions to energy and heating that directly attract customers and so do not depend upon government subsidy. In the process, Himin has transformed the local economy of its home town, Dezhou in Shandong province, eastern China. Over 90% of families now use solar-thermal energy in the area and 30% of the workforce is in industries related to the sector. The real challenge for the future, says chief executive and founderHuang Ming, is whether the company is ready for the continuing growth in demand over the next decades. 

Hangzhou ISAW Technology Corporation (ISAW) has a range of products that build on chief executive Yuan Yijun’s scientific expertise to exploit “psychrometric” principles, regarding the different physical and thermodynamic properties of vapour mixtures, to provide low-cost, relatively low-tech and low-carbon alternatives to a range of processes that are usually extremely energy intensive, such as air-conditioning and solar desalination of salt water. These innovations have attracted the attention of the major Chinese real estate company, Vanke, and Masdar eco-city in the Persian Gulf. 

Lüyuan is a major manufacturer of electric bicycles and was the first Chinese company to develop an e-bike. The e-bike is a hugely popular form of transport in a country in which commuting distances are growing as people move to the burgeoning mega-cities but cars are too expensive and, in any case, face daily gridlock. Some 120 million e-bikes are estimated to be on China’s roads, and Lüyuan is a major player in this market. And with annual savings of about one tonne of carbon dioxide equivalent per year, this adds up to a huge overall saving in emissions, even before systemic effects of discouraging private car ownership are included. 

Pearl Hydrogen is also targeting the e-bike sector, amongst its various products, but using its innovative, but low-cost and simplified, fuel-cell technology. Recognising the extraordinary challenges associated with the familiar goal of a fuel-cell vehicle that could compete with existing car models, chief executive Brian Tian and team have been focusing on novel uses for their fuel cell, including providing back-up power to telecom-base stations needing the guarantee of uninterrupted power supply (UPS). And in collaboration with an Italian partner, they have been busy creating a full energy system for their fuel-cell bicycle that allows production of the hydrogen fuel from high pressure electrolysis of tap water in the user’s home. 

Shengchang Bioenergy is making high-quality pellets from agricultural residues that would otherwise simply be burned in the field, as well as the stoves and boilers to maximise the efficiency of combustion. By offering an attractive substitute for current coal burners, therefore, a double emissions reduction is provided. Furthermore, by positioning pellet factories to service farmers within a short 20 kilometre distance, Shengchang is establishing a model of reliable and locally-sourced energy. 

ZNHK (Beijing Sinen En-Tech) offers a water purification system that allows the high temperature recycling of water in industrial processes. By keeping the water at elevated temperatures, energy that is normally wasted through cooling and reheating the water is saved, while the purity of the filtered water meets the highest national standards. And by allowing for efficient water recycling, the water demands of the industrial processes are also reduced. Cost savings from reduced energy and water use typically allow recovery of the capital expenditure of fitting the equipment within one year. 

Current policy – in China and many other countries – tends to focus on research and development for high-technology “solutions”. The innovations highlighted here instead suggest that waiting for “perfect” technologies would be a mistake. A broader understanding of innovation would also be particularly compatible with the needs of developing countries such as China; these innovations are more appropriate to the Chinese domestic market and that of other developing countries. 

A greater focus on such technologies would help to engage all stakeholders, including the world’s poorest, in low-carbon innovation. It would also overturn the assumption in vital international collaborations that developing countries can only follow the lead of developed nations. In collaboration with its partners, disruptive low-carbon innovation represents an opportunity for China to set the agenda. 

First, policy could create more opportunities for these types of innovation to develop and spread. The diversity of China’s provinces and the relatively devolved government structure could be a significant strength in incubating a wide range of experiments, with successful ones leading to broader support at higher tiers of government – a process that would match the pragmatic approach of the last three decades of economic “reform and opening up”. Current financial support and initiatives establishing “low-carbon zones” could also be opened to these forms of innovation, beyond the familiar focus on hi-tech innovation and research and development (R&D). 

Second, policymakers could provide the right kind of governance, that is, as an enabler rather than director or controller. This will require new ways for government, innovators and stakeholders to interact, regardless of their existing guanxi (connections or relationships). Refocusing of fiscal and other supports from “hi-tech” to “innovative” companies, more broadly defined, could also significantly help many innovative companies that are excluded under current definitions. 

Third, policymakers could also exploit the opportunities of low-carbon innovation policy to improve governance. Traditional modes of governance are seriously challenged by the need for wide social participation in the transition to a low-carbon society. Building on China’s indigenous strengths for low-cost and low-carbon innovation and encouraging widespread participation could help to develop governance in the medium term. 

Finally, policymakers both within and outside China (including the UK) could maximise the opportunities for intra-national and international learning by involving small and medium enterprises such as these in partnerships, rather than just academics and large multinational corporations. This will require establishment of new platforms for both formal and informal interactions on a regular basis that can in turn stimulate substantive international collaborations in innovation, not just R&D projects. By explicitly addressing these issues and developing its existing strengths in low-carbon innovation, China could lead the global low-carbon transition that we need in the next 40 years. 

Part one: disruptive innovation explained

This is a summary of the report “Game changing China: Lessons from China about Disruptive Low-Carbon Innovation”. It was commissioned by the UK’s National Endowment for Science, Technology and the Arts (NESTA) and written by David Tyfield (Lancaster University), Jun Jin (Zhejiang University) and Tyler Rooker (Oxford University). It is summarised and used here with permission. 

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