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US-China climate deal: Moving toward a clean innovation economy

November 13, 2014

It’s safe to say you didn’t see this one coming.

Not just one major deal between the world’s economic superpowers, but two. Few, if any, were expecting a two-for-one double deal on climate change and trade tariffs between the U.S. and China during this week’s Asia-Pacific Economic Cooperation (APEC) summit in Beijing. That seemed outside the realm of possibility, especially given the 2014 midterm election shellacking Part Deux President Obama took at the polls last week. The last thing any seasoned political observer would expect is that a U.S. president fresh from the worst midterm beating since the Truman presidency would have any leverage heading into heated huddles with world leaders.

But it did happen. President Obama and Chinese President Xi Jinping not only agreed to pursue what is described as a historic reduction in carbon emissions from the planet’s leading economies, but they also managed the biggest slash on import tariffs in 20 years. To combat climate change, the U.S. would cut emissions by 26-28 percent through 2025; China would make clean energy sources 20 percent of its overall energy palette by 2030. On trade, both sides agreed to cut tariffs on technology, including $1 trillion in global IT sales along with the elimination of 200 tariff lines.

The big question is what does this do for the innovation sector?

Industry analysts and geopolitical forecasters have been looking very closely at the role of technology in reversing the impact of climate change. “The solution rests in replacing the hydrocarbon economy,” notes Stratfor founder and chief intelligence officer George Friedman during a 2009 interview with the New Statesman about his book The Next 100 Years. “[A] likely solution—space based solar energy generation. I expect that to emerge as a new energy source because it can have a massive impact, it requires no intellectual breakthroughs, and it suits the interests of the United States Department of Defense. Conservation will not happen in my view. New technology will.”

The timing of a deal between the two global competitors is something of a surprise given the geopolitical climate and recent events in the U.S. political space. But that nature of that deal (in which two agreements are chiseled out simultaneously) helps explain the progress since both issues are in direct correlation to the other. In technology, concerned advocates and innovators seeking a reverse in climate change impacts find their solution. In fair, reduced-tariff trade, innovators presumably find easier access to technologies and greater pathways to collaboration. 

Back in 2009, Forrester’s Christoper Mines had jumped on to the forecasting bandwagon of experts who were predicting that businesses would be investing heavily in enterprise-wide carbon and energy management systems. “A new liability is coming onto the collective balance sheet of companies around the world: carbon,” wrote Mines. “In the context of increasing awareness of the business and societal risks of climate change, corporate carbon emissions (and the energy consumption that creates them) are being scrutinized as a crucial indicator of business performance. We expect that ECEM will be a mainstream element of corporate software backbones over the next five years.”

As Gartner analyst Chet Geschickter points out in a July Hype Cycle for Emerging Energy Technologies, utility sector CIOs are already focused on the latest disruptive trends in what’s being dubbed “cleantech” these days. While such technology will have a dramatic impact on “core business processes within utilities,” it still remains obvious that these “technologies … affect [greenhouse] reductions directly by providing alternatives to conventional generation including fossil fuel combustion, nuclear and hydroelectric; or indirectly by aiding in the assimilation and adoption of alternative energy. Some technologies contribute indirectly by improving the efficiency and operation of the electric grid.”

The global marketplace is already moving in this direction as well. A laser focus on climate change is not just about environmentalists saving trees; businesses have found high demand for these technologies on a number of levels. Consumers not only want to feel as if they are contributing to the safety of their planet, but they also believe in the long-term cost-saving function of low-emission technology. Businesses also reduce operation costs and shield themselves from regulatory fines by embracing anti-GHG technology. As that happens, CIOs will be pressed to find service providers with talent and skill sets best suited to developing, implementing and maintaining green technology. The evolving Internet of Things will rely increasingly on these trends. Hence, the twin U.S.-China deals appear tailor-made for these recent trends.

Charles Ellison is a senior analyst relations strategist for TEKsystems. He keeps close tabs on changes and public policy shaping the innovation space. He is also a former congressional staffer, senior aide to state and local elected officials and an expert advocacy strategist. You can reach him with questions and comments @twoARguys via Twitter.

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