China and US poised to break new ground in green technology partnership

Barack Obama said the US and China will break new ground in their partnership on clean energy technology during a summit in Beijing tomorrow that will also seek to find a new way forward for global climate talks.

A day after backing a delay in the international negotiating process towards a deal in Copenhagen, the US president told a townhall meeting in Shanghai that he and his Chinese counterpart Hu Jintao would focus on ways to reduce their carbon footprints.

As the world's two biggest emitters expand their economies and populations, he said they needed a way to minimise the impact of increased energy use. "Both countries have a great interest in finding new strategies to combat climate change," he said.

During the summit, the two nations will announce a new energy cooperation programme, unveil closer collaboration on "cleaner coal" technology and smart grids and establish a joint research centre.

Sources close to the preparations say a memorandum of understanding will be signed in the Great Hall of the People, under which the US Trade Development Agency will fund an office in Beijing to assist US firms to secure government financing for new energy projects.

A group of companies led by Peabody, one of the biggest US coal firms, will receive seed money from the US government money to establish a demonstration facility in China that shows off its scrubbing, washing and emission-reduction technology, the source says. The firm may also unveil a deepening of its involvement in China's GreenGen project to pioneer cleaner and more efficient coal burning technology.

General Electric will sign a deal with Shenhua, China's biggest coal company, to use the former's coal gasification technology for increased energy efficiency and carbon capture and storage.

But the message of cooperation between the world's two biggest emitters looks likely to be diluted by the competitive instincts of businesses and politicians who are reluctant to share funding and technology with a rival.

US sources say no public money will be channelled to Chinese firms or projects because the country is seen as a rival. At the start of his Asia tour, Obama highlighted this point by describing China as a "vital partner, as well as a competitor."

The potential for friction has been evident in backroom negotiations over the funding of a joint clean energy research centre. China is thought to have asked the US to provide a larger share of the costs to reflect its greater wealth and historical responsibility for the carbon in the atmosphere. But the US wanted a 50-50 split. The final amount of its investment in the new centre, which is expected to be unveiled by energy secretary Steven Chu tomorrow, will be in the region of $18m, according to a source familiar with the deal. US officials have recently been trying to link China's Qinghua University, MIT in the US, and Cambridge in the UK.

The two nations also talk a different language when it comes to the transfer of technology from west to east, a key concern for China. On Beijing's wishlist are salt-resistant materials for offshore windfarms, hi-tech components for large wind turbines, smart-grid control systems and more efficient pumps for nuclear reactors.

But the US side prefers to talk in terms of "technology cooperation", suggesting more of a two-way street. Observers say far more could have been achieved with a smoother transition between the Bush and Obama administrations and a greater level of trust.

"There are some areas where China is more advanced, but in key areas, it needs US technology," said Yang Fuqiang, head of climate solutions at the Worldwide Fund for Nature. "The difficulty is how to compensate the private sector and how to remove trade restrictions on items that the US does not want to give to China because of its fears a loss of competitive advantage."

Claims that China needs US technology are disputed. "There is nothing out there that China does not have access to if it is willing to pay for it. This is more about money," said Charlie McElwee, a Shanghai-based American lawyer specialising in environmental issues. "On carbon capture and storage, China is among the world leaders if not the leader."

Business optimism about a potential low-carbon market worth $1 trillion in China has been tempered by concerns about trade tensions. US solar panel manufacturers have accused Chinese rivals, such as Suntech, of dumping underpriced photovoltaic panels in the US.

Such concerns have slowed progress. But industry insiders say tomorrow's summit could smooth future collaboration.