Asia+Technology+Comes+Clean+To+Provide+Green+Solutions+-+Jackie+Wittich

Economics IB HL Y1 Jackie Wittich 15 May 2011

Article: Asia Comes Clean To Provide Green Solutions Author: Richard Anderson Date: 9 May 2011 Link: http://www.bbc.co.uk/news/business-13332528


 * Brief Summary:** Asian countries are investing more into environmentally-friendly technologies which will help find alternative sources for energy. China, in particular, is the leading Asian nation that demonstrates this phenomenon by spending twice as much on clean tech than the US. The reason behind this is because the need for renewable energy sources is in high demand due to Asia's rapidly rising population. The rising population will further the problems that are pushing governments to adapt to environmental-friendly technologies, such as energy security, environment degradation, and the need for new industries to create new jobs.


 * Explanation:** Asian countries who are investing more heavily into environmentally-friendly technology, especially China, will be diverting many of their resources used for current technology towards 'clean tech' in the future, which explains why clean tech is becoming a growth industry. This phenomenon creates an opportunity cost, because the tens of billions of dollars spent per year towards clean tech could have been spent on producing existing technologies that are perhaps not environmentally-friendly. By definition, producing these 'existing' technologies will have become the next best choice. The reason behind this is because the demand for renewable energy has heightened as demand for energy itself heightens due to the escalating Asian population. Therefore, the determinant of demand which is causing the demand to increase is the 'number of consumers'. As a result, governments in Asia are hoping that through investments, both within and outside of Asia, they will be to expand factors of production for clean technologies so that the "gap" between supply and demand will become closer.

Figure 1: PPC Graph:

Figure 2: Supply and Demand Graph

Figure 1: The graph illustrates what the two best options that China can invest towards technology as stated in the article: clean technologies and existing technologies (most of which is not clean). Assuming that China is still producing more existing technologies than clean technologies, China will most likely move along the curve towards the 'right' as investments allow it to divert its resources towards clean technology, resulting in an increasing opportunity cost for existing technology.

Figure 2: The graph illustrates how demand for renewable energy has increased in Asia due to the determinant of demand, increasing number of consumers. As seen, the demand curve shifts to the right from D1 to D2 to indicate this increase in demand.

Vocabulary: Demand: The quantity of a good or service that consumers are willing and able to purchase at a give price in a given time period. Determinants of Demand: Non-price factors that determine demand and lead to an actual shift of the demand curve to either the right or the left. Production factors: Resources that allow an economy to produce its output/service (land, labor, capital management) Growth Industry: A sector of the economy experiencing a higher-than-average growth rate. Investments: An asset or item that is will generate greater income or appreciate in the future Opportunity cost: the next best alternative forgone when an economic decision is made

Evaluation: The increase in clean technology in Asia will benefit many because it will result in a cleaner environment, increase the chances of energy security, and create new job opportunities for many as this industry becomes fully developed. However, it will impact the industries which produce existing energy that are perhaps not as green. If clean technology becomes more needed in the future, those who have jobs at non-clean technology companies will lose in this situation. The opportunity cost is therefore not just limited towards shifting resources from one market to another, but also includes the loss of jobs for many employees.

Another problem that Asian governments are currently facing is that there is a huge 'gap' between the demand for renewable energy and the means to supply it. Because the industry for renewable energy has not been fully developed, there is still a 'thirst' for money and more investments. The article states that while "the potential is clearly there, although, for now at least, a little more western investment might be needed to unlock it." I agree with the normative statement because I think that despite the manpower and capabilities that Asia has to allow the clean-tech industry to expand, there are parts of Asia that are not fully developed yet, and therefore will not acquire all the necessary funds if they was looking at investors within their own countries. As a result, I think that Asian countries such as China will need to make more of an effort to attract Western investors.