The Wall Street Journal-20080130-Politics - Economics- Climate-Control Talks to Address Barriers to Green-Technology Profit

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Politics & Economics: Climate-Control Talks to Address Barriers to Green-Technology Profit

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After years of debate over who will foot the bill to curb greenhouse-gas emissions, world leaders are now taking up a new matter: Who will profit.

Diplomats from some of the world's biggest economies will gather in Hawaii today for a new round of talks aimed at hashing out an international agreement to succeed the Kyoto Protocol, which sets caps on greenhouse-gas emissions but expires in 2012. The meeting isn't expected to produce any major breakthrough.

But it comes as the U.S. and other industrialized countries are pushing developing nations to scrap tariffs and other trade barriers they now impose on clean-energy technology -- a push backed by Western companies such as General Electric Co., which see sales of those goods in the developing world as a hot business.

Deploying existing clean-energy technologies more broadly throughout the developing world is widely seen as important to slowing the growth in emissions of carbon dioxide and other greenhouse gases. But getting developing countries to drop the tariffs won't be easy. China and India have their own fast-growing companies selling clean technologies such as wind turbines and solar panels around the world. Those companies often want to continue to be protected by tariffs.

Big money is at stake. Globally, exports in the environmental- technology sector, including such machinery as wind turbines, solar panels and biomass boilers, have grown at an average annual rate of 15% since 2000, the U.S. government says.

The latest sign of U.S. interest in expanding that market came in President Bush's State of the Union speech Monday night. He said the U.S. would invest in a global "clean technology" fund to speed the deployment of new technologies in developing countries such as China and India. The planned investment of $2 billion over three years is meant to boost market confidence in the technology and spur more private-sector investment.

The president's proposal followed Japanese Prime Minister Yasuo Fukuda's announcement last week that Japan will spend $10 billion over the next five years to help developing countries curb their emissions. Japan wants to boost sales in the developing world of energy- efficiency technologies it cranks out at home.

An even clearer bid by industrialized countries for a toehold in developing-world clean-energy markets came in late November, when the U.S. and EU jointly proposed that members of the World Trade Organization remove tariffs and other international trade barriers on a set of technologies identified as particularly important in fighting global warming. The applied tariffs for these goods average about 7% in China and 13% in India, the U.S. government says.

"Lots of companies" in the U.S. think there is significant money to be made if those tariffs are lowered, says James Connaughton, chairman of the White House Council on Environmental Quality. Many of these technologies are common in the industrialized world. That means profit margins can be relatively low -- and that tariffs can be deal killers, he says.

GE stands to gain from an end to clean-technology tariffs. The company sold $15 billion in what it calls clean technologies last year -- about 9% of GE's total sales -- and sales of these technologies are growing faster than others at GE, says Peter O'Toole, a company spokesman. GE has been giving Bush administration officials "regular updates" about how lowering tariffs in developing countries would help GE's business, he says. "If we could get a little more firepower in our portfolio, that's obviously very good news for GE."

Caterpillar Inc., the heavy-equipment maker, builds power generators that can run on methane. It wanted to sell them to a Chinese company to produce electricity from a mine in China, says Mr. Connaughton. Methane is a greenhouse gas far more potent than carbon dioxide, which is more common. Capturing methane to power a generator amounts to a win: The generator burns the methane and emits less-potent carbon dioxide into the air.

Caterpillar, though, faced a Chinese tariff on the generator sales that was "prohibitive," Mr. Connaughton says. The company negotiated down the tariff and, aided by some low-cost financing, the sale went through. Bringing down tariffs to speed up the flow of clean technology to the developing world is "the engine by which you accomplish any meaningful objectives on climate change," he says. A Caterpillar spokesman confirmed the sale of the generators but said he wasn't familiar with the details of any tariff negotiations.