China now wants to lead the world in clean-energy vehicles

Earlier this month, China's government announced another bold move to ease traffic congestion and reduce carbon emissions: the authorities want 60 per cent of all motor-vehicle use in towns and cities to be public transportation, and the government in Beijing is urging regional governments to use more zero-emission and alternative-energy vehicles.

China continues to be the top market for gas-powered vehicles, but it is increasingly clear that its government intends to lead the world in clean-energy vehicles. The Renault-Nissan Alliance will support China's ambition.

Nissan entered China in 2003, when Chinese consumers bought 4.5 million cars. Sceptics said that Nissan was "late to the game" in China: the Chinese car market was supposedly fully saturated. Back then, the world's top automotive market was the United States, with Americans buying more than 16 million cars and trucks.

What a difference a decade makes: In 2012, Chinese consumers purchased an estimated 18 million new cars, a 300 per cent increase. Growth in the Chinese auto sector has silenced the sceptics and exceeded even the most bullish expectations of third-party observers.

Now the world's biggest car market has declared a new goal: China wants to have the largest number of clean cars. In April, the State Council, China's highest administrative authority, unveiled targets aimed at reducing the carbon footprint of the country's cars. The State Council wants to produce 500,000 new-energy vehicles - including electric vehicles (EV), plug-in hybrid electric vehicles, and fuel-cell vehicles - by 2015, and is aiming for a production capacity of two million EVS per year by 2020. Ultimately, China wants a total of five million EVS on the country's roads, powered by an estimated 10,000 charging stations, by 2020.

As in 2003, some observers say that China's goals are overly ambitious, because the cleancar market will not grow so quickly. But China may silence the sceptics once again. In 2011, the Chinese government earmarked $1.5 billion annually for the industry for the next 10 years, hoping to transform the country into one of the leading producers of zero-emission vehicles. While China's aim is to promote domestically produced vehicles, all of the world's major car manufacturers are working together - and with local partners - to roll out their own EV models and gain leadership in the Chinese market.

China has no choice but to move toward zero-emission cars. The country relies on coal for about 70 per cent of its energy needs. In 2011, China's energy consumption climbed 9.7 per cent, reaching 3.7 billion metric tonnes of standard coal equivalent - the fastest growth rate since 2007.

China is not only the world's largest consumer of coal, but also is second only to the US in oil imports - more than five million barrels of oil per day in 2011, from Saudi Arabia, Angola, Iran, Russia, and other producers. Reliance on coal and oil has made China the world's largest source of carbon emissions, and has eroded the quality of life for Chinese citizens.

Indeed, 16 of the world's 20 worst cities for air pollution are in China. In 2012, the China Medical Association warned that air pollution could become the country's biggest health threat, owing to rising rates of lung cancer and cardiovascular disease - particularly in the country's megacities.

As a result, the Chinese government is taking bold steps to move beyond fossil fuels. In August, China committed about $290 billion to clean-energy projects.The authorities want renewable energy to account for one-fifth of its total energy demand by 2015. China can now generate 6.2 gigawatts of solar power and 68.3 gigawatts of wind power - the equivalent of 50 coal-fired power plants - and has nine of the world's top 10 solar-energy companies, which together produce 65 per cent of the world's photovoltaic panels.

At the same time, China is implementing stricter fuel-efficiency standards than the United States and many other countries. For example, the authorities have imposed a 12 per cent tax on gas-guzzlers.

Moreover, China offers incentives of about $8,000 for the purchase of EVS. This is one of the highest such subsidies in the world, attesting to the authorities' seriousness about encouraging consumers and fleet owners to switch. China is also replacing government fleets with EVS. The city of Shenzhen, in China's Pearl River Valley, has 2,350 EVS in its municipal fleet.

China is encouraging the use of zero-emission EVS because they are "energy agnostic" - that is, they can consume any kind of fuel that is already in the national grid's mix, including the growing amount of renewable energy. So, as China rapidly develops solar power, China's EVS will become, in essence, solar cars - and wind and hydro cars as those energy sources increase as well.

When electric cars penetrate the market, they will significantly reduce urban smog. The State Council estimates that achieving the targets for EVS will lower China's greenhousegas emissions by 19 per cent while reducing the country's reliance on imported oil - both of which are key national policy goals.

China is investing in its future by challenging both its citizens and the auto industry to evolve beyond the internal combustible engine. The Renault-Nissan Alliance has accepted that challenge, and looks forward to helping the world's biggest car market become one of the cleanest car markets as well.

Carlos Ghosn is Chairman and CEO of the Renault-Nissan Alliance » Project Syndicate