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9.24.99  
China's Environmental Crisis of 2012 Spurs an Entrepreneurial Japan
Excerpts from The Long Boom: A Vision for the Coming Age of Prosperity

The Long Boom One of the greatest challenges in the early part of the 21st century was the environmental consequence of Chinese industrialization. The Chinese were trying to bring a billion people to a much higher standard of living at a very rapid pace. They were trying to accomplish in twenty years what had taken the United States a hundred.

Unfortunately, the Chinese were adamant about using old technology and a local energy source -- dirty coal. So the air quality over China and beyond was rapidly deteriorating. For years, the Chinese obstinately stuck to their original economic plans until a series of disasters compelled China to transform its economic development strategy from low technology to high technology.

The Chinese public could tolerate factory accidents, massive chemical leaks, and toxic air as long as they seemed to affect mostly adults. When thousands of children began dying of respiratory diseases and strange cancers, the Chinese started to radically rethink their approach. The Shanghai Winter in 2012 was the turning point. The black pall of coal soot had hung over Shanghai for a decade. But late in January 2012, a dense, warm inversion of air moved over the city. Over several days, the air got blacker. And the inversion pushed the ceiling of soot lower. People began to die.

At first, the casualties were the very old and very ill. Then it got people with chronic respiratory illnesses like asthma. Then small children, who were gasping to death right in their parents' arms. A state of emergency was declared. The most vulnerable people were evacuated, and healthier ones ordered off all the roads. All coal-generated power or heat sources were shut down.

The only solution appeared to be a massive shift to electrical power from anything but coal. However, the electricity distribution system of Shanghai could not carry the proposed surge in use. In addition, the utilities would need months if not years to retool for cleaner energy. The world community came to the rescue. People in the energy field knew there was only one answer to this problem: fuel cells.

Western companies like Siemens, DaimlerChrysler, and Asea Brown Boveri had inventories of hundreds of thousands of fuel cells that had been in production around the world. They said they could quickly retrofit fuel cells headed for vehicles to become stationary ones, and dramatically pump up overall production. Western governments airlifted the fuel cells into Shanghai, and within a matter of days, thousands of fuel cells had arrived in Shanghai from all over the world.

In every neighborhood and every major building, a powerful fuel cell was set up that used one of various fuel sources, from imported pure hydrogen canisters to regular gasoline. Electric heaters were sold all over Shanghai to heat homes. Within a week, the coal pall began to dissipate. After two weeks, a heavy storm blew through. Several more weeks of rain later, there were blue skies over Shanghai for the first time in years.

More than 200,000 had died. Many more had suffered irreparable lung damage.

The Shanghai Winter led to an unequivocal commitment to transform the environment of China, to accelerate the transition to new technology. The Chinese people and the world community were now of one mind.

After the Shanghai Winter, the Chinese put a radical proposal on the table. What became known as the Great Environmental Deal started with the Chinese offer to abandon all old polluting technologies and change as quickly as possible to the cleanest ones available. They let go of their nationalistic fear of Western intervention and tight control of energy matters.

The Westerners said they were willing to transfer the technology and have their companies set up the infrastructure, but they needed the freedom to operate their businesses and earn a fair return on their investments. China accepted the terms, and the tech rush began. Whole plants that were being built for vehicles with internal combustion engines switched in midstream to producing top-of-the-line fuel cells. Once the Chinese took the leap, other developing countries like India opened themselves up to the same deal.

Developed nations become more aggressive in making the high-tech transition in their own economies. The United States had been particularly hamstrung by powerful domestic constituencies, such as the coal industry. The really long-term solution to environmental degradation came with the adoption of nanotechnology. By around 2015, the science of nanoscale engineering was beginning to advance very rapidly. Both computing power and new kinds of physical tools were making it possible to operate on increasingly smaller scales at the level of molecules and individual atoms. A number of the breakthroughs came in Asia, especially in Taiwan and Singapore and, most of all, Japan.

Japan had recovered from its economic stupor after the turn of the century and had moved away from traditional manufacturing and into an economy based on smaller firms providing higher-value services to enterprises throughout Asia. The Japanese had succeeded in the manufacturing era because they had a long tradition of high quality production and terrific design. They had huge numbers of talented engineers and a commitment to long-range scientific research. All of these assets came together to make Japan a nanotech power.

Nanotechnology was one place where Japanese government-funded R&D was paying off handsomely. By 2015, the Japanese had learned the U.S. venture capital model, which stimulated the creation of many new companies.

One key beneficiary was a company that came to be known as Nippon Nano. It acquired rights to commercialize software ideas coming out of the government-funded scientific research, and it became an integrated distributor of software for the nanotech industry. Nanoscale devices achieved staggering efficiency but were extremely difficult to fabricate. Nanotechnology, more than anything, brought pollution levels down to the minimal degree that we experience now in 2050.

Peter Schwartz is the founder and chairman of the Global Business Network, a consulting firm in the San Francisco area, and the author of The Art of the Long View.

Peter Leyden is a journalist who has covered technology, economics, and politics since the mid-1980s. He was formerly managing editor of Wired magazine and a special correspondent in Asia for Newsweek.

Joel Hyatt teaches entrepreneurship at Stanford University's Graduate School of Business. He was co-founder and senior partner of Hyatt Legal Services, and founder and CEO of Hyatt Legal Plans.

Reprinted with permission from The Long Boom: A Vision for the Coming of the Age of Prosperity
By Peter Schwartz, Peter Leyden and Joel Hyatt
Copyright 1999 by Peter Schwartz, Peter Leyden and Joel Hyatt
Published by Perseus Books, a member of the Perseus Book Group
Adapted by permission of the authors and Perseus Books
May not be modified, reproduced, republished, uploaded, posted, transmitted, or distributed in any manner.
Available beginning October, 1999, from bookstores nationwide, online retailers, or by calling 800 386-5656.

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