Part II

Host: China has committed itself to reducing energy consumption per unit of GDP by 40 to 50 percent by the year 2020. And the Chinese central government is working hard to include low-carbon plans in the 12th Five-Year Plan (2011-2015), which shows China's determination, of course, to develop its low-carbon economy. Do you have any low-carbon technology ideas you'd like to introduce to China?

Denom: Canada has an excellent environment for research and development. And for the last ten years or so the government of Canada has been encouraging the so-called ‘clean tech', clean tech industry being those industries who are looking for ways to take less input for the same units of output to reduce the carbon footprints. There is now a large number of interesting new technologies that are now ready for commercialization. We hope to be the pipeline to bring some of the innovations to China. At the same time, as China begins this kind of programs and spend more and more on R&D, we will find innovation here that will be well-adapted to the conditions we find here in China that can then be turned around and export to third countries. That is now our approach to China. It used to be this kind of idea that you ‘innovate in the west and manufacture in the East'. I think that era is coming to an end now. We are in global value chains; innovations will both happen in the East and the West, in Canada and in China. We will share ideas; we will co-develop together; we'll co-invest and take the ideas to our home countries, and we will take them together to the third countries. This will be a new business model going forward, to share what we have discovered in the area of low-carbon cities and other important technologies. As I said, we develop together now.

Host: What challenges and opportunities will the new five-year plan bring to your company? And will you adjust your China strategy accordingly?

Denom: Yes, I think the new Five Year Plan brings more benefits than it does challenges. The benefit I see are more in the area of research and development. It gives us more opportunities to work together with Chinese institutes and Chinese scientists and technical and engineering companies to work on the ideas together. In doing so, it will give us more opportunities to work here and outside China, because China will be an important investor in many projects. And since our company is already an investor, it will be a good opportunity to put our money together to go into investments. The issue of intellectual property rights, I think, will finally get settled with much higher level of innovation here in China, and we'll see much stricter enforcement intellectual property rights, which will encourage many companies who are now hesitant to bring technologies to China. It will be a much richer environment from the technology point of view. On the negative side, it will obviously become more competitive. Chinese companies are already getting very big and very capable, becoming world class competitors. We'll probably see more regulations from the government side. We're already seeing a rising standard of living bringing rising wages, rising taxes, so the whole financial structure, the cost structure of the business, is changing and we have to adapt to that as do the Chinese companies have to adapt to that. I think we're converging toward some middle ground and we will be working off a similar cost base. We can really focus on moving ahead together on what's called the knowledge economy – putting our heads together – to create good things for the world.

Host: What do you think is China's biggest challenge in building low-carbon cities?

Denom: I think the biggest challenge in China is the same as the biggest challenge everywhere, and that's changing people's ideas and behaviors. Low-carbon city is hundreds, it's thousands of little actions that added up all together end up producing carbon. It's a simple thing like the way you manage your waste at home and the way you conserve water; the kind of car you buy and whether you walk or ride your cycle or drive your car to work. It's a long process to change the way people act and think, and, in fact, it takes generations. By training the children young at school, they will come out more attuned; it will be an automatic reaction for them to act in ways that will reduce the carbon footprint. The challenge is sticking with it in the long run, because it is something that will take years and years and years to develop.

Part I Part II