10/07/2010 01:32 pm ET | Updated May 25, 2011

India Vs. China: Which Low-Carbon Development Model Will Win?

For the first time, India's current GDP growth rate exceeds China's. The big concern in India is not whether the growth will continue but what the impact of too-rapid growth might be on food prices (in the short term) and on the environment (longer term). India's government, like China's, is serious about finding a lower-carbon pathway -- however reluctant they may be to have a binding international agreement tie their hands going forward.

But that's where the similarities end. India emits far less carbon, both overall and per capita, than China does. It sees itself as a nation that is poor in carbon fuels. Indian power companies are anxious about a world in which massive reliance on fossil fuels forces them to compete with the Chinese on international oil and coal markets.

India isn't yet locked in to carbon-based growth. Gasoline and diesel are heavily taxed in India -- and the government just placed a new levy on coal. Renewables already provide a larger percentage of power in India  than in the U.S. or in China. Seventy percent of the buildings that India will have in 30 years haven't been built yet -- they can be as wasteful or as fuel-efficient as this generation of Indians chooses to make them. And the government has put together an ambitious energy-efficiency program.

Unlike China, where massive state subsidies flow to companies that are innovating with clean-technology products, in the Indian government's emphasis is on subsidizing poor consumers, including those who rely on kerosene for lighting and cooking. Farmers get electricity for free -- but for only a few hours per day. The electrical grid has not yet been built out, and hundreds of thousands of Indian villages have no electricity at all. The cost of extending wires to villages is enormous -- while generating electricity from coal may cost $.10/kwh, every additional kilometer of village grid connection adds $.02 kwh. For any village more than a few kilometers from the grid, then, distributed solar (currently running about $.24/kwh) is cheaper than conventional power. Grid parity is here for much of this country, and the government has an ambitious, 20-gigawatt solar goal.

So the conventional American narrative, in which India and China are lumped together as our competitive manufacturing threats and as looming global-warming heavies, is fundamentally flawed. (The U.S. does not, for example, run a major trade deficit with India, in spite of President Obama's current politicking against outsourcing to Bangalore.)

India's strategic approach is also very different from China's. The emphasis is much more on building globally competitive companies than on government-financed state corporations -- and Indians worry that their hugely decentralized and democratic society won't be able to move as quickly as the behemoth to their north can. Ambitious government announcements are routinely scorned as unlikely to be implemented in practice.

The competition between these two nations for low-carbon preeminence is critical for the climate. But it's also critical because it will influence which development model that the rest of the world is likely to embrace -- top-down or bottom-up. Since the U.S. has far more in common with the Indian model than with the Chinese model, our two nations really ought to collaborate more closely. If bottom-up India can't compete with top-down China, then the bottom-up American economy is likely to be in big trouble.