YCW Conversation – The China-US Climate Deal: Game Changer or Disappointment?

 

This is a repost from Young China Watchers.

 

In November 2014, President Xi Jinping and President Obama signed a “historic agreement” between China and the United States to take action on climate change. The agreement, announced at a joint press conference in Beijing, commits the United States to double the speed of its current greenhouse gas emissions reduction trajectory, aiming for 28 percent below 2005 levels by 2025. It also marks the first time China has agreed to cap its own emissions, which are to peak in 2030. But does the agreement go far enough? We asked two experts on China’s sustainability efforts to weigh in and share their perspectives on what the agreement will mean for China, which since 2006 has been the world’s leading contributor of carbon emissions.

 

Wang Tao, Ph.D., is a resident scholar in the Energy and Climate Program at the Carnegie–Tsinghua Center for Global Policy. Dr. Wang contributed to the State of the World 2009 report by the Worldwatch Institute and the United Nations Development Program’s Human Development Report 2007–2008. His research focuses on China’s climate and energy policy, with particular attention to unconventional oil and natural gas, transportation, electric vehicles, and international climate negotiation.

 

Carla Freeman, Ph.D., is Executive Director of the Foreign Policy Institute and Associate Research Professor in the China Studies Program at Johns Hopkins School of Advanced International Studies (SAIS). She has also served as program officer for civil society and community development at The Johnson Foundation and as a political risk analyst for China and other countries. Her ongoing research focuses on China’s efforts toward sustainable development, and Chinese foreign and domestic policy.

 

Wang Tao
 

It is clear that profound economy and energy-related structural changes are imminent in China, but success is not guaranteed, even with the best intentions.

 

Many of the delegates coming back from climate talks in Lima, Peru last December may not be very satisfied. Expectations were very high after the milestone U.S.-China joint announcement of new climate pledges at the Asia-Pacific Economic Cooperation (APEC) summit held in Beijing the previous month. The bitter reality of slow progress for Lima’s climate negotiations disproved the idea that a form of G2 (U.S. and Chinese) leadership is what is needed to pull together a global climate deal. Division remains between the Global North and South, and the path to Paris is set to be bumpy.

 

However, the significance of the first ever U.S.-China joint climate announcement should not be overlooked, and given the particular circumstances in which the two nations’ targets were set, the sincerity of both administrations to fulfill their targets is still credible.

 

On the U.S. side, debates continue over the construction of Keystone XL, a pipeline that would deliver a few million barrels per day of dirty tar sand oil to the United States from Canada. Other important issues include proposed power plant emissions standards and the latest initiative to address methane emissions from industries including shale fracking. The Obama administration is keen to explore more administrative options including executive orders to curb carbon emissions—paths that need no approval from the gridlocked Congress.

 

In very different circumstances, President Xi Jinping also has led a war against pollution in China with a strong focus on tackling severe air pollution and its causes. Improving the structural composition of the energy sector with a greater share of cleaner energy is a critical step to reducing air pollution and mitigating carbon emissions from coal, which constitutes the lion’s share of China’s current primary energy demand. Achieving 20 percent non-fossil energy in the primary energy demand by 2030 does not sound particularly ambitious, but it will be an impossible task if China’s energy demand continues to grow at the pace it has been. The recent collapse in oil prices is not conducive to achieving the changes that are needed. In that light, the Chinese government’s bold decision to raise the oil tax three times since last November deserves some applause.

 

Yet the war cannot be won without substantially reducing coal consumption.

 

The latest air quality report released by the Environment Protection Ministry for 74 key cities in China has shown some slight improvements in 2014 from the apocalyptic air quality seen in 2013. This progress has resulted from massive efforts across China to shut down dirty, small-scale industries and to switch from coal to gas consumption for local heating needs. The urban centers of Beijing, Tianjin, and surrounding Hebei province, however, despite a huge disruption to hundreds of millions of citizens’ daily lives that eventually brought about APEC-Blue sky conditions last November, remain at the bottom of the list, including eight cities out of the ten worst.

 

But some important changes are happening on the ground. In 2014, the Chinese economy continued to slow down. Those provinces that used to top the GDP growth list fueled by rapid expansion in their coal, steel, and other heavy industries, have now sunk to the bottom. China’s coal consumption in 2014 may have already started to fall, although official data have yet to be confirmed. If this is already happening, it would be occurring much earlier than many have expected. Even the amount of power generated by burning coal (measured in kilowatt-hours) fell in 2014—a phenomenon unseen in China for decades. As a result, now one of every four kilowatt-hours in China is generated from non-fossil fuels that produce nearly no carbon emissions. In comparison, this mark equals that of the EU, which leads the world in this category, whereas the United States generates only 13 percent of its power from renewables.

It is clear that profound economy and energy-related structural changes are imminent in China. Growth boosted by heavy industrialization and massive infrastructure construction has trapped many Chinese provinces and sectors in a painful situation plagued by overcapacity and looming debt that they simply cannot keep accumulating as before. The anti-pollution war and carbon emission peak target are very much in line with the direction of upgrading the economy, improving social welfare, and other values that are core interests to President Xi’s administration and its governing stability.

 

But this does not necessarily mean “bon voyage” to China’s energy transition. Setting aside all the expected opposition from vested interest groups, success is not guaranteed, even with the best intentions and promise of economic instruments that are supposedly putting reasonable prices on pollution, such as the EU’s emissions trading scheme (EUETS). So far success remains uncertain: integrating massively upscale, intermittent renewable energy into a national power grid that is too large to be supported by neighbor regions is a major challenge. There are also important loopholes to be closed in China’s targets.

 

In a recent piece with my colleague David Livingston, we found that oil may slip through the cracks of the recent US-China climate announcement. Without its inclusion, the clean energy transitions in both nations could be seriously jeopardized. Increased reliance on unconventional oil in both countries also can prompt unintended consequences. An important example is petroleum coke, a by-product in the bottom of oil barrel after the refinery process. This substance has found its way into the boilers of many heavy industries in China, with a large proportion of such oil coming all the way across the Pacific from the United States. It becomes a dirtier alternative to coal as China tries hard to cut its consumption of the latter.

 

There is certainly no silver bullet for resolving China’s compound environment issues, and the battle of climate change cannot be fought alone by a non-existent G2 either. But the targets announced last November, coupled with persistent efforts and bilateral collaboration to deliver them, will certainly set both nations on very different development paths.

 

Carla Freeman
 

China’s push to reduce emissions is occurring at a time when its economy is slowing to levels that may fail create the economic opportunities needed to satisfy the ambitions of a Chinese population.

 

Even as sparring intensifies between the United States and China over issues of mutual concern in Asia, momentum on the part of the two countries toward cooperation on the climate change front continues to build ahead of the upcoming US-China Strategic and Economic Dialogue (S&ED) this month and visit of Chinese President Xi Jinping to the US in September. Last year in November, the US and China announced a joint agreement to work together to address climate change. As a roadmap for unprecedented bilateral coordination toward negotiations on a new international climate change treaty the agreement was groundbreaking. Disagreement over global climate policy between the two countries, which together generate more than 40 percent of global greenhouse gas (GHG) emissions, has been a significant factor in failure to make headway toward a post-Kyoto climate change accord. The bilateral agreement also added impetus to existing areas of cooperation by the US and China on climate change issues, including CO2 reduction targets, joint activities on carbon sequestration, greener building and smart grid development, among other areas, that could help make a desperately needed dent in the global production of gases that trap heat in the atmosphere.

 

Along with boosting both the prospects for the outcome of COP21 in Paris this year and spurring bilateral cooperation, the US China agreement on climate change appears to have bolstered climate change action by both countries on their respective home fronts. The Obama Administration has used the November agreement to push ahead to fulfill campaign promises to make the US a better actor in global climate change. US climate negotiator Todd Stern submitted Washington’s blueprint for climate action to the United Nations by the late March 2015 deadline—making the US among a select group of countries to do so. The blueprint reinforced the Administration’s commitment to reducing its GHG emissions by at least 26 percent below 2005 levels by 2025 through such steps as freezing the construction of new coal-fired plants; moving ahead with a “”Clean Power Plan,” which requires states to reduce C02 emissions by 30 percent by 2030, largely by forcing cleaner production by power plants – the largest source of GHG production in the US; imposing tighter fuel efficiency standards for cars and trucks; and introducing new regulations on methane from industrial sources.

 

Since last November, China has also built on its existing efforts to reduce the carbon intensity of its economic growth. Among the pledges made in the joint agreement with the US, China promised to peak carbon emissions by 2030 and raise the share of non-fossil fuel sources in its energy mix to 20 percent. It also promised to cap its use of coal at 4.2 billion tons by 2020. In February, the Ministry of Finance (MOF) and Ministry of Industry and Information Technology (MIIT) released an action plan for improving efficiencies in the use of coal, including a target of reducing coal usage by 160 million tons by 2020. China’s efforts to wean itself from coal, which currently accounts for around 68 percent of China’s energy inputs also include a push to implement more market-based policy instruments for low carbon growth. This includes expanding the scope of the pilot carbon trading projects that were launched in seven regions in 2013 to erect a functioning national carbon trading program by 2016. Even as it develops carbon trading, however, Beijing has also made clear that it has not ruled out a tax on carbon as an additional carbon reducing policy lever. Other elements of China’s multipronged carbon reduction effort include policies such as the widespread development of low carbon industrial and residential zones – plans are to expand the former from 55 to 80 this year, for example. Coal is not the only CO2-emitting fuel targeted by Beijing: China’s Ministry of Transport also announced a target of 300,000 “new energy vehicles” by 2020, including 200,000 new energy buses and 100,000 new energy taxis and delivery vehicles; in May, authorities exempted new energy cars and ships from vehicle and vessel tax. This accompanies an increase in governmental financial programs in support of the production of energy efficient vehicles. China also recently committed to expanding the percentage of forest cover on its territory beyond the current 22.6 percent (2012 data).

 

The political challenges to the Obama Administration’s successful implementation of its climate change policies are well known. There is a forceful contingent in the US Congress that denies the existence of climate change, with many other lawmakers opposed to curbing carbon emissions on economic grounds. Fifteen energy-producing states have already taken legal action challenging the EPA’s regulatory power to enforce the Clean Power Plan.

 

Despite the power of its central government, China also faces a difficult road to achieving its climate goals—there are numerous challenges, but the following exemplify the range of difficulties confronting it. Arguably, foremost among these is the so-called policy “implementation gap:” an endemic weakness in the enforcement of national environmental guidelines and regulations at the local level in China. Historically, local officials have been evaluated foremost on their achievement of local growth targets, an incentive structure that reduced the attention given to the environmental costs of growth by local authorities. In addition, the preference for government control over information in China, reinforced by government restrictions on media and non-governmental organizations, means that data vital to verification and monitoring of both firm behavior and government performance in areas of environmental management, such as emissions regulation, is generally less available and accessible. A further challenge is that China’s push to reduce emissions is occurring at a time when its economy is slowing to levels that may fail create the economic opportunities needed to satisfy the ambitions of a Chinese population. Slower growth may mean lower emissions but also may entice authorities to revert to the energy-intensive investment that has helped keep the Chinese economy roaring, a particularly strong temptation amid pressure from the existing political and business interests that have benefited from this stimulus recipe. Along with this, coal prices in China have fallen to a six-year low, a trend that appears likely to continue. Many of the country’s powerful coal-producing companies are operating at a loss, with consequences for local fiscal revenue of coal-producing regions, with the result that Beijing is subject to acute “lobbying” from these sources to reverse its plans to reduce the country’s use of coal in energy production.

 

These challenges might ultimately prove insurmountable, but China’s leaders have demonstrated they are mustering the political will to overcome them. In May, for example, China’s State Council released new guidelines, using the framework of “eco-civilization,” that mark a step toward strengthening the role of environmental performance metrics in the performance assessments of government officials—in Hebei province, environmental performance already reportedly accounts for 20 percent of the performance score for government workers. This is a move aimed at tackling air pollution – an increasingly hot button issue in China where chronic haze is now recognized as a serious threat to health— but efforts to reduce PM 2.5 should complement carbon emissions reductions as well. In addition, despite slowing growth, Chinese leaders have stuck with their economic reform agenda to date, allocating stimulus spending to areas like social welfare, for example. In addition, while in April the government took steps to offset the losses of its coal mining companies, given the government’s control over energy prices for end users, this is not incompatible with reforms to the power sector. Some speculate that it could enable grid companies to “blend in” higher cost renewables.

 

These examples offer no assurance that China will meet its objectives in the climate arena, but they do show that China’s agreement to work with the US to reduce its impact on changes to the global climate stems from a genuine commitment to taking meaningful steps to do so. China is expected to file its own climate plan with the UN this month. While it is unlikely that China will present goals other than those already announced in its agreement with the US, reports from the meeting on global climate change now underway in Bonn suggest that the US-China accord has dampened the mordancy characteristic of past interactions among climate negotiators, replacing it with an atmosphere far more conducive to constructive cooperation.

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The Paul H. Nitze School of Advanced International Studies (SAIS)
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