October 5, 2015

U.S.-China Climate Change Announcement: Something Old, Something New

Stephen Eule

President Barack Obama and Chinese President Xi Jinping recently issued a joint announcement on climate change. Anyone expecting to find something new in this latest release will come away sorely disappointed. Both leaders plowed the same ground in previous statements and in the U.S. and China Intended Nationally Determined  Contributions (INDC).

Press reports have focused on China’s plan to launch an emissions trading system covering certain industrial sectors and to favor low-carbon sources in the dispatch of electricity to the grid.

But China’s overall emissions commitments haven’t changed, nor are they likely to do so.  We’ve already analyzed China’s INDC and found that the country’s three energy related goals—peaking carbon dioxide emissions “around” 2030, decreasing emissions intensity (i.e., CO2 emissions per dollar of GDP) 60% to 65% from 2005 to 2030, and increasing the share of non-fossil fuels in energy consumption to “around” 20% by 2030—represent little more than business as usual. In other words, the Chinese have committed to doing what they are doing already. “Enhanced action” this is not.

After examining China’s INDC, the experts at Bloomberg New Energy Finance came to the same conclusion. They found that meeting China’s emissions goal would require “no abatement” when compared to BNEF’s business–as–usual emission scenario, leading it to conclude that “the Chinese target implies a low level of ambition.”

Why does any of this matter? Because the whole point of an intensity goal is to slow emissions growth so that future emissions, although they may be higher in absolute terms, are still lower than they would be without the intensity goal. That’s clearly not what China is proposing. While China’s announcement that it will eventually follow through on its long-standing pledge to set up a cap and trade scheme has burnished its climate creds, it’s fair to ask: If the cap doesn’t actually lower emissions, then what’s the point? It’s action for action’s sake.

At the risk of repeating ourselves, we’ll note again that these facts do not imply criticism of China’s commitment, which sensibly prioritizes national interests and economic development—something we’re seeing from other large developing economies, too. But the fact that China is celebrated for committing to an inconsequential goal highlights how reality and perception have diverged so completely in the international climate change negotiations.

What’s more of a mystery is why the administration is content to throw away the United States’ energy edge in favor of an agreement that will put us at a competitive disadvantage for no discernible environmental impact. In fact, when other nations choose not to impose carbon restrictions as stringent as those in the U.S., we will be likely to see “carbon leakage,” where emissions are not reduced at all, and instead simply moved (along with the jobs that come with them) to our global competitors.

In addition to the cap and trade pledge, the announcement also contains a new financial commitment from China. The country has agreed to match the Obama Administration’s Green Climate Fund (GCF) pledge of about $3 billion by promising to send an equivalent amount not to the GCF but to the South-South Cooperation Fund on Climate Change it announced last year at the climate talks in Lima, Peru. China also launched the Asia Infrastructure Investment Bank last June, another finance initiative boasting 50 prospective founding members (a list that doesn’t include the United States). Both of these funds have been viewed as Chinese exercising its “soft power” by making finance available to developing countries.

These funds also serve another purpose. China is a member of the Group of 77 developing countries, the biggest bloc of countries in the climate change discussions that today represents many more that its original 77 members. As China‘s economy and emissions have raced ahead, however, it’s found itself taking more and more positions seemingly at odds with many of its poorer G77 partners. Both of these financial institutions will assist China in papering over emerging cracks and making sure G77 pressure is directed in the right direction—towards developed countries. You have to admit, the Chinese know how the game is played.

As to the larger issue of whether this announcement in any way increases the odds of a successful Paris agreement, as many have claimed, it’s important to note that countries already have invested a lot of political capital to ensure a successful outcome. Nevertheless, the fact remains that there are many outstanding issues that the U.S.-China announcement don’t touch on, but which individually or collectively could complicate the negotiations.

For example: will the agreement have “legal force,” and how will it be implemented? Where will developed countries come up with $100 billion in promised climate finance by 2020? Will developed countries be on the hook for compensating developing countries for the “loss and damages” associated with severe weather? Will intellectual property rights be weakened to pave the way for technology transfer?

If you’re looking for guidance on these issues, look somewhere other than the U.S.–China announcement.