Chinas Copenhagen Commitments: A Workable Solution

“China should at the very least be expected to commit to a cap on its CO2e emissions in 2030 at 7.8 Gigatons” (15% above 2005 levels) — so says guest poster Charlie McElwee. This is based on a new McKinsey study McElwee discusses. Needless to say, the U.S. must commit to deep reductions by 2030–42% below 2005 levels (a la Waxman-Markey and USCAP) is a reasonable figure. But the notion offered by some — “Binding targets for the developing nations is [sic] out of the question” — is the road to Hell and High Water for the Chinese, Americans, and the rest of humanity. McElwee is an international energy & environmental lawyer and Professor at Shanghai Jiao Tong University’s School of Law who writes the blog China Environmental Law.

In less than nine months the world gathers in Copenhagen to forge a post-Kyoto climate change agreement. Without a substantial commitment from China to address its CO2 emissions, whatever the rest of the world does will be swamped by China’s carbon juggernaut. Can the China carbon engine be retooled to save us from catastrophic climate change?

Yes, says a new McKinsey study “China’s green revolution.” It crunches the numbers and provides a framework for a real “green revolution” in China. The study concludes that by aggressively utilizing a suite of technologies that are or are likely to be commercially available no later than 2030, China can limit the growth of its annual carbon emissions to 15% or “just” 1 additional Gigaton over 2005 levels by 2030 (6.8 Gigatons of CO2e in 2005 vs. 7.8 Gigatons of CO2e in 2030).

The best news from the study is that the costs of the efforts needed are well within China’s means and will certainly not cripple its economy, strand millions in poverty, or leave the Chinese people “in the dark” without electricity as Yu Qingtai, China’s climate ambassador, rather melodramatically put it recently. The “abatement scenario” requires average annual incremental capital of US$46 billion (the McKinsey study uses Euros to express cost which have been converted to US dollars here) from 2011 to 2015. From 2016–2020, US$192 billion per year will be required. The true “cost” is actually considerably less since McKinsey reports that approximately one-third of the required capital will earn positive economic returns. Moreover, the collateral benefits of expending these sums such as cleaner air and water, lower health care costs, and decreased climate change adaptation expenditures, have not been quantified. The capital needs increase in the later years, but China’s economy will have grown significantly by then.

To put these figures into perspective, US$46 billion is about 8% of China’s economic stimulus package, or about 60% of what China has allocated to environmental improvement efforts in that stimulus plan. It is also roughly equal to what China spent on Olympic-related construction. The McKinsey “abatement” scenario appears technically and financially feasible.

Unless another practical scenario that achieves the same or better results is proposed quickly, China should at the very least be expected to commit to a cap on its CO2e emissions in 2030 at 7.8 Gigatons. Of course, more would be better if China truly wants to assume a global leadership position. In contrast to a Chinese commitment to simply slow the growth of its emissions, under the recently released Waxman-Markey bill, US emissions in 2030 should be 42% below 2005 levels, representing a reduction of about 3 Gigatons of CO2e. Thus, China’s commitment, in accordance with the “common, but differentiated” principle, would be significantly less stringent than that which may be adopted by the US.

What are the chances of achieving a deal on these terms with China? The likelihood of Chinese acceptance of this proposal is probably no better than 50%. There has been no public suggestion that Chinese leaders have contemplated a climate change commitment of the magnitude proposed by McKinsey. They have shown no flexibility in moving off of their “no binding commitments” stance. Even given the abatement scenario’s technical and financial feasibility, it will be a hard and slow sell internally in China. China’s “government by consensus” would require that the plan be explained and vetted by numerous stakeholders many of whom will have their own agendas and claims upon the money which will need to be allocated to carbon reduction efforts.

If the proposal is to have any chance of success, the US must, of course, lead with aggressive efforts of its own. The proposal must receive a strong push from the highest levels of the US government, and be the focus of concerted negotiations with China between now and Copenhagen, and perhaps beyond into 2010. It should be presented to China as an opportunity for both countries to reach an agreement that will set the stage for a successful outcome at Copenhagen. There are many avenues for jointly beneficial projects between China and the US in the abatement scenario, and a strong commitment from the US and NGOs to work cooperatively with China to achieve (and even outperform) the 2030 goal should be provided.

There are a number of other issues which will need to be resolved to obtain a deal: the amount of developed country financial aid, technology transfers, pre-2030 milestones, and post-2030 reductions. These issues will be complex, but they can not be meaningfully discussed until it is clear how much China’s carbon reduction efforts (at least in the mid-term) will cost, and what the technologies are that China will need to have transferred. A strong point of the McKinsey study is that it provides guidance on both these issues.

Subtle pressure will also be required. Some have expressed dismay at Secretary Chu’s recent comments regarding the imposition of tariffs upon countries that fail to mandate acceptable greenhouse gas emission limitations, but it was fairly obvious that the Secretary was saying tariffs were a last resort, and would not be imposed upon a country that was part of deal agreed to by the US at Copenhagen. Having made the point, it is probably best if administration officials refrain from further statements along these lines. However, US negotiators must be very candid with their Chinese counterparts about their inability to control Congress and the likelihood that any climate change legislation passed by Congress will include sanctions against countries who fail to do enough to reduce greenhouse gas emissions. The Waxman-Markey bill includes tariff-like International Reserve Allowances.

While everyone hopes there will be no need to open the tariff can of worms, their threat serves a salutary purpose now. Former Treasury Secretary Paulson would not have coaxed from the Strategic Economic Dialogue (SED) process with China even the small floatation of the RMB he managed were it not for the specter of the Schumer-Graham currency manipulation bill lurking in the background. The flip side of the tariff threat is that the administration must be prepared to put on a full-court press before Congress to convince skeptical Senators and Representatives that a deal along the lines proposed here is fair and the absolute best that can be achieved with China.

Some will argue that China can and must to more. Hu Angang, an economist and professor at the Chinese Academy of Sciences and Tsinghua University, has recently proposed that China reduce its annual emissions to 2.2 Gigatons of CO2 by 2030. Hu Angang is the very model of a global citizen, and his proposal is cogent, sincere, and heroic; it also has zero chance of success. Occasionally we are constrained by a lack of vision among those in power as surely as we are constrained by financial and technical realities.

Others (including Chinese officialdom) suggest that with the actions already under way in China no further actions are necessary. They tout the fact that China is already taking actions, such as setting aggressive energy efficiency goals and renewable energy targets, which have the effect of reducing the growth of its carbon emissions. Although China would like these efforts to be deemed sufficient, it has resisted calls to make its internal goals and targets binding in an international agreement.

Are these efforts enough? The answer is clearly no, and anyone who says they are simply hasn’t looked at the numbers. China’s own coal production projections almost defy comprehension. As previously noted by Climate Progress

… from 2007 to 2015, China will increase its coal production by an amount equal to two-thirds of the entire coal consumption of the United States — an amount that surpasses all of the coal consumed today in Europe, Eurasia, the Middle East, Africa, and Central and South America

The McKinsey study confirms the conclusions that can be drawn from these coal numbers. If China continues to grow at an annual GDP growth rate of 7.8%,

AND continues to meet its aggressive energy intensity reduction goals,
AND installs all the renewable energy called for its current medium- & long-term renewable energy plan,
AND achieves a 4.8% annual growth rate in carbon efficiency,

it will more than double its 2005 carbon emissions by 2030. (6.8 Gigatons of CO2e vs. 14.5 Gigatons of CO2e) (McKinsey calls this the “baseline” scenario). This conclusion comports with China’s own internal analysis.

There are still others who suggest that the US should significantly ramp up its cooperative efforts with China first and then through these efforts persuade China, within the next several years, into greater (although perhaps still non-binding) climate change action. While the cooperation is essential, it is not a substitute for achieving hard, binding numbers now when the world spotlight is on China, and the concerted action of the developed countries (and not a few developing ones) can be brought to bear to strike a deal that both depicts China in a positive light and achieves real progress.

Delay is a recipe for disaster. Some of the countries the US needs to support its negotiation efforts with China will lose interest, and far from presenting a more congenial environment, if the US has led and China has refused to follow, the post-Copenhagen period will be marked by recriminations, a loss of funding for cooperation with China, and possibly legally-mandated sanctions.

If China doesn’t agree to the cap proposed here (or something similar), then all bets are (and should be) off. Therefore, it is absolutely essential that a deal be struck with China at Copenhagen (or before the expiration of any internationally agreed upon extension).

China has a unique opportunity to send a clear sign that it is prepared to assume a leadership position in the world commensurate with its rising economic and political clout. More importantly, it can demonstrate that it intends to use its power not only to serve its own interests but to serve the interests of all of us. Wouldn’t that make a nice debut for China upon the world stage?