By Julian Wong Apr.8.2009
In: climate change, collaboration, policy
7 comments

Thinking Out of the Climate Box: Re-Examining Monolithic Approaches to the "Common But Differentiated Responsibilities" Impasse

As international climate talks conclude today in Bonn, Germany, the time is right for another climate change policy edition of The Green Leap Forward.  Today, we explore emerging new frameworks that might just get China on the path to enacting tangible emissions reductions.

All eyes are now on the U.S. (with new leadership), and as always, China.  Climate change policy in the two biggest greenhouse gas (GHG) emitting countries (on an annual basis) is heating up.  Earlier this year, we witnessed a few zesty exchanges between US and China delegations as the latter continues its unswerving resistance to any possibility of binding emissions caps, peddling its “common but differentiated responsibilities”  (hereinafter “CBDR”) refrain.

CBDR has been the linchpin argument of China’s negotiation position in the international climate change policy arena (see previous post ).  CBDR is grounded in a concern for social equity, best explained in terms of examining (1) who are historically culpable for GHG emissions while giving consideration to (2) per capita emissions and (3) the relative economic development status of each country.  The typical Beijing position would amount to something like the following:

Greenhouse gas emissions (GHGs) should be calculated on a per capita basis from 1900 to ensure fair play as nations strive to halve global emissions by 2050…developed countries, which are home to just 20 percent of the world’s population, have contributed 75 percent of all global GHGs emissions since the Industrial Revolution, according to the website of the UN Framework Convention on Climate Change.  Cumulative carbon dioxide emissions should be calculated on a per capita basis for each country, so that every nation can shoulder a common but differentiated responsibility for climate change…Such a calculation “better reflects the principal of equity for developing countries”…

Yes, we’ve heard this tired argument time and time again.  Thus, in China’s view, Annex I countries of the Kyoto Protocol (the industrialized countries) should take the lead in cutting GHG emissions while giving free money and free technology (financial assistance and technology transfer) to Non-Annex I countries, which have in general not undertaken the same pattern of industrialization of the West and have significantly lower per capita emissions, both currently and, especially, historically.   While all this sounds logically appealing, and most of us would agree that China (and the rest of the Non-Annex I world) is in a very strong moral position, it is worth investigating this argument a little closer and pointing out the failings of both the argument and its premise:

  1. The world does not exist in binary–developed vs. developing. I think it is fair to acknowledge that while China is not in the same development category of the United States or Germany, that it certainly is not in the same category as Western Samoa or Angola.  To say that China should receive be subject to the same requirements and receive the same monetary and technology assistance as the least developed countries is highly disingenuous.  Distinctions should be made within the Non-Annex I band of countries to account for different stages of development.  More on this below, but we’ll just point out a few observations for now:  Suffice to say, it is apparent that China is a category of its own. It may be a developing country, but one that is on a trajectory of hyper-growth.  The Climate Group projects (see text to footnote 1 of its recent report) that China’s per capita emissions will be double that of Europe’s by 2020 if China continues at an 8% emissions growth rate while EU continues towards its planned 20% reduction from 2007 levels.  Yet, China may also be uniquely positioned to become a climate change leader. It is flush with cash–it set up a US$200 billion sovereign wealth fund just a few years ago, is fresh off financing history’s most expensive Olympics (US$40 billion), recently unveiled a RMB 4 trillion economic stimulus plan, and may be single-handedly propping the world’s vulnerable financial system through its voracious appetite for U.S. Treasury bonds.  At the same time it is the world’s leading producer of PV solar panels and solar thermal water heaters and the fourth largest wind power market in the world.  In other words, while its per capita GDP is low, it really has a lot of financial and technological muscle than the tag of “developing country” suggests.
  2. Progressive climate policy provides net benefits, not costs. The now famous McKinsey Abatement Cost Curve identifies a plethora of energy efficiency options that have negative costs, i.e actually result in net economic benefits.  Similarly, McKinsey’s follow-on report, China’s Green Revolution, while a bit more glum about the overall costs of climate action (some 150 to 200 million Euros per year for the next 20 years), provides a menu that contains many negative cost strategies (“According to our analysis, approximately one third of these investments will have positive returns…”).  There is also the benefit of “innovation offsets,” as business guru Michael Porter likes to call them–consider a study which found that Annex I countries that ratified the Kyoto Protocol experienced increased greentech innovation (measured in terms of patent filings) over those that did not (i.e. U.S. and Australia, which only ratified much later in December 2007).   But all this may be irrelevant because the “benefit” of the survival of the human species must surely trump any sort of economic calculation. As Lord Stern made crystal clear in his landmark report on climate change economics, the cost of climate inaction (5 to 10% of global GDP) is far more than action (1%).  It is really kind of absurd to complain about the cost of climate action when the alternative is a fundamental disruption of the world’s climatic and hydrological cycles, water scarcity and rampant disease–essentially the end of civilization as we know it.
  3. There is simply not enough time to be calculative and play the morality game.  Emerging climate science is telling us that we may be in hotter soup already than we thought we were.  MIT has doubled its 2100 projection for global warming to 5.1 degrees Celsius after taking into account non-linear feedback interactions.  Separately, a WWF report released earlier this year, positive feedback loops are causing some places of the Arctic Ocean to lose ice 30 years ahead of IPCC predictions.  While concepts are fairness and equity are desirable, they are becoming increasingly superseded and made irrelevant by the science, which is essentially telling us that we have no time to allow developing countries to repeat the ill-fated trajectory of Western-style industrialization; every economy needs to accelerate its transition to a low-carbon one, and they needed to do so yesterday if we are to stabilize CO2 concentrations at 450 ppm, the generally recognized level needed to avert climate catastrophe. Indeed, it is in China’s very own national security interests that it takes the leadership in climate action.  McKinsey recognizes the dear cost of delay, saying in China’s Green Revolution:

We estimate that just a 5-year delay in starting to implement the abatement technologies described in our study would result in a loss of as much as one-third of the total abatement potential by 2030.  If China waited 10 years before beginning to implement these technologies, it could lose up to 60 percent of the abatement potential by 2030.

To be fair, we should not disregard the progress that China has made in clean energy and climate change action.  Its climate change white paper released last year (see link under Key Documents in the right panel) demonstrates a remarkably comprehensive understanding of the mitigation and adaptation risks and opportunities that climate change represents, and details all the positive actions in has embarked on in those areas.  Still, the white paper leaves something to be desired on the diplomatic front–We  here at GLF have taken some of the white paper’s stubborn position negotiation positions to task (see previous post).  Most of all, the white paper incongruously fails to appreciate the risk of amplified, runaway climate change fueled by positive feedback loops, and thus the imperative for urgent, immediate global action.

Applying the Scalpel to Monolithic Approaches

The first step in tackling the CBDR, Non-Annex I conundrum is for policymakers to disabuse themselves from the idea that the developing world can be treated as a monolithic block of nations.  The second step is to do the same for China,  and appreciate that there exists wide range of development in different parts of the Middle Kingdom.  This approach is precisely what Hu Angang, the name of whom readers of this blog may find familiar (see previous post), advocates.

Hu’s approach, as he describes top 20 GHG emitters, which together contribute to 75% of the world’s emissions, undertake additional obligatory cuts according to their relative GHG emissions.  Thus, in this second layer of analysis, India would be required to cut emissions as a Top 20 emitter even though it is a medium-low HDI country.

In concluding that China poses a unique analytical problem, Hu observes:

China is not a developing nation in the typical sense. It is a country that is constantly making progress…20% of its population is in the High HDI group and 75% in the Medium-high group. Analysing China’s 31 provincial-level divisions uncovers levels of human development that span the entire HDI spectrum. However, in the last two decades, China’s population has moved from primarily occupying the lowest two groups to the highest two..by 2010, 42% of China’s population will be in the High HDI group. By 2020, although China’s per-capita GDP will only have reached the world average, its HDI will be 0.87 or 0.88. Overall, China will be in the High HDI group. This reflects one of the characteristics of China’s growth: relatively low per-head income in comparison with developed nations, yet high living standards. China will have the ability to undertake emissions reduction commitments.

With this insight, Hu applies the same HDI analysis to political subdivisions and devised the following classification:

  • High HDI provinces:  Zhegjiang, Liaoning, Guangdong, Jiangsu (accounting for 21.4% of China’s carbon emissions) should be subject to non-conditional cuts.
  • High HDI municipalities:  Beijing, Shanghai, Tianjin (5.8%) should similarly be subject to non-conditional cuts
  • Medium HDI provinces: Hebei, Shandong, Shanxi, Henan, Hubei and Hunan (48.9%), should be subject to conditional cuts depending on their respective HDI variance from 0.8.
  • Negative net carbon emitters: Yunnan, Qinghai and Tibet (2.2%) (and probably with low HDIs, although Hu’s article does not say) should receive subsidies
  • Medium-high HDI provinces: The rest, except Guizhou (why, Hu does not explain), should be subject to conditional cuts, and then non-conditional cuts as they move into the High HDI bracket.

In sum, Hu’s approach offers a fresh and more intellectually robust framework for climate negotiators to move past the CBDR impasse.  Regional or HDI-based caps also provides an constructive alternative to industrial sector caps, which is a concept backed by many camps in engaging China, but one which has been quite flatly rejected by Beijing.   One note of caution–if such a differentiated approach to dealing with developing nations (and Chinese provinces) is adopted, an enormous effort for capacity building at the country (and provincial) level would have to be undertaken.  The practical realities of implementation are never so pretty as they appear on paper.

A New Climate for Collaboration?

The topic of US-China collaboration is the latest rage in both Capitol Hill and Beijing.  There have been a number of reports released recently on the topic (Asia Society/Pew Center, Brookings Institution, NRDC) and organizations have built their mission around it (JUCCCE, US-China Green Energy Council).

Clearly, action on the part of U.S. towards some domestic, legally binding emissions reduction regime is paramount for any sort of Copenhagen consensus.  Most also see U.S. action as necessary for China to budge; yet many American legislators refuse to tie the U.S. to any sort of carbon reduction commitments unless major developing countries similarly commit.  Thus we have a classic “prisoner’s dilemma.”  Some scholars, such as my former professor in law school in a jointly-written book, have advocated some sort of bilateral arrangement between the U.S. and China that operates in parallel to the Kyoto-Copenhagen process but converges over time to a single regime.  But as we’ve discussed before, however, China has flatly objected in its white paper to any sort of multilateral or bilateral arrangement that is not part of or “supplementary” to the Kyoto process, whatever that means; it is thus uncertain if such a proposed parallel track would be acceptable to Beijing.

Waxman-Markey and its Legal Hooks

Another interesting trend is the flurry of policy proposals and bills on U.S. domestic climate regulations emerging from Capitol Hill which will indirectly influence China’s climate change mitigation and adaptation policies and activities, or set examples for it.  Earlier this month, the comprehensive 678-page Waxman-Markey bill (full bill, 5-page summary) was released.   The bulk of the bill contains regulations for a cap-and-trade system.  Among the interesting provisions are those that artfully create leverage for U.S. climate change negotiators to rope in Non-Annex 1 country commitments, such as provisions that concern the use of international offsets by regulated entities in the U.S. to meet their emissions targets.

First, in order to offset one ton of emissions, an emitter must purchase 1.25 tons of offset credits.  Second, if international offsets are sought, such offsets can only originate from an international programs that are (1) subject to emissions caps at the national level or economic sectoral level, and (2) as stringent as the proposed U.S. program in terms of monitoring, verification, enforcement and other measures.  Such a requirement would obviously have to be adjusted to accommodate Hu’s proposal, which does not envision a national cap on the outset but targets responsibility towards specific provinces rather than economic sectors.   Such re-categorization is probably negotiable; what is probably far less negotiable is that some sort of caps are enacted, whether sectoral, provincial or national.

It’s a brilliant hook!  Make no mistake about it–with global carbon credit prices hovering at low levels (EUR10 per ton or less), China’s CDM market is looking to the U.S. to be a significant purchaser of carbon offsets.  China was probably not expecting the validity of such international offsets to be made conditional on some sort of binding obligations on their part.  If this aspect of Waxman-Markey becomes law, China would feel much more pressured to move towards some sort of provincial or sectoral caps so as to continue to grow its CDM market.

I’ll discuss two additional legal hooks here.  One provision may require imports to be accompanied by  an appropriate amount of “international reserve allowances”–i.e., carbon permits that are purchased through a proposed U.S.-run international allowance system.  This essentially a carbon tariff that, WTO-compliance aside, may cause the likes of China to reassess the carbon profile of its manufacturing sector.   Another provision concerns the much touted concept of technology transfer, which would only be made available to developing countries that “undertake nationally appropriate greenhouse gas mitigation activities.”  Once could certainly anticipate a spirited debate about what qualifies as nationally appropriate when the China question arises.

For even more ways in which Waxman-Markey equips U.S. climate negotiators with leverage to draw out developing country commitments, read this excellent overview by Jake Schmitt at NRDC.

Leading by Example

Finally, there is something to be said for good precedent and creating robust examples for others to follow.  The Waxman-Markey bill is full of good stuff relating to energy efficiency, smart grid and clean jobs stimulus that China could aim to emulate.   Receiving less attention is an alternative U.S. bill considered by the Senate Energy and Natural Resources Committee.  Though it is not as comprehensive as Waxman-Markey, it does contain a remarkable section that addresses the water-energy nexus, an area of HUGE concern in China (and indeed everywhere) as readers of this blog would appreciate (see previous post).  Quoting from Climate Progress, the highlights of the proposed energy-water nexus provisions are as follows:

Energy-Water Integration – Provisions to increase our understanding of the interdependence of energy and water and begin integrating decision-making related to both resources.

1. Requires a National Academy of Sciences Energy-Water Study to assess water use associated with developing fuels in the transportation sector, and the water consumed in different types of electricity generation.

2. Requires the Energy Information Administration to annually report on the energy consumed in water treatment and delivery activities.

3. Directs DOE to identify best available technologies and other strategies to optimize water and energy efficiency in producing electricity.

4. Directs the Secretary of Energy to develop an Energy-Water Research and Development Roadmap to address water-related challenges to sustainable energy generation and production.

5. Directs the Bureau of Reclamation to evaluate energy use in storing and delivering water, and identify ways to reduce such use through conservation, improved operations, and renewable energy integration.

GLF hopes that some variation of these “watergy” provisions get integrated into final energy-climate legislation, and that governments worlwide, especially China, start to engage in some healthy “legal borrowing” in this regard.

Conclusion

In sum, it is clear that what’s happening on Capital Hill in domestic climate legislation can have a profound impact on the shape of Chinese climate policy, and in fact, the whole international process, in so far as U.S. action is politically and scientifically vital.  The debates that emerge out of U.S. domestic regulation can engender international dialogue that creates an alternative or additional forum to the international negotiation table.   With the Copenhagen deadline looming at the end of this year, everyone needs every opportunity they can get to march towards a workable solution.  GLF hopes that by adopting a more nuanced approach to the developing country-block, appreciating the regional homogeneity of socio-economic development in China, and seeing through the mirage of false dichotomies (i.e. the labels of “developed” vs. “developing”), that the parties can avoid climate deadlock and start a new era of renewable, climate-friendly international economic relations.

Comments (7)

  1. Elizabeth Balkan Apr.9.2009@12:17 am Reply

    Super, comprehensive post on the full range of issues and news items. Well done, Julian.

    eb

  2. Charles Stewart Lee Apr.9.2009@2:39 am Reply
    Charles Stewart Lee Apr.9.2009@2:39 am Reply

    This is toooo good!

    Thanks for the very useful info :)

  3. sustainablejohn Apr.9.2009@10:30 am Reply

    I also really like Hu’s analysis and ideas of splitting up the provinces. I think what he meant for Guizhou is that it’s a medium HDI province, but it’s emissions aren’t really high enough to be in the Hebei, Shandong, Shanxi, Henan, Hubei, Hunan group…

    A combination of sectoral/provincial cuts would be quite significant. Although the provinces with highest HDI, Zhejiang and Guangzhou, are more service and light manufacturing oriented (think electronics, including solar panels(!), and plastics, paper, etc.) whereas Jiangsu and Liaoning I think must have slightly lower HDIs and have a lot of light manufacturing but also decent shares of heavy manufacturing like steel (China’s biggest source of emissions of any one single industry). Hebei is the steel powerhouse of China, I think twice more than any other province in terms of production, but it has a lower HDI… so this is where we would need a balance between provincial and sectoral.

  4. Andrew Stevenson Apr.9.2009@8:54 pm Reply

    I think Hu’s plan is a great way for determining burden sharing within China, and something similar could emerge on the international stage. The EU proposal is roughly along the same lines with developed mandatory cuts, developing with conditional cuts/financing, and least developed. China will no doubt fall in the second group.

    However, from the US perspective, I think the legal nature of the agreement with China (whether bilateral or multilateral), is much more important than the nature of China’s reductions (sectoral, national, etc) or even the scale. If the US accepts a legally binding international commitment with penalties, China must as well (even if it’s an intensity target or something like that). If China is only willing to make a political commitment internationally (although one that is domestically enforcable), the US will also only be willing to make a political commitment internationally (even if it could produce the exact same cap-and-trade system with the same reductions).

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