I have been impressed with China’s recent response to climate change. While the scientific community in China has been engaged for years, Hu Jintao seems to have discovered climate change only a few months ago. He is now a passionate campaigner, having taken a scientific and engineering approach to the problem in keeping with the new non-ideological stance of the leadership. As a result China has been able to mobilize an impressive response, with a couple of important footnotes. The roll out of wind farms and solar capacity is already significant, moving as fast as new coal capacity, with China aiming to generate 10% of its energy from renewables by 2010 and 15% by 2010. They plan to invest $1Tr between now and 2020 on rail and rolling out simple but very commonsensical energy saving measures, like 40 million solar heaters (two-thirds of the entire world production). Over the coming decade China is also building three times as many nuclear plants as the rest of the world combined. With these measures, China aims to reduce the carbon intensity of its economy by 20% between 2005 and 2010. It’s unclear whether they’ll reach that goal, especially since they did not suffer the big reduction in economic output that other countries did, but there is undeniably some positive momentum.
When China announced two weeks ago, timed with an eye on the COP15 meeting in Copenhagen, that they were willing to reduce the carbon intensity of the economy even more, by 40- 45% below 2005 levels by 2020, the message was well received. Kim Carstensen, leader of WWF International’s global climate initiative, told Reuters: “It is extremely welcome news that China is now putting specific figures on its reductions of carbon intensity towards 2020.” And Deborah Seligsohn from WRI calculated China’s goal to be in line with what the International Energy Agency (IEA)’s latest scenarios suggest would be necessary from China if the world is to keep total emissions within a target of 450 ppm.
Without taking away anything from China’s efforts in the field of climate change, there are several important ways these pledges might yield surprising results. First they are focusing on per capita reductions in energy intensity. This means using less per person over time. Unfortunately the number of persons is still growing and even a small percentage of one billion is a large number. And those people are getting richer fast, driving up total consumption of energy. So even as they become more efficient, which is a good thing, their absolute level of emissions is still going to grow.
It is also worth looking at their latest pledge in the context of another big topic in Sino-American relations: currency exchange rates. It is widely understood that if the Chinese were to loosen the peg of the yuan to the USD, the yuan would appreciate significantly against the dollar (and other currencies like the euro). Between 2005 and 2008 when the peg was temporarily loosened, the yuan appreciated 20% against the USD. Carbon intensity is measured as CO2 per unit of GDP (measured in yuans). A 20% appreciation in the yuan would automatically slash 20% from the carbon intensity of China’s exports, at least on paper. This gaming of the rules both unintentionally and by design is likely to occur in the early stages of any climate regulatory regime.
As I write this, the Copenhagen negotiations are stumbling along. One of the big issues on the table is verifying emission reductions. “Trust but verify,” was one of Ronald Reagan’s favorite slogans in arms talks with the Soviet Union and it shapes the US negotiating stance. It could become a very hard sticking point in the discussions along with the vexed issues of environmental justice between the rich and the poorer countries. These issues, among others, are unlikely to be resolved before the heads of state start showing up in a few days. The odds in favor of a meaningful agreement continue to shrink. But some cosmetic agreement to continue to talk is still possible.
