x Abu Dhabi, UAEFriday 18 August 2017

Beijing in line to lead global climate policy

With the US president Donald Trump deciding to pull out of the Paris Agreement on targets to cut harmful emissions worldwide, China looks likely to take pole position.

The Chinese vice president Xi Jinping meets the California governor Jerry Brown, left, and the US commerce secretary John Bryson. Robert Gauthier / AFP
The Chinese vice president Xi Jinping meets the California governor Jerry Brown, left, and the US commerce secretary John Bryson. Robert Gauthier / AFP

Beijing // The Chinese capital witnessed a rare event last week.

Jerry Brown, the governor of the biggest US state, California, met the Chinese president Xi Jinping to work out ways to counter a decision taken by the US president Donald Trump to pull out of the Paris Agreement on tackling climate change, signed by most countries of the world last year.

The visit gave substance to international speculation that China now aims to step into the US’ shoes to become the world leader in the fight against climate change.

Chinese leaders do not usually bypass the US president to hold meetings on policy issues with US state governors. But this meeting was more about business deals than policy. China plans to deploy a system of pricing carbon emissions from factories along the lines of California’s cap-and-trade programme. In November, Jiang Zhaoli, the deputy head of the national development and reform commission’s climate change department, revealed that allocation of carbon allowances was likely to be completed in the first half of this year, with a Chinese climate market launched in the second half.

Mr Brown inked China-California cooperation deals on renewable energy, zero-emission vehicles and low-carbon cities. He also encouraged Chinese companies to work with his state on the development of batteries for storage and electric vehicles. The California delegation, which included 30 businessmen, met Chinese counterparts interested in expanding their businesses into the state.

The California governor’s visit came as a ray of hope for Chinese business leaders and experts who fear that the US withdrawal from the Paris Agreement will impact the cost and deployment of systems designed to enhance environmental protection in China. There are concerns that American companies will no longer be under government pressure to invest in green projects, and this could result in a sharp reduction in their investments in environmentally friendly projects in China.

Talking to The National, Ma Jun, the director of the Institute of Public and Environmental Affairs in Beijing, expresses concern about the effect of Mr Trump’s decision on fund allocation for green projects by multilateral institutions such as the World Bank and the Asian Development Bank.

“That is part of the uncertainties. We all know that they [World Bank and Asian Development Bank] can be much impacted by America. I hope that they will continue to support the fight against climate change,” he says.

There are already signs of a squeeze in funds flowing to non-government organisations (NGO), many of whom work on reducing industrial pollution, he adds. “I heard from some of the American NGO partners that they are having difficulty to get the government [funding],” Mr Ma says.

He suggests individual US states and multinationals should work together with their Chinese counterparts to create opportunities for the market to play a bigger role in the business of emissions control and carbon trading.

American companies including Apple, Coco-Cola and Walmart have already emerged as trendsetters in implementing environmentally friendly production and distribution systems, which a large number of Chinese firms wish to emulate. The three multinationals are among at least 13 of the largest companies in the US that have signed the American Business Act on Climate Pledge with some ambitious goals to reduce CO2 emissions.

While Mr Brown’s visit was lauded as a mark of closer collaboration between his state and China, it now seems the event was in part prompted by fears of rising competition from European companies involved in the business of the environment. They are eager to tie up with Chinese firms following Mr Trump’s withdrawal from international climate change efforts. Almost immediately after Washington’s decision, the Chinese premier Li Keqiang signed an agreement with the European Commission designed to push clean energy to “become the main pillar of the bilateral partnership”.

At a joint press conference with Mr Li on June 2, the European Commission president Jean-Claude Juncker said: “This is helpful, this is responsible, and this is about inviting both, China and the European Union, to proceed with the implementation of the Paris Agreement.”

This agreement sparked worldwide speculation that China, the biggest emitter of carbon dioxide, planned to lead from the front in the battle against climate change with strong European support.

Indeed, Jiang Kejuan, an expert with China’s planning body, the national development and reform commission, recently said his government was ready to be at the vanguard globally of tackling environmental issues. “China will take the lead in dealings on climate change,” he said. “This has been repeated by China’s leaders.”

But that is easier said than done. China depends on coal for more than 60 per cent of its energy requirements, and changing the energy mix dramatically will require a much faster rate of growth in renewables. Currently, the country’s solar and wind power is expected to grow five-fold by 2030. This may seem impressive but it is not enough to seriously dent the dominance of coal, experts say.

Beijing is faced with another, equally daunting, challenge involving its much trumpeted and highly ambitious Belt and Road programme. One of the purposes of the huge project, which might ultimately involve some US$2 trillion of expenditure, is to export China’s industrial overcapacity to less developed countries around the world. China regards it as a “win-win” situation. Such exports would include coal-based power generation plants and a host of other associated equipment, which Chinese companies find difficult to sell at home owing to increasingly stringent environmental rules.

Overcapacity in traditional sectors such as coal, steel and cement is holding back Chinese economic growth. The government is gradually closing down units in these sectors both to cut production and pollution but Beijing is worried about the dangers of laying off millions of workers as a result. It sees building projects overseas that can absorb a lot of Chinese cement, steel, and unsold equipment, as an ideal solution.

But this exposes a dilemma: it is not easy for a country to take moral leadership on the issue of climate change if it continues exporting environmentally regressive equipment and material.

“Our concern is [to make sure] that those investments China is making abroad are in line with both the local environmental regulations, but also the Paris Agreement,” says Li Shuo, the global policy adviser for the international environment NGO Greenpeace. “We are talking about exporting, for example, coal power plants, [and] then it is almost unavoidable that the pollution associated with such a project will be translated into other countries as well.”

Mr Li says China needs to improve environmental conditions at home before legitimately taking up the mantle of global climate-change leader. The evidence of the need for urgent action is obvious on the often smog-bound streets of many of China’s main cities.

“This is not a black or white situation. I think [on the issue of the] Chinese advancing on international climate action, there are indeed a lot of setbacks in other fields,” Mr Li says.

Put simply, the cost of taking global leadership on the climate issue is potentially a prohibitive one. The Chinese foreign ministry is also worried that developed countries will slow down their contributions to the worldwide effort, thereby raising the bill for a government that has set itself up as the global example to be followed.

“Developed countries should fulfil their obligations under the UNFCCC [United Nations Framework on Climate Change] and Paris Agreement to offer financial support to developing countries through the green climate fund and mechanism,” says the Chinese foreign ministry spokesman Hua Chunying. 
But there is also a potential upside, according to Simon Baptist, the chief economist for Asia at The Economist Intelligence Unit (EIU). “This gives [the president] Xi Jinping an opportunity to pursue his agenda of increasing China’s soft power,” he says. “I mean, he will certainly give some rhetoric about being a leader on climate change.

“[But] China is far from being an environmental leader in the way a country like maybe Denmark or Sweden could be considered to be. It is quite a carbon-intensive economy.”

Still, whatever the current situation and future risks and rewards, the Chinese government remains committed to the Paris Agreement.

China has promised to peak its carbon emissions, and begin tapering downwards from 2030.

The Chinese premier recently told his German counterpart, chancellor Angela Merkel, that his government will not renege on the deal. “With tremendous efforts, China will move towards the 2030 goal step-by-step, steadfastly,” Mr Li added.

business@thenational.ae

Follow The National’s Business section on Twitter