US China emissions pact could signal end of climate firewall

COMMENT: Synergies between climate action and top domestic priorities are driving leaders to back green economy


By Per Klevnas

Reactions to the climate targets jointly announced by Presidents Barack Obama and Xi Jinping have ranged from “historic”, “ground-breaking”, to dismissive.

Among the latter, many commenters have stressed that the goals aren’t enough to keep global warming under 2C; several also argued that the targets go no further than the US, and particularly China, planned to go anyway.

China says it will aim to have its emissions peak by 2030, earlier “if possible”, and to meet 20% of its energy needs with non-fossil sources by 2030.

The U.S. commits to reducíng greenhouse gas emissions by 26%, from 2005 levels by 2025, and to try to reach 28%.  It also reiterates its aim of 80% reductions by 2050.

Keeping the door open to more ambitious effort is important.  To achieve the 2C target China’s emissions would need to peak much sooner, possibly by the early 2020s.

The US too would have to make deeper GHG cuts – as would the European Union, which last month pledged a 40% reduction from 1990 levels.

But even in its own right this is a very significant political development, and one we should welcome.

This is the first time that the U.S. and China have taken a joint climate initiative of any substance, and it marks a dramatic shift from the rivalry and suspicion between the two countries in the lead-up to the 2009 UN Climate Change Conference in Copenhagen.

ANALYSIS: US-China climate pact breaks barriers to a global deal 

It is also important to remember, as the White House stressed, that these two countries account for more than a third of global GHG emissions.

Much remains to be done to achieve a global climate agreement in Paris next year – but by standing together, the US and China send a powerful signal that they want a deal, and that they see fighting climate change as a shared responsibility.

One that could help bridge the gap between developed and developing countries in the UN negotiations.

Others have written insightfully about the domestic implications for both the U.S. and China, so we won’t go into great depth here, but will stress that the U.S. has effectively agreed to double its rate of decarbonization.

The shale-gas revolution, which helped reduce coal’s share of U.S. power generation from 49% in 2007 to 39% in 2013, is unlikely to yield much greater emission reduction benefit.

The Obama administration’s vehicle fuel economy standards and proposed new power plant rules are also unlikely to be enough to meet the 2025 target.

More ambitious policies will be needed.

ANALYSIS: US climate pledge 4% less ambitious than at Copenhagen 

China, meanwhile, has for the first time committed to an absolute emissions target, even if the target itself remains unspecified.

This is a major step, and it is only possible because government leaders now see real synergies between climate action and top domestic priorities, including economic restructuring, energy security, and improved air quality.

The latter is not to say that China can achieve its targets without major efforts. To peak overall GHGs by 2030, coal use, which now constitutes two-thirds of China’s energy and practically all its electricity, would likely need to stop growing within about five years.

The energy intensity of China’s economy would need to fall at record pace, likely involving not just energy efficiency measures, but also major write-offs of existing capital stock of recent construction.

And the growth in non-fossil energy would need to be enormous to reach the target of a 20% share. It will take a revolution in power system governance and investment patterns, and possibly early retirement of coal power plants.

All of this is hugely important for the private sector.

Climate and energy policy in recent years has been haphazard, creating great uncertainty for investors: Should they push hard on solar and wind power, energy efficiency, electric cars, or will the policies that support them be gone within a year or two?

REPORT: US-China climate deal puts pressure on G20 leaders to step up 

Not only has the lack of a clear policy signal discouraged investment, but it has increased the cost of financing low-carbon technologies and stifled innovation.

Adopting medium-term targets, as the U.S. and China are choosing to do, sends a powerful signal to markets that climate policy is here to stay (though U.S. Republicans’ strong opposition sends the opposite message).

And it’s a massive business opportunity. For example, the 20% non-fossil energy pledge by China will likely require 1,000 gigawatts (GW) of new non-fossil power generation capacity. Global wind power today is around one third of this number, and total global renewables capacity, around 1,500 GW.

Finally, it’s important to recognize what the U.S.-China announcement says about how both countries’ leaders see the relationship between economic growth and climate action.

Monday’s commitments show that both President Obama and President Xi now recognize that quite a lot can be done for the climate even without paying a steep economic price.

This is good. Now let’s hope that we can all go even further still.

Per Klevnäs, an energy economist, is a senior project manager at the Stockholm Environment Institute in Stockholm. He led the SEI’s contribution to the New Climate Economy project, published in September 2014.

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