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China gets serious about curtailing its carbon emissions

Dr Samuel FankhauserBy Dr Samuel Fankhauser, Committee member.

Britain’s carbon budgets are domestic emissions objectives, adopted because they make sense for the UK. But climate change is a global problem. So it is important to see other nations taking action as well. The most eye-catching development in recent weeks has been the commitments China has made under the 12th five-year plan, which was approved in March 2011.

Anyone who follows the international negotiations on climate change will be familiar with China’s assertive stance on emissions targets. Like other emerging emitters, and not without justification, China insists on the concept of “common but differentiated responsibilities”, which puts the onus for most emissions cuts firmly on industrialised countries.

The tone of China’s domestic debate is quite different, as I learned during a recent visit.  As part of a small government delegation I was touring China from 14-18 March to discuss emission reduction policies and share the UK’s experience with government officials and think tanks.

During the entire visit there was not a single debate, heated or otherwise, about the merit of decarbonisation, international burden sharing or the science of climate change. The tone was business-like and the focus firmly on how Chinese emissions may be reduced – although no doubt the broader discussions are taking place too.

Officials are responding to the guidance contained in China’s latest five-year plan, which has just been approved.  The 12th five-year plan stipulates targets for both energy intensity and carbon intensity.  Energy use per GDP is to fall by 16% over the five years and carbon emissions per GDP by 17%.  The share of non-fossil fuels in primary energy consumption is to rise to 11.4%.

There is an interesting parallel here to the UK, which was not lost on my counterparts, although the context is fundamentally different.  In both countries action on climate change builds on clear, legally / politically binding and widely accepted foundations: the new five-year plan in the case of China and the Climate Change Act in the case of the UK. Both countries hope that clarity about the objectives will help to focus on delivery.

Officials were keen to learn from the policy experience of the UK, which many had studied in some detail.  There was an open debate about the use of fiscal instruments and the possibility of a cap-and-trade scheme. There were many concerns, but they were all practical, rather than conceptual, and surprisingly similar to those raised in the UK. The impact of climate policies on poverty is understandably a big issue.  I was more surprised by the widespread concern about competitiveness, at least until I remembered that successful competitors constantly work to improve their game.

One scenario is that China may experiment with a cap-and-trade pilot at provincial level, perhaps restricted to electricity to reduce the risk of carbon leakage between provinces.  Fiscal instruments are more likely to be in the form of industrial subsidies than a carbon tax, although some taxation is also contemplated. As in the UK, there is a recognition that achieving the ambitious targets will require the use of all the policy tools “in the box”.

The UK Foreign Office is playing a discreet but important role in shaping the debate through dialogue and technical assistance. The work has obvious global benefits. In time it might also help to reduce the competitiveness concerns of UK firms with respect to China.

A 17% reduction in carbon intensity will not be sufficient to stabilise Chinese emissions, given that the economy is expected to grow at 7.5% a year, or over 40% in the course of the five-year plan. The new target will also have to be followed by higher carbon intensity reductions in the 13th five-year plan if China is to meet its Copenhagen pledge of a 40-45% intensity reduction from 2005 by 2020.

This will not be easy. But China is clearly making a serious effort and is recognizing the severity of the problem. Britain would do well to continue the dialogue on policy and indeed explore opportunities for deeper cooperation.

Dr Samuel Fankhauser is a member of the Committee on Climate Change, member of the Adaptation Sub-Committee and Principal Fellow at the Grantham Research Institute on Climate Change at the London School of Economics.