Greenovation Hub’s response to the China-US Joint Presidential Statement on Climate Change
- A positive signal to UNFCCC and more leadership expected
Sept. 26, 2015
On 25th September, 2015, during Chinese President Xi’s State Visit to Washington, D.C., China and the United States announced a joint presidential statement on climate change with new domestic policy commitments and a common vision for an ambitious global climate agreement in Paris. Greenovation Hub’s response to this is as follows:
Implications for the Paris climate agreement
With Paris climate conference only two months ahead, and the next round of Bonn climate negotiation in three weeks, China and the United States, as the world’s largest two economies and carbon emitters, signaled another critical move in combating climate change, after last November’s historic announcement by President Xi and President Obama. Last November’s joint statement provided the basis for China’s INDC (Intended Nationally Determined Contributions) submitted to the UNFCCC earlier this year, in terms of carbon intensity reduction, energy efficiency and non-fossil fuel energy targets. This new statement specified some concrete actions and measures to implement the targets, which will increase other countries’ confidence in China’s climate actions. Moreover, the commitment of the two nations to provide climate finance to other developing countries to combat climate change will significantly boost their confidence in coping with climate change, enhance the mutual trust between developed countries and developing countries and inject positive momentum towards a fair and ambitious new climate agreement at the end of this year in Paris.
A bigger picture here lies in the dynamics and complicated Sino-US bilateral relations and geopolitics. Climate change is one of the topics that China and the US could work together, given the large shared interests and cooperation opportunity in transforming their economies to low carbon ones. There is a tension between a G2 approach and commitment to multilateral approval (UNFCCC). Thus many countries, especially developing countries, do not want to see a G2 scenario overriding UNFCCC. So far we see a positive balance and interaction between the two approaches, while China and the U.S. should continue to demonstrate their political willingness and leadership towards Paris. After all, climate action plans submitted by countries so far are not sufficient enough to control the global average temperature increase below 2 degree C, which is necessary to secure a safe climate future.
Since Copenhagen, the impact of China on the UNFCCC negotiation is more than obvious. China shall demonstrate more leadership, which means not only with louder voice, but also through leading by doing (higher ambition at home), promote the positive progress of the negotiation to reduce the divergence and forge common agreements, as well as jointly promote the interests of developing and poor countries for a clean and safe future for all.
About the commitments on the mitigation and energy transition
China has pledged in its INDC that by around 2030, China will peak its CO2 emissions. China has been taking various measures to reduce domestic coal consumption, and drive its energy transition. Therefore, it is very likely to reach coal consumption peak before 2020, and achieve the emission peak target sooner than 2030, which could also accelerate its control of air pollution. If China could speed up and scale up renewable energies, and further improve the energy efficiency in the transport and building sectors, it could achieve the coal consumption peak as soon as possible, enhance emission reduction ambition and play a leading role in combating climate change in UNFCCC process and other bilateral regimes.
The announcement on Friday strongly promotes China’s transition towards clean energies. By strictly controlling public investment flowing into projects with high pollution and carbon emissions both domestically and internationally, and prioritising renewable power generation in a green power dispatch system, it also sends a clear and long-term signal to investors, which will leverage more private investment to accelerate the transition towards renewables, and help achieve its target that the non-fossil fuel will account for 20 per cent in the total energy mix by 2030.
The announcement shows that apart from emission reduction, China wants to secure the significant co-benefits of energy transition, such as health improvement, environmental protection and job creation. Since it declared “war against pollution”, many studies by think tanks and NGOs have shown that, a low carbon economy will also help the country improve public health, reduce environmental pollution and increase green jobs. As the nation is undergoing a rapid urbanisation, its measures to strictly control the public investment from flowing into high carbon and high pollution projects will help avoid high carbon lock-in, and set on a sustainable, low-carbon and green urbanisation pathway.
About the commitments on global climate finance
China announced that it will make available ¥20 billion (about $3.1 billion) for setting up the China South-South Climate Cooperation Fund to support other developing countries to combat climate change, while the United States reaffirmed its $3 billion pledge to the Green Climate Fund (GCF). These financial commitments to support developing countries will greatly increase their confidence to take climate actions and adapt to the adverse impacts. In its INDC, China pledged to set up South-South Climate Cooperation Fund, to show it can and is willing to take the responsibility suitable for its national circumstances and capabilities as a large emerging economy, to enhance the political willingness from other countries, rich and poor, to take climate action. If it could make full advantage of the South-South Climate Cooperation Fund, China will play a critical role in helping poorer countries to adapt to the worst impacts of extreme weathers and climate disasters, especially at a time when developed countries are far from fulfilling their pledge on climate finance. With this Fund, it will leverage more investment into climate resilient areas and promote the upgrade of foreign trade and investment. Moreover, if China-led financial institutions such as Asia Infrastructure Investment Bank (AIIB) and Silk Road Fund could integrate climate resilient principles into the investment decision making process, it will effectively improve the market performance of renewable energy in developing countries, and accelerate the global transition towards clean energies.
About the national cap-and-trade market
China announced its plan to start in 2017 its national emission trading system, which is in line with the domestic timeline announced previously (around the end of 2016 and the beginning of 2017). Given the fact that provinces are still working on preparations such as historical emission check, the set up and the exact date of a national carbon emission trading system relies on the work at the provincial and local level and also on the progress of climate legislation.
Greenovation Hub looks forward to the establishment of a national carbon emissions trading system, which, as an innovative market-based mechanism, could help reduce emissions at a lower cost, and help achieve national emission reductions targets pledged in its INDC. The government has launched seven pilots before setting up a national carbon market, yet some risks and challenges still remain that might undermine its effort to effectively reduce emissions through this market-based mechanism. The quality and sufficiency of emission statistics is not yet satisfactory; the cap setting is at risk of being too generous could potentially have a negative impact on the market, e.g., ex-post adjustment; the consideration of reserves for emission growth space and the synergies with other policies relevant to national energy development and pollutant control still need to be improved. In particular, emission allowance allocation methods applied to these seven pilots mainly use a free allowance approach and grandfathering based on the historical emissions, and several pilots are making positive attempts to try benchmarking and auctioning approaches. Another key challenge is that the power sector is faced with structural challenges such as the government control over electricity prices. The particular choice of double “regulating” the upstream and downstream (both the direct emissions from the power sector and indirect emissions of electricity and heating of industries are covered in each pilot region) and its implications still need careful assessment and examination. The legal basis and punishment/compliance system seem to be inadequate in terms of the existing practices. Monitoring, Report and Verification (MRV) mechanisms, management of third-party qualification and market risk control also need further improvement. In addition, specific provisions are needed for the efficient and transparent use and management of revenues (both existing and potential) generated by the carbon market
From now till 2017, China still have some time to deal with these risks and challenges and lay down a solid foundation for an effective market. The ultimate goal of setting a carbon price and forming an effective market is to reduce national greenhouse gas emissions, which is also critical to global efforts of combating climate change. However, the policy discussions to date are still concentrated in a relatively small circle with limited stakeholder participation. The different stakeholders participating in the market mainly represent the pursuits and concerns of commercial interests. As such, the process of carbon market development requires comprehensive thinking and practices, the participation and consultation of different stakeholders, as well as effective market monitoring and public supervision, in order to ensure the functioning of the market and fulfillment of its objectives in a fair and effective manner.
Relevant links:
- Full text: U.S.-China Joint Presidential Statement on Climate Change （White House）
- Executive Summary: An NGO Review of China’s Carbon Market, 2013 (Greenovation Hub)
About POLICY CENTRE – GREENOVATION HUB (www.ghub.org/cfc_en)
Greenovation Hub is a grassroots environmental NGO with a global outlook. G:HUB Policy Centre promotes the development and implementation of sound climate and environmental friendly policies through conducting in-depth analysis and research, as well as fostering dialogue among stakeholders, to drive China's green transition towards a sustainable, equitable and resilient future, contributing to the reduction of global ecological footprint.
