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China’s climate policies: Tough negotiations ahead

Summary:
As countries recover from the COVID-19 pandemic, the major countries of the world are turning their attention to the next UN climate conference (COP26), scheduled for November 2021. China, the European Union (EU), and the United States (US) are the world’s top three greenhouse gas (GHG) emitters, so their cooperation is essential. The EU and the US have laid out ambitious intentions, but their goals may be more aspirational than convincing. At this writing, however, Beijing has not put a cap on carbon emissions, nor has it specified mechanisms to reduce GHG emissions. Tough negotiations will be needed to close loopholes and set a clear action agenda if the goals are to be met. Both the EU and the US have tabled updated emissions reduction commitments. The EU released its European Green

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As countries recover from the COVID-19 pandemic, the major countries of the world are turning their attention to the next UN climate conference (COP26), scheduled for November 2021. China, the European Union (EU), and the United States (US) are the world’s top three greenhouse gas (GHG) emitters, so their cooperation is essential. The EU and the US have laid out ambitious intentions, but their goals may be more aspirational than convincing. At this writing, however, Beijing has not put a cap on carbon emissions, nor has it specified mechanisms to reduce GHG emissions. Tough negotiations will be needed to close loopholes and set a clear action agenda if the goals are to be met.

Both the EU and the US have tabled updated emissions reduction commitments. The EU released its European Green Deal in December 2019, with ambitious plans to reduce net GHG emissions by at least 55 percent by 2030 from 1990 levels and make Europe climate-neutral by 2050. After four years of ignoring climate change during the Trump administration, President Joseph R. Biden Jr. brought the US back to the Paris Agreement. At the Leaders’ Summit on Climate in April 2021, the US committed to reduce its GHG emissions by at least 50 percent below 2005 levels by 2030 and achieve net zero emissions by 2050.

Until recently, climate change was not a high priority in China, currently the world’s largest emitter.[1] In his speech to the 75th session of the UN General Assembly in September 2020, President Xi Jinping surprisingly announced that China aims to achieve peak carbon emissions before 2030 and to reach carbon neutrality by 2060. Expectations are now running high for China to disclose ambitious implementation policies. Concrete policies will be a major subject of negotiation between the US and the EU on the one hand, and China on the other.  

So far developments do not meet expectations.[2] In March 2021, the central government published the nation’s 14th Five-Year Plan, which serves as a blueprint for China’s economic and social development between 2021 and 2025. The Plan sets binding targets to reduce CO2 emissions per unit of GDP by 18 percent and energy use per unit of GDP by 13.5 percent, both by 2025, and a nonbinding target to increase the share of nonfossil energy to 20 percent of total consumption. Apart from these targets (which do not require an absolute reduction in emissions), the Plan does not cap the total level of carbon emissions, nor specify mechanisms to reduce emissions. Instead, it calls for relevant government agencies to formulate plans to achieve peak carbon emissions before 2030.

Later this year, sectoral five-year plans issued by the National Energy Administration and the Ministry of Ecology and Environment should provide details on China’s transition to nonfossil energy and emissions-peaking plans.[3] These details will be of intense interest to US and EU experts, and possibly the subject of behind-the-scenes talks. If trilateral talks get underway, China will no doubt query the US and EU experts on their own mechanisms for achieving announced goals. For example, there is no guarantee that the US Congress will enact President Biden’s ambitious green energy plans. Moreover, China will likely challenge the EU Carbon Border Adjustment Mechanism (CBAM) as inconsistent with World Trade Organization (WTO) rules. 

Though relations between Beijing and the West worsened amid the COVID-19 pandemic and controls in Hong Kong and Xinjiang, climate change remains an area of common ground. In his April 2021 video summit with Chancellor Angela Merkel and President Emmanuel Macron, President Xi expressed Beijing’s willingness to work with Germany and France on climate issues. The US-China joint statement following the visit by US Special Presidential Envoy for Climate John Kerry to Shanghai reaffirms the joint commitments to tackle the climate challenge.

But optimism should be guarded owing to China’s insistence on “common but differentiated responsibilities” for taking the lead on climate change measures, a principle that both Xi and the Plan reiterated. While China is currently the largest emitter, the historic stock of GHGs owes far more to advanced economies than to China or other emerging-market economies. Accordingly, Beijing may seek to retain “special and differential treatment” (SDT) in the WTO if environmental negotiations move forward in the multilateral forum.[4] Predictably, the US and the EU will criticize China for claiming SDT to avoid taking on greater responsibilities. Moreover, the CBAM, which the EU plans to table for selected sectors by July 2021, also under consideration by the US trade representative (USTR), could trigger clashes over trade-related environment policies between the three great powers. Obstacles are numerous, but constructive discussions at the WTO might surprise everyone by yielding positive outcomes.

Notes

1. In President Xi Jinping’s 2017 speech at the 19th Party Congress, he noted that China’s economy is transitioning to a stage of “high-quality development” and raised the “three tough battles” campaign, one of which is to tackle air pollution. The State Council published a Three-Year Action Plan for clean air in 2018. The Ministry of Ecology and Environment declared in February 2021 that China won its battle against air pollution. 

2. In February 2021, China’s Ministry of Ecology and Environment issued a trial regulation on the national emissions trading scheme. The scheme covers 2,225 firms in the power sector. Trading will start before the end of June 2021. The Shanghai Environment and Energy Exchange will be responsible for trading, and the China Hubei Emission Exchange in Wuhan will be responsible for registration of applications and data collection.

3. By the end of 2020, the Ministry of Ecology and Environment had completed a draft of the 14th Five-Year Ecological Environment Protection Plan.

4. In November 2020, 53 WTO members launched new initiatives to intensify WTO work on trade and the environment. The first meeting took place in March 2021.

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