Energy Security Initiative at BROOKINGS
U.S.-China clean energy cooperation: the road ahead
Kenneth G. Lieberthal
The Brookings Institution 1775 Massachusetts Ave., NW Washington, D.C. 20036 brookings.edu SEPTEMBER 2009 Policy Brief 09-05 Energy Security Initiative at BROOKINGS
U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD
Kenneth G. Lieberthal
SEPTEMBER 2009 Policy Brief 09-05 About The Brookings Energy Security Initiative
he Energy Security Initiative (ESI) is a cross-program effort by the Brookings Institution designed to Tfoster multidisciplinary research and dialogue on all aspects of energy security today. ESI recognizes that public and private choices related to energy production and use will shape the global economic, environmental and strategic landscape in profound ways and that achieving a more secure future will therefore require a determined effort to understand the likely consequences of these choices and their implications for sound policymaking. The ESI Policy Brief Series is intended to showcase serious and focused scholarship on topical issues in one or more of these broad research areas, with an emphasis on targeted policy recommendations.
Contact for the Energy Security Initiative: Lea Rosenbohm Project Manager (202) 797-6248 [email protected]
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER i i U.S. CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD
Kenneth G. Lieberthal Kenneth Lieberthal is Senior Fellow and Director of the John L. Thornton China Center at Brookings. He is Emeritus Professor of Political Science and Business Administration at the University of Michigan. Dr. Lieberthal served as Special Assistant to the Presi- dent for National Security Affairs and Senior Director for Asia on the National Security Council from August 1998 to October 2000. He has written and edited fifteen books and monographs and authored about seventy periodical articles and chapters in books. Dr. Lieberthal has a B.A. from Dartmouth College, and two M.A.’s and a Ph.D. in Political Science from Columbia University.
The author wishes to acknowledge the generous support of the GE Foundation for this report. He also acknowledges with sincere gratitude the contributions of indi- viduals inside and outside the U.S. government who agreed to be interviewed for this report and who provided extremely helpful comments on earlier drafts of the manu- script. The Brookings Institution and the University of Michigan provided ideal en- vironments in which to write this report.
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD i i i Table of Contents
Executive Summary ...... v
Introduction ...... 1
Historic Obstacles to U .S -China. Cooperation on Clean Energy and Climate Change ...... 2
Changes Since 2009 ...... 4
U .S .-China Cooperation on Climate Change: The U .S . Political Context ...... 7
U .S .-China Summit ...... 13
Dealing with Copenhagen ...... 20
Conclusion ...... 24
Appendix I: Memorandum of Understanding to Enhance Cooperation on Climate Change, Energy and the Environment between the Government of the United States of America and the Government of the People’s Republic of China . . . 25
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER i v Executive Summary
ince the Obama administration took office, against cap and trade that are based on myths SU.S.-China cooperation on clean energy and about China’s efforts in this sphere. On balance, climate change has become one of the major is- though, it will be very difficult to pass cap and sues that is shaping the evolution of U.S.-China trade legislation and have the bill signed by the relations. This change reflects internal develop- president before Copenhagen convenes. ments in both countries, along with the looming prospect of the Copenhagen Conference in De- The United States and China signed a Memoran- cember 2009. dum of Understanding on climate change, energy, and the environment in July 2009. An “memo- Despite this sea change in the importance of the randum of understanding” is aspirational. The clean energy and climate change issues, accords two presidents, if possible, should sign a bilateral on specific cooperative efforts to date have not agreement on cooperation in clean energy at their moved much beyond the U.S.-China Ten Year November summit in Beijing. That agreement can Framework Agreement on Energy and Environ- move cooperation significantly forward if it clari- ment signed in June 2008. The remaining months fies the principles guiding cooperation, the prior- of 2009—which will witness both a presidential ities in each of five clean energy areas, and specific summit in Beijing in November and the UN Co- implementing tasking and procedures. penhagen Conference in December—are critical for translating momentum created in the first The Copenhagen summit is itself unlikely to nine months of 2009 into concrete progress. reach a global agreement on country-specific CO2 targets. Governments should therefore begin to U.S. domestic legislation on cap and trade legisla- re-frame what will constitute success at Copen- tion is an integral part of this near-term future. hagen to prevent apparent “failure” from sapping Opponents of the legislation point to potential the momentum for future negotiations. Chinese competition as part of their argument for opposing passage. China, in turn, looks at the fate In reality, Copenhagen will be highly successful of this legislation as a test of whether the United if the parties agree on the architecture of a fu- States is going to play a leading role on restrain- ture agreement, which would require addressing ing CO2 emissions. And the Obama administra- successfully a series of difficult, complex issues tion sees serious cooperation with China on clean such as transparency, capacity, verification, -en energy as helpful in mitigating the arguments forcement, and equity. Presently, even the basic
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD v approach to reaching country-specific targets has understandings that will potentially carry over not yet been settled. very effectively into the formal UN Conference of Parties negotiations. The United States and China can leverage their own cooperation on clean energy and climate Astute U.S.-China cooperation can make expec- change in several ways to promote success at Co- tations about Copenhagen more realistic and the penhagen. They can work together to re-calibrate meeting itself more likely to lay the groundwork the standards for that “success” along the lines just for a full agreement before the Kyoto Protocol ex- noted. A U.S.-China bilateral agreement on coop- pires in 2012. But it will take astute leadership at eration on clean energy can impart momentum to the highest levels in both Washington and Beijing Copenhagen, given the tremendous importance —and effective management of domestic politics of both countries in the climate change equation. in both countries—to achieve these results. The Finally, Beijing and Washington can use their in- issue could not be more important; unfortunately, fluence in other key negotiating forums such as the chances of success are at this point quite un- the Major Economies Forum to promote mutual certain.
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER v i Introduction
he year 2009 is unusually consequential significant change potentially has implications both Tin terms of the global response to climate for bilateral ties and for the global negotiations. change. Put simply, the Copenhagen meeting in December can either advance toward more effec- This paper focuses on the clean energy and cli- tive worldwide coordinated actions or highlight mate change component of U.S.-China relations. fissures and sap the momentum for a global agree- It reviews why the cooperation was so minimal ment. The roles of the United States and China before 2009 and the changes since then. It then will be influential in the run-up to Copenhagen, analyzes the politics of forging U.S.-China coop- and in this context the politics of and progress to- eration in the coming months and makes policy ward U.S.-China cooperation on clean energy and recommendations on how best to structure a climate change warrant attention. presidential level bilateral agreement on clean en- ergy cooperation. Finally, it examines the need to Until 2009 Washington and Beijing regarded glob- re-focus the goals at Copenhagen and articulates al warming as a relatively marginal issue in U.S.- how Washington and Beijing can play a critical China relations, but that is no longer the case. This role in teeing up that meeting for success.
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 1 Historic Obstacles to U.S.-China Cooperation on Clean Energy and Climate Change
n recent years both Washington and Beijing hypocritical, at best. China’s own leaders would Ihave played into the politics of clean energy have difficulty in making the case for stringent ef- in the other capital, but neither leadership has forts on the People’s Republic of China’s (PRC’s) understood this reality very well. Many Chinese part on climate change grounds, given America’s have viewed any U.S. effort to engage China on posture. Beyond this, most Chinese view the clean energy issues as simply a ploy by Washing- United States as defining what a “modern” life- ton to slow down China’s rise by burdening the style entails. As long as Americans are profligate country with new and unfair responsibilities. in their energy use, Chinese will see that as the ap- Many in Washington have seen China’s rapid propriate model to which to aspire. Not surpris- rise as a manufacturing power as morphing into ingly, China therefore until 2009 justified most something even more threatening if the United of its energy-related measures on the grounds of States were to adopt measures to put a meaning- securing energy resources around the world, not ful price on carbon while Chinese enterprises do reducing carbon emissions. not bear comparable burdens. The United States, in turn, has repeatedly pointed In addition, the George W. Bush Administration to China’s exemption, as a developing country, evinced considerable skepticism about the climate from any specific obligations under the Kyoto Pro- change issue and generally sought to deal with en- tocol to suggest that Beijing was being hypocritical ergy security issues by increasing domestic pro- as it shirked its own responsibilities on this issue. duction of fossil fuels. The Chinese viewed this as Opponents of the Kyoto Protocol created a televi- a rich, technologically advanced country failing sion commercial that showed China being cut out to take seriously its responsibilities for past car- of a map of the world with a pair of scissors, as bon emissions and failing to take meaningful ac- a voice said, “The Kyoto Protocol—it’s not glob- tions to cope with the threat of climate change. In al and it won’t work.” President George W. Bush this context, American efforts to encourage Bei- mentioned China often in explaining his admin- jing to assume greater responsibilities appeared istration’s rejection of the Kyoto Protocol in 2001.1
1 See, e.g.,
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 2 In short, each country’s posture has made the is- to forge a Ten-Tear Framework Agreement on En- sue of climate change politically more difficult for ergy and Environment with the Chinese in 2008.2 the other country’s leadership. Neither system This document played an important role in lay- took the other country’s perspectives into serious ing a foundation for the future, identifying areas account, and the basis for substantial bilateral co- for cooperation, and helping forge a bureaucratic operation has therefore remained very weak. It is consensus on the Chinese side to move ahead a tribute to the commitment of former Treasury on cooperation with the United States. Even this Secretary Henry Paulson that he was able to use Framework, though, avoided a focus on clean en- the Strategic Economic Dialogue (SED) process ergy linked to climate change.
2 Strangely, the English title for this document labels it, as indicated in the text, a “Ten-Tear Framework Agreement on Energy and Environ- ment,” but the Chinese title omits the term “Agreement” and simply calls this document a “Framework.” When the Chinese refer to this agreement, they term it a “document,” not an “agreement.” This is very unusual and implies a failure to reach a consensus in Beijing on what terminology to use. It resonates with the decision in the 1990s to adopt the name “Asia-Pacific Economic Cooperation” (APEC), without ever indicating the type of organization or body that was being named.
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 3 Changes Since January 2009
gainst the above background, significant has a necessary role to play4 to bring necessary Achange has occurred since January 2009. changes to the carbon emissions trajectory. He Perhaps most fundamental, a year ago few would regards the issue as inherently transnational and have included the issue of clean energy and climate believes the United States should play a leading change as among those shaping the U.S.-China re- role in shaping the global response to it. And lationship, but now both sides acknowledge that it he has chosen people for key positions who are has become a Tier 1 issue in U.S.-China relations. deeply knowledgeable on climate-related issues This startling change reflects significant develop- and determined to improve America’s capacity to ments on both sides. address this problem. These include Steven Chu as Secretary of Energy, John Holdren as the head President Obama’s views differ fundamentally of the Office of Science and Technology Policy, from those of his predecessor on the clean energy Todd Stern as Special Envoy for Climate Change and climate change issue. President Bush did not negotiations, Carol Browner as Energy Czar in regard climate change as very compelling, and the White House, and Lisa Jackson as head of the he trusted to technological change produced pri- Environmental Protection Agency. marily by the private sector to address the issue adequately.3 He effectively opposed having the President Obama also believes that China, along United States take on binding emissions reduc- with the United States, has a critical role to play tion obligations under multilateral regimes to im- in reducing the global trajectory on greenhouse prove its trajectory on carbon emissions. gas emissions. He has been a strong supporter of increased U.S.-China cooperation on this issue. In all of these regards, President Obama’s ten- On this as on other foreign policy issues, he has ure brings a marked change. President Obama sought to understand the sensitivities in the other regards climate change as a grave threat to the capital and how the U.S. is perceived there as part human condition and believes the government of the strategy for sculpting the U.S. approach.
3 The Bush administration established a limited government program to encourage climate change related technology development
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 4 In short, under President Obama U.S. policy has overall global temperature rise below the wide- changed very substantially toward clean energy ly-accepted 2 degrees Centigrade level is shorter and climate change domestically, globally, and in than previously thought.6 terms of engaging China. With these underlying changes since January Beijing has also shifted its position. China’s lead- 2009, U.S.-China discussions of cooperation on ers have become increasingly concerned with the clean energy and climate change have greatly ex- impact of climate change on the PRC and the panded.7 When Secretary of State Hillary Clinton measures required to reduce future damage. An visited Beijing in February 2009 on her first for- authoritative October 2008 report by Chinese sci- eign trip in her new role, she made clean energy entists made clear that China itself is one of the and climate change cooperation a centerpiece more vulnerable countries in the world to the of her agenda. Presidents Hu Jintao and Barack ravages climate change can wreak.5 In addition, Obama included the issue among their joint pri- Beijing actively seeks to develop constructive re- orities when they met at the G-20 in London in lations with the new Obama administration, and April and sketched out the future path of develop- it now recognizes that its approach to climate ment for U.S.-China relations. Energy Secretary change will be a serious factor affecting this ef- Steven Chu and Commerce Secretary Gary Locke fort. China’s leaders also have found over the past highlighted U.S.-China clean energy cooperation two years that the issue of climate change comes on their joint trip to China in July, and serious up at virtually every international meeting they lower level discussions have also taken place.8 attend. They therefore had the Ministry of For- And House Speaker Nancy Pelosi (with her del- eign Affairs establish a Climate Change Office in egation) and Senator John Kerry focused on clean order to develop better talking points for them to energy and climate change in their overlapping use on the issue. China wants to avoid becoming late May 2009 trips to China. a target of criticism at the Copenhagen meeting in December 2009. The opening plenary session of the new U.S.- China Strategic and Economic Dialogue (S&ED) More generally, scientific findings continue to on July 27, 2009, took up clean energy coopera- come out that indicate that previous estimates tion as a major topic, and the only official docu- of climate change were likely too optimistic, that ment signed by both sides at this inaugural S&ED change is accelerating beyond expectations in meeting was a Memorandum of Understand- studies as recently as two years ago, and that the ing (MOU) on U.S.-China cooperation on clean time available to take significant action to hold energy and climate change. This MOU clearly
5 Information Office of the State Council of the PRC,China’s Policies and Actions for Addressing Climate Change (Beijing: Foreign Language Press, 2008). 6 Ross Garnaut, The Garnaut Climate Change Review: Final Report (Cambridge: Cambridge University Press, 2008). Available in pdf at:
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 5 stated that cooperation on clean energy and cli- ergy and climate change. In some quarters, this mate change has become an important factor has produced concerns that the two countries in the ongoing development of U.S.-China rela- might work together to reduce the urgency of the tions.9 In addition, U.S. and Chinese counterparts global response at Copenhagen.11 But more gen- have engaged the issue at meetings of the Major erally, this has elicited agreement that U.S. and Economies Forum.10 And looking ahead, both Chinese support for measures to reduce emis- sides see this issue as one of the key topics in the sions of greenhouse gases is critical to the capac- presidential summit meeting expected in Beijing ity of the world to limit climate change. in November 2009. That summit, if managed well, might in turn bolster their respective positions at Having moved the issue of U.S.-China coopera- the Copenhagen meeting the following month. tion on clean energy and climate change to a more prominent place on both countries’ agendas, the The net results of the above activities are signifi- issues for both American and Chinese policy- cant. As noted above, cooperation on clean ener- makers now are to understand and manage the gy and climate change is now seen in both Wash- politics involved in developing cooperation, to ington and Beijing as a major issue in U.S.-China provide substance to the broad assurances of a de- relations, one that can significantly enhance the sire to cooperate, and to leverage bilateral coop- depth and stability of the relationship in the fu- eration for better outcomes in the global climate ture. In addition, the world has awakened to the change negotiations. potential for U.S.-China cooperation on clean en-
9 See Appendix 1 for the text of the MOU. 10 For information on the Major Economies Forum on Energy and Climate, see: Office of the Press Secretary, The White House. Press Release, March 28, 2009. 11 John M. Broder and James Kanter, “Despite Shift on Climate by U.S., Europe Is Wary,”New York Times (July 7, 2009):
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 6 U.S.-China Cooperation on Climate Change: The U.S. Political Context
efore turning to the politics in Washington of In this context, what the United States itself does BU.S.-China cooperation on climate change, and how it deals with China on this issue are very it bears mention that cross currents on this issue important. remain strong in Beijing. There continues to be a strong current of thought in China that views A key factor is whether President Obama will be American pressure to address climate change as able to have cap and trade legislation adopted in simply a U.S. effort to disrupt China’s rapid rise the Congress during the fall of 2009. The Presi- by convincing Beijing to impose a price on car- dent views this as important in its own right and bon emissions. In addition, at the ministerial level as providing a strong basis for the U.S. to play and below strong vested interests argue against a serious role in the negotiations for a new UN China’s taking major measures to address climate Agreement. The U.S. at Kyoto signed a protocol change. Energy supply is a matter of national se- that it then could not get ratified at home. Presi- curity, and environmental protection is a matter dent Obama wants to avoid a similar situation. of socioeconomic concern. But China remains the world’s largest coal consumer, and the size and The House of Representatives passed a cap and importance of the country’s high greenhouse gas trade bill in June 2009.12 This bill helps to make emitting steel, aluminum, cement, power genera- the case at home and abroad that things have tion and petrochemicals industries are very im- changed in Washington with regard to energy pressive. legislation. In addition, the Environmental Pro- tection Agency has made clear that it is prepared For China to make significant commitments at to use its existing statutory authority to regulate Copenhagen, therefore, the highest level national carbon emissions under the Clean Air Act if the political leadership will have to make courageous Congress fails to act to reduce the threat such decisions in the face of a system that is inherently emissions pose.13 Nevertheless, President Obama tilted strongly against such action. Such decisions rightly sees enormous value in having a bill on will be driven by overall strategic considerations. his desk for signature before Copenhagen—or
12 John M. Broder, “House Passes Bill to Address Threat of Climate Change,”New York Times (June 26, 2009):
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 7 at least far enough along that the administration in getting health care through the Senate, feels confident in what it can commit to at Copen- then the administration will be in good hagen. In lieu of this level of progress domesti- shape to promote favorable consideration of cally, the administration has to consider whether a significant cap and trade bill. If, however, taking on significant obligations at Copenhagen the health care bill increases rancor in the might actually increase opposition in the Con- Democratic ranks and leaves the president gress, with some alleging that the administration looking politically wounded, then oppo- is prepared to “give up American sovereignty.” nents (and there are many!) of cap and trade legislation will see an opening they can ex- The action on cap and trade legislation has moved ploit to prevent a good bill from becoming to the Senate. Although there as in the House the law. Before the health care effort moves con- situation is more favorable for such legislation siderably farther along, it is impossible to than it has ever been before, the obstacles to hav- know how this dimension of the politics in ing a bill on the president’s desk remain very con- the fall 2009 will play out. siderable. These take several forms. • Opponents of cap and trade may argue that First, health care reform is dominating the Senate health care reform will cost so much, es- agenda for at least the early part of the fall. Even pecially when deficits are already at record as Senator Kerry introduces the cap and trade levels, that it would be unwise to take on legislation drafted in the Environment and Public the additional massive costs that these indi- Works and other committees,14 the dominant is- viduals will contend a cap and trade bill will sue will be health care. And health care reform is impose. potentially consequential for cap and trade legis- lation in three ways. Second, between health care reform and the reces- sion, the country has not focused on clean energy • If health care reform, as expected, takes up and climate change legislation. Cap and trade is the major part of the fall, it will push the a system that is simple in theory but very com- consideration of cap and trade legislation plex in practice. Very few Americans will grasp back, potentially to the point where it can- how the system works and feel confident that not be done during 2009. Even when health they know that this will be an effective approach care reform has cleared the Congress, more- to dealing with climate change. In addition, there over, consideration of financial regulation is potential concern about market failures under may compete with cap and trade legislation such a complex system with so much money at for attention on Capitol Hill. stake, especially in the wake of the financial crisis. Even more, polls indicate that there is widespread • How President Obama handles health care awareness that climate change is an issue but very reform may prove consequential for the cap little understanding of what it is about, of the and trade effort. If the president is able to level of scientific consensus on the issue, of the mobilize popular support and demonstrate adverse consequences for American prosperity strong leadership and sharp political skills and security, and of the reasons why early action
14 Edward Luce and Sheila McNulty, “Democratic Battle Lines Separate Green-friendly and Smokestack States,” Financial Times (September 16, 2009), p. 4. All relevant committees are moving pieces of this legislation simultaneously to be packaged later by leadership. This rather unusual process is apparently intended to enlarge the buy-in across the Senate.
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 8 is necessary even if the greatest dangers are po- These concerns are reflected in the group- com tentially decades into the future.15 Put simply, the prising the so-called Gang of 16. Senator Debbie president needs to develop the capacity to educate Stabenow (D-Michigan) organized a group of her the American public on this issue in a convinc- Democratic colleagues in the 2008 climate bill de- ing way. Given the complexity of the issue and bate to insist that the scope for emissions auctions its scope, that is a very daunting task, even for as be adjusted so as to ease the burden on major effective a communicator as is President Obama. manufacturers. She has reassembled that group to Unless he is prepared to make this effort and finds try to move the 2009 legislation toward a less bur- effective means to drive the message home, even densome set of measures.18 Other groups, such as many senators who appreciate the stakes may find the American Coalition for Clean Coal Electric- that they lack voters’ support to enable them to ity, are targeting the constituents of the Gang of vote in favor of cap and trade legislation.16 16 in a massive grass roots effort in those states to oppose climate change legislation.19 This Coali- Third, the Republican Party in the Senate is pre- tion, which is organized by the coal industry, is pared to vote overwhelmingly against cap and reportedly prepared to spend as much as $40 mil- trade legislation. Some of this is based on mis- lion in its overall campaign on behalf of the coal information,17 some on principle, and some on industry in industrial states. partisan considerations. The net result is that the president has to enlist the support of nearly every China plays into the above factors in a serious Democrat to obtain the sixty votes likely needed way and therefore presents a difficult issue for the in the Senate, and that will be extremely difficult. administration. Despite the reality that China is Many Democrats come from states that are ma- taking significant measures to reduce its carbon jor coal producers or base their power generation emissions as it continues to pursue high speed overwhelmingly on coal. Many, too, represent economic growth,20 the image among many on industrial states and fear that imposing a cost on Capitol Hill is that Beijing refuses to take the clean carbon emissions will disproportionately harm energy and climate change issues seriously. This their state’s competitiveness and capacity to re- stokes fears that imposing a price on carbon emis- cover from the current recession. And some sena- sions on American firms will simply increase the tors simply believe that it is imprudent to begin competitive advantage that Chinese manufactur- to set up a system to impose a cost on carbon at ers already enjoy. At a minimum, it is argued, this a time when the economy is mired in recession. will undermine American competitiveness and
15 See “Increased Number Think Global Warming Is ‘Exaggerated’,”Gallup , March 11, 2009:
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 9 cost American jobs. Even worse, some say, it will because China does not have a climate change actually encourage American firms to shift pro- program comparable to that in the U.S. is funda- duction to China and therefore will offset most mentally misplaced.22 if not all of the carbon reductions that American laws are designed to produce. In addition, as noted above, China in reality has adopted serious measures to improve energy ef- The most popular approach to remedy this threat ficiency, develop clean technologies, mandate re- is to adopt some form of tax at the border in order newables, improve automotive mileage standards, to raise the price of imports from countries such and in other ways reduce its carbon emissions as China that do not adopt clean energy policies well below what a BAU trajectory would have comparable to America’s. There are various ways been. In most of these spheres its national level such a tax could be structured, and it may be efforts considerably exceed those Washington has possible to make it compatible with the WTO.21 adopted to date. The urge to use a border tax provision to protect American jobs is understandable and politically That said, the recent U.S. and Chinese records on attractive, especially at a time of recession. If care- CO2 mitigation are difficult to compare. In Chi- fully structured around reasonable standards and na, carbon emissions continue to climb rapidly with adequate presidential discretion, such a tax because the rate of urbanization drives carbon in theory could make sense. But given the politics intensive infrastructure development on a huge of the issue, an effort to legislate such a tax runs scale, while the U.S. has no comparable process a high risk of creating counterproductive public underway. In the United States, many localities policy. have undertaken serious carbon mitigation mea- sures, even if the national government has lagged In reality, moreover, the embedded carbon con- behind on this issue. China has significant prob- tent of Chinese exports to the U.S. is extremely lems in the capacity for rigorous implementation low. The major carbon emitting Chinese manu- of its national policies. And China is undertaking facturing sectors—cement, power generation, these measures at a state in its development when steel, aluminum, and petrochemicals—do not its per capita carbon emissions and per capita in- send their products into the American market come are both a small fraction of the comparable in any significant quantity. Most Chinese manu- figures in the U.S. facturing exports to the United States consist of products that have been assembled in China but Even though meaningful comparisons of efforts whose major components have been produced in the U.S. and China are difficult to make, it is elsewhere in Asia and imported to China for fi- clearly untrue that the U.S. is leaping ahead and nal assembly and re-export. Therefore, a border China has failed to take the issues of clean energy tax that discriminates against Chinese exports on and climate change seriously. The reality is that the basis that they have a competitive advantage both countries have a long way to go to move
21 See Frankel, Jeffrey. “Global Environmental Policy and Global Trade Policy,” Discussion Paper 08-14, Harvard Project on International Climate Agreements, Belfer Center for Science and International Affairs, Harvard Kennedy School, October 2008, available in .pdf at: http://www.< ft.com/cms/s/0/d9d8ad2e-61e9-11de-9e03-00144feabdc0.html?nclick_check=1>, and “Trade and Climate - A report by the United Nations Environment Programme and the World Trade Organization,” The United Nations Environment Programme and the World Trade Organiza- tion (June 2009), available in .pdf at:
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 1 0 significantly to low carbon growth paths. Neither To move its own cap and trade agenda forward, is in a position to declare that the other is not the administration would like to be able to point making a comparable effort. to the serious prospect of clean energy and cli- mate change cooperation with China in order to China, therefore, will deeply resent any tax at the make the case that: 1) China is doing a lot to com- border that is based on the assertion that the U.S. bat climate change and is not simply trying to free is doing what it should and China is shirking its ride on the efforts of others; 2) the U.S. and China responsibilities.23 This would especially rankle in can do a great deal together that will redound to Chinese eyes because the United States is so much the benefit of both sides even as such cooperation richer than is China and so much more economi- improves efforts to combat climate change; and 3) cally developed in every way. A border tax would, if the U.S. does not adopt cap and trade legislation therefore, most likely stoke Chinese suspicions or adds burdensome border adjustment tax provi- that America is using clean energy and climate sions to it, then the advantages of U.S.-China co- change as excuses to impose protectionist mea- operation will be lost and the capacity for the U.S. sures and cut China off from a lucrative market. to lead in the global effort will also be reduced. The Chinese would, under those circumstances, But these arguments rely on solid progress in de- look for ways to counter this new threat to their veloping U.S.-China cooperation on clean energy development. A U.S. border adjustment tax would and climate change. And the major opportunity most likely lead Beijing to back away from bilat- to highlight that cooperation and to codify it in a eral U.S.-China cooperation on clean energy and document that specifies the mutual commitments climate change and to become more determined will come at the U.S.-China presidential summit to press a “developing country” agenda in the in Beijing that will take place in November 2009. global climate change talks. As the cap and trade legislative effort gets -un Beijing also harbors doubts about whether the der way, the administration thus can seek to U.S. is really going to adopt clean energy legisla- treat China as an opportunity. There is the pros- tion. It suspects that America may be using the pect, through serious cooperation, of involving promise of such action to lure China into taking American firms in the development of effective on onerous commitments to curb carbon emis- measures to combat climate change. There is at sions, even as the U.S. then fails to muster the the same time the prospect of strengthening the political will to do its share. There is, therefore, a hands of both countries in promoting progress in conundrum with which the administration must the global climate change talks. To make China wrestle—rapid action on cap and trade legislation into an opportunity, though, progress in the bilat- that includes a border adjustment tax makes clean eral talks must enable the administration to make energy and climate change cooperation with Chi- the case for cooperation candidly and factually, as na more difficult, but without a clear prospect of there will be many skeptics on the Hill seeking to serious cap and trade legislation the Chinese are dismiss these arguments as wishful thinking. skittish about agreeing to significant U.S.-China cooperation or making serious commitments in Inevitably, part of the debate on Capitol Hill will Copenhagen. revolve around various ways of seeing China as
23 For Chinese official opposition to a U.S. border tax adjustment, see:http://news.bbc.co.uk/chinese/simp/hi/newsid_7950000/new < - sid_7951900/7951978.stm>, and
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 1 1 a threat on the climate change issue. In its bald- in selected areas where such cooperation makes est form, this argument stipulates that increases especially good sense in order to develop new in China’s greenhouse gas emissions will more technologies and business models from which than offset any reductions that American actions both sides can profit. will produce, thus leaving America and the world worse off while China free rides on global efforts. Some inevitably will point to Chinese practices that amount to protection of their infant clean To be most effective, the administration is well energy industries and state-assisted efforts to un- advised to make the case that China not only is in- dermine foreign competition and claim market vesting heavily to reduce its own carbon footprint share abroad and will use this to bolster the case but also is developing the industries and technol- for countervailing American measures.25 These ogies necessary to become a major winner as the Chinese tendencies are clearly evident and from world places increasing value on green technol- an American perspective can lead to very unde- ogy. Recent Chinese investments in wind, solar, sirable outcomes. This makes it all the more im- and nuclear are very impressive,24 and the admin- portant that the U.S. develop serious cooperative istration can argue that it is critical for cap and efforts with China in the clean energy and climate trade legislation to incentivize American firms to change fields soon so as to shift the Chinese tra- increase their efforts in clean energy if America jectory in a more constructive direction. Given is not to lose out in the competitive world of a the likely importance of clean technology globally clean energy future. A potentially helpful variant in the years and decades to come, this may prove of the argument would point to the opportunities to be a critical moment in which to set things for American and Chinese firms to work together onto a better course.
24 Investment in nuclear (71.85%) and wind power (88.10%) soared in 2008, while investment in coal-fire plants declined year-on-year: “China’s energy sector rises to global economic challenge,” People’s Daily (February 16, 2009):
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 1 2 U.S.-China Summit
gainst this background, Presidents Barack In addition, such an agreement could provide im- AObama and Hu Jintao have agreed to hold a petus both to the American effort to put a cap and summit in Beijing in the latter half of 2009. That trade system into law and to the U.S. and China as meeting is expected to occur around mid Novem- they prepare for the Copenhagen meeting. ber as part of the President’s trip to Asia to par- ticipate in the APEC Leaders Meeting. A presi- As noted above, the U.S. and China signed a Ten- dential summit is an action forcing event that, if Year Framework Agreement on Energy and En- used astutely, can advance significantly the cause vironment at the Strategic Economic Dialogue of U.S.-China cooperation on clean energy and (SED) in June 2008.27 This Framework specified climate change. Of note, this summit is likely to significant areas for potential U.S.-China coopera- take place less than a month before the Copenha- tion. Given the Bush Administration’s disinterest gen meeting. in climate change, the document never mentions that issue. Indeed, “clean energy” itself was added Although Presidents Obama and Hu meet a num- as an area of cooperation only during the final SED ber of times a year,26 a formal stand-alone summit meeting in December 2008. At that point, exten- is unique. A summit entails especially extensive sive discussions took place on follow-up efforts. planning and interaction at the staff levels for both leaders, and almost always both sides seek Because the Bush White House did not agree on to produce “deliverables”—specific agreements the importance of the clean energy and climate that demonstrate the progress that is being made change issues in general, the discussion of coop- in the relationship. An agreement on U.S.-China eration on energy and the environment took place cooperation on clean energy would fit very well under the somewhat peculiar aegis of the SED with the goals of this summit in demonstrating led by the Treasury Department. In addition, the that the United States and China are effectively change in U.S. administrations in January 2009 coming to grips with finding significant ways to unavoidably disrupted follow-up efforts to imple- cooperate on a truly global issue, climate change. ment the Ten-Year Framework Agreement.
26 In 2009, these include meetings associated with gatherings of the G-20, the G-8 (which China attends as one of the “plus” countries), the APEC Leaders Meeting, and the UN General Assembly opening in September. 27 Details of the agreement available at:
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 1 3 The Ten-Year Framework nevertheless served an the July 2009 inaugural S&ED meeting and oc- important role. Treasury Secretary Henry Paulson cupied much of the time of the respective staffs.28 attached enormous importance to climate change The final compromise was to take up the clean and worked hard to develop U.S.-China coopera- energy and climate change issue in the opening tion around that issue. The climate change issue plenary session, when all four co-chairs would itself never fully engaged either White House or participate in the discussion. In the ensuing twen- Chinese enthusiasm, but the effort to finalize the ty-four hours the two sides finalized agreement framework nevertheless played a very important on a Memorandum of Understanding to Enhance role on the Chinese side. Within Beijing, the pres- Cooperation on Climate Change, Energy and the sure to put this together produced a serious pro- Environment,29 which was signed on July 28th. cess of consensus building that forged the capac- ity to sign this rather wide-ranging document. It This MOU notes specifically that, “Cooperation on produced a similar interagency process in the U.S. climate change, clean and efficient energy and envi- ronmental protection can serve as a pillar of the bi- The new Obama administration from the start re- lateral relationship, build mutual trust and respect, garded clean energy and climate change as very and lay the foundation for constructive engagement high priority issues, but there have been inevita- between the United States and China for years to ble hiccups as the new administration has sought come, while also contributing to multilateral coop- to engage with the Chinese side effectively on bi- eration.” It calls for cooperation, inter alia, on en- lateral cooperation. ergy conservation and energy efficiency, renewable energy, cleaner uses of coal, carbon capture and One issue has concerned how to handle the clean storage, sustainable transportation (including elec- energy and climate change issue within the suc- tric vehicles), modernization of the electrical grid, cessor to the SED, the new Strategic and Econom- joint research and development of clean energy ic Dialogue that is co-chaired on the U.S. side by technologies, and combating climate change and the Secretaries of State and Treasury and on the promoting low-carbon economic growth. Chinese side by Vice Premier Wang Qishan and State Councilor Dai Bingguo. Within the U.S. The problem with the MOU is not in its scope or side, Secretary of State Clinton is strongly com- ambition but rather in the fact that it is neither an mitted to playing a leading role in America’s in- agreement nor a partnership. In Chinese practice, ternational diplomacy around clean energy and the term “MOU” is employed to indicate that both climate change, while Treasury Secretary Geith- parties consider an issue of sufficient importance ner does not have the passion for these issues that that they agree to discuss it intensively in order his predecessor brought to bear. On the Chinese to ascertain whether they can reach an agreement side, State Councilor Dai is Secretary Clinton’s on how to proceed with it. This MOU is, there- functional counterpart in the S&ED, but it is Vice fore, aspirational. It does not in itself command Premier Wang who forged the 2008 consensus authority among the many pertinent bureau- and who remains highly engaged with this issue. cratic actors on the Chinese side. The November presidential summit provides the opportunity to This lack of parallelism created significant prob- transition from an aspirational document to an lems in coordination that vexed preparations for action-focused agreement.
28 On the Chinese side this was especially difficult, as China does not normally assign two leaders of basically equal rank to co-lead one activity. 29 See Appendix I.
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 1 4 In both countries the energy-related policy com- counters that China’s recent emissions trajectory munity is more fully defined than is the broader indicates that China will be the largest cumulative and more diffuse climate change community. Co- historical emitter if the time frame is extended operation focused on clean energy, therefore, can forward to 2040, that China’s total national emis- effectively target climate change while potentially sions are now the largest in the world, and that the avoiding some of the controversies and defini- current U.S. infrastructure is not energy efficient tional problems that an explicit broader climate and will be more expensive to retrofit or replace change objective might entail.30 than would be the case if the U.S. were starting from scratch now. Preparation for a presidential summit agreement on clean energy requires reaching agreement on The reality is that the facts adduced by each side three dimensions: guiding principles, substan- are valid, and each is presenting the facts that tive priorities, and implementation mechanisms. most effectively limit its responsibilities. Neither Work on all of this must begin in the early fall, as leadership is able to accept the other side’s per- in China a consensus must be reached at the top spective as “the correct” approach, and thus mak- of the system before President Hu can sign such ing such acceptance a condition of serious coop- an agreement. The advantage is that, once the eration is a formula for failure. Rather, both sides agreement is signed, it should carry substantial should agree that as a matter of principle: weight in Beijing. • Each will continue to articulate its own prin- Principles are always very important in an agree- cipled view; ment with the Chinese. The agreement negotiated • Each accepts that the other side’s facts are for the November summit should state clearly also valid; and that it builds directly on the Ten-Year Framework. • Both agree that, in view of the pressing need Given the effort made internally in Beijing to se- for serious cooperation, they will set aside cure a consensus in favor of that earlier docu- differences and move ahead on cooperative ment, appearing to neglect that consensus now efforts that present win-win opportunities. risks undermining the earlier consensus and cre- ating a very unfavorable dynamic. In short, a U.S.-China bilateral agreement on clean energy cooperation should be feasible de- It is also important for the U.S. and China to agree spite the disagreements on principles that have that the objective situation requires effective co- made the global talks so difficult. The above type operation, even if there are ongoing differences of consensus in the U.S.-China bilateral agree- on the traditional issues of principle that have ment may also help negotiators in the global talks divided the industrialized from the developing find their way forward. countries. These differences are briefly asfol- lows. Beijing focuses on the facts that the U.S. has In addition, the U.S. and China should pledge overall since 1900 emitted more carbon dioxide to reduce barriers that inhibit investment in than has any other country, U.S. per capita emis- clean energy in either direction and to seek to sions remain nearly five times China’s per capita harmonize respective regulatory provisions and emissions, and the U.S. is already an urban so- standards. These can be important measures for ciety with mature urban infrastructure. The U.S. permitting new products and processes to gain
30 Lieberthal and Sandalow, op cit.
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 1 5 scale more rapidly by growing in both countries’ the popular imagination and begins to build markets. Scale is critical to bringing the cost of a supportive political base in each country. new breakthroughs down to a level that can meet market tests. Moving from the above guidelines to identifying specifically what should be included in a bilat- Reaching agreement on substantive priorities re- eral agreement will require both conceptual and quires intensive, practical consultations. Each practical discussions among pertinent national country has strong interest groups and its own level government officials and, in linked fashion, concerns. But a presidential agreement on clean among the scientists, corporations, local officials, energy cooperation must establish initial priori- and NGOs of both sides. With time short, both ties if it is to amount to more than a feel-good governments should accord priority to organiz- document that provides too little direction to mo- ing those discussions and moving them forward. tivate serious action. Almost certainly, many of the activities supported by the presidential agreement will involve various A presidential level agreement, though, cannot types of public-private partnerships with both na- go into serious detail on specific projects and tional and local governments variously involved details. Substantive priorities should, therefore, on both sides. assume the form of identifying some particular areas of initiative and should set up a process that It is beyond the scope of this paper to identify will move quickly to turn those identified pri- particular initiatives that should be incorporated orities into concrete programs and projects. The into a presidential agreement. The following dis- key considerations in negotiating the priorities cussion is intended simply to highlight the reality should include: that efforts that fit within the above guidelines are quite feasible. • Identifying a key priority in each of five ar- eas: coal, transportation, renewables, energy Coal: Both the United States and China are coal efficiency, and joint R&D. countries. While each aspires to reduce substan- tially its reliance on coal in the future, the reality • Prioritizing initiatives where the U.S. and is that coal will remain a critical source of power China bring complementary capabilities to in each country for many years—and likely many the table so that the initial major efforts can decades—to come. There is no such thing as “clean meet the test of being potentially significant coal,” but there are approaches to reducing carbon win-win cooperative opportunities. dioxide emissions from coal that hold promise of substantially reducing the climate change impact • Including among these at least one priority of coal-fired power. in which the U.S., without a major expendi- ture of funds, can contribute significantly to Carbon capture and sequestration (CCS) is one Chinese capabilities that it is in the interests of the approaches that holds promise. CCS entails
of both countries that China develop. separating out CO2 emissions, capturing that CO2 stream, and then pumping it into the ground for • Supporting at least one major program that permanent storage. Within this broad framework will generate a sense of excitement among there are a very large number of questions that re-
the publics in both countries so that U.S.- main unanswered. Where is it safe to store CO2
China clean energy cooperation captures underground? What uses (such as utilizing CO2
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 1 6 to pressure oil out of the ground) can be made of potential value of cooperative projects to develop some of that CO2? How can costs be driven down and deploy carbon capture and sequestration. to the point that this approach imposes a feasible And cooperative public-private partnerships can economic burden? What kinds of engineering facilitate the effort to raise funds, develop and problems will need to be resolved? How much share intellectual property, scale up, and drive will it cost to convert a coal fired power plant down costs to the point where this technology be- so that its CO2 emissions can be captured and comes economically viable. stored? How much does this vary according to the technology used in the power plant involved? There are, of course, uncertainties around carbon capture and sequestration, including questions There are various experiments in carbon capture as to whether it will ever be economically viable, and sequestration that have begun in China, the whether it will take such a long time to deploy at a U.S., and Europe, but none of these has been at significant scale that it should not be a priority ap- full commercial scale.31 In addition, a great many proach, and whether it will prove technologically experiments will be required in order to gain the feasible. This example is, therefore, presented sim- necessary experience to cope with each of the ply to illustrate that there are important areas in above questions and more. For example, this ap- which U.S.-China capabilities are highly comple- proach to reducing greenhouse gas emissions can mentary. Whether this particular approach should be highly sensitive to the specific geology of the be a top priority requires serious discussions be- location chosen for sequestering the CO2. tween the two governments. At this point, it ap- pears the U.S. side is more enthusiastic about the U.S.-China cooperation to develop carbon cap- potential for CCS than is the Chinese side. ture and sequestration capability makes great sense because the two sides bring complemen- Energy Efficiency: Energy efficiency provides an tary capabilities to the effort. The American side arena in which the U.S. can contribute to Chinese to date has done more theoretical work and gar- capabilities at relatively modest cost. Under the nered more technical data. But in the U.S., it takes Ten Year Framework the U.S. Department of En- an average of six years to clear the regulatory hur- ergy began a specific program to help China’s one dles to construct a carbon capture and sequestra- thousand largest enterprises to do energy audits tion test bed facility, while the comparable period and analyze how to improve energy efficiency.32 in China is roughly two years. The Chinese side While well intentioned, this program has made also has advantages in terms of being able to scale very slow progress to date. Presidential endorse- up operations at less cost than is the case in the ment might help move it onto a faster track. U.S., while U.S.-China cooperation will permit There is considerable potential for important re- both sides to adopt regulatory approaches that sults if the program can be scaled up. This is an will make it far easier to achieve scale once initial area in which U.S. expertise is well-developed and technologies have been developed. Complemen- technology transfer can greatly facilitate improve- tary engineering capabilities further enhance the ments in China’s energy efficiency effort. It might
31 For examples of projects in the U.S., Europe, and China, see:
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 1 7 also generate demand that American companies incorporate aspects of a clean energy corps into are well positioned to meet in such areas as sen- their programming. There would not be a single sors and other types of instrumentation. approach to what the clean energy corps does. Rather, each participating institution would come An extension of this program might target China’s up with its own activities to meet overall goals. over 200 local energy offices. These have been- es And while it would be infeasible to have a mil- tablished to help localities improve their energy lion young people travel from one country to the efficiency. But virtually none of these offices has other, through digital/electronic programming personnel who have sufficient training in per- and other means it should be possible to actively forming energy audits. The United States has rela- involve a very large number of young people over tively advanced techniques for doing such audits. the course of a few years.34 It might be highly cost effective for America to provide training to personnel from each of Chi- Any such program would, of course, have to find na’s local energy offices. China currently builds ways to manage numerous bureaucratic obstacles. roughly two billion square meters of floor space But this is an idea that could tap into the idealism per year—about half of the world’s total. Serious of the youths of both countries and become an in- improvements in the capabilities of local regula- spiring example of cooperation among members tors to determine the energy efficiency of new of the younger generation in the world’s two larg- buildings could have an important impact on en- est greenhouse gas emitting countries in order to ergy efficiency and on greenhouse gas emissions.33 reduce the dangers of future climate change.
Green Energy Corps: There are various types of As noted above, a presidential level agreement can programs that can potentially tap the popular specify agreed-upon principles and articulate key imagination in both counties. One, for example, priorities, but it is critically important that it also would be to develop a bilateral Green Energy set up procedures to assure prompt and serious fol- Corps, comprised of young people from both low up. This requires on each side an interagen- countries who would do a period of national ser- cy group specially designated to implement the vice by working together in teams to do projects agreement, to consult intensively with the compa- such as retrofitting buildings to improve their en- rable implementation group on the other side, and ergy efficiency or providing technical assistance to report back regularly to the respective president to local governments, NGOs, and businesses on progress and recommendations. The S&ED in to improve their energy outcomes. Such teams July 2009 established such groups to oversee clean could be deployed in both countries or even in energy cooperation in both countries. On the U.S. third countries. Many existing programs—such side, this is led jointly by the Secretaries of State as the International YMCA, Sister City program, and Energy, while on the Chinese side it is led by AFS, Fulbright and National Science Founda- the NDRC. Either these bodies or specially-des- tion—could potentially provide platforms for ignated subgroups of them should be tasked with various component parts of the Clean Energy following up the presidential agreement and issu- Corps effort by incentivizing them to find ways to ing regular reports on implementation.
33 Barbara Finamore, “Four ways the U.S. and China can start cooperating now to reduce emissions and tackle climate change together,” Natu- ral Resources Defense Council – Switchboard website, August 21, 2009:
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 1 8 Both presidents must, of course, also pledge to progress in moving to a cleaner energy future. It put resources behind their commitment and must will embed clean energy cooperation in the heart make clear that this agreement is an important of the U.S.-China relationship and thereby give pillar in U.S.-China relations and thus must com- both countries increased reasons to continue to mand serious attention. pursue this effort. And it will increase hope in the rest of the world that the major players are There is a potentially important issue in specifying becoming serious about rising to the challenge how this U.S.-China agreement on clean energy of climate change, thereby potentially increasing cooperation relates to other bilateral and multi- the potential for cooperation among other coun- lateral efforts on clean energy and climate change tries. At the same time, it is important for both in which the U.S. and China respectively are en- Washington and Beijing to make clear that their gaged. There is no question that, as the world’s bilateral cooperation does not come at the cost of two largest greenhouse gas emitters, the United full cooperation with others,35 and indeed that ac- States and China can do a great deal of good if tivities under their agreement will welcome par- they can initiate serious cooperation on clean en- ticipation by others wherever it is advantageous ergy. This will pave the way to faster substantive to the goals of the program to have this.
35 The Chinese, for example, already have cooperative projects with countries in the EU, and with Japan, Singapore, and others. For China-EU cooperation on climate change and energy issues, see:
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 1 9 Dealing with Compenhagen
he Copenhagen meeting in December 2009 volume of greenhouse gases historically—a Twill bring together representatives of 192 highly pertinent fact, given that such gases countries to try to agree on a successor regime to can remain in the atmosphere for a cen- the Kyoto Protocol, which expires in 2012.36 This tury—the populations most affected are meeting is extremely important because a global typically from countries that emit the lowest scientific consensus points to the need for very levels of greenhouse gases. substantial efforts to reduce greenhouse gas emis- sions worldwide starting within a few years, lest the • Equity issues are made more complex by con- costs and risks become unmanageable if countries sideration not only of national levels of green- delay. But climate change has all the attributes that house gas emissions but also of per capita make such a problem difficult to address. emissions that to a fair extent correlate with standards of living. • Reducing greenhouse gas emissions is a clas- sic collective action issue: it is in the interest All of these characteristics make achieving a glob- of every country for every other country to al agreement on how to move the world to a low take serious measures to reduce its green- carbon path of development ineffably difficult. house gas emissions while doing relatively little itself. Free rider effects are very salient With these formidable hurdles to overcome, the to this issue. strategy for negotiating to a global agreement be- comes crucially important. As of September 2009 • The costs of measures to reduce greenhouse there is serious reason to worry that Copenhagen gas emissions are generally concrete and im- will be seen as the type of failure that sets back— mediate, but the impacts of climate change perhaps fatally—the effort to put a global agree- are generally long-term and, in popular dis- ment together. course, disputed. The initial hope for Copenhagen was that by • Even though it is the most industrialized the end of the conference the participant coun- countries that have emitted that greatest tries would have agreed on targets for carbon
36 Website of the United Nations Climate Change Conference:
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 2 0 emissions. While some still talk of having all if it has not yet passed cap and trade legislation countries take on targets for absolute reductions domestically. The Obama administration is very in greenhouse gas emissions, most of the rheto- sensitive to the reality that the Clinton adminis- ric now assumes that the industrialized countries tration erred in agreeing to targets at Kyoto that should take on such targets, while the developing the White House could not then convince the countries should commit to reducing emissions Congress to accept. Indeed, the commitments significantly below what they would have been made at Kyoto stoked anger on Capitol Hill that had current trajectories continued (the BAU mod- arguably made ratification of the Kyoto Proto- el), with the notion that at some future point they col even less likely. As noted above, with cap and would agree to absolute reductions in emissions.37 trade legislation a major objective for late 2009, the administration will likely prove hesitant to There are endless arguments about the baseline take on specific targets at Copenhagen unless that against which reductions should be measured. legislation is already passed at home—a prospect The European Union (EU), for example encour- that is at best uncertain. ages the use of 1990 as the baseline year. The economic changes resulting from the collapse of It is, in reality, a mistake to seek final commit- communism in Europe in the 1990s themselves ments on targets at Copenhagen, as there is too produced major reductions in greenhouse gas much that must be sorted out before any such set emissions, all of which the EU can take credit for of target commitments would be meaningful. In- with a 1990 baseline.38 The United States, by con- deed, it is sobering to consider the array of issues trast, seeks 2005 as the baseline year in order to that must be addressed to build a climate change put everyone on a more truly comparable basis.39 global architecture, beyond the issue of individual The reality is that every country will promote the country targets. base year that makes itself look best, but in fact all of this posturing unfortunately tends to obscure To identify but a few key concerns: the fact that the only number that really counts is 2—the number of degrees Centigrade many • How will actual greenhouse gas emissions scientists have concluded the global average tem- be measured by each country? Will this rely perature can warm up (as against pre-industrial on national reporting alone? If so, how will levels) before possibly triggering catastrophic countries that lack the technical capacity changes in the climate. to reach such determinations be treated? If there are international inspection mecha- The issue of targets is complex, and there appears nisms, will they apply equally to all coun- to be almost no possibility that agreement can be tries, regardless of their levels of economic reached by late December on specific targets that development, institutional and technical ca- each country will assume. Even though, for ex- pacities, and political systems? ample, the Obama administration wants to take a leadership role at Copenhagen, the United States • What enforcement mechanisms will be put will have a hard time agreeing to specific targets into place to motivate countries to take their
37 See Jake Schmidt, “Texting Copenhagen: Draft Negotiating Text Proposed for Copenhagen Agreement (Part 1),” Natural Resources Defense Council – Switchboard website, May 28, 2009:
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 2 1 own targets seriously? How effectively can Organization, which has had long experience they be deployed, and what processes will in dealing with trade-related IPR? In short, be necessary in order to initiate enforce- much work remains to be done to reach ment actions? agreement on the most effective scope for the new UN framework agreement to take. • How should national targets be developed? Should they be the result of multilateral ne- • Given stark differences in wealth, capabili- gotiations or should they amount to inter- ties, and emissions, how should issues of eq- national registration of each country’s effort uity be taken into account, and what metrics to develop its own national program?40 If the should be utilized to address equity issues? latter, how to develop incentives to encour- age countries to take on serious national re- • How much of the pre-Copenhagen negotia- sponsibilities? tion process should be done in the formal set of meetings under UN auspices to pre- • Should the new agreement maintain the dis- pare for Copenhagen and how much should tinction between developing and developed be shifted to other forums? The Copenha- countries that is built into the Kyoto Pro- gen process brings in nearly 200 countries tocol? If so, how to account for the reality and automatically invokes all of the formu- that, for example, China and Africa have al- las and history of Bali and other prepara- most nothing in common when it comes to tory meetings. This is both cumbersome emissions of greenhouse gases and to their and unwieldy. Arguably, significant parts respective capacities for climate change ad- of the negotiation should take place among aptation and mitigation measures? the relatively small group of countries—un- der twenty—that cumulatively produce well • How broad should be the scope of issues over 80 percent of global emissions. That that a new UN agreement seeks to encom- suggests the value of pertinent talks within pass? Almost certainly any new agreement the framework of the Group of 20 and of the will include some type of funding for adapta- Major Economies Forum. tion and mitigation provided by the wealthier countries. But is the best vehicle for manag- Copenhagen should thus seek to reach agreement ing these funds a new UN-based architecture on the architecture of a global agreement and on or would the World Bank or a creation of the the process by which targets will be developed G-20 be better able to handle this? Intellectu- over the ensuing 1-2 years. al property rights (IPR) are a potentially criti- cal issue, given the important role that tech- With all these uncertainties and conundrums, nology development and transfer will play in U.S.-China cooperation can play three very im- the battle to contain global climate change. portant roles. Should a new UN framework agreement try to manage the IPR issue or would this First, as of the time of this writing in mid Septem- be better handled through the World Trade ber 2009 many governments are well aware that
40 See the recommendations of Australia and of the Republic of Korea at the Ad Hoc Working Group on Long-term Cooperative Action Under the Convention, United Nations Framework Convention on Climate Change, Sixth session, Bonn, 1–12 June 2009, pp. 3 and 78.
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 2 2 Copenhagen should not be judged on the basis of Copenhagen. The U.S. and China produce more targets, but no country has been willing to state than 40% of total global greenhouse gas emissions, this publicly. Each presumably fears being criti- and each has been widely viewed as underper- cized for backing away from an ambitious target- forming in terms of addressing the emissions issue. centered approach. This reticence comes at po- If these two big players highlight the importance of tentially serious cost because it means that global clean energy cooperation at the presidential sum- media continue to report overwhelmingly on the mit and demonstrate through a serious bilateral issue of targets and to largely ignore the other agreement that they can deal with each other de- important questions raised above. It is critical, spite the problems that have plagued cooperation therefore, for some key governments to begin to between industrialized and developing countries, brief prominent media on the realities concerning this can give an enormous psychological boost to Copenhagen and to make the case to these media the global mindset leading into Copenhagen. It is that real success should be measured by the extent often said that without the U.S. and China, there to which Copenhagen is able to produce agree- can be no effective global agreement. If the U.S. and ment on the architecture of a final climate regime China make clean energy cooperation a highlight and the process for getting to targets instead of on of their relationship, then, that will also give them specific targets. increased standing at the global talks and, very likely, make other participants feel more confident The United States and China can play a vital role that such talks can potentially lead to success. in this effort, and each is more likely to take the necessary initiatives if it has agreed with the other Finally, as two key players in both the G-20 and that both will move simultaneously on this. If this the Major Economies Forum, the U.S. and China effort to shift media expectations of Copenhagen can help those forums advance the state of negoti- succeeds, it becomes far more likely that what is ations outside of the more cumbersome UN Con- in reality an effective Copenhagen meeting will ference of Parties (COP) meetings. The G-20 and be judged a success and will build momentum to- the Major Economies Forum cannot, of course, ward a final agreement—instead of its being cari- reach formal agreements that substitute for the ne- catured as a failure and taken as evidence that a gotiations at the COP meetings. But serious talks global agreement is almost impossibly difficult to among the major greenhouse gas emitters at these achieve. alternative forums—especially in view of the fact that these forums include the major developed Second, a U.S.-China bilateral agreement on and developing countries—can produce mutual clean energy cooperation at the presidential sum- understandings that will potentially carry over mit in November can provide serious impetus to very effectively into the formal COP negotiations.
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 2 3 Conclusion
n view of the above complications, it is difficult As indicated above, astute U.S.-China coopera- Ito be very optimistic about making adequate tion can make expectations about Copenhagen progress on climate change during the remainder more realistic and the meeting itself more likely of 2009. U.S.-China bilateral cooperation should to lay the groundwork for an eventual full agree- be the easier task. The number of players is small, ment. But it will take astute leadership at the both sides see potentially welcome side benefits in highest levels in both Washington and Beijing— terms of strengthening their overall relationship, and effective management of domestic politics in and it should be possible to focus in particular on both countries—to achieve these results. The is- those activities that clearly are beneficial to both sue could not be more important; unfortunately, sides. The global talks enjoy none of these advan- the chances of success are at this point quite un- tages and are in addition weighed down by larger certain. political considerations that revolve around both the negotiating history and the relationship be- tween developed and developing countries.
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 24 Appendix I
Memorandum of Understanding to Enhance Cooperation on Climate Change, Energy and the Environment between the Government of the United States of America and the Government of the People’s Republic of China July 28, 2009
The Government of the United States of Ameri- change, promote clean and efficient energy, pro- ca and the Government of the People’s Republic tect the environment and natural resources, and of China (hereinafter referred to as “the Partici- support environmentally sustainable and low- pants”), recognize the following: carbon economic growth. Both countries commit to respond vigorously to Climate change, clean and efficient energy and the challenges of energy security, climate change environmental protection are among the greatest and environmental protection through ambitious challenges facing the United States and China. domestic action and international cooperation.
Cooperation between the United States and Chi- Toward this end, both countries intend to transi- na is critical to enhancing energy security, com- tion to a low-carbon economy, carry out policy bating climate change, and protecting the envi- dialogue and cooperate on capacity building and ronment and natural resources through pollution research, development and deployment of cli- control and other measures. mate-friendly technology.
Cooperation on climate change, clean and effi- Both countries resolve to pursue areas of coop- cient energy and environmental protection can eration where joint expertise, resources, research serve as a pillar of the bilateral relationship, build capacity and combined market size can acceler- mutual trust and respect, and lay the foundation ate progress towards mutual goals. These include, for constructive engagement between the United but are not limited to: States and China for years to come, while also contributing to multilateral cooperation. 1. Energy conservation and energy efficiency 2. Renewable energy The Participants have therefore reached the fol- 3. Cleaner uses of coal, and carbon capture lowing understandings: and storage 4. Sustainable transportation, including elec- I. Purpose tric vehicles 5. Modernization of the electrical grid The purpose of this Memorandum of Under- 6. Joint research and development of clean standing (MOU) is to strengthen and coordinate energy technologies our respective efforts to combat global climate 7. Clean air
The U.S.-China Clean E nergy Cooperat i o n : T h e R o a d A h e a d 2 5 8. Clean water Both sides also recognize the fruitful work 9. Natural resource conservation, e.g. pro- of the TYF Joint Working Group in meeting tection of wetlands and nature reserves the goals of this MOU and are committed to 10. Combating climate change and promot- maintaining this effective working mecha- ing low-carbon economic growth nism. As is defined by the TYF, the Joint Working Group is composed of officials at the Wherever possible, cooperation should seek to Assistant Secretary-level for the United States include expertise from all sectors of society and and at the Director General-level for China. provide incentives for engagement at the sub-na- The Joint Working Group is co-chaired by tional level as well as by the business and academ- the Department of State and Department of ic sectors and non-governmental organizations. Energy on the U.S. side and by the National Development and Reform Commission on II. Implementation the Chinese side.
This MOU is to be co-chaired by the Department B. Climate Change Policy Dialogue and Coop- of State and Department of Energy on the U.S. eration side and the National Development and Reform Commission on the Chinese side. The Partici- The Participants have decided to establish pants intend to hold regular ministerial consulta- Climate Change Policy Dialogue and Coop- tions to deepen mutual understanding and pro- eration as a platform for the United States and mote and guide bilateral cooperation on climate China to address global climate change and to change, clean and efficient energy and environ- identify and resolve areas of concern. mental protection through a range of mecha- nisms, including: Consistent with equity and their common but differentiated responsibilities, and respective A. Ten Year Cooperation Framework on Energy capabilities, the United States and China rec- and Environment ognize they have a very important role in com- bating climate change. The United States and The Participants recognize the ongoing impor- China will work together to further promote tance of the Framework for Ten Year Coop- the full, effective and sustained implementa- eration on Energy and Environment (“TYF”) tion of the United Nations Framework Conven- dated June 18, 2008 in facilitating practical tion on Climate Change. cooperation between the two countries in the areas of energy and environment. Both sides The Participants concur that their Climate are committed to implementing all five exist- Change Policy Dialogue and Cooperation ing action plans and to expanding the work of should promote (i) discussion and exchange the TYF through new action plans. of views on domestic strategies and policies for addressing climate change; (ii) practi- The Participants also recognize the importance cal solutions for promoting the transition to of and are committed to strengthening the Eco- low-carbon economies; (iii) successful inter- Partnerships initiative under the TYF in promot- national negotiations on climate change; (iv) ing sub-national cooperation and public-private joint research, development, deployment, partnerships to meet climate change, clean and and transfer, as mutually agreed, of climate- efficient energy, and environmental goals. friendly technologies; (v) cooperation on
ENERGY SECURITY INITIATIVE JOHN L. THORNTON CHINA CENTER 2 6 specific projects; (vi) adaptation to climate C. Other Mechanisms for Cooperation change; (vii) capacity building and the raising of public awareness; and (viii) pragmatic co- New initiatives, frameworks or other mecha- operation on climate change between cities, nisms for cooperation intended to achieve the universities, provinces and states of the two goals of this MOU may be established with the countries. mutual consent of both countries. Existing bi- lateral efforts may also be included as part of The Participants intend to hold consultations the cooperation described in this MOU, with between representatives of the two countries’ such mutual consent. leaders on a regular basis. The Participants may establish working groups or task forces Cooperation under this MOU may commence involving relevant ministries as necessary to upon the date of signature and is not intended support the objectives of the Climate Change to give rise to rights or obligations under inter- Policy Dialogue and Cooperation. national law.
THE U.S.-CHINA CLEAN ENERGY COOPERATION: THE ROAD AHEAD 2 7 Energy Security Initiative at BROOKINGS
U.S.-China clean energy cooperation: the road ahead
Kenneth G. Lieberthal
The Brookings Institution 1775 Massachusetts Ave., NW Washington, D.C. 20036 brookings.edu SEPTEMBER 2009 Policy Brief 09-05