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.