Can There Be a Positive Prognosis for Climate Negotiations? | An Economic View of the Environment


I’m writing this brief essay on board my flight to the USA from Europe (where I participated in a workshop at the Center for European Economic Research (ZEW)in Mannheim, Germany). It was an interesting event, the substance of which (the “energy-efficiency paradox”) I will write about in the future, but today’s post is stimulated by a news article I read on board my flight, titled, “U.S. and China May Find Agreements Outside Stymied Climate Talks.”

Bad News from Bonn

In Bonn this past week, international negotiations continued under the United Nations Framework Convention on Climate Change (UNFCCC). The two most important countries in terms of greenhouse gas (GHG) emissions – China and the United States – apparently engaged in a war of words on the fundamental question of who should do what. In particular, these two giants – and their respective allies in the developed and developing worlds – bickered over their very different interpretations of the Durban Platform for Enhanced Action’s call for an agreement to be reached in Paris in 2015 that is “applicable to all Parties” (countries).

The United States and other industrialized countries have insisted that this calls for an agreement withemissions reduction pledges by all countries (in particular, by the industrialized countries plus the large emerging economies of China, India, Brazil, Korea, Mexico, and South Africa). But China, India, and most countries in the developing world have maintained that because the Durban Platform was adopted under the auspices of the UNFCCC, it calls only for emission reduction commitments by the industrialized countries. In previous essays at this blog, I’ve written about the potential promise that the Durban Platform can offer for a departure from the paralysis that has characterized the past 15 years under the Kyoto Protocol with its dichotomous distinction between emissions-reductions commitments for industrialized (Annex I) countries and no such commitments for other nations. But it is difficult to claim that the rhetoric in Bonn has been encouraging in that regard.

Better News from Beijing and Washington

At the same time, U.S. government officials back in Washington were quoted in the news article I read on board my flight as saying that bilateral negotiations with China – possibly outside of the UNFCCC – are where real progress is most likely to be made. This caught my eye, because it may be the major – and perhaps only — cause for (cautious) optimism regarding the path ahead. I wrote about this reality shortly after the UNFCCC negotiations concluded in Warsaw, Poland, in November, 2013, and recent developments merit returning to it today. My premise is what I perceive to be the potential emerging convergence of interests between these two most important countries in the world when it comes to climate change and international policy to address it – China and the United States. Five factors stand out: emissions, historical responsibility, fuel sources, policy approaches, and geopolitics.


First, the annual carbon dioxide (CO2) and greenhouse gas (GHG) emissions of these two countries have already converged. Whereas U.S. CO2 emissions in 1990 were almost twice the level of Chinese emissions, by 2006 China had overtaken the United States. We are the world’s two largest emitters.

Historical Responsibility

Second, cumulative emissions are particularly important, because it is the accumulated stock of GHGs in the atmosphere that cause climate change. Any discussion of distributional equity in the climate realm therefore inevitably turns to considerations of historic responsibility. Looking at the period 1850-2010, the United States led the pack, accounting for nearly 19% of cumulative global emissions of GHGs, with the European Union in second place with 17%, and China third, accounting for about 12% of global cumulative emissions. But that picture is rapidly changing, because emissions are flat to declining throughout the industrialized world, but increasingly rapidly in the large emerging economies, in particular, China. Depending upon the relative rates of economic growth of China and the United States, as well as other factors, China may top all countries in cumulative emissions within 10 to 20 years.

Fuel Sources

Third, China and the United States both have historically high reliance on coal for generating electricity. At a time at which U.S. dependence on coal is decreasing (due to increased supplies of unconventional natural gas and hence lower gas prices ), China continues to rely on coal, but is very concerned about this, partly because of localized health impacts of particulates and other pollutants. Importantly, both countries have very large shale gas reserves. U.S. output (and use for electricity generation) has been increasing rapidly, bringing down CO2 emissions, whereas Chinese exploitation and output have been constrained by available infrastructure (that is, lack of pipelines, but that will change).

Policy Approaches

Fourth, in both countries, sub-national market-based climate policies – in particular, cap-and-trade systems – are moving forward. In the case of the China, seven pilot CO2 cap-and-trade regimes at the local level are under development, while in the United States, California’s ambitious AB-32 cap-and-trade systemcontinues to make progress, and in the northeast, theRegional Greenhouse Gas Initiative (RGGI) is witnessing higher allowance auction prices due to the more severe targets the RGGI states recently adopted.


Fifth and finally, there is the reality of global geopolitics. If the twentieth century was the American Century, then many observers, including leaders in China, anticipate (or at least hope) that the twenty-first century will be the Chinese Century. In this regard, I’m reminded that I was quoted by David Jolly in the New York Times, as saying, “If it’s your century, you don’t obstruct, you lead.”

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