Fighting climate change: China’s contribution (part one)

Tony Blair’s report stresses the urgency for all countries to help control CO2 emissions. In the first of two articles, Hu Angang and Guan Qingyou discuss what this means for their country.

China, with its huge population, fragile environment and frequent natural disasters, is one of the biggest victims of climate change. Consequently, as a permanent member of the United Nations Security Council and as one of the most powerful developing nations, China has a responsibility in playing a major role in the global fight against climate change. 

On June 27, a report by the former prime minister of the United Kingdom, Tony Blair, entitled Breaking the Climate Deadlock: A Global Deal for Our Low-Carbon Future, was published in Tokyo. Blair’s report provides a comprehensive survey of the issues that leaders need to address over the next eighteen months, along with a number of significant ideas that have come out of climate negotiations. Blair is well aware that simple persuasion cannot overcome political differences or conflicts of interest. A solution will require powerful evidence in order to convince national leaders to reach a consensus agreement. 

The report provides important reference material for China’s response to climate change and future participation in international climate-change negotiations. What responsibilities and duties should China undertake in order to protect the basic and common interests of both the nation and humanity as a whole? What should China’s basic theory and political stance be? China believes that it must play a positive and leading role in accepting emissions reductions obligations by untying the knots of the “Prisoner’s Dilemma and by making a contribution to global society. 

Between 70% and 80% of the stock of carbon in the atmosphere has been released by developed nations. According to the World Resources Institute, developed nations account for seven tonnes of CO2 for every ten released since the start of industrialisation. The historical average for CO2 emissions per capita for the United Kingdom and the United States is 1,100 tonnes. The equivalent statistics for China and India are 66 tonnes and 23 tonnes per capita, respectively.  

Regardless, climate change is our common problem and not that of individual countries. Emissions produced in New York or Shanghai have equal impacts on the planet. Because the climate is common property, no solitary nation can provide an effective unilateral response to climate change. Relying on the United Nations alone is not enough to produce a consensus on a universally accepted global climate change framework. The Kyoto Protocol lacks the necessary sanctions and incentives to be effective, and thus has only a limited impact on a small number of developed nations.

In these circumstances, the public good can only be achieved if the major nations (the developed and large developing countries) reach a consensus in order to establish and strengthen a new global framework for mitigating climate change.  

Blair’s report provides many possible solutions for consideration. Blair hopes that G8 nations will band together to take the first steps in setting global long- and mid-term emissions-reduction targets. At the same time, Blair hopes that in the subsequent decades developing nations with emerging markets will increase their “carbon productivity” (the amount of GDP produced per carbon equivalents emitted). Will the upcoming UN climate talks in December 2009 in Copenhagen succeed? Will these talks provide the direction necessary to meet the targets for 2050?  

Appropriate short-term targets and transition points must be established in order to ensure that developed nations meet their requirements and that developing nations make fair contributions. It is also necessary to establish a series of support mechanisms and organisations to provide for the improvement of these methods as part of an ongoing learning process. We need to determine if the investment, policy decisions and fund transfers promoted by the agreement are adequate to bring the twenty-first century world into a low-carbon economy. This is a hugely complex issue and it will depend upon the leadership at the highest levels – starting with G8.  

Currently, the emission of greenhouse gases is concentrated in a small number of countries. The United States accounts for about one fifth of emissions, followed by China, India, Japan and Russia. These five nations alone account for over half of all emissions. According to Blair’s report, to avoid extreme climate risk, all nations should adjust their economic structures and reduce CO2 emissions. The contribution of developed nations alone will not be adequate. Although developed nations leave the deepest carbon footprint and therefore should lead the way in committing to reductions, developing nations should commit to a timetable to institute emission caps and reductions in accordance with their circumstances and ability.  

Ultimately, a transition to a low-carbon economy requires unprecedented and coordinated policy measures. The provision of financial and technical support to assist developing nations in dealing with climate change is only one aspect of the task. It is also essential to assist developing nations in bolstering their economic systems and policies in order to meet the challenge of climate change. A global framework for mitigating climate change must provide developing nations with a set of practical policies and systems. But, when all is said and done, developing nations must increase their ability to cope through the transformation of their own economies.  

According to an Intergovernmental Panel on Climate Change (IPCC) study on the cost of mitigation, reducing emissions will result in somewhere between a 1% increase and a 5.5% fall in GDP by 2050, which is only a 0.12% reduction in annual GDP growth. This is a tiny amount and practically insignificant when compared with the impact of interest rate changes, inflation and business cycles. The predictions examined were mostly made before the recent increases in energy costs, and hence assumed lower prices than currently exist. Blair’s report, therefore, holds that when the factors cited below are considered, the impact of emissions reductions may seem even smaller.  

— On average, the United States spent about 6% of GDP per year on defence during the cold war (1950-1990). 

— Today, the world spends about 3% of GDP per year on insurance.

— The estimated global cost of the US sub-prime mortgage crisis for the financial sector is potentially up to 2% of GDP. 

— The estimated global cost of oil increasing from US$40 billion to US$130 billion from June 2004 to June 2008 was about 5% of GDP. 

Assuming normal economic growth, the average per-capita GDP will rise from US$5,900 to US$15,900 between now and 2050. With a shift to a low-carbon economy, that figure will be between US$15,000 and US$15,600. Even with a shift to a low-carbon economy, average incomes will still increase 2.5 times.  

According to calculations by the International Monetary Fund, genuine efforts to reduce climate change could have a rapid and widespread macroeconomic impact. But a carbon price, which starts low and increases gradually, will minimise that cost by spreading it over a longer time period. If impact reduction policies aimed at CO2 concentrations of 550 parts per million (ppm) by 2100 start in 2013, consumption prior to 2040 will drop by only 0.6% in net present values – and global production will still increase 2.3-fold compared with 2007.  

According to William R Cline of the Petersen Institute for International Economics and the Centre for Global Development, virtually every nation has been affected by climate change. If developing nations do not play an active role, they will suffer greater losses than even the developed nations, since climate change will have a greater impact on their largely agricultural economies. China’s loss and benefit will both be 7%, meaning that climate change will have a neutral impact on the country. Cline believes that China is interested in reducing emissions.  

According to our own preliminary calculations, as China’s potential growth rate falls in coming decades, the average annual cost of reducing emissions will not have a major impact on the economy. Data from Blair’s report show that even if the developing nations switch to low-carbon economies, China’s GDP per capita will expand 6.9 times by 2040, as opposed to 7.2 times if no changes occur. These figures do not take into account the significant benefits to China by emission reductions and a low-carbon economy.  

The growth of a low-carbon economy will increase employment, and the transition will involve a significant investment in the creation of both jobs and business opportunities. Currently two million people are employed in the renewable energy sector. In 1998, US$10 billion was invested in environmental protection technology – by 2007 this had increased to US$66 billion. In China it is estimated that the renewable-energy sector employs one million workers with over 60% of these in solar thermal manufacturing and services.  

The longer we wait, the higher the costs of reducing emissions will be. According to the [British government’s] Stern Review, ensuring that carbon concentration peaks between 445 ppm and 710 ppm in 2030 will result in a loss of no more than 3.3% of global GDP. If we take action as soon as possible, the impact will be minimised. If existing policies and measures are not improved, global emissions of greenhouse gases will continue to increase in the coming decades. If we do not take action now, the economic and social damage caused by global warming will be greater than that of the Second World War and the Great Depression, as we may lose as much as 5% to 20% of global GDP.  


Next: Moving to a green economy


Hu Angang is a professor of public policy and management at Tsinghua University and director of the Centre for China Studies, Chinese Academy of Sciences/Tsinghua University.

Guan Qingyou  is a director of Tsinghua University’s Centre for China Studies' Energy and Climate Project. He holds a doctoral degree in economics.


(This work is one of a series, How Can China Meet the Challenge of Climate Change?, completed with funding from Tsinghua University’s School of Public and Policy Management’s Industrial Development and Environmental Protection Centre. In June, the authors attended a meeting with Tony Blair on climate-change trends and China’s low-carbon future, organised by the Chinese People’s Institute of Foreign Affairs and the UK’s Climate Group. A brief commentary on the report prepared by Hu Angang after the dialogue has been passed on to Tony Blair’s office by the Climate Group.)

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