from Asia Unbound

China and Climate Change: Three Things to Watch After Paris

December 15, 2015

Chinese President Xi Jinping delivers a speech for the opening day of the World Climate Change Conference 2015 (COP21) at Le Bourget, near Paris, France, November 30, 2015. REUTERS/Stephane Mahe
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China is the world’s largest emitter of greenhouse gases, so it is not surprising that Beijing’s every statement on the issue is swallowed, digested, and regurgitated by the rest of the world. My colleagues Yanzhong Huang and Ariella Rotenberg penned a helpful piece early in the Paris climate negotiations outlining the dramatic turnaround in China’s negotiating posture over the past six years, from obstreperous in Copenhagen to virtuous in Paris. Now that Paris is over, however, the question remains as to whether China will meet its target of capping CO2 emissions by around 2030. The good news is that most analysts seem to feel that Beijing has under-promised so that it can over-deliver: Many climate experts argue that it would not be surprising for Beijing to meet its targets by 2025.

China is off to a good start on the policy front by establishing a number of clear objectives: a target of 20 percent non-fossil fuels in its overall energy mix by 2030 (about half of which is slated to come from nuclear), additional targets to reduce carbon intensity and energy intensity, and coal consumption caps for a number of provinces. The year 2017 will be a big one: China is slated to inaugurate a nation-wide cap-and-trade system for CO2, as well as an environmental tax. A slowing economy will also contribute to reducing the country’s growth in emissions. Nonetheless, as another colleague of mine, Michael Levi, has noted, within every country there will be barriers to strong action. So what does this mean in terms of the world’s largest emitter? Here are three implications:

Cap-and-trade: China has pledged to launch a nation-wide cap-and-trade system for CO2 in 2017. As designed, it will quickly become the largest in the world. Yet experts who have looked closely at China’s pilot projects to date raise a number of concerns surrounding the likely efficacy of Beijing’s effort. First, China’s non-market economy and weak rule of law pose a real challenge to such a system, given that cap-and-trade is designed to operate within a transparent, rules-based market system. What else is missing in China? A number of the essentials: an up-to-date inventory on emissions that will allow Beijing to set the original cap of allowances properly; transparency in the auctioning process as well as in the amount of emissions; a robust system for monitoring emissions;  a law that governs rules for a cap-and-trade system, without which “regulators must operate largely in a politically uncertain environment”; and a penalty structure for non-compliance that is tough enough to induce behavioral change. China will likely find its own version of cap-and-trade with Chinese characteristics; what that means remains to be seen.

The Data Dilemma: I know it is boring to hear about the problems with Chinese statistics yet again, but actually addressing climate change, not simply pledging to do so, requires accurate reporting of such things as coal consumption or renewable energy use.  When considering China’s adoption of renewable energies, for example, it is important to distinguish between existing capacity and actual deployment of that capacity in electricity production. The International Renewable Energy Agency published a report in 2014 that suggests a significant discrepancy between the two due to factors such as electricity pricing, lack of grid interconnectivity among the three national electric grids, technical concerns over such things as the intermittency of wind power, and the continued priority given to coal companies in power production. In 2012, for example, 22 percent of installed wind power was running idle. The process of measuring the contribution of renewables is also an important sticking point when considering China. A 2015 study by a senior group of U.S. energy experts points out that China uses a distinctive energy accounting method, not shared by any other country or organization, to convert its non-fossil electricity into units that can be compared with other energy sources, such as coal. In one sample test comparing the Chinese method with an internationally-recognized method of accounting, the team discovered that the Chinese methodology resulted in an assessment of the contribution of renewables in 2010 that was twice that calculated through the internationally-recognized system. With such variation, as the scholars suggest, it will be important for all the calculations to be done using the same methodology when moving forward with climate change pledges. No doubt there will be other unfortunate surprises as China pushes forward with improving its data collection and reporting process. Still, the good news is that at least some officials in Beijing are trying to improve the country’s data measurement and reporting capabilities. I would be remiss if I did not point out, for example, that China in early November acknowledged that it had underreported its coal consumption annually since 2000—and by as much as 17 percent in one year.

The Spirit of Paris: With international environmental agreements, there is often the expectation that countries will adhere not only to the letter of the agreement but also to its spirit. Thus, beyond China’s commitment to cap its CO2 emissions by around 2030, there is the hope that Beijing will not undermine the intent of the agreement while still technically adhering to it. Its continued commitment to new coal-fired power plants at home and abroad, however, suggests that the spirit is likely to be challenged. For example, China increased new coal power plant capacity by 55 percent in the first six months of 2015 compared to 2014, approving 155 new coal-fired power plants—a number that exceeded the total approvals in the previous three years. In addition, China has become a major exporter of coal-fired power plants. As Michael Forsyth has reported, China is offloading its excess capacity in coal plant production, announcing plans for $72 billion worth of investment for 2014 and beyond. If China simply enables other developing countries looking for a quick energy fix to become addicted to coal, it will not be upholding the spirit of the Paris climate agreement.

None of these issues is insurmountable, but they do bear watching. China deserves credit for adopting a CO2 reduction target, investing significantly in renewable energy resources, and taking steps to develop a nation-wide cap-and-trade system. Yet its record on delivering on environmental protection promises over the past few decades is poor. There is no point now—with an environmental challenge on the scale of climate change—in assuming that what Beijing says is what Beijing can or will do. The proof will be on the ground—and of course, in the atmosphere.