The economic crisis cast a pall over climate change talks held this month in Poland. While negotiators were hoping for concrete progress toward an international climate agreement, the world’s two largest polluters were distracted — the US with preventing a collapse of the financial system in the midst of a presidential transition and China with a slowdown in domestic investment and weakening foreign demand for its manufactured goods. With US home values and retirement savings falling and Chinese unemployment numbers rising, observers worry that neither the US nor China will have much appetite to cut emissions.
The paradox here is that the crisis presents a unique opportunity for the US and China to strike a deal that would lay the groundwork for a global climate agreement. Indeed, one of the main goals of the most recent biannual meeting of the US/China Strategic Economic Dialogue (held the week before the climate talks began) was to begin work under the “Ten Year Energy and Environment Cooperation Framework” created earlier this year.
This initiative comes on the heels of a decade in which the US abstained from international efforts to address climate change.
Its rationale was that if it acts but China doesn’t, the world will fail to meet emission-reduction targets and US industry will suffer. China has countered that its historic and per capita emissions remain well below US levels and that to cap aggregate national emissions at the same level as the US would imply a personal carbon budget in San Francisco five times greater than in Shanghai.
The Strategic Economic Dialogue sidestepped this disagreement on burden sharing and focused instead on what the two countries have in common. Both depend on imported oil for transport and on domestic coal for power generation. Both have strong state-level governments and balkanized regulatory and energy supply systems. But the structure of the two countries’ economies and what drives their energy needs — and thus greenhouse gas emissions — are very different. It is this difference that offers the best chance for addressing climate change head-on.
Economically, the US and China are mirror images, opposite sides of a massive global imbalance. Americans spend too much and save too little, leaving a US$250 billion trade deficit financed by other countries. Much of this credit comes from China, where companies and individuals save too much and consume too little, leaving a surplus of both goods and capital that flows abroad.
This macroeconomic imbalance is reflected in the two countries’ carbon footprints. In the US, more than 70 percent of carbon dioxide emissions come from consumer-related activities, whether gas-guzzling sport utility vehicles or power-hungry McMansions.
In China, more than 70 percent of emissions come from industry. Steel production alone consumes 18 percent of the nation’s energy resources, nearly twice as much as all Chinese households. The chemical industry consumes more energy than all private transportation and aluminum production rivals the commercial sector in terms of electricity demand.
In terms of brokering a climate deal, this imbalance is good news. It suggests a framework for reducing emissions that respects the development needs of China’s households, addresses US firms’ competitiveness concerns and adheres to the principle of “common but differentiated responsibilities” embedded in international negotiations.