Climate Change: Western business can help China and India

Climate Change: Western business can help China and India

Climate Change: Western business can help China and India

Written by Katinka Barysch, 17 November 2006


Climate change:
Western business can help China and India
by Katinka Barysch



We Europeans are proud pioneers in combating climate change. But what we do at home is almost irrelevant unless we persuade and help China and India to limit emissions.

European countries are doing more than most to reduce emissions at home, according to report presented to the UN’s climate change conference in Nairobi this week: 15 of the world’s ‘greenest’ countries are in Europe. And the EU wants to go further. The European Commission has just published a plan to extend the EU’s pioneering emissions rights trading (ETS) scheme to cover more sectors and pollutants.

European climate policies matter – as examples for the rest of the world and as a testing ground for new technologies and policies. But to stop global warming we need a global approach.

In the US – the single biggest source of greenhouse gas emissions – the consensus is slowly shifting in favour of tougher policies. While the Bush administration has ruled out ratifying the Kyoto Protocol, a large number of State governments have adopted emission reduction targets or joined regional ‘cap and trade’ schemes.

Whether the US supports a post-Kyoto regime will critically depend on whether China and India come on board. China is already the second biggest emitter of greenhouse gases, mainly because it relies on coal – the dirtiest of fuels – for two-thirds of its power generation. Coal in China is cheap and plentiful. The country still has reserves to last it about 200 years, and the price of producing energy with coal is a fraction of any alternatives. India is a similar story: it relies on coal for more than half of its energy needs and is the fourth biggest source of CO2 emissions in the world. The International Energy Agency assumes that 70 per cent of additional coal demand until 2030 will come from India and China.

The Kyoto protocol almost pales into insignificance in comparison. In 2004, the Christian Science Monitor reported that China was on course to build 562 additional coal-fired power plants by 2012, more than half of the world’s total. Together with planned new plants in India (213) and the US (70 or so), these will emit 2.7 billion additional tons of carbon dioxide. Compare that with the (maximum) 480 million tons that Kyoto countries have promised to cut from their CO2 emissions by 2012.

Coal is not the only problem. China is already the second biggest oil consumer in the world, after the US. It used up 5.5 million barrels of oil a day in 2005, and India an additional 2 million. Both countries’ needs will continue to grow fast as people get wealthier and more mobile. More than three million new passenger cars were registered in China last year. But still only 11 out of 1,000 people have their own vehicle. In a developed country like the UK, more than half of all people have a car.

Improving the EU’s ETS is important. But our priority must be to persuade and help China and India to limit greenhouse gas emissions.

The Chinese and Indian authorities say they take climate change seriously. But they insist that economic growth has priority and only rich countries can afford to combat climate change. China and India account for only 10 per cent of the fossil fuel CO2 accumulated in 1850-2004. The EU, the US and Russia together account for 70 per cent. Getting Beijing and Delhi to sign up to a tough post-Kyoto regime will be as difficult as it will be essential. In the meantime, are there other things we in Europe can do?

At a workshop on India, China and climate change – which the CER ran together with the German-British Forum on November 14th – we explored how the private sector could help China and India to become greener.

The transfer of Western technology is helping to make these countries more energy efficient. But change is slow: 15 years ago, Chinese power plants typically operated at a level of efficiency that was 35-50 per cent of that of German plants. Since then that share has crept up to 50-60 per cent. A step change is needed.

Many people put their hopes into clean coal technologies. These capture the CO2 produced by coal burning and bury it under ground. So far there are only a few pilot plants in places such as Norway and the UK. But even if the West managed to make the technology commercially viable, it would remain too expensive for China to roll it out on a grand scale.

Western governments and the EU give China some money to encourage the adoption of clean technologies. But it is not enough to make a difference. Perhaps market mechanisms are more promising. Business is certainly interested. There are now 80 environmental companies listed in London’s AIM (alternative investment market) alone. Mainstream companies from Goldman Sachs to Virgin have earmarked billions of dollars for green investment schemes. There are now more than 100 funds that solely invest in clean energy and other environmental technologies.

Under Kyoto’s ‘clean development mechanism’, rich-world polluters can keep within their target by investing in environmental projects in those developing countries that have no targets themselves. In theory, therefore, Western businesses have an incentive to invest in energy savings technologies, clean coal plants and renewables in China. In practice, however, the clean development mechanism is clunky and complicated. Its effectiveness also suffers from Kyoto’s limited lifespan. Most green investments, such as new power station or windfarms, have long lifespans. So investors have to make an assumption about long-term trends in carbon prices. At the moment, they don’t even know whether there will be a carbon market after Kyoto runs out in 2012.

China itself is not exactly making it easy for Western companies. Widespread disregard for intellectual property rights makes investors reluctant to transfer the cutting edge technologies that are often needed in environmental projects. Moreover, regulatory frameworks are uncertain or badly enforced. Take renewables as an example. Both India and China have ambitious targets but since burning coal is cheaper than building dams or erecting wind turbines, regulation is needed to encourage investment. In 2004, the Chinese authorities announced that 30 Giga-watts should come from wind power by 2020 (a modest target: experts assume that China’s potential for wind-powered energy is at least ten times that). However, when the government finally released the relevant regulation in 2006, potential investors withdrew in frustration: local content requirements of 70 per cent and an overly competitive market framework would make it almost impossible for western companies to turn a profit. The big winners would be incumbent Chinese energy giants.

Western investment can help China and India to limit their greenhouse gas emissions. But these countries also need to help themselves by building an attractive regulatory and business environment for green investments.

Comments

Added on 11 Jan 2007 at 20:31 by basil

Despite the disastrous current American administration that country had quite capable and extraordinary presidential talent, that served America quite well in the past. Some of these leaders would have been able to see deeper in future, understand the dilemmas we already face in climate policies and take apt measures. Instead? America shamefully leads on the polluters list, along with the EU, Russia, China and India.
The reasons all remain unconvinced in cutting down on their gas emission are both understandable and shameful, when we all see where their blindness and stubborness leads.
Why not take the lead, the EU that is, in bringing together these polluting nations to re-address the climate changes issue in view of new and cleaner energy alternatives. Rather than asking China and India alone to cut down on their cheap coal emissions, why not sit them down all together and try to bring them to their senses. Why not convene the meeting in a European Alps resort in the middle of winter, when there would be lots of sunshine and tanning opportunities rather than snow and skiing chances..

Launch of CER report 'Can Europe and China shape a new world order?'

Launch of CER report 'Can Europe and China shape a new world order?'

Launch of CER report 'Can Europe and China shape a new world order?'

02 July 2008

Speakers included: The Rt Hon Lord Patten of Barnes, former European commissioner for external relations and former governor of Hong Kong, Simon Fraser, director general, Europe & Globalisation, Foreign & Commonwealth Office, Adriana Vazquez-Garrido, DG external relations, European Commission, Xinning Song, Will Hutton, Gerard Lyons & Linda Yueh.

Location info

London

Launch of CER report 'Can Europe and China shape a new world order?'

Launch of CER report 'Can Europe and China shape a new world order?'

Launch of CER report 'Can Europe and China shape a new world order?'

30 June 2008

With Volker Stanzel political director, German foreign ministry.

Location info

Berlin

Crisis shows imbalances are not sustainable indefinitely

Crisis shows imbalances are not sustainable indefinitely

Crisis shows imbalances are not sustainable indefinitely

Written by Simon Tilford, 27 November 2008
From Financial Times

The era of the grand treaty is over

The era of the grand treaty is over

The era of the grand treaty is over

Written by Hugo Brady, 16 June 2008
From The Guardian

The bear's Achilles heel

The bear's Achilles heel

The bear's Achilles heel

Written by Charles Grant, 15 August 2008
From The Guardian

Europe must build a strategic alliance with China

Europe must build a strategic alliance with China

Europe must build a strategic alliance with China

Written by Charles Grant, 09 June 2008
From Financial Times

Russia-China: Axis of Convenience

Russia-China: Axis of Convenience spotlight image

Russia-China: Axis of Convenience

with Bobo Lo , 20 May 2008
From Open democracy

Humanising China

Humanising China

Humanising China

Written by Bobo Lo , 05 June 2008

by Bobo Lo

An extraordinary thing happened to China the other week. Not the Sichuan earthquake, even though that was an enormous, catastrophic event. Nor even the phenomenal popular response to this tragedy. No, the most remarkable development was the recasting of the Chinese people in Western consciousness. In place of the previous image of a homogenous, often demonised, mass of humanity, there emerged a picture of the Chinese as individuals, with real feelings and vulnerabilities.

How did this happen? Certainly, human tragedy on such a vast scale invites sympathy even in the stoniest of hearts, although perhaps not in some Hollywood stars. Yet in the past the western media have assigned little importance to loss of life in the non-western world. The infamous headline ‘Boston man breaks arm, 250,000 Bangladeshis drown’ may be apocryphal, but the attitude behind it is all too common.

What makes the change in western attitudes all the more remarkable is that prior to the earthquake China was having a very bad year in PR terms. Western coverage of Beijing’s response to the Tibetan demonstrations in March was uniformly critical. The Olympic torch relay was a fiasco, in which blame shifted from violent demonstrators and inept security arrangements to Beijing’s excessive pride. More generally, China had become the scapegoat for many of the world’s ills. It was accused of hoovering up natural resources, pushing up oil prices to record levels, swamping the market with cheap (and sometimes toxic) goods, polluting the atmosphere, and supporting vicious regimes in Sudan and Zimbabwe. Even the Olympics were turning out to be a mixed blessing, with the promotion of a vibrant, technologically advanced nation being undermined by accusations over Tibet and human rights abuses.

The Sichuan earthquake changed everything. Suddenly, China became a victim rather than a perpetrator, the focus of worldwide sympathy instead of an object of fear and loathing. Four factors were critical to this transformation. The first was the Communist leadership’s almost instantaneous response to the crisis. Within hours, Premier Wen Jiabao was on a plane to the worst-hit areas. Within a day, some 100,000 soldiers had been mobilized. The government acted with an urgency lacking in other, more developed countries – most conspicuously the United States after Hurricane Katrina.

Second, the degree of transparency was unprecedented. National and foreign media were given maximum access to the earthquake region. They were also able to report on sensitive subjects, such as the shoddy building standards for schools that contributed to the particularly heavy death toll among the young. The Chinese government recognized from the outset that it had everything to gain from highlighting the scale of the tragedy and from allowing individual human stories to speak for themselves.

Third, the leadership revealed an unusual empathy with the victims. Wen Jiabao – ‘Grandfather Wen’ – not only reached the earthquake zone within hours, but once there acted in a way uncommon in Chinese leaders. He got his hands dirty, whether in helping to dig people out of the rubble or holding a saline drip for one of the injured. The subsequent declaration of three days of national mourning, during which all public and private entertainments were suspended, revealed a finely tuned sense of the national mood. The traditional divide between government and people – ‘the Emperor is far away’ – gave way to a genuine sense of common purpose.

Finally, the humanisation of China benefited from the country’s growing prominence in a globalised world. The Sichuan earthquake brought raw human emotion into our living rooms, proving that some things are truly universal. Who can forget the sight of rows of parents holding up pictures of their only children – the ultimate victims of China’s ‘one-child’ policy? Such images transcend even the starkest of ideological and political differences.

The question now is whether this new image of China can be sustained. What would it take for the Western commentariat to revert to type and indulge in further China-bashing – over Tibet, climate change, Darfur, lost industrial jobs, or democratisation? Probably not much at all. The humanisation of China is a fragile and perhaps transient phenomenon. A swathe of Chinese gold medals at the forthcoming Beijing Olympics could trigger a new wave of Sinophobia. But whatever happens a very different China has emerged, far from the one-dimensional economic machine and totalitarian state of Western imagination. This China is a complex and contradictory entity, but whose resilience in times of crisis speaks of a profound sense of national unity.

Bobo Lo is director of the Russia and China programmes at the Centre for European Reform.

Comments

Added on 08 Sep 2008 at 11:27 by Anonymous

great article
thought-provoking understanding of China

Added on 07 Jun 2008 at 03:30 by Anonymous

Bobo Lo is truly able to comprehend the sheer complexities of a China like China rather than simple stereotypes cast in most Western media.

Great article!

Added on 05 Jun 2008 at 23:42 by Anonymous

Great analisys.

Issue 46 - 2006

Issue 46 - 2006 spotlight image

Issue 46 February/March, 2006

The EU needs a bolder Balkan strategy

External author(s): Carl Bildt
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