Economy First, Environment Second in China’s Carbon & Climate Games

What’s the reality behind China’s new, high-profile enthusiasm for a green revolution?  There’s to be a carbon tax and trial carbon trading scheme. Maybe it reflects strategic concerns that extend well beyond the boundaries of climate change and the desire for a cleaner world. Read More

Graham Lloyd in The Australian (11 February 2012):

CHINA’S new, high-profile enthusiasm for a green revolution, including a carbon tax and trial carbon trading scheme, reflects strategic concerns that extend well beyond the boundaries of climate change and the desire for a cleaner world.

Both welcomed and greeted with some suspicion, China’s internal decisions on carbon pricing  cannot be separated from the bigger questions of global trade and reciprocal market access.

China’s primary objective is not necessarily to save carbon but to bolster its economic opportunity. Being seen as a co-operative global citizen will be central to China’s long-term ability to preserve good relations while being the world’s largest emitter of carbon dioxide.

Further economic opportunity comes from using domestic markets to help underpin China’s position as the world’s leading supplier of renewable energy technologies such as wind and solar.

China’s low starting price of 10 yuan ($1.59) per tonne of carbon suggests the economic imperative and good public relations are more important than the amount of carbon emissions that will be ultimately saved.

But the carbon tax announcement builds on a commitment to pilot a cap-and-trade scheme in selected industrial regions, and is in line with China’s most recent five-year plan that, for the first time, mentions climate change as a state concern.

More pointedly, the carbon tax move coincides with a series of escalating trade wars between China and the US and European governments over wind and solar power and air travel.

In an aggressive move ahead of a summit meeting with EU leaders next week, China this week banned its airlines from participating in a European carbon tax on air travel.

China has already warned of a trade war in air travel and claims the support of other nations, including India, Russia and the US.

Meanwhile, the US International Trade Commission ruled unanimously in November that Chinese solar panel and cell imports were harming the American solar manufacturing industry, and the US Department of Commerce may impose retrospective duties on imported Chinese renewable energy products.

The US action was initiated by German manufacturer SolarWorld AG, which has seen its grip on the world’s solar panel industry destroyed by the rise of cheaper Chinese exports.

China is facing the same trade issues in Europe, where the financial performance of wind and solar stocks has been in freefall as financially straitened governments wind back taxpayer-funded subsidy schemes to promote renewable energy use.

At one level, China’s carbon tax plan can be seen as rearguard protection for its heavily state-subsidised renewable energy sector. But there are deeper messages as well.

According to John Lee, adjunct associate professor at the Centre for International Security Studies at the University of Sydney and a visiting fellow at the Hudson Institute in Washington, China’s new language on climate change recognises that it has lost its traditional arguments against taking domestic action.

These arguments are that the developed world is responsible for past carbon emissions and therefore must take responsibility for future cuts. In addition, with 800 million people still living on less than $2 a day, China’s primary responsibility is economic growth.

China’s plans remain firmly rooted in a policy of “economy first”. And the country’s lead negotiator on climate change, Su Wei, says China believes the system of different treatment for developed and developing countries should remain in place.

Lee sees China’s carbon tax plans as an attempt to win a long-standing argument with the West over who should be responsible for carbon emissions, effectively shifting the burden to the largely foreign-owned export manufacturing sector.

Su argues that China considers a carbon tax to be one of the instruments that can be used to direct the economy towards low-carbon development, and he says senior officials are still debating whether they should even use the term “carbon tax”.

“Whether we call it a carbon tax – or environment tax or resource tax or even fuel tax – we have lots of taxes already. We need to carefully redesign the category and type,” he says.

China is also looking at a plan to put voluntary labels on low-carbon products, Su says, “in order to try to give a clear signal to business and industry”.

For Lee, such measures underscore the acute embarrassment China faced when it was blamed for the collapse of the overly ambitious climate change negotiations in Copenhagen in 2009.

“I think the Chinese have lost the argument on who should bear responsibility for climate change,” Lee says. “All that is being taken into account is how much is China emitting and how much are they due to emit in the future.

“The Chinese realise that whatever arguments they put forward, the pressure will be on them to do something about it, and I see the pronouncement of a carbon tax as some sort of token effort that they are serious about it.”

Lee says disputes over renewable energy and air travel must be seen in the broader context of reciprocal market access: “Even though it is not stated publicly, I think the Americans and the Europeans are privately negotiating a separate deal with China.

“They are pushing anti-dumping measures and the currency issue, but what they really want is market access to the protected sectors of the Chinese economy,” he says. “If the US and European firms can get that, then you will see America and Europe become a lot less vitriolic about the anti-dumping measures.”

The list of protected industries has been a movable feast. It used to be sectors such as telecommunications, construction, heavy industrial machinery, mining, chemicals and media. But in the past few years China has included renewable technologies, IT platforms and the energy sector.

“The big concern the West has,” Lee says, “is that China has shown it will preserve every significant, important sector for state-owned enterprises in the name of helping national champions.”

Source: www.theaustralian.com.au