NBER Working Paper No.14460
October 2008 [PDF Download]
China's Participation in Global Environmental Negotiations
Huifang Tian and John Whalley
[ABSTRACT] In the paper we discuss China's participation in both the 2009 Copenhagen negotiations on a post-Kyotoglobal climate change regime currently under way and out beyond Copenhagen in further negotiationslikely to follow. China is now both the largest and most rapidly growing carbon emitter, and has muchhigher emission intensity relative to GDP than OECD countries. In the Copenhagen negotiation, therewill be strong pressure on China to take on emissions reduction commitments and China's concernwill be to do so in ways that allow continuation of a high growth rate and fast development. Centralto this will be maintaining access to OECD markets for manufactured exports in face of potential environmentalprotectionism. Thus the broad approach seems likely to be to take on environmental commitmentsin part in return for stronger guarantees of access to export markets abroad. This involves directlylinked trade and environmental commitments although how linkage can be made explicit is a majorissue. More narrowly, the issues that seem likely to dominate the climate change negotiating agendafrom China's viewpoint are the interpretation of the common but differentiated responsibilities (CBDR)principle adopted in Kyoto, the choice of negotiating instruments and form of emission commitments,and the size (and form) of accompanying financial funds for adaptation and innovation. We suggestthat a possible interpretation of CBDR reflecting China's desire to leave room to grow when undertakingemission reduction commitments might be for China to take on emission intensity commitments whileOECD countries take on emission level commitments. Larger funds and flexibility in their use willalso raise China's willingness to make commitments.
[JEL No.] Q54,Q56
1. Introduction
A central element in global policy coordination over the next 20-30 years will almost certainly be both the design and implementation of post-Kyoto arrangements aiming to mitigate climate change. In the shorter term, these are to be negotiated by the Committee of Parties (COP15) under the UN Framework Convention on Climate Change (UNFCCC) with the negotiating process to conclude in Copenhagen in November 2009. In the 2007 Bali meeting that launched this second round of global climate change negotiations (after Kyoto in 1997), four negotiation areas of mitigation, adaptation, innovation, and trade and finance were agreed on. The participation of China both in this process and beyond is the focus of this paper.
China did not participate in the earlier 1997 Kyoto negotiations, and faces decisions as to how actively and on what basis to involve herself in this second negotiating round of climate change mitigation initiatives. China is still a low income (even if rapidly growing) country, and the primary policy emphasis remains on achieving growth and development and accompanying poverty elimination for the bottom deciles of the Chinese population. China sees her need as having global environmental arrangements in place that allow her to continue to grow, and key to this is maintaining openness in the global economy, and without environmentally motivated trade restrictions, so as to allow for continued high export growth and continuing FDI inflows as she and others take on environmental commitments.
At the same time, China faces pressure to take on commitments as the largest and most rapidly growing global emitter and there is growing recognition in China of the potential damage China faces from climate change. China also has a significantly larger share of GDP originating in emissions intensive manufactures and relatively inefficient small coal burning power plants. China also has opportunities to influence the outcomes of negotiations through coalitional activities with other lower income and large population partners (India, Russia, and Brazil). Also the choice of approach to the negotiations through the selection of negotiating instruments, dealing with Kyoto non-compliance and other issues key to China such as carbon embedment in exports will be critical.
The negotiating agenda agreed in Bali for conclusion in Copenhagen is simultaneously extremely ambitious, vague and highly imprecise, and the time frame for negotiation is short. For China, four issues seem likely to dominate the narrower climate change negotiating agenda outside the broader trade linkage issues. One is the interpretation of the common but differentiated responsibilities principle agreed in the Kyoto negotiation for non-OECD economies. Here compensation and the form and depth of emission reduction commitments enter as issues. A second is the choice of negotiating instrument, with issues of negotiation on emission intensity rather than emission level and embedment of emissions in exports. A third issue is the size and form of the funds that will likely be created to facilitate adaptation and innovation. A final issue is how to deal with non-compliance by key OECD countries with their Kyoto commitments, which weakens the credibility of any commitments that might now be made by OECD countries in a second round of global negotiations. China's interest is in dealing with Kyoto non-compliance through firmer environmental dispute resolution for new Copenhagen commitments.
We suggest that a possible compromise interpretation of the common but differentiated responsibility principle allowing negotiation to progress and reflecting China's desire to leave room to grow when undertaking emission reduction commitments might be for China (along with India, Russia, and Brazil) to take on emission intensity commitments while OECD countries take on emission level commitments. Non-compliance with Kyoto commitments seemingly implies both carrying forward and combining of levels of non-compliance from Kyoto into the post Bali Copenhagen agreements and even beyond, but now with new firmer dispute resolution and enforcement procedures. The size and form of accompanying financial funds (for adaptation and innovation) are also key to China, and firmer arrangements here also seem key.
It is clear that China now sees significant direct environmental benefit at home from climate change mitigation and wishes to continue high growth without adverse environmental impact. These perceptions will likely induce significant Chinese participation in global Copenhagen negotiations, but China's other interests in maintaining openness and growth will be equally, if not more, important. China differs sharply from the OECD countries in having much smaller cumulative emissions, not having been a party to the first Kyoto negotiating round, having potential coalitional partners outside the OECD, having high growth which is to be maintained if development goals are to be met, and sharply higher emissions intensities than OECD countries. All of these factors will also come into play in negotiation.
2. Where current global environmental negotiations stand
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3. China's broader objectives in global environmental negotiations
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4 Key negotiation issues for China in Copenhagen
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5. Concluding remarks and implications for China's participation in global environmental negotiations beyond Copenhagen
In this paper, we discuss a range of issues concerning China's participation in Post-Bali process One is that a interpretation of CBDR which reflects developing countries' desire to leave room to grow will be needed for the negotiation to be fruitful. Another is that choices of instruments will be central in the negotiation. Emission intensity, effective technology transfer and financial support and other related issues will be raised by China. Also non-compliance and collative activities will be issues for the Post-Bali process and need to be dealt with in the negotiation.
Globally, we see an emerging structure of a sequence of global environmental negotiations which has parallels to trade negotiations in the GATT and WTO. In the WTO case, the ninth rounds of negotiation of GATT/WTO negotiations since 1947 have sequentially moved forward. In the environmental area, we effectively have two rounds negotiation from Kyoto to Bali and Copenhagen. Seemingly inevitably these negotiations will continue with deeper and deeper commitments and the emergence of a more global environmental regime. This global environmental regime is in our view likely to be increasingly linked to other dimensions of international policy coordinated with trade and finance. The result may eventually be linked negotiations between trade, finance and environment, and even potentially a new institution format that goes beyond the current WTO structure and the patchwork quilt of arrangements in the environmental area. For China, therefore, the prospect is of ongoing negotiations after the Bali and Copenhagen which broadly expand on the existing coverage and commitments and also growing linkage to trade and finance. Eventually linkage could be such as to yield a new global organization or body. What the broadening of these negotiations will be at this point is hard to say but could include broadening to other environmental issues including biodiversity and other matters added into broadened climate change negotiations. It could also involve broadening to energy and energy security issues, including nuclear and other matters. The positions that China takes on in the Copenhagen negotiation thus potentially affects their position in future negotiating rounds.
On the broadening of coverage and linkage to trade and finance, the issues here basically reflect the time warp that global institutional structure of policy coordination currently find itself in. Since the Breton Wood Conference in 1944, through trade and finance arrangements in the GATT/WTO and in the IMF, global activities have been based on the premise that the only links between national economies care those involved in the trade and finance in physical linkage. These physical linkages are now the global emissions which are to be addressed through climate change and global environmental negotiations. The prospect therefore is eventually one of environmental negotiation growing in significance and linkage will thus likely become lager and larger, to the point that these separate negotiations eventually become directly linked.
From China's point of view, linkage is central because the need to maintain growth and development policy is orientated to growth based on trade and FDI. At the same time, commitments made on global environmental negotiations will be central to this. In turn, China will have major role to play in any institutional evolution. There are now arguments being made that the World Trade Organizations are viewed not as a bargaining organization just on trade policy, but effectively a photo type of a global bargaining organization worldwide for all forms of policy coordination including environmental area (Whalley, 2008). Hence the World Trade Organization may evolve as a World Bargaining Organization which encompasses environmental bargaining as well as trade bargaining. China's participation in the potential emergence of such an organization may thus also be on issue in current global environmental negotiations.
