The United States and China’s Joint Climate Policy Announcement—What It Means

Yesterday the United States and the People’s Republic of China reached an historic agreement in the global effort to reduce greenhouse gas emissions and address the impending consequences of climate change through commitments by President Obama and President Xi.

The U.S. announced plans to reduce greenhouse gas emissions 26–28 percent below 2005 levels by 2025, with a commitment to a “best effort” to realize 28 percent.  Achieving those targets will require doubling annual emission reduction rates from a current 1.2 percent through 2020 to 2.3–2.8 percent from 2020 to 2025. This will set the course for the U.S. to realize an 80 percent emissions reduction by 2050.

For its part, China has committed to peak its carbon emissions by 2030, and possibly sooner, capping the emissions growth of the world’s largest emitter. This announcement was the first of its kind for China, which has to-date shied from international commitments. To realize this target, President Xi also announced that zero-emissions, non-fossil energy sources (i.e., nuclear and renewables) would represent 20 percent of China’s supply mix by 2030. (In 2011, zero-emission sources represented less than 9 percent of China’s total energy consumption.)

SIGNS OF PROGRESS AND CAUSE FOR OPTIMISM

As the world’s two top emitters of carbon—jointly responsible for approximately 43 percent of global energy-related emissions—leadership and cooperation from both nations is critical to charting a path the rest of the world can follow. Neither China nor the U.S. can independently initiate the necessary change at the scale required; both countries need to act jointly and decisively. President Obama echoed this sentiment earlier in the week, stating: “When the U.S. and China are able to work together effectively, the whole world benefits.”

The joint announcements set a powerful precedent for other countries to emulate, and could foster ambitious international action in the near term. Many have their eye on international climate negotiations in Paris next year, where the U.S. and China’s bilateral cooperation could lay necessary groundwork for a potential future international climate treaty.

THE ONGOING NEED FOR ADDITIONAL PROGRESS

These synchronized commitments represent a decisive moment in the history of global and national-level climate action, but not a panacea.

The Intergovernmental Panel on Climate Change (IPCC) has indicated that warming must be held beneath two degrees Celsius to avoid the most catastrophic effects of a rapidly changing climate. Related analysis suggests that we must therefore hold our carbon budget (the cumulative amount of emissions generated) to roughly 500 billion tons from now to 2050 to achieve this goal. So what will this agreement mean relative to our collective carbon budget?

Lynn Price, leader of the China Energy Group at Lawrence Berkeley National Laboratory, explains the reductions related to Chinese emission trends: “When we compare China’s 2030 target to the results of a number of recent or ongoing studies of China’s energy and emissions pathways to 2050, this [2030] appears to be a relatively ambitious date to achieve a CO2 emissions peak and implies a meaningful effort beyond business as usual. An important consideration, though, is the level of CO2 emissions when the peak occurs, which was not included in China’s announcement. Current studies show a range of 12 to 15 GtCO2 (billion tons CO2) between 2038 and 2040 in the baseline scenarios and a range of 10 to 11 GtCO2 between 2025 and 2030 in the ambitious scenarios.”

So while the absolute magnitude of the peak is unclear, pulling it forward has an undeniable benefit of dissipating some of the momentum in fossil asset development, thereby driving down total emissions through both timing and magnitude effects.

Factoring these numbers alongside similar analysis for the United States suggests that the combined agreement could result in as much as a 100-billion-ton reduction through 2050 between the two countries against business as usual. This is undeniable progress. However, it belies the fact that together the two countries will likely emit more than the global budget themselves even with this new commitment. And what carbon budget does that leave for the remaining 75 percent of the global population?

It is clear that yesterday’s agreement must be a momentum-builder toward transforming our global energy economy, not an end goal, if we are to effectively rise to the climate challenge.

OPPORTUNITIES FOR ENERGY EFFICIENCY AND MARKET-BASED SOLUTIONS

China’s announcement sets significant targets against what studies show as the current trajectory or “business as usual” scenario for the country. But while the target of a 20 percent non-fossil energy share by 2030 is a good start, it will require additional supportive measures to ensure that carbon emissions peak at a manageable level.

For example, demand-side resources, omitted from the recent announcements, will need to play a substantial role in realizing both countries’ targets. Energy efficiency will need to continue to contribute towards a deeply decarbonized future. By some accounts, China has already built the equivalent of a virtual Three Gorges Dam through the energy saved by national standards for just its efficient refrigerators and air conditioners. Such efficiency measures, expanded across other areas of the economy, can help China and the U.S. meet and beat their 2030 targets.

In addition, beyond national-level government targets and supportive policies and standards, a need exists for nimble, fast-scaling, market-based solutions to play a significant role mobilizing capital towards a global clean energy economy. The dynamism of business can rapidly mobilize—and is already mobilizing—against this challenge. Annual global investment in energy efficiency and renewable energy is already at ~$300 billion and ~$250 billion, respectively, driven largely by business.

THE ROAD AHEAD: A ROLE FOR REINVENTING FIRE: CHINA

In partnership with China’s Energy Research Institute, Energy Foundation China, and Lawrence Berkeley National Laboratory, Rocky Mountain Institute is 18 months into a 24-month study called Reinventing Fire: China. The project is a pan-Pacific cooperative research effort to reimagine China’s future energy system as one that is clean, connected, distributed, and secure. Reinventing Fire: China is a pathway designed to enhance energy and environmental security without compromising economic growth. The initiative’s analysis aims to measure the economic, social, and environmental benefits of rapidly deploying renewables and energy efficiency technologies in China. To do so, it focuses on an economy-wide analysis of the four energy-producing and -consuming sectors of the economy: buildings, industry, transportation, and electricity. While the analysis is still being refined, the project team believes China might be able to more than double its 2030 target of 20 percent non-fossil supply economically by 2050.

In addition to the two officially sanctioned cooperative efforts between the U.S. and China—the U.S.-China Clean Energy Research Center and Climate Change Working Group— Reinventing Fire: China is contributing technical analysis, policy frameworks, and market strategies designed to support the broadest possible adoption of energy efficiency and renewables in China through 2050.

China and the U.S. have committed to ambitious and important climate goals this week, representing a truly watershed moment. President Xi indicated his commitment to the bilateral agreement, acknowledging these targets as critical first steps, stating: “A pool begins with many drops of water.”

While the goals are clear and significant, much remains to be clarified as to how the they will be realized. The exciting and challenging work lies just ahead. It is often said that with great power comes great responsibility, and the announcements made this week by President Xi and President Obama signal that China and the U.S. take that responsibility very seriously. Ongoing pan-Pacific collaboration will prove vital to realizing the goals outlined this week by the world’s two most powerful heads of state.

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