China rolls out cap and trade, tops U.S. aid pledge

Source: Jean Chemnick, E&E reporter • Posted: Monday, September 28, 2015

Six years ago when cap-and-trade legislation was working its way through Congress, its foes warned the emissions scheme would put U.S. industry at a disadvantage because China wouldn’t follow suit.

But China has turned the tables, announcing a cap-and-trade plan today for its greenhouse gas emissions while there’s nearly no chance for the United States to do the same.

And the world’s second-largest economy also said it would provide $3.1 billion in climate finance to poor countries, topping the U.S. pledge of $3 billion over four years.

The announcement of China’s climate moves by President Obama and Chinese President Xi Jinping at the White House today follows their joint commitments last year on post-2020 greenhouse gas emissions and is aimed at influencing the United Nations’ climate talks in Paris this December. Pope Francis called for a strong agreement in an address today at the United Nations (see related story).

“Last year’s joint announcement was about setting targets,” a senior White House official said. “And this year is about showing the world our countries’ conviction to implement policies to reach those targets and to lead the world toward a durable global climate agreement.”

For the United States, the agreement reaffirms commitments the Obama administration has already made. U.S. EPA’s Clean Power Plan rule for curbing power-sector emissions and Obama’s pledge to the United Nations’ Green Climate Fund are both highlighted.

But Xi’s commitment is grabbing most of the world’s attention as he puts China on a path to a sweeping new emissions-trading system beginning in 2017 that will cover the bulk of his nation’s economy.

Building on seven regional carbon markets that are already in operation, the Chinese program will cover industries that are not currently regulated for carbon in the United States: iron and steel, chemicals, building materials, and paper manufacturing.

China will also respond to EPA’s existing power plant rule with its own steps to curb utility pollution, both through emissions trading and by introducing a “green dispatch” plan that will boost the role of renewable energy in its power grid and require dispatchers to draw first from the most efficient, lowest-emitting fossil fuel power plants, thus accelerating the retirement of older, dirtier units.

Obama and Xi hope to provide the needed boost that will allow the Paris talks to deliver an agreement. Last November’s joint announcement by the world’s two largest carbon emitters was credited with raising ambition during last year’s U.N. talks in Lima, Peru.

The two presidents will also seek to contribute more directly today to the U.N. negotiations by announcing some new areas of agreement on what such an accord should look like.

They agree that the post-2020 emissions reduction targets countries have put forward ahead of Paris that will form the basis of the negotiations are “crucial steps in a longer-range effort to transition to low-carbon economies” and that they should be increased over time.

The leaders also called for the development of midcentury strategies for the transition to low-carbon economies “mindful” of the goal of keeping warming less than 2 degrees Celsius above preindustrial levels. The targets that countries have offered ahead of Paris are expected to fall short of that threshold.

And like last year’s U.S.-China accord, today’s language will further break down the U.N. process’s traditional firewall, which governs the responsibilities of developed and developing nations. This is a goal long sought by U.S. negotiators but opposed in the past by large developing emitters.

China’s pledge underscores that effort because historically, only developed countries have been expected to provide financial resources. The pledge will not move through the Green Climate Fund — which will provide $10 billion by 2020 to help poor countries cope with warming and limit their own emissions.

A White House fact sheet says the $3.1 billion will be made available “through a bilateral fund designed to help developing countries combat climate change.”

The grant, which is China’s most significant to date, will be “consistent” with the U.S. Green Climate Fund pledge, the fact sheet said. This might mean it will follow the same guidelines laid out for the U.N. fund.

A White House official said it was important that responsibilities under the new accord be based on a country’s actual capabilities rather than on what those capabilities were two decades ago when the process began.

If developed countries are required to constrict their emissions but large developing countries like China are not, that would place industries based in the developed world at a competitive disadvantage, the official said.

“There is necessarily a concern by countries all around the world that their partners and their competitors are treated in a way that’s fair, and fair one to the other,” he said.

If businesses based in the developing world, he said, are covered “in a kid-gloves category where less is expected simply because they are in that category, that’s not a prescription for support at a political level in any developed country.”

China today also pledged to “strictly control” its support for high-emitting fossil fuels projects, including in other countries. The United States has already severely restricted its support for overseas coal-fired power projects.

The United States and China also agreed to issue rules for heavy-duty vehicles and to take action to curb methane and hydrofluorocarbons, which remain in the atmosphere for a short time but can be far more climate-forcing than carbon dioxide.