China to Announce Cap-and-Trade Program to Limit Emissions

Source: By JULIE HIRSCHFELD DAVIS and CORAL DAVENPORT, New York Times • Posted: Friday, September 25, 2015

Presidents Obama and Xi Jinping of China left the White House on Thursday for dinner across the street at the Blair House. Credit Doug Mills/The New York Times 

WASHINGTON — President Xi Jinping of China will make a landmark commitment on Friday to start a national program in 2017 that will limit and put a price on greenhouse gas emissions, Obama administration officials said Thursday.

The move to create a so-called cap-and-trade system would be a substantial step by the world’s largest polluter to reduce emissions from major industries, including steel, cement, paper and electric power.

The announcement, to come during a White House summit meeting with President Obama, is part of an ambitious effort by China and the United States to use their leverage internationally to tackle climate change and to pressure other nations to do the same.

Joining forces on the issue even as they are bitterly divided on others, Mr. Obama and Mr. Xi will spotlight the shared determination of the leaders of the world’s two largest economies to forge a climate change accord in Paris in December that commits every country to curbing its emissions.

Mr. Xi’s pledge underscores China’s intention to act quickly and upends what has long been a potent argument among Republicans against acting on climate change: that the United States’ most powerful economic competitor has not done so. But it is not clear whether China will be able to enact and enforce a program that substantially limits emissions.

China’s economy depends heavily on cheap coal-fired electricity, and the country has a history of balking at outside reviews of its industries. China has also been plagued by major corruption cases, particularly among coal companies.

But the agreement, which American officials said had been in the works since April, is China’s first commitment to a specific plan to carry out what have so far been general ambitions.

Domestic and external pressures have driven the Chinese government to take firmer action to curb emissions from fossil fuels, especially coal. Growing public anger about the noxious air that often envelops Beijing and many other Chinese cities has prompted the government to introduce restrictions on coal and other sources of smog, with the side benefit of reducing carbon dioxide pollution. The authorities also see economic benefits in reducing fossil fuel use.

The cap-and-trade initiative builds on a deal that Mr. Obama and Mr. Xi reached last year in Beijing, where both set steep emissions-reduction targets as a precursor to the global climate accord. Mr. Obama, who has made climate change a signature issue of his presidency, announced the centerpiece of his plan this year. With his announcement on Friday, Mr. Xi will outline how he will halt the growth of China’s emissions by 2030.

“It increases our probability of succeeding, and it increases the likelihood that we will have a more robust agreement” in Paris, one senior administration official said, speaking on the condition of anonymity because officials were not authorized to preview the agreement.

Lu Kang, the spokesman for the Chinese delegation during Mr. Xi’s state visit, declined to confirm the climate initiative. He said only that the two presidents could “make further progress” in demonstrating that they were committed to dealing with global warming.

The climate deal will be a substantial, if rare, bright spot in a wide-ranging summit meeting that is expected to be dominated by potential sources of friction between Mr. Obama and Mr. Xi. The two leaders began meeting on Thursday night with a two-and-a-half-hour working dinner at Blair House, across from the White House.

The president plans to raise a number of contentious topics on Friday, White House aides said, including cyberattacks on American companies and government agencies, China’s increasingly aggressive reclamation of islands and atolls in disputed areas of the South China Sea, and Mr. Xi’s clampdown on dissidents and lawyers in China.

Under a cap-and-trade system, a concept created by American economists, governments place a cap on the amount of carbon pollution that may be emitted annually. Companies can then buy and sell permits to pollute. Western economists have long backed the idea as a market-driven way to push industry to cleaner forms of energy, by making polluting energy more expensive.

Mr. Xi will pledge to put in place a “green dispatch” program intended to create a price incentive for generating power from low-carbon sources, officials said. He will agree to help provide financing to poorer countries to help them pay for projects that reduce harmful emissions. And China, one of the world’s largest financiers of infrastructure projects, will agree to “strictly limit” the amount of public financing that goes toward high-carbon projects, another official said, in line with a 2013 commitment by the United States Treasury Department to cease public financing for new coal-fired power plants.

In his first term, Mr. Obama tried to push a similar cap-and-trade program through Congress. But the measure died in the Senate, in part because lawmakers from both parties feared that a serious climate change policy could threaten economic competition with China. Now, however, China appears poised to enact the same climate change policy that Mr. Obama failed to move through Congress.

China has been developing and carrying out smaller cap-and-trade programs for at least three years. In 2012, it started pilot programs in seven provinces, intended to serve as tests for a national program.

President Xi Jinping visiting a high school in Tacoma, Wash., on Wednesday, a day before he is to meet with President Obama in D.C. Credit Ruth Fremson/The New York Times 

Last week, Chinese officials met in Los Angeles with top environmental officials from California, which has enacted an aggressive cap-and-trade program. People who attended the talks said they were meant to pave the way for a possible linkage of the Chinese and California cap-and-trade systems.

The Chinese announcement comes less than two months after Mr. Obama unveiled his signature climate change policy, a set of Environmental Protection Agency regulations that would force power plants to curb carbon emissions. The rules could shut down hundreds of heavily polluting coal-fired plants. They have drawn fire from Republicans and coal-state lawmakers, but international negotiators say Mr. Obama’s regulations have helped break a long deadlock between the United States and China on climate change.

Yet the two nations are still deeply divided on other issues. American and Chinese officials have been in negotiations over cyberattacks over the past several weeks, an area where they are bitterly at odds after several major intrusions believed to have emanated from China, including a hacking at the Office of Personnel Management that allowed the theft of 22 million security dossiers and 5.6 million fingerprints.

They are working to strike a deal that would reopen a high-level dialogue over cyberissues and set minimum standards, such as a mutual commitment not to attack each other’s critical infrastructure during peacetime. But they are not expected to reach any mutual understanding on cybertheft of intellectual property or personal information, one of the thorniest areas.

Similarly, the two presidents are unlikely to come to terms on the South China Sea, where Chinese moves to build runways on artificial islands in disputed areas have raised American fears of a confrontation in a critically important waterway.

The two presidents are expected to strike a deal on rules governing episodes involving Chinese and American military aircraft, building on past agreements that sought to avoid accidents or episodes that could escalate into confrontations.