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Thoughts on China and climate change in the lead to Cancun

preparing an article for a US audience, a US colleague asked me some
very good questions related to China and climate change.

  • What do you think the Chinese people expect the US delegation to commit to in Cancun?

  • What are the main goals of the Chinese delegation here in Cancun?

  • What of these goals are more flexible (can negotiate) and which are firm (can’t negotiate?)

  • Does the 12th five year plan include designs for a cap and trade program in China?

  • Does China have the financial market maturity to successfully implement a cap and trade program?

Below you can find my personal take on these questions as an independent China researcher.

-What do you think the Chinese people expect the US delegation to commit to in Cancun? What are the main goals of the Chinese delegation here in

The Chinese expect the US to honor the Convention and the Bali Action Plan, which the US government did
sign. We should not forget that,
Art 3.1 specifies that developed countries must "take the lead
in combatting climate change".

The Chinese people are asking the US to stop using China as an excuse for its own inaction, as clearly stated in an open letter by some leading
academics and Chinese green groups

here we want to emphasize that China is not and must not continue to serve as an excuse for continued inaction by the United States, especially
as China is moving forward with serious efforts. The United States,
as the world’s richest country and its greatest historical
polluter, must fulfill its obligations under the UNFCCC and Bali
Action Plan. We call upon the United States to respect and contribute
to the UN process, instead of undermining it and becoming a shield
for other Annex I countries to hide behind.

Despite President Obama's rhetoric of constructive engagement on climate change, the United States remains the only Annex I country that has not ratified
the Kyoto Protocol. It has failed to establish effective national
climate legislation. It has offered weak emission reduction pledges
for 2020 – only 3% to 4% below 1990. And it has instead sought to
draw attention away from its own failures in part by focusing
attention on China, even though it lags behind China in many emission
reduction measures, as shown above.”

The recent 301 petition by the US union have further consolidated the impression by many Chinese public that US has no real concern for the climate, but
only using it as a China-bashing tool whenever convenient. The
inconsistency of the US climate and trade policy is too obvious to

In Bali, US was asked “lead or get out of the way”. To give it fair credit, the Bush government did get out of the way and allowed the world to move
forward with Bali Action Plan. Now it is again the time to ask the US
“get out of the way if cannot lead”. The last two years with
President Obama and especially the mid-term election made it clear
that the US won't be getting on board (let alone lead) any time soon.
The US government needs to be honest to acknowledge that it cannot
lead, not now, but to get out of the way to allow the rest of the
world to move forward with the
of “Bali Action Plan”. Climate architecture and global ambition
are more important than
to be a leader for its domestic audience.

-What of these goals are more flexible (can negotiate) and which are firm (can’t negotiate?)

The principle of “common but differentiated responsibility” is very important for the Chinese population. Those who have only visited
Beijing and Tianjin may have the illusion that China is already a
developed country. The high concentration of wealth in the cities and
imbalanced development tend to give people such illusions. Yet as
someone working on agriculture issues as well, I have routinely
visited villages without running water. For example, this August, I
visited an organic farmer friend in Hubei province, Hengshui county,
which is only 3 hour train ride from Beijing. His village does have
tap water, but it only comes once every 5 days. This is what “right
to development” means for me: someday my farmer friend can and
should have running water all the time. In an open letter to the
Chinese government(,
Chinese academics and green NGOs demand the government to strongly
uphold the principle of “common but differentiated responsibility”
in international negotiations. For domestic policies, they ask the
government to take more concrete measures to curb consumerism and
rapid emission rise in some highly developed urban areas: including
higher fuel tax, staircase electricity pricing, establishing absolute
emission reduction targets for highly developed and high emission
areas etc. They also ask the government to strengthen South-South
cooperation in mitigation, adaptation, technology exchanges and
cooperation, and low-carbon development planning, etc, and increase
financing and technology support to least developed countries. In
they want the government to uphold “common but differentiated
responsibility” in international negotiations, and
it in its domestic and international policies as well. All these are
not for the interest of China only, but for the interest of the whole
developing world. The Chinese public expects and demands the Chinese
delegation to play a strong and constructive role in advocating the
interest of G77.

The Chinese government has also made it clear that it is unnegotiable to link climate aid and transparency, as said recently by Huang Huikang,
the Chinese Foreign Ministry's special representative for climate
change talks

As a NGO observer, I very much feel the narrow focus by US government and media on the so called transparency issue with China is just
another smoke screen to divert attention from the real issues,
especially the mitigation targets by developed countries. China is
very serious with its announced targets. In recent months, in the
final push to achieve its domestic energy efficiency target for the
five year plan, not only some factories were shut down, but also some
residential areas experienced black outs (a related report could be
found here
Have any Annex 1 country had black outs in order to make its Kyoto
targets? Yet in most discussion about transparency in western media,
China is presumably guilty. Of course such kind of the discussion and
hinted accusation undermine the trust between the north and the

-Does the 12th five year plan include designs for a cap and trade program in China?

In the 12th five year plan, a
number of possible mechanisms are included to reach the energy and
carbon intensity targets, including:

-Carbon Tax or Cap-and-Trade system

-Environmental and resource taxes

-Subsidies for low-carbon tech. and development

The Chinese government does not view cap-and-trade and carbon tax as mutually exclusive. They are actively exploring both and other

It should also be noted that the proposed Chinese ETS system is a domestic
system based on national energy intensity reduction targets rather
than one linked to international legally binding emissions reduction

-Does China have the financial market maturity to successfully implement a cap and trade program?

This is exactly the wrong question to ask. We should not forget that it is the “mature” and “innovative” financial institutions of the
Wall Street which brought us into the financial crisis. In order to
design a carbon market for environmental and financial integrity, we
need to have a honest look at different cap-and-trade schemes which
have failed and which have succeeded. One cap-and-trade scheme which
works rather well is the acid rain trading system. It covers a much
smaller universe of entities, is not dominated by financial
speculators (in most years, the majority of the sulfur dioxide trades
between related entities, namely, power companies), and never
experienced significant problems with market clearing (see details at
The EU ETS works some what, but have much more problems compared to
the acid rain trading system. Yet despite of such evidence, some
carbon trading proponents claim that is imperative to ensure
liquidity for market functioning, and argue for large markets with
unlimited participation from financial institutions. One of my
biggest concerns now is that with the scheduled closing of CCX
(Chicago Climate Exchange) by the end of the year, some out-of-job
wall street carbon traders will go to China and try to sell their
“expertise” to the Chinese government. Their policy
recommendations, though wrapped in green rhetoric, may very well be
recipes for the building of subprime carbon bubble, instead of design
for a stable carbon markets with environmental and financial
integrity. I hope the Chinese government will have the wisdom and
political will to resist the lobbying of global financial
institutions in their design for domestic carbon markets.

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