As friction between Washington and Beijing ratchet up over a growing array of issues, the Paris climate change agreement stands out as a powerful example of what can be achieved when the U.S. and China cooperate. However, many hurdles stand in the way of the world’s two largest emitters’ respective abilities to meet the climate commitments to which they have agreed. To overcome these challenges, which are principally political but also include important economic and institutional dimensions, sustaining cooperation between the United States and China will be crucial.
Political factors have the greatest potential in both countries to derail progress away from their carbon reduction goals. The U.S. is in the throes of a turbulent presidential contest between candidates with radically different views on climate action. Republican nominee Donald Trump is a vociferous critic of climate change policy who would reject U.S. participation in the Paris Agreement. In contrast, Democratic Party candidate Hillary Clinton promises to make mitigating climate change a national priority. Her administration would pursue implementation of the Obama Administration’s Clean Power Plan (CPP) with other policies aimed at meeting U.S. commitments to its emissions by 26-28 percent below 2005 levels by 2025. However, even if elected, Clinton faces a domestic landscape that is substantially hostile to policies aimed at cutting carbon. At the request of corporations, business groups and 27 states, and with support from the five conservative justices, the U.S. Supreme Court is assessing the legality of the CPP. The CPP is based on the idea that the authority of the Environmental Protection Agency (EPA) can be used to mandate compliance by states and regulated entities on emission targets under the 1963 Clean Air Act. The Supreme Court took the unusual step of staying administrative implementation of the CPP while it is under review. In addition, although the Obama Administration argues that executive authority is sufficient to make the U.S. a party to the Paris Agreement, critics in the Republican-controlled Congress disagree, contending that authorizing funding to the U.N. Framework Convention on Climate Change (UNFCCC) is illegal based on a 1994 law that bars funding to any UN group that includes the “State of Palestine” as a member.
In China, climate politics—although not nearly as sharply divided as in the U.S.—also complicate implementation of pro-climate policies. China’s top leadership has endorsed a basket of policy initiatives to meet the country’s nationally determined contributions in line with the Paris Agreement. These goals include peaking CO2 emissions by 2030 and increasing non-fossil energy to 20 percent of its energy consumption by the same year. These objectives build upon earlier planning targets, which have already distinguished China as a world leader in energy conservation and renewable energy. However, opposition to policies that reduce greenhouse gases has persisted even in the face of high-level political support for climate action. For example, the development of a national carbon market is among the highest profile and technically ambitious of China’s carbon reduction schemes. Passing the draft climate change law designed as the legal foundation for this market has proved an uphill battle, however. Opposition to the draft law from the coal and other carbon-intensive industries has been strong enough that some observers predict the climate legislation that is ultimately passed will lack such regulatory teeth as penalties for non-compliance. Support for low carbon policies also varies at the local government level where local leaders must still deliver GDP growth and create jobs in this period of economic volatility. Some local economies are based on energy-intensive industries where climate action may equate to job losses and potential instability. This has implications for green growth strategies as well, as subsidies designated for that purpose may not be well utilized by local governments.
Structural features in both countries’ economies pose particular challenges to policymakers pursuing climate friendly objectives. Among these for the U.S. is the energy intensive nature of the U.S. industrial base, which is also highly sensitive to changes in production costs that affect its international competitiveness. To stem the risk that more U.S. manufacturing is off-shored (which would also represent the export of current U.S. emissions to other countries), climate policies must mitigate the costs of adjustment by American industry to a more climate-friendly policy environment. For China, central challenges related to economic structure include its reliance on coal as a primary source of energy and the driving role of highly capital-intensive investment in economic growth. Moving toward a more consumption-driven economy is consistent with broader economic policy goals, including enhancing productivity and innovation. Meanwhile, reducing coal in its overall energy mix aligns with Beijing’s commitment to improve national air quality. Nonetheless, these are fundamental changes to a recipe that for decades has powered China’s rise, requiring both substantial investments from the central government and the painful adjustment to lower rates of economic growth.
Institutional factors also persist as hindrances to climate action in both the U.S. and China. In the U.S., achieving compliance with a national climate policy by a diverse set of states in a federal system is a well-recognized challenge. Implementation issues also affect policy implementation at the subnational level, varying widely depending on factors such as citizen support and the capacity and will of municipal governments to develop climate friendly policies. This gives rise to leakage and weakens the impact of climate policies in states with a climate-friendly leadership, like California – a major emitter. In China, climate policy is no less vulnerable to the bureaucratic policy bottlenecks and uneven implementation challenges as are other areas of policy. Institutional factors related to China’s still developing economy also pose difficulties for it to achieve its climate policy goals. One such challenge is the further modernization of China’s financial sector to expand the financial infrastructure for climate-friendly investments as well as enable such financial instruments as derivatives that could strengthen China’s planned carbon market.
U.S.-China cooperation cannot solve these political, economic, and institutional challenges to climate policy in the two countries but it can mitigate them to a significant degree. In the context of U.S. climate politics, cooperation with China may do little to persuade opponents of climate change policy whose views are rooted in denial of climate change. However, cooperation between the two countries in tandem with the Paris Agreement has engendered a sense among industry leaders that sustained competitiveness must involve adapting to a low carbon economy. On the institutional front, the Climate Working Group within the U.S.-China Strategic and Economic Dialogue (S&ED) has fostered a more enabling environment for policy design and implementation in both the U.S. and China by bringing multiple agencies from both governments together on strategies to reduce greenhouse emissions.
The high level S&ED process has also facilitated U.S.-China cooperation at the subnational level, opening the door to concrete linkages that could make emission reduction efforts in both countries more effective. As a recent Harvard study points out, developing connections between the two countries’ emissions trading systems could yield an array of dividends. For example, it can advance the creation of a set of international standards and terms for emissions accounting. It can also reduce costs by connecting regions with different abatement costs and, by expanding the geographic scope of coverage, can reduce price volatility in emissions trading. In a move that could mark a step toward such cooperation, in April 2013, California and Guangdong – both known as pioneers of innovative policies in their respective countries – signed a Memorandum of Understanding on Low Carbon Development and Emissions Trading. Finally, at the industry level, the U.S. and China are engaged in working together on innovations in green technologies, from electric vehicles to carbon capture processes to new green building techniques—new industries that could be sources of job creation in both economies.
It is still possible that U.S.-China cooperation on climate change could be derailed. Were the next American president to “cancel” the Paris Agreement, as Trump has threatened to do, this would be a blow to both U.S.-China cooperation and a setback for global climate action. A failure by Washington to implement its Clean Power Plan would also have damaging reverberations. Either development would complicate Beijing’s efforts to push ahead with its own ambitious carbon reduction targets. It would dim a vital bright spot in U.S.-China ties while damaging the United States’ international credibility as a leader in tackling a catastrophic global threat. This dismal outcome is not likely – and given the high stakes, it should not be a possibility.
