On the recent US-China agreement on climate change

Carlo Carraro 07 February 2015

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Even though several analyses of the US–China deal on climate change policy have already been circulated, let us focus again on this important event to provide a better quantification of its implications for climate change control. Let’s take a look at the basic facts. China and the US have recently agreed to reduce their production of greenhouse gas emissions. China has committed to peaking their emissions by 2030, if not before. The US says it is shooting for emissions reductions of 26–28% by 2025 (from 2005 levels).

These commitments have created more international impact than the EU has been able to elicit through years of steady and progressive climate action. Even though the most significant outcome of the US–China deal is not the targets themselves, but the impact on the political deadlock of international climate negotiations that will force other nations to up their game in the forthcoming climate negotiations in Paris (COP21), it’s worth assessing the actual effectiveness of US and Chinese greenhouse gas emission reduction commitments. What quantifiable impact will these targets have? Are these new commitments any better than their previous approaches? If so, are they enough to avoid dangerous climate change?

The US case

The new emissions reduction target set by the US appears to be on track for the 2°C warming by 2100 limit. By achieving its target of reducing emissions by 26–28% by 2025 (from 2005 levels), the US will have achieved a 16.3% reduction in greenhouse gas emissions compared with 1990 levels. Though notable, this target is decidedly less than the about 30% reduction decided by the EU for 2025 (recall that the EU committed to reduce its greenhouse gas emissions by 40% from 1990 levels by 2030).

Even so, broadly speaking, the US is on track. Let’s consider three scenarios for US future emissions consistent with the achievement of the 2°C target by the end of the century. The first scenario (EMF) is produced by the Energy Modeling Forum. The second scenario (LIMITS) comes from LIMITS, an important project funded by the European Commission. The third scenario (SSP) identifies US greenhouse gas emissions within the socio-economic pathway leading to a 2°C temperature increase by the end of the century.

As shown in Figure 1, courtesy of Samuel Carrara and Giacomo Marangoni from FEEM, in all scenarios the emission reduction target adopted by the US administration is fairly consistent with the 2°C objective. An important additional effort will be necessary beyond 2025, but the target for 2025 seems to be ambitious enough.

Figure 1. Scenarios of US greenhouse gas emissions from 1990 to 2100

However, is the US emission reduction objective feasible? This target will mean doubling the pace of emissions reduction set for 2005–2020 thereafter. Doubling the US effort to mitigate greenhouse gas emissions is likely to be technically and economically feasible. Both US per capita emissions and US emissions per unit of GDP are larger than the EU ones. Hence, the marginal mitigation effort is smaller in the US than in the EU.

  • However, in the US, the most significant barrier to climate change action will be a political one.

The US lawmakers in Congress, currently a Republican-dominated body, may oppose any action to effectively reduce greenhouse gas emissions. In response to these political obstacles, President Obama may develop a climate action framework through his regulatory power that does not need to be passed through Congress. The most notable of these regulatory mechanisms are the Clean Power Plan, energy efficiency standards, heavy-duty engines standards, and vehicles standards.

Even with this practical approach to avoiding Congress, however, it is unlikely that these policies will be able to achieve all of the 26–28% emissions cut needed unless new clean energy technologies are developed. With the Congress obstacle still standing, this could mean looking to private investment to facilitate the development of such clean energy technologies (Climate Policy Initiative 2014). With lowering costs and an opening market for some renewables in the US, attracting this finance may be viable. This may be the case particularly for solar power, the production of which has grown by 139,000% in the US in the past decade.

The China case

Prior to the recent commitment to peaking emissions by 2030, China had only a carbon intensity target of reducing emissions per dollar of economic output by 40–45% in 2020 (from 2005 levels). Modelling projections from the IEA and EIA suggest that a 45% carbon intensity target would result in overall emissions that are slightly more ambitious than (IEA) or the same as (EIA) China’s business-as-usual trajectory. In addition, given China’s current and projected economic growth rate, it is very unlikely that a relative target of this kind will allow emissions to peak in time. The absolute commitment now pledged is therefore a step in the right direction. However, can we also conclude that China is on track for the 2°C by 2100 warming limit?

Let us consider again the three scenarios previously outlined and their implications for China. As shown in Figure 2, a peak of emissions in 2030 does not seem to be consistent with the 2°C target in any of the three scenarios. Chinese emissions should peak in 2020–2025 for the 2°C target to be achieved by the end of the century.

Figure 2. Scenarios of China greenhouse gas emissions from 1990 to 2100

According to another more optimistic study (Zhang et al. 2014), in the continued effort scenario, namely by keeping the present carbon intensity target, Chinese emissions will peak in 2040, whereas in the accelerated effort scenario, emissions will peak in 2030 with a cost of about 1.3% of GDP (probably not realistic) and a large increase of the share of non-fossil fuel sources in the energy mix. However, this share – 20% in 2025 – is mostly achieved through the diffusion of nuclear energy. In addition, the study is unable to suggest that this emission reduction path in China – combined with the proposed emission reductions paths for US, Europe, and the rest of the world – is sufficient to keep global temperature increase below 2°C by the end of the century.

Nonetheless, the enhanced effort by China is worth being positively considered. Under the old commitment (2005–2020), China was supposed to reduce energy intensity by about 3% per year (a target that China is likely to achieve). Under the new commitment (peaking emissions by 2030), the implicit pace of emission reduction is about 4% per year. It’s not a doubling of the emission reduction effort, but it’s a significant one.

It’s important to stress how important the non-fossil fuel energy target is for China. Solar energy in China is developing at unprecedented rates. Nuclear energy is also growing fast. Unfortunately, China’s coal use and overall growth are also developing at unprecedented rates. With the number of coal plants being built, China is already locked into a high level of carbon emissions no matter what actions they take now. With this in mind, hope comes anyway from China’s concrete aim of increasing the total share of non-fossil fuel energy to 20% by 2030 at the latest. This commitment is certainly demanding. At the moment, only 10% of China’s energy mix comes from non-fossil fuel energy sources. The 20% ‘clean’ energy target would require China to deploy an additional 800–1,000 gigawatts of wind, solar, nuclear, and other carbon neutral technologies by 2030. This is greater than the capacity of all coal-fired power plants currently operating in China.

Even were China to be successful in reaching this target, the necessary emissions reductions after the peak year are unlikely to be achieved. As previously shown by Figure 2, Chinese emissions must decrease very quickly for the 2°C target to be achieved.

Concluding remarks

Let us conclude with two final remarks on the US–China agreement.

  • First, emission reduction is not the only component of the agreement.

Both countries are showing strong interest in the two nations’ bilateral investments into R&D, which aim to drive the technology innovation and price reductions required to catalyse a clean energy future.

The renewed commitment to the US–China Clean Energy Research Center is particularly encouraging in this respect. As is the new major carbon storage project planned in China. It is hoped that projects like this will be able to develop carbon capture and storage technology so as to make it commercially viable. This platform may ease the barriers that both countries face in meeting their targets.

  • Second, while insufficient for keeping temperature increase below the 2°C limit, the US and China’s bilateral commitments are certainly a step in the right direction.

They send a signal to other countries that there are no more excuses for ignoring climate change issues. And they are the basis for a stronger and binding international climate change agreement at COP21 in Paris later this year.

References

Climate Policy Initiative (2014), “The Global Landscape of Climate Finance 2014”.

Zhang, X, V J Karplus, T Qi, D Zhang, and J He (2015), “Carbon emissions in China: How far can new efforts bend the curve?”, MIT Joint Program Report 267, October.

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Topics:  Energy Environment

Tags:  US, China, environment, climate change, greenhouse gas emissions

Professor of Environmental Economics, Ca' Foscari University of Venice and CEPR Research Fellow

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