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Published October 2, 2008 07:51 AM

Trade and climate policies must be linked post-2012

Emissions from China's export industry are everyone's responsibility — future trade and climate policy must be linked, says Glen Peters.

China is now the world's biggest emitter of carbon dioxide, decades earlier than many predicted. Chinese emissions are often viewed as a Chinese production problem, but the role of spiraling consumption in rich nations should not be underestimated. One third of China's territorial emissions come from producing exports.

A closer look at China's emissions from 2002—2005 shows that half their growth was due to export production. A further third of the growth came from capital investments, with a significant share of this in export industries. Indeed, only 15 per cent of the emissions growth from 2002—2005 was due to household and government consumption.

By the same argument, emissions in some developed countries have not stabilised if imports are included. In the UK, for example, emissions associated with consumption have increased 18 per cent since 1992 — even though emissions reported to the UN Framework Convention on Climate Change (UNFCCC) have declined.

Protectionism is not the answer

In many developed countries, industries with vested interests point to China's growing emissions and blame its weak environmental legislation, which they say gives Chinese producers an unfair advantage. These industries argue that they — and the environment — need protection in the form of subsidies, free carbon permits or border tax adjustments. They also argue that such protectionist measures will coerce China and other developing countries into taking quantifiable action to mitigate greenhouse gas emissions when the first commitment period of the Kyoto Protocol ends in 2012.

But ignoring the developed world's share of responsibility for Chinese emissions could put post-2012 debates on a negative and protectionist footing, with serious consequences for world trade. In the words of Ma Kai, the chairman of China's chief economic planning agency, "the ramifications of limiting the development of developing countries would be even more serious than those from climate change".

Linking climate and trade policies

Given the importance of trade to many countries' emissions profiles, one would expect it to be an important part of climate policy. Yet the UNFCCC treats countries' emissions as disconnected units, even though trade creates a strong link between them. A clear first step for policymakers is to ensure that climate and trade policies work together.

Emissions from China's export industry need not present a problem to the global trading system — there will always be emissions associated with producing traded goods. The problem lies in China's less than carbon efficient production systems and electricity generation.

Internally, China must ensure that new installations use the latest clean technologies. As China rapidly increases its capacity, there is no reason why it cannot become a world leader in developing and using clean technologies. Using the latest technologies now will greatly reduce mitigation costs later, as will investing in urban planning and infrastructure that moves China away from a fossil-fuelled future.

And China's exports are so important to global climate that its international trade should play a key role in post-2012 climate policy. Such policy should take advantage of China's huge production capacity and use it to help solve environmental problems by specialising in the products needed in a low-carbon future.

But for China to play an active role in post-2012 climate policy, solutions must come from both inside and outside the country. Rich nations can make a first step by replacing rhetoric with action — for example, by encouraging China to mass produce cheap wind turbines rather than cheap disposable products. The international community must place strict efficiency standards on the use of products. Encouraging China to focus mass production on clean technologies will drive down production costs and speed up global diffusion of technologies such as low-carbon cars, wind turbines and solar panels.

Unforseen opportunities

These solutions offer the promise of increased production and trade as an incentive for China to invest in clean technologies. But to continue receiving these benefits, China must agree to use a share of the proceeds to clean up its own economy. Global agreements can monitor the country's progress. In the short-term Chinese emissions will continue to increase, but in this case it will be to climate policy's benefit.

Rapidly developing countries have the opportunity to lead the world in a low-carbon future. They are expanding at a rate that allows large-scale installation of and experimentation with tomorrow's technologies. By contrast, rich nations suffer from deep sunk costs and entrenched vested interests. Developing countries have the chance to step forward and revolutionise the world in a way no-one thought possible until now.

Glen Peters is a senior research fellow at the Center for International Climate and Environmental Research in Oslo, Norway.

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