Market News

 May 03, 2013
China reaching out to deal with Climate Change

 China has often been criticized for its high level of greenhouse gas emissions and its uneven record with respect to enforcing environmental standards and regulations.

While there is much on the environmental agenda in China that can be criticised, credit must be given for the efforts that the world's most populous nation is making to address climate related and other environmental problems, many of which are legacies of bygone ages.

In its efforts to meet the daunting challenges China is reaching out to the world community for help and guidance. Two notable recent examples highlight the importance of international cooperation in dealing with climate change, and the mutual benefits that arise when nations work together.

Earlier this month, China and the United States initialled an agreement to form a bilateral Climate Change Working Groupin anticipation of the 2013 Strategic and Economic Dialogue (S&ED) slated to meet this summer.

In the official communiqué on the proposed undertaking, both sides acknowledged the increasing dangers presented by climate change and agreed that the inadequacy of the global response required a more focused and urgent initiative. Coming from the two nations with the highest levels of greenhouse gas emissions, the move could prove significant in breaking the logjam that has characterized international negotiations on climate change to date.

Both nations agreed that the overwhelming scientific consensus regarding climate change constitutes a compelling call to action crucial to having a global impact on climate change, citing in particular the sharp rise in global average temperatures over the past century, the alarming acidification of oceans, the rapid loss of Arctic sea ice, and the striking incidence of extreme weather events occurring all over the world.

The communiqué states "given the latest scientific understanding of accelerating climate change and the urgent need to intensify global efforts to reduce greenhouse gas emissions, forceful, nationally appropriate action by the United States and China - including large-scale cooperative action - is more critical than ever. Such action is crucial both to contain climate change and to set the kind of powerful example that can inspire the world."

The Working Group will be led by Mr. Todd Stern, U.S. Special Envoy for Climate Change and Mr. Xie Zhenhua, Vice Chairman, the National Development and Reform Commission.

Its purpose will be to identify new areas for concrete, cooperative action to foster green and low-carbon economic growth, including through the use of public-private partnerships, where appropriate.

Both sides noted a common interest in developing and deploying new environmental and clean energy technologies that promote economic prosperity and job creation while reducing greenhouse gas emissions. Also referenced were the possible business benefits that could arise from mutual cooperation on climate change.

This is the second significant China-U.S. agreement for joint action on climate change announced this month. After more than a year of preparatory work, Guangdong Province and the State of California launched a new climate change partnership to share tools and strategies for policy, trade, and investment in low carbon programs and technologies that boost economic growth and cut energy use.

Montreal Protocol

On a broader scale, another significant climate related initiative involving China was launched this past week. The United Nations body that supports developing countries to phase out substances that damage the ozone layer will provide China with up to US$380 million in funding to eliminate industrial production of the ozone-depleting substances HCFCs (or hydrochlorofluorocarbons) by the year 2030.

China is the world's largest producer and consumer of HCFCs. Under the agreement China will retire its current HCFC production capacity, as well as surplus production capacity currently not utilized.

The Chinese government says the total amount of HCFCs to be eliminated by 2030 will prevent the emission of over 4.3 million metric tonnes of HCFCs (equal to 300,000 tonnes in terms of its ozone depletion potential), and 8 billion tonnes of carbon dioxide equivalent greenhouse gas emissions.

HCFCs are widely used in the refrigeration, foam, solvent, aerosol and fire fighting sectors as a replacement for ozone-depleting CFCs (chlorofluorocarbons), which were successfully phased out worldwide under the Montreal Protocol in 2010. Although having considerably lower ozone depleting potential than CFCs, many HCFCs have high global warming potentials, of up to 2000 times that of carbon dioxide.

Over the next four years, China will receive US $95 million to cover the first stage of its HCFC production phase-out management plan. This is designed to assist the country to meet the freeze in HCFC production by 2013 and the reduction by 10 per cent by 2015, as required by the Montreal Protocol's HCFC phase-out schedule. China's progress towards phasing out HCFC production will be verified by the Multilateral Fund before further funding is awarded. Any interest earned by China on the amounts received will be offset against future funding.

A More Sustainable China

Both these agreements signal the importance of international cooperation and engagement in dealing with a global problem such as climate change. Creating a more sustainable economy in China is a daunting task, given that the nation's headlong push toward industrialization over the last quarter century left in its wake enormous environmental and ecological challenges that are only now being fully addressed.

As well, rapid societal changes in China, including unprecedented growth in the number of urban middle class consumers seeking higher standards of living, means that developing China's economy while responding to increased environmental and quality of life goals present both challenges and opportunities.

Already a world leader in renewable energy development and deployment, China is reaching out to economies around the world both as a purchaser of key commodities and as a supplier of technologies, consumer products, and investment capital.

Helping China to deal with it's enormous environmental challenges not only will benefit the global community generally, but also could create significant busines opportunities for those who partner with China in its efforts.