Climate Change and the Globalisation – China’s Emissions and Trade

1. Climate Change and the Globalisation – China’s Emissions and Trade Dr Tao Wang and Dr Jim Watson Tyndall Centre for Climate Change Research Sussex Energy Group, SPRU, University of Sussex CARIS and WB conference on Regional Integration University of Sussex, 14-15th September 2009

2. Climate Change: Developed Countries and Developing Countries’ perspectives • Developed countries have the most responsibility as well as ability (political and economic), should take lead in reducing emissions, and help developing countries to transit to low carbon growth • Developing countries are the most vulnerable to the consequences of climate change, yet will have the mostcontribution of the increase of carbon emission • Is there a low carbon development path or society that successfully decarbonise in its development? • How much the developed countries should be held responsible for the rise of carbon emission in developing countries?

3. China’s position As an emerging economy and trade power, China stands at very forefront of this debate • quickly moves on a road of high growth and high emission since 2000 • long way to go for development and poverty eradication • environmental pollution threaten further development • 58% of China's total export in 2006 is from the foreign venture industries in China, and 70% FDI in China in 2006 goes to manufacturing • looking for alternative development path but cautious to potential risk

4. Carbon embodied in Trade • China has emerged as a major trading economy – with a rapidly growing trade surplus with the developed world, US and EU • How much of China’s carbon footprint is due to its exports? • The extent to which carbon emissions in China should be ‘owned’ by China has been the subject of much debate The Emma Maersk

5. Take-offs of China’s export and emission

6. Who owns China’s emissions? • Headline results: • Emissions from exports in 2004 :1490 million tonnes of CO2 • Emissions avoided due to imports: 381 million tonnes of CO2 • 23% of China’s emissions due to net exports • One reason is large (& growing) trade surplus: tripled between 2004 and 2005 to $102bn, rose again to $177 bn in 2006, and over $250bn in 2007 • Another reason is relatively high carbon intensity of Chinese economy. In 2000, the US produced 0.5 kg CO2 per dollar of economic activity whereas China produced 2.76kg per dollar

7. Potential inaccuracies • using national average CO2 emission intensity of GDP neglects the difference in emission intensities of different goods • neglect the life cycle effects of producing and consumption of goods and focus only on that happened at the custom • difficult to trace the trade via intermediate ports e.g. Hong Kong and Singapore • processing trade, particularly within Asia

8. In a worldwide context • It is only slightly less than the total emissions from Japan in 2004, almost Germany and Australia combined, and more than twice of the UK emissions. 2004

9. The main categories of China’s trade • First, low value-added, low energy and labour intensive goods • textile, machinery & electronics, footwear etc • major exporting sectors • major source of trade surplus as well as embodied CO2 • Second, energy and resource intensive products • base metals and related products • similar high volumes for both exports and imports • modest net import, substantial pollution and energy consumption, large carbon exporter

10. The main players of China’s trade • Third, high-tech and high value-added products • chemical, transport and optical/precision equipment • net import • export largely stems from multinational companies’ plant in China • China still lack ability and capacity • Fourth, natural resources and minerals • mineral, plastic and rubber • 70% from mineral imports is crude oil • very large net import

11. Source : WWF (2008)

12. Imbalance of Carbon in Trade in 2001 Source : Peters and Hertwich (2008)

13. Different Strategic Positions in World Trade Balance of Embodied Emission 3.5 Emission Intensive Export South Africa 3 2.5 Sweden Japan Russia Germany 2 United Kingdom China 2004 China United States Canada 1.5 Brazil emission imbalance in trade (kg CO2 / 2000 US$)) Poland India 1 Australia Poland India Australia Russia 0.5 China South Africa Brazil 0 China 2004 Canada UK -600 -400 -200 0 200 400 600 800 1000 1200 Sweden United States Germany -0.5 Japan Import Export Emission Intensive Import -1 Total CO2 emission in trade (Mt)

14. Other similar researches sources: Wang and Watson (2008)

15. A heavier and heavier burden to China • China is a resource scarce country (1/3 in land, 1/4 in water) • Heavy industrialisation and manufacturing already made China resource scarce, and spurred severe social and environmental problems • Cheap products export driven economy is not sustainable nor stable • Trade conflicts with other trade partners and fuels protectionism in the West

16. Low Carbon Society, or just Business as Before? • China repeating old business: UK (19th Century), US (1st half 20th Century), Japan & Germany (1960s) and the Asian Tigers (1980s). Latest wave of industrial relocation is also emerging • Economic growth driven by consuming, particularly relies on pulls of rich country’s over consumption, has to be changed • Consumerism doesn’t increase welfare, over-debt the public in developed countries, create economic cycles, but appropriate resources needed for the poor’s development needs • Challenges of Climate Change and Sustainable Development calls for a service based, not resource/material based economy

17. Short-term solutions to address the problem • Consumption based emission accounting • significant data requirements and lagging • very much rely on international agreement and collaboration • inconsistent to mainstream accounting system • business greening up its supply chain is a good start • Sectoral approach for key sectors • rely on international collaboration and agreement • difficult to agree on benchmark standards • technology and finance support for developing countries’ industries • complementary not substitution • China’s embodied emission mainly from low emission sectors

18. How to address the problem? • Border carbon tariff or allowance • conflict with “common but differentiated responsibility” and WTO rules • inefficient, huge administrative burden and not address carbon leakage • ineffective, won’t change price and advantages of Chinese goods • lobbied by heavy industries that China exports little or net-imports • Low carbon technology transfer and diffusion • Use trade to promote low carbon products, technologies and services • Carbon market and CDM to be scaled up • Capacity building in developing countries • Leverage from other sectors such as power

19. Trade and climate policy to facilitate low carbon transition • China’s heavy industry and export led economy need to be changed, unsustainable both for China and its trade partners, both for global environment and finance system • An even more critical issue in today’s economic slowdown • Pressure for exporting countries to comprise environmental standards • Adverse impacts on consumers’ environment preference • Short term economic stimulation conflict with long term climate efforts • Proactively pursue to harmonising the international trade and climate policies • Addressing the global economy driven by material-consumerism is a must and a long term target that needs global efforts

20. Thank You! tao.wang@sussex.ac.uk (valid till Oct 2010) tao.wang.2006@163.com