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By Elizabeth M. Lynch, September 10, 2009

An Expert Weighs In

On Monday, we ran a piece on the international trade implications of the border adjustment measures of the House’s climate change bill.  The article ends with a section questioning the legality of the tariff provision under WTO rules.

China Law & Policy was fortunate to have Henry Gao, Associate Professor of Law at the Singapore Management

Prof. Henry Gao

University and expert on WTO law comment on our analysis.  In his comments below, he questions whether the provisions would in fact violate WTO rules.

If I understand it correctly, this means that the carbon tariff provision is in violation of the national treatment obligation under the WTO. However, this seems to be rather unlikely. The national treatment obligation only applies with regard to domestic taxes and other regulations. The carbon tariff, by definition, is not a domestic tax. Instead, it is a tariff that will be applied before the goods enter the border. Thus, for me, it appears that it’s more accurate to say that this is a violation of the MFN clause (given the assumptions in your article that some foreign firms will qualify while others don’t), or possibly the tariff binding obligation under GATT Article II, assuming that the US might exceed its bound tariff levels by imposing the extra tariff.

Also, legally speaking, while the US will surely have to fight hard to defend its case if the issue is really referred to the WTO, it’s less than certain that the US will win.  Indeed, in the very first case that went before the WTO Appellate Body (AB), the US-Gasoline case, the WTO has, contrary to popular belief, affirmed the right for WTO members to take actions to conserve exhaustible natural resources, which has been explicitly interpreted by the AB to include clean air. Of course, this doesn’t give countries an open license to do whatever they want. They will need to demonstrate first, that are no less trade-restrictive measures; second, that their measures do not constitute arbitrary or unjustifiable discrimination. To sum up, it’s OK to take actions to control climate change, but the legality of the measure would depend on how you structure your package. The devil, as always, is in the details.

Henry Gao
Professor of Law
Singapore Management University
Editor, WTO & China Blog

As Prof. Gao notes, the devil is most certainly in the details.  As of yet, the House bill does not clearly spell out how exactly these tariffs will be applied.  Because of this, experts fall on both sides of this issue.  Paul Krugman of the New York Times expressed the opinion that the tariff provisions would like be okay under WTO rules.  However, attorneys at Akin Gump’s Climate Change practice disagree and offer their assessment that the provisions are a violation of WTO rules.

While there is a call by some moderate Democrats and many Republicans in the Senate to make the provisions stronger, expect at the very least for the provisions to be made a bit clearer.

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By Elizabeth M. Lynch, September 7, 2009

Originally posted on the Huffington Post.

Health care will not be the only derisive issue on the Senate’s calendar when it returns to Congress on September 8.

Rep. Ed Markey Announces Climate Change Passage, June 26, 2009

This past June, the U.S. House of Representatives passed the American Clean Energy and Security Act of 2009 (the “Climate Change Bill”).  Far-reaching in its impact on the U.S. economy and particularly detrimental to certain energy-intensive sectors, debate in the Senate will become increasingly cantankerous as special interests and certain states lobby for protection.

And while the Bill, through a series of complicated cap-and trade equations and a plethora of subsidies to renewable energy, has the potential to completely alter the domestic market, debate thus far has been about its global impact.  With fear that countries like China will not pass legislation to cap their domestic industries’ carbon output, the House added two provisions to protect U.S. industries from companies in countries that are not similarly restrained.  Out of a 1,400 page bill, these two provisions have become the center of the debate, some calling these provisions much needed protection and others calling them tariffs.

But conspicuously absent from these discussions is an analysis of what is really going on here.  How exactly do these provisions work?  Will they have the intended effect of maintaining the competitiveness of U.S. industries or are they attempts by certain industries to protect their profits?  Will these provisions bring countries like China to the table in Copenhagen or will they ultimately produce a tariff war?  Can they withstand a challenge under global trade rules?

To answer these questions, China Law & Policy sat down with Jake Caldwell, director of Policy for Agriculture, Trade & Energy at the Center for American Progress.  Click here to listen to the interview with Jake Caldwell.

The Trade Provisions

Applicable Only to Energy-Intensive and Trade-Sensitive Industries
In our interview, Jake stressed that the two trade provisions in the Climate Change Bill will only apply to those U.S. industries that are both energy-intensive and trade-sensitive, making these provisions applicable in fact to only about five U.S. industries: ferrous metals (iron and steel), nonferrous metals (aluminum and copper), non-metal minerals (cement and glass), paper and pulp, and basic chemicals (World Resources Institute (WRI) report, p. xvi).

Under the Bill, these industries will initially be given a two-year waiver from compliance to the Bill’s cap-and-trade regulations.  However, after the two years, these industries can seek protection from foreign competition through the following two trade provisions.

Provision 1: Recovery of Some Cost of Compliance
The first of these provisions is less controversial.  Found in Title IV, Part F, subpart 1 of the Bill, it establishes an emissions allowance rebate program.  As Jake explained, this will allow companies in energy-intensive, trade-sensitive manufacturing industries to be compensated in other ways for the cost of complying with the Bill’s cap-and-trade program.  The rebate program will reduce the threat that these companies will lose business to companies from countries that do not impose equally as rigorous caps on greenhouse gas emissions. The rebate program will be phased

Click on image for a PDF of the Trade Provisions in the Climate Change Bill

out by 2035.

Provision 2: Border Adjustment Measures (a.k.a. Tariffs)
It is the second trade provision, found in Title VI, Part F, subpart 2, that is the most contentious; this is the provision that establishes unilateral border adjustment measures – a.k.a. tariffs –  on imports from countries that do not have similar emissions reduction policies.  Under this provision, if by 2018 there is no international climate change treaty in force, the President, starting in 2020, is required to impose a border adjustment measure on imports from sectors in countries that have not capped their emissions or reduced their energy-intensity to comparable levels.  The U.S. importer of the competing foreign product will have to purchase an “international reserve allowance” through a carbon market.  This in effect establishes a tariff on imports from that foreign country.

As Jake pointed out, the President can grant a waiver to certain countries if he or she deems that there is an important national economic or environmental reason that takes precedence.  But the Presidential waiver is subject to Congressional approval through a joint resolution of Congress. In effect, Congress has to “second” the President’s decision, making for a cumbersome procedure.   If either house of Congress does not agree with the President’s reasoning, the waiver is denied.  Given the already politically-sensitive as well as politically-expedient nature of the U.S.-China relationship, it is difficult to imagine that any waiver to a Chinese industry could make its way through Congress without a fight.

Effectiveness of the Trade Provisions

As Jake explained in our interview, the trade provisions were adopted for three reasons: (1) to prevent carbon leakage (the transfer of production and jobs from industries in the U.S. subject to cap-and-trade rules to companies in foreign countries that do not have such rules in place), (2) to keep U.S. manufacturing industries competitive in a potentially unequal carbon-restricted world, and (3) to be used as leverage against other countries that have yet to set emission reduction targets.  But will these provisions achieve their stated goals?  Or are they protectionist responses to pressure from a few select industries?

Carbon Leakage
If a goal is to prevent carbon leakage and promote emission caps in other countries, the trade provisions, especially the border adjustment provisions, are not tailored narrowly enough to achieve these goals.  Congress was largely targeting China with the trade provisions.  However, out of the five U.S. industries that would be able to use the tariff provisions (steel, aluminum, chemicals, paper and cement), only one industry imports more than 10% of its product from China: the cement sector (WRI report, p. xviii).  For the other industries, the majority of foreign imports are from Canada and other developed nations, many of which already have emissions standards that surpass the U.S’.  While there will inevitably be some carbon leakage, it’s questionable just how dramatic it will be.  Currently, the majority of U.S. imports in these sectors come from countries with less-carbon intense production methods than China or even the U.S.  Just because U.S. companies will bare the cost of meeting more rigorous emission standards does not necessarily mean that production will be shifted to countries with less rigorous standards.  Currently, China’s production of aluminum is carbon-intensive and uses a tremendous amount of energy.  However, China’s production is more expensive than Canada’s or the U.S.’ and can barely remain competitive in the global market.  Thus, lower carbon emissions and greater energy efficiency do not always equate with higher costs.

Furthermore, if the goal is to prevent carbon leakage, the trade provisions offer no recourse to individual companies from foreign, carbon-heavy countries that are meeting their own private emission caps.  For example, Baosteel, China’s largest steel producer, is relatively energy-efficient (WRI report, p. 35).  However, under the current Climate Change Bill, even though Baosteel may voluntarily subject itself to carbon targets similar to those that will be imposed on steelmakers in the U.S., Baosteel will still be penalized.  The Bill’s trade provisions evaluate imports on a sector-wide basis and not an individual company one.  Arguably, if the goal is to prevent carbon leakage, the U.S. has a better chance of influencing a Chinese company’s behavior than an entire sector in China.  Thus, the trade provisions should establish a secondary track where certain companies, if they are able to show that they are compliant with U.S. standards, are exempted from the border provisions applied to their country and sector.

Finally, the question remains – how do you measure the carbon footprint of an imported product?  These provisions rely heavily upon the assumptions that monitoring and reporting of greenhouse gas emissions from the country of origin is (a) an easy task and (b) accurate.  While these assumptions might hold true in countries like Canada or Japan, for China, where implementation and enforcement on the local level is a perpetual struggle, any form of data collection is a challenge and results are often less than reliable.  Thus, in a world where carbon measurement is problematic, the actual ability to implement the trade provisions remains questionable.

Competitiveness
As mentioned above, imports from China in the energy-intensive, trade-sensitive industries are very small (14% of cement, 7 % of steel, 3% of aluminum, 4% of paper, and less than 1% of chemicals).  These five industries also make up a small portion of the U.S. economy, accounting for 3% of economic output and less than 2% of U.S. employment.  While these industries will inevitability be negatively affected by the Climate Change Bill, the impact on the greater U.S. economy is relatively small.  Additionally, over-protection of these industries loses sight of the broader U.S. economy and the other goal of the Climate Change Bill: to shift production and jobs to energy-efficient or renewable energy industries.

Furthermore, while the border adjustment measures protect these raw material industries, it potentially could hurt those industries that use the raw materials for production of “downstream” products.  For example, the border adjustment measures are only applicable to the importation of sheet steel, and not to products that are made out of steel, like cars or appliances (WRI report, p. 52).  U.S. car makers will still have to compete against foreign car manufacturers whose products could contain steel from countries without carbon regulations.  Without the benefit of border adjustment measures on cars, U.S. car makers would become less competitive.

Similarly, U.S. chemical manufacturing companies are fairly competitive globally.  These companies refine the carbon-intensive, raw material chemicals to make downstream, specialty concoctions (WRI report, p. 52).  However, by imposing a border adjustment measure on the raw material chemicals, any of these chemical manufacturing companies who import raw materials, would experience an increase in the cost of production, making their products less competitive abroad.  While the border adjustment measures will protect the five energy-intensive, trade-sensitive industries’ profits, they could likely hinder the competitiveness of industries that use these raw materials to manufacture downstream products.

Leverage
The jury is still out on whether border adjustment provisions do in fact bring countries to the table to discuss climate change.  The general assumption is that tariff threats rarely cause countries to act, especially countries as large as China.  However, after the U.S. backed out of the Kyoto Protocol, the European countries threatened similar types of tariffs, targeted precisely at energy-intensive U.S. industries.  Perhaps a mere coincidence, but it’s interesting to note that today, the U.S. is now close to passing climate change legislation.  Recently, South Korea voluntarily set a 2020 emissions reduction target; the South Korean government cited the fear of border tariffs as a reason to set targets.

But it is still questionable how far the threat of tariffs can go.  China has certainly taken notice of the border adjustment provisions in the U.S. Climate Change Bill, but that does not mean it will agree to carbon caps.  China’s exports to the U.S. that would likely be subject to the tariff provisions accounted for less than 0.2% of economic output in 2005, thus making the U.S.’ tariff threats of little consequence to China (WRI report, p. 57).  However, of greater consequence to the U.S. and to the rest of the world is if China, the largest emitter of greenhouse gases, walks away from climate change negotiations because it feels as though it needs to “act tough” for its domestic audience.  In looking at the current border adjustment provisions in the Bill and the tepid success they have had thus far, the Senate might want to ask itself if the risk is worth it.

Legality of the Trade Provisions

As Jake mentioned, World Trade Organization (WTO) rules require that countries pass nondiscriminatory trade provisions – that the provisions do not discriminate against foreign products in favor of domestic ones.  Arguably, the current Bill does discriminate.  As discussed earlier, individual companies that could be meeting similar carbon caps will be discriminated against if their home country has not agreed to carbon caps.  Without some sort of procedure that exempts foreign firms which individually meet carbon caps from the border tariffs, the current trade provisions may not withstand a WTO challenge.

There will certainly be a Senate showdown over the Climate Change Bill.  Already ten Democratic Senators have stated that the trade provisions need to be stronger.  But do they really?  If your singular goal is to protect 3% of the nation’s economic output and 2% of its jobs, then yes, the trade provisions will maintain the status quo, at least for the time being.  But if your goal is to increase innovation in new sectors like renewable energy, create clean jobs and limit global climate change, then the trade provisions, as they stand now do not achieve that goal.  There is a need to maintain U.S. competitiveness in the five effected industries, but in the current tariff provision, what is being maintained are corporate profits in a few select, and powerful, industries.  The Senate needs to take a good hard look at the current trade provisions and question if it is worth it.  Perhaps it is time to move away from defensive measures against China and begin to better engage China in agreeing to a climate change treaty.  Without China’s agreement, any legislation the Senate passes will have negligible effect in limiting climate change.

Click here to listen to the interview with Jake Caldwell

Click here to open a PDF of the transcript of the Jake Caldwell interview

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By Elizabeth M. Lynch, August 14, 2009

Last week, Taliesin Thomas, in her review of Song Dong’s current exhibit at the MoMA, observed that “[f]or all that we can posses in this life, in the end we leave the entire corporeal world behind, entrusting someone else to manage the

Trash in the Yangtze River

articles of our former existence.”

But where does all this “stuff” go?  For Song Dong’s mother, it sits in a museum.  For the billions of other Chinese people, their “stuff” and trash ends up in landfills; and China is becoming overwhelmed by the amount of trash that its population increasingly produces.

China’s Legal Daily, in an article published yesterday, provided some sobering numbers.  Every year, China’s cities produce 150 million tons of trash, with a litter growth rate of over 10% per year.  The Legal Times estimates that the amount of trash sitting in Chinese cities’ landfills has reached 7 billion tons.

Beijing alone produces 18,400 tons of trash per day, 6.7 million tons per year, quickly filling Beijing’s 23 landfills.  By 2010, the Legal Daily estimates that 10 of these landfills will be filled to capacity and closed.  Experts hypothesize that with the increasing growth in Beijing, all of its landfills will reach capacity within five years.

For China, this is more than just a space problem; it is also a health hazard.  As the NY Times reported this week in an interesting article about trash in China, as trash decays, it emits large amounts of methane, a greenhouse gas that is more effective in trapping heat in the atmosphere than even carbon dioxide.

As a result of this trash problem, China has begun to look to incineration of trash as a solution, creating a global hazard if strict limits on emissions are not enforced.  As the NY Times points out, such limits differ widely from city to city in China, and even within cities.  In general, communities of the affluent and well educated impose stricter limits similar to those in Europe and the U.S. while across town,  incinerators barely meet the loose requirements imposed by the national government.

China’s national government has allowed slack restrictions imposed years ago on incineration emissions to remain in place due to a power play amongst the various agencies that have overlapping jurisdiction on the matter.  Currently, national emission standards allow for 10 times the level of emissions allowed in Europe or the U.S.

China’s trash is not merely a domestic problem but impacts the world.  Pollutants from trash incinerators in China, like mercury and dioxide, have made their way to the Pacific coast of North America.  As China seeks to increase the number of incinerators, with the currently slack limit on emissions, the U.S. will suffer.  But China has made progress.  Its growing middle class will no longer tolerate such environmental hazards, as evidenced by the incinerators in these neighborhoods that emit almost zero pollutants.

U.S. policymakers need to see this as progress and instead of walking away from the table in Copenhagen, look to continue this progress and work with China to develop the capacity to institute limits that benefit not just the wealthy in China, but even the poor.  China is a big country and this will take time.  But if ever there was a more dire sign that the U.S. needs to reach an agreement with China in Copenhagen, their trash is it.

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By Elizabeth M. Lynch, August 5, 2009

In a recent interview with the Council on Foreign Relations (CFR), CFR Senior Fellow and China environmental expert

Dr. Elizabeth C. Economy

Elizabeth C. Economy analyzes the recent Strategic & Economic Dialogue with China and the U.S.’ changing relation with the emerging global power. While noting that serious differences remain, Dr. Economy stresses the importance of the U.S. and China to work together on a myriad of global issues.

She also pontificates on the changing dynamic in our relationship with China due to the weakened economic might of the U.S. vis-à-vis China and the increase of differing opinions on issues from the Chinese leadership.

But for us at China Law & Policy, where our focus is on the interplay of legal development in China and U.S. policy toward the country, most exciting part of the interview was Dr. Economy’s powerful insistence that the U.S. make rule of law development a priority in its policy toward China.

CFR: What issues should the United States prioritize in its talks with China?
Economy: Off the top of my head, I would say climate change because it is potentially game changing for the entire world in an overwhelmingly negative way. However, my second thought would be the rule of law. The rule of law underpins virtually every other issue. Whether we’re talking about food and product safety, or environmental implementation of anything China might agree to when it comes to global climate change, or trade and investment barriers and intellectual property rights protection, all of them hinge on China having an effective rule of law. Without that, the relationship will continue to founder, because even though we have high-level agreement that we want to work on these issues, if China can’t ensure that it will live up to its obligations, then we’re going to continue to have serious conflict. From my perspective, the most important thing we can do is help them develop the rule of law; it is at the root of most of our conflicts. (emphasis added)

Read Entire Interview Here.

We at China Law & Policy say “You go Liz Economy!”

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By Elizabeth M. Lynch, August 4, 2009

In Friday’s Huffington Post, Sen. John Kerry published a timely op-ed piece, “Who Lost the Earth?” on the need for the U.S. and China to reach some kind of an agreement on climate change.  “Who Lost the Earth?” comes at a point when it appears that any agreements reached during  December’s U.N. Conference on Climate Change will likely not include the two biggest emitters of greenhouse gases: the U.S. and China.

In his op-ed, Sen. Kerry correctly commends China for its efforts in already implementing measures to curb greenhouse gases.  It is in fact impressive that China is already experimenting further than the U.S. with some energy efficient technologies.   Furthermore, Sen. Kerry is right to criticize those in the U.S. who say that China “won’t lift a finger.”  While nervous that it could forestall economic development, China still has a sincere interest in solving its impending environmental crisis.  Every year, over 60,000 “mass incidents” (protests often involving thousands of people) in China are spurred by environmental damage.  The Chinese government views these mass incidents as a very real threat to its rule.

But even in light of these factors which propel China forward on the issue of climate change, Sen. Kerry and his Democratic colleagues still need to be realistic about China’s capacity.  Sen. Kerry notes that there needs to be legal commitments on the international stage and that China needs to be held accountable.  All of this is true.  But at the same time, China’s circumstances must be understood.  While moving forward in some areas, China still lacks the technical capacity to implement many energy-saving measures.  Simple things like an energy audit of a building often elude local officials.  Many industries, such as waste-heat recovery, have yet to be developed.

Another impediment is the difficulty for the central government to implement environmental laws on a local level.  Because China is an authoritarian regime, many believe that whatever the Chinese central government wants to achieve, it can easily impose.  But with this authoritarian government comes a layer of inflexibility.  Rule is from the center out; from top down; for the central government to guarantee that laws are implemented on the local level, it must amass all of its power, and oversee the locality, a very time-consuming and exhausting activity.

Unlike the U.S., China does not have a flexible regulatory state where government authority has been delegated to specific agencies that have almost exclusive jurisdiction over a field.  Nor do laws allow for individuals to enforce the law through lawsuits on behalf of the government (i.e. private right of action).  Instead, the Chinese central government must do all in a country as large as the U.S.  Not surprisingly, its ability to control the local level and guarantee that laws are implemented is not as prevalent.

In moving forward, U.S. policy makers must take China’s circumstances into account.  While they need to push China forward to meet greenhouse gas emission targets, these targets must reflect China’s current capabilities.  If Sen. Kerry and the Democrats do not devise a realistic strategy to help China in terms of technology assistance and implementation skills prior to Copenhagen in December 2009, opponents in Congress will use China’s capacity issues as an excuse to reject any agreement arising out of Copenhagen.  This would not just be a defeat for Sen. Kerry and like-minded Democrats; this would be a defeat for the future of this world.

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By Elizabeth M. Lynch, July 31, 2009

This past Monday and Tuesday marked the sixth Strategic and Economic Dialogue (S&ED) between the U.S. and China.  Formerly just the “Strategic Economic Dialogue” and before under the sole supervision of the U.S. Treasury

Secretary Hillary Clinton & State Councilor Dai Bingguo with the Strategic Track delegation, July 28, 2009 (White House Photo/Public Domain)

Department, the inclusion of  the conjunction “and” to the title brings non-economic issues to the table as well as Secretary of State Hillary Clinton.

On day one of the two-day conference, President Obama spoke to the delegation, stressing the need for the U.S. and China to continue cooperation to guarantee a lasting economic recovery, to lessen the impact of climate change and promote “a clean, secure and prosperous energy future,” and to stop the spread of nuclear weapons in places like North Korea and Iran (these three issues were also the main thrust of an op-ed written by Secretary Clinton and Secretary of the Treasury Timothy Geithner  in Monday’s Wall Street Journal) .

[youtube]4qAMaMlC1wA[/youtube]

Was the S&ED successful?  Did it produce more than just mere rhetoric?  At first glance, no.  But in the relationship between the U.S. and China, sometimes even rhetoric is a step forward.  See below for a review of the issues in greater detail.

(1) Climate Change

There was definitely paper success here.  The U.S. and China signed a Memorandum of Understanding  to Enhance Cooperation on Climate Change, Energy and the Environment (MOU), but the MOU just puts on paper existing relationships and does little to further climate change cooperation.  Both governments promise to continue with the Ten Year Cooperation Framework on Energy and Environment signed just last year and both promise to promote cooperation on a variety of vague steps, including capacity building and cooperation “between cities, universities, provinces and states of the two countries.”  Perhaps this shows a greater understanding on the part of U.S. policy makers that “capacity” is something that China sincerely needs assistance with (see The U.S. in Copenhagen: Preventing Another Toothless Tiger).  Also, in a nod to the Chinese delegation’s claim of differing responsibilities between developed and developing countries, the MOU states “Consistent with equity and their common but differentiated responsibilities, and respective capabilities, the United States and China recognize they have a very important role in combating climate change” (emphasis added)  Only time will tell if any of this rhetoric becomes a reality and whether the U.S. and China can reach an agreement in time for Copenhagen, an increasingly less likely proposition.

(2) Economic Recovery

Discussion regarding economic recovery was perhaps the most public, and most interesting, of all the talks.  Showing the changing dynamic of the U.S.-China relations, Xie Xuren, the Chinese finance minister, called the U.S. to task and requested that it reduce its budget deficit.  Holding an estimated $1.5 trillion in U.S. Treasuries, the Chinese government is concerned that an increased deficit could weaken the dollar, lowering the value of their Treasuries.  At the same time, for the U.S. to decrease deficit it would need to buy less goods, further decreasing demand on China’s manufacturing sector (an unfortunate Catch-22 here for China).  While Secretary Geithner promised the Chinese delegation that the U.S. would lower its deficit once recovery has begun, he also called upon the Chinese to increase

Who's got the ball? Vice Premier Wang Qishan with Pres. Obama at the Oval Office, July 28, 2009 (White House Photo/Public Domain)

domestic demand and lower the astronomically high savings rate of its people (estimated at 50%) in an attempt to rebalance the U.S.’ trade deficit with China.

(3) Currency

Always a thorny issue, the U.S.’ repeated request that China allow its currency to strengthen was most likely discussed during the S&ED.  However, nothing about currency was mentioned publically.

(4) North Korea

China has taken a much more foreceful approach to North Korea.  In May, when North Korea first began its saber-rattling, China spoke a hard-line against its neighbor, agreeing to abide by U.N. Security Council sanctions.  Less clear is what actions China actually undertook to promote these sanctions.  And although North Korea was a main point in President Obama’s speech before the S&ED, publically, neither the U.S. nor China made any statements on how they will cooperate to contain the country.   Such silence is par for the course since North Korea is a very sensitive issue for China but at the same time, their assistance in dealing with the North Koreans is essential.

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By Elizabeth M. Lynch, July 22, 2009

It’s 2015.  The immediate danger of climate change is apparent; rising sea levels in some countries, drought in others; countries on the brink of war due to shortage of food; governments that have existed for more than five centuries are toppling.  In this scenario, how would leaders in the United States, India and China respond?

This is no longer a theoretical question.  In testimony Tuesday before Congress on “Climate Change and Global Security,” Sharon E. Burke of the Center for a New American Security (CNAS), reported on a recent “climate change war game” that CNAS sponsored and which included representatives from the U.S., Europe, China and India.  Similar to war game simulations that countries’ militaries periodically organize, CNAS set up a dire climate change simulation to see how these countries would respond.  Ms. Burke testified that the responses in their simulation have thus far been accurately reflected in the current stalemate among the U.S., China and India.  In CNAS’ climate change game, India staunchly refused to agree to specific targets to carbon emissions, a sentiment that was recently shared with Secretary of State Clinton on her trip to India.  However, the CNAS simulation found that India was willing to negotiate on other issues.  Because they perceived their country as vulnerable to natural disasters, India was willing to concede certain things.  Ms. Burke also commented that the climate change game also showed that concessions made by the U.S., although provide the U.S. greater credibility, were not as important to other countries as the behavior of China.  However, in the simulation, China was not willing to concede to anything unless more developed countries financially supported their efforts.

While the countries in the CNAS climate change game were unable to reach an agreement, Ms. Burke was not willing to give up all hope.  Instead, she urged that the CNAS simulation be used to alter the current negotiations, negotiations that are obviously going nowhere.  The past has shown that the U.S. and China can reach agreement on issues even more complex than climate change (e.g. thermo-nuclear war) but policy makers need to find the commonalities between the two countries.  For China, climate change is a national security issue – currently there is great unrest in China due to environmental damage so they have as much of an interest as the U.S. in reducing the threat of climate change.  In a follow up with Ms. Burke after the hearing, she maintained that negotiators need to find a Plan B; we cannot continue with the current dialogue.  And although Ms. Burke thought that perhaps Plan B will not emerge until after the U.N. Climate Change Conference in Copenhagen, many policy makers have begun to realize that a Plan B is necessary.

To watch a full video of the hearing, please click here (starts at 30 minutes, 22 seconds in).

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By Elizabeth M. Lynch, July 19, 2009

Last week, U.S. Secretary of Energy Steven Chu and U.S. Secretary of Commerce Gary Locke visited Beijing.  Much of their discussion with Chinese officials, as well as the focus of Secretary Chu’s speech at Tsinghua University, revolved around climate change and preparation for the U.N. Climate Change Conference in Copenhagen this December.  Both the NY Times and the Associated Press

Secretaries Steven Chu and Gary Locke in Beijing

reported on Chu and Locke’s visit.  During their visit, the U.S. and China agreed to jointly fund the Clean Energy Joint Research Center, with $15 million provided up front.

While the Clean Energy Joint Research Center is certainly a step in the right direction, especially in light of the technical capacity issues that China currently faces in curbing greenhouse gas emissions, talks between China and the U.S. on a potential agreement on climate change have still not progressed forward.  Copenhagen is less than five months away and it appears that the U.S. and China, the world’s two largest emitters of greenhouse gases, have made little progress in coming to any agreement.  China still continues to maintain trade barriers to U.S. clean energy companies, shielding their own nascent clean energy industry from global competition, and potentially hindering its own technological capacity.  However, with the new tariff provision in the House’s Clean Energy Bill, the U.S. has less standing to argue against China’s protectionist policies.

In similarly frustrating turn of events, Indian officials, in an unexpected statement to U.S. Secretary of State Hillary Clinton during her visit to India, announced today that they remain opposed to any binding requirements on developing nations to reduce their carbon dioxide emissions.

Have climate change talks stalled?