Key Takeaways from Today’s U.S.-China Climate Announcement

September 25, 2015

Today, U.S. president Barack Obama and Chinese president Xi Jinping used the occasion of their high-level bilateral meeting to once again send a strong message about the two countries’ commitment to address climate change. The two leaders, in a joint statement, outlined a series of domestic actions and financial contributions to implement last November’s historic joint climate announcement. China’s decision to announce its ambitious new policies in Washington rather than Beijing is likely intended to send a message to both the U.S. Congress and climate negotiators around the world that they can no longer use China as an excuse for inaction.

Q1: How does today’s announcement build on the bilateral announcement last November?

A1: Last year, the leaders unveiled new parallel targets: for the United States to cut greenhouse gas emissions 26–28 percent below 2005 levels by 2025, and for China to peak emissions around 2030 and increase the nonfossil fuel share of energy to around 20 percent by 2030. These targets served to signal a year ahead of key global climate negotiations that both countries were serious about reducing emissions and committed to the success of global climate talks in Paris at the end of this year. Fast forward to today, China used the joint statement to announce the launch in 2017 of a nationwide carbon emissions trading system that will cover heavy polluting sectors including iron, steel, power generation, paper, aluminum, and chemicals. These industries account for roughly three-quarters of China’s energy-related carbon emissions. If China is successful in launching emission trading, it is likely to be the largest emissions trading system in the world. In addition, China unveiled plans for a green dispatch system that will prioritize low-carbon power generation and help phase out the least efficient and most polluting surplus power facilities. China’s domestic announcements today stand alongside the Obama administration’s Clean Power Plan, issued in August, to reduce carbon emissions in the power sector by 32 percent by 2030. The two countries will also carry forward parallel programs to improve fuel efficiency of heavy-duty vehicles. Together, these policies provide the building blocks to help both countries meet their respective climate targets.

Q2: What is significant about China’s new financial pledge?

A2: Equally noteworthy, China announced a contribution of 20 billion yuan ($3.1 billion) to help countries address climate change through the China South-South Climate Cooperation Fund. This marks a significant shift in the climate finance landscape by expanding the pool of major donors beyond just industrialized countries. The pledge is likely to flip China from a net recipient to a net donor of climate funds. China’s pledge stands in parallel to the $3 billion pledge the United States has made to the Green Climate Fund, which in turn helped to catalyze over $10 billion to assist the most vulnerable countries address and cope with climate change. China has not specified which projects will qualify and whether the funds will be in the form of grants or loans. Its pledge today to significantly limit official financing for high-carbon projects is viewed by many in the environmental community as a signal that China may be willing to set rigorous guidelines to establish credibility in the low-carbon financing sphere. Climate finance, specifically the ability of countries to deliver on their finance pledges, will still be a contentious issue in the upcoming negotiations, but China’s finance pledge changes the debate in a positive direction.

Q3: How is this announcement intended to influence the upcoming negotiations in Paris?

A3: As part of today’s announcement, the leaders also sought to enhance the chances for success in global climate talks this December in Paris by identifying potential diplomatic landing zones for some of the most contentious issues. The leaders offered a common vision for some of these issues heading into the Paris negotiations, including responsibilities of developed and developing countries, how to frame long-term global emission targets, what type of system is needed to measure progress, and what qualifies as climate finance. To be sure a wide divide remains on these issues, particularly among several developing countries reluctant to accept formal commitments. That said, the United States and China have put forward potential areas of agreement that may help break the logjam in much the same way that text from last November’s joint announcement bridged the divide between developed and developing countries in the Lima negotiations last year.

Q4: What do the United States and China hope to signal with this agreement?

A4: First, the United States and China have identified an area of common objectives in the face of economic turmoil and tension in other areas of their bilateral relationship. It by no means makes the areas of tension easier to resolve, but it does show the durability of both leaders’ commitment to the issue of climate change.

Second, today’s announcement makes it increasingly difficult for domestic opponents to use China as an excuse for inaction on domestic climate policy or international climate assistance. The debate about comparability of effort will of course be an ongoing area of interest, but it is now impossible to say either country is inactive. There is also strong symbolism in China’s decision to announce its cap-and-trade program in Washington, where congressional support for similar proposals has failed due in part to competitive concerns vis-à-vis China.

Third, China and the United States are committed to a successful global agreement in Paris, and today’s agreement is clearly intended to enhance the prospects for diplomatic progress heading into December.

Fourth, China and the United States, through these high-level agreements, intend to signal perhaps the most important driver for global action on climate change: the two largest energy producers and consumers are embarking on a long-term, low-carbon transition, which will create opportunities for new technologies and challenges for traditional energy markets.

Sarah O. Ladislaw is a senior fellow and director of the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Michelle Patron was senior director for energy and climate on the National Security Council from 2013 to 2015.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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