Productive Competition: A Framework for U.S.-China Engagement on Climate Change
January 21, 2021
This commentary is part of CSIS's Global Forecast 2021 essay series.
The United States and China remain two of the most important countries for addressing climate change. They are the largest greenhouse gas emitters globally, though China far surpasses the United States on a national basis, and the United States surpasses China on a per capita basis. They are both significant contributors to the creation of low-carbon energy technology. Here, too, China has surpassed the United States as both a market for clean energy technology and as a manufacturer of those technologies. From a scientific perspective, it is impossible to address climate change and the goal of keeping global temperature rise to less than 2 degrees Celsius above pre-industrial levels without both China and the United States taking aggressive action to reduce emissions within the next decade.
There is precedent for cooperation between the United States and China on climate change: the partnership between the two during the Obama administration created the global political dynamic that enabled the Paris Agreement. Given the urgency of the task at hand and the diplomatic muscle memory of the Biden administration, it is tempting to once again seek bilateral cooperation between the United States and China as the anchor in a new model of global climate leadership. But times have changed.
First, and most importantly, the relationship between China and the United States has grown much more contentious since the end of the Obama administration. Beijing’s economic, technological, and military power has grown along with its ability to assert its distinct agenda on the global stage. It is unclear which issues will take top priority for the Biden administration regarding U.S.-China relations, but there will be many areas where U.S. and Chinese interests will conflict, and even more where the two will regard each other as competitors. Still, some degree of compartmentalization will likely be necessary to manage a contentious but essential relationship.
Worsening U.S.-China relations under the new administration will likely have significant repercussions for the climate agenda. Trade disputes, concerns over human rights, and national security concerns could all disrupt clean energy supply chains between the United States and China, not to mention other countries. National security and competitiveness pressure could lead to less collaboration between the U.S. and Chinese scientists and institutions.
Second, how we think about the climate challenge is different too. The main goal is no longer to negotiate a global agreement but to deliver on the actions pledged in those agreements. The United States' reentry to the Paris Agreement is a positive first step, and it needs to submit a new pledge of climate action (National Determined Contribution) to the UN Framework Convention on Climate Change. Still, beyond that, the high-stakes items are not about negotiations and agreements.
The economic and political atmosphere in which climate change exists is different too. Countries are still reeling from the Covid-19 pandemic. Even before the pandemic, countries were pulling back from one another due to a crisis of confidence in globalization and free trade sparked by inequality-fueled domestic populism. Add to this an unprecedented growth in climate activism in civil society, climate risk awareness in global financial institutions, and pledges to be carbon neutral by countries and significant corporations alike. The result is enormous pressure for actions that deliver economic and climate benefits to domestic constituencies.
Europe, China, India, Japan, and the United States, among others, are adopting more industrial strategy-oriented models of climate action that seek to create clean energy economic opportunity as they do emissions reduction. At one point, the vision for reducing greenhouse gas emissions was through a system of globally linked carbon markets and integrated supply chains that would drop the cost of technology. Now countries exist in an uneven playing field consisting of varying approaches to dealing with climate change and rising incentives to compete to extract maximum domestic economic value from their climate investment and policies.
This environment might foster less of a tendency toward bilateral cooperation, and instead toward competition. The goal should be to make it a productive competition where players compete to achieve good rather than destructive outcomes. In this case, the United States could challenge China to be the first country to reach net-zero greenhouse gas emissions and to be the top provider of clean energy technology solutions to the world. Others will compete too, of course—formidable challengers like Europe, India, South Korea, and Japan.
This productive competition dynamic will still require some elements of cooperation as well as efforts to co-opt China. For example, the United States, China, and other countries should continue to facilitate cross-border collaboration on energy research and development. Here, cooperation among scientists, industries, and sectors is critical. When it comes to research-led innovation, there are no benefits to breaking down scientists and innovators' network, which will deliver the essential breakthroughs we need.
The United States and China might also need to agree on some things, like new rules to ensure the multilateral financial, development, and trade systems encourage climate change measures. While concerns over China’s unfair trade practices are indeed valid, the United States should find ways to protect the climate agenda from these ongoing economic tensions. A strategy of working with like-minded countries to pressure China to come on board may be necessary. In the current trade environment, it is quite likely policies to manufacture and deploy clean energy technologies will run into trade barriers (as they have in the past) due to China's massive use of state subsidies to develop technologies and protect domestic industries. One way to avoid this is to agree to a climate waiver under the World Trade Organization (WTO), which would allow countries to subsidize and protect clean energy industries and technologies that help them to meet their climate commitments. Thus far, the European Union, Japan, and the United States have been leading the charge to reign in the Chinese overall state-led economic model using pressure in the WTO. Working within this group to propose a climate waiver to China would allow these countries to remain united on other aspects of their agenda while compelling China to address climate change.
The United States might also want to find other ways to co-opt China into doing more positive things for the climate. For example, in the context of Covid-19 debt relief, the United States and other countries could pressure China to restructure existing debt holdings from developing countries into climate-beneficial projects. These so-called debt-for-climate swaps could be similar in format to the debt-for-nature swaps that became popular following the sovereign debt crisis of the 1980s. There may be other ways to co-opt Chinese investment in global infrastructure projects to be greener by granting them recognition for their green performance as part of a multilateral initiative.
The first and most important part of this strategy is for the United States to get serious about its clean energy and climate policy and commit to being more competitive. The Biden administration has already pledged to do this as part of its Build Back Better plan, but there is reason to believe both parties in Congress could support some of this agenda. As I wrote in an earlier commentary on the topic, the last remaining bipartisan area of agreement in Washington concerns U.S. competitiveness relative to other countries, particularly China. As the American Council on Competitiveness notes, no matter the measure or sector of the economy, the United States is either newly lagging or weakening its leadership across the board. Before the end of 2020, Congress passed a clean energy innovation package that makes a substantial down payment toward a more competitive U.S. clean energy sector. But more must be done.
The final thing to note is that there will likely still be areas where the United States and China simply cannot and will not trust each other. These could be concrete issues like the inclusion of Chinese-made equipment in our critical infrastructure, including the electric power grid. Or significant, principle-related matters like human rights violations in the clean energy supply chain for solar panels. There may be excellent reasons for the United States to confront China on a range of trade or security issues, but getting tough on China is no substitute for launching a viable U.S. strategy to compete in the field of clean energy technologies. A productive competition strategy means leaning into our instincts to compete with China but in a way that advances shared global interests.
Sarah Ladislaw is senior vice president and director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.
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