climate change and the globalisation – china’s emissions and trade

Sussex Energy GroupSPRU - Science and Technology Policy Research

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

Dr Tao Wang and Dr Jim WatsonTyndall 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


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 most contribution 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?


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


• 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

Carbon embodied in Trade

The Emma Maersk


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1990 1995 2000 2005

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tC)

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Ex

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Carbon emissions Exports

Take-offs of China’s export and emission


• 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

Who owns China’s emissions?


Potential inaccuracies

1. using national average CO2 emission intensity of GDP

neglects the difference in emission intensities of different

goods

2. neglect the life cycle effects of producing and consumption of

goods and focus only on that happened at the custom

3. difficult to trace the trade via intermediate ports e.g. Hong

Kong and Singapore

4. processing trade, particularly within Asia


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.

Japan

UKAustralia

US

China's total

China's Net Export

Germany

0

1000

2000

3000

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5000

6000

7000

CO

2 em

issi

on (

Mt)

2004


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


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


Source : WWF (2008)


Imbalance of Carbon in Trade in 2001

Source : Peters and Hertwich (2008)


Different Strategic Positions in World Trade

Balance of Embodied Emission

India

Russia

South Africa

SwedenGermany

UK

United States

CanadaBrazil

Poland

China China 2004

-1

-0.5

0

0.5

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1.5

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3.5

-600 -400 -200 0 200 400 600 800 1000 1200

Total CO2 emission in trade (Mt)

emis

sio

n im

bal

ance

in t

rad

e (k

g C

O2

/ 200

0 U

S$)

)

Sweden

Japan

Germany

United Kingdom

United States

Canada

Brazil

Poland

Australia

India

Russia

China

South Africa

China 2004

ExportImport

EmissionIntensive Export

EmissionIntensive Import

Japan

Australia


Other similar researches

sources: Wang and Watson (2008)


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


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


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


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


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


Thank You!

[email protected] (valid till Oct 2010)[email protected]

climate change and the globalisation – china’s emissions and trade

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