US and China: A Plan for Partnering for Success

US – China partnership to lower carbon emissions is critical to US economic growth, argues Kelly Sims Gallagher.

Kelly Sims Gallagher

The second in the STEP series focused on  climate change public policy issues between the US and China.  Kelly Sims Gallagher is an expert on energy and climate policy in the United States and China at the Fletcher School of Public Policy at Tufts.  She is particularly interested in the role of policy in spurring the development and deployment of cleaner and more efficient energy technologies, domestically and internationally.

In Dr. Gallagher’s opinion, China and the US have much more to gain from an agreement than to loose. Both countries are interested in market growth, and access to clean, affordable power and technologies.  The economic issues are also the same in both countries: the high cost of capital for new projects; investor risk; the need for incentives both public and market driven; and human capital recruitment and training.  The US wants to maintain it’s foothold on the Chinese market, and must find ways to compete successfully with new Chinese turbine and solar panel production.  China is in need of new  “clean coal” technologies such as carbon capture and sequestration (CSS), as well as coal gasification: both of which are critical in a country where a vast majority of power is produced from coal.  All these factors  are multiplied by the need for a framework for intellectual property  protection, joint venture negotiation and technology transfer.

However, the barriers to cooperation are formidable.

She started out by pointing out that most public policy originates in industrialized countries and filters down to developing countries.  Looking at Climate Change, Dr. Gallagher believes that we don’t have time for the ten years that this process usually takes.  She noted that the current world wide emissions are above the original IPCC predictions, and that is partially because Chinese emissions are, overall, very high.  She also noted that US per capita emissions continue to be the highest in the world.  The issue with China is the dynamic industrial growth, which includes a rapid deployment of new power  facilities, increased industrial growth and growing consumer demand.

However, the Chinese have agreed to spend 1.5% of GDP toward renewable energy, and to a reduction in carbon intensity of 40-45% of 2005 by 2020.  In China’s case, their reduction goals have been relatively easy to achieve in the past, as old, high emitting plants and industries have been shut down and replaced by cleaner burning fuels or processes. This would lead to a lower rate in emissions growth when compared to industrial growth (GDP), although an overall rise in the absolute amount of carbon being emitted. In the last year or two, China’s growth in actual emissions was 14% as compared to a 10% growth in GDP. As a result, China faces a much bigger challenge in meeting their own carbon intensity goals going forward.

Copenhagen

Prior to Copenhagen, the Chinese worked at building coalitions with other countries in an effort to get voluntary commitments. Gallagher believes they were successful, setting the stage for Copenhagen.  The US, in contrast, arrived empty handed, with nothing to negotiate with due to the impasse in the Senate, and inadvertently made some announcements that were later called a “lack of coordination” that upset the Chinese.  All in all, when Dr. Gallagher arrived, she found that the two parties couldn’t be in same room together.

Looking back, she talked about possible reasons for the impasse.

• Realistic: The most powerful country in the world didn’t want a deal; or neither country wanted a deal
• Bureaucratic in the US: Congress has to authorize funding and ratify a deal.  US may have assumed others were in the same situation, and so were unprepared.
• Bureaucratic in China: The Chinese had some political infighting on their side. They may also have been trying to mediate between factions, resulting in information that they couldn’t address publicly.
• Institutional: Copenhagen and the UN may not be the right venue.  Some small countries thwarted the progress, and just before the event the Danish president dethroned his own minister which caused chaos. Gallagher suggested that  another institution–Major Economies Forum or the G20–could be a better forum.
• Procedural: There was inadequate US–China discussion before the event.  Some is attributable to a new President and perhaps to a hope that legislation would provide the US with real bargaining power.

Forum for Cooperation

She closed her remarks with a radical call for what she termed a Carbon Mitigation Fund.  This would be an independent global agency, funded by developed nations, which would review projects on a first come, first serve basis.  It would provide a mechanism for collaborating on research and development, and deploying clean technologies.  By bringing multiple parties to the table, the fund would provide assistance for the LDC (Least Developed Countries).  The fund would enable international banks and private venture capital to manage their risk exposure, while creating a mechanism that would lead to binding international agreements to protect the rights of the parties involved.

A model for her proposal can already be seen in the way the US DOE (US Department of Energy) ARRA (American Recovery and Reinvestment Act) has spurred joint ventures between nonprofits, research institutions, private capital and industry. By helping to mitigate risk, and providing the reward for funds to match those raised in the private sector, the US DOE has helped create new ventures in the energy efficiency and clean energy space.

Such a world wide competitive solution would stop a downward path that is leading to the US loosing ground in China, which is turning to Japan and Europe for product development, licensing and technology transfer.  Even thought the US may not want to admit that growth will be in Asia, we need to think about how to bring China into this regime, in order to stay globally competitive.

Kelly Simms Gallagher

Kelly Sims Gallagher is Associate Professor of Energy and Environmental Policy at The Fletcher School. She is a faculty associate of the Center for International Environment and Resource Policy’s (CIERP), and its Energy, Climate, and Innovation (ECI) research program. She is also Senior Research Associate and a member of the Board of Directors of Belfer Center for Science and International Affairs at Harvard University, where she previously directed the Energy Technology Innovation Policy (ETIP) research group. Broadly, she focuses on energy and climate policy in both the United States and China. She is particularly interested in the role of policy in spurring the development and deployment of cleaner and more efficient energy technologies, domestically and internationally.

A Truman Scholar, she has a MALD and PhD in international affairs from The Fletcher School at Tufts University, and an AB from Occidental College. She speaks Spanish and basic Mandarin Chinese. She is the author of China Shifts Gears: Automakers, Oil, Pollution, and Development (The MIT Press 2006), editor of Acting in Time on Energy Policy (Brookings Institution Press 2009), and numerous academic articles and policy reports.

To see more about Dr. Gallagher, click here.
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