China rises from ashes of US climate-policy uncertainty

Listen to MLex Senior Energy Correspondent Laurel Henning talk with MLex Brussels Senior Managing Editor James Panichi about this analysis and related new developments in a new edition of the MLex podcast.

31 January 2017. By Laurel Henning

As shadows gather over US climate policies and their future under President Donald Trump, the gaze of international policymakers is turning east — to China.

The shift of focus could see China fill the leadership vacuum that had formerly been filled by the EU and its close alliance with the US. As Washington wavers in its commitment to tackle climate change, Beijing is rising.

China, an industrial superpower, will be home to the world's largest carbon market by the end 2017. That will have a trickle-down effect on how other countries design national policies to curb emissions.

Yet, paradoxically, that trickle-down could also mark an end to the EU's efforts to lead global efforts to cut greenhouse-gas emissions. The Europeans are now unlikely to have the same influence they have sought to maintain at global climate negotiations.

The reason for that is that, in the 10 days since Trump took office, he has issued five executive orders on policy areas ranging from immigration to healthcare. Along with those executive decisions was an order issued on Jan. 24 forcing a media blackout on the US Environmental Protection Agency.

The result of all this is a question mark on the future of US climate policy. And that's a problem for a UN climate deal designed to curb the world's carbon output.

But it is also a problem for EU officials, who until now had seen the Americans as important allies in the fight against carbon emissions. With the US considering whether to back out of international commitments, European officials are in unchartered territory — and they know it.

EU climate chief Miguel Arias Cañete said in November that any signs that the US will back out of any climate policy will make China even more important to the EU.

This realization leaves the Europeans scrambling to build even closer ties with their Chinese counterparts, in a bid to remain part of the action.

But they are playing catchup, and the shift of influence from Washington to Beijing is occurring at breakneck speed, with China making its own preparations to fill the void of US influence even before Trump's inauguration.

Earlier this month, Chinese President Xi Jinping said that "all signatories should stick to [a UN climate accord] instead of walking away from it" — which is what the Trump administration appears set to do.

This is the new paradigm the EU must confront. With China signaling to the world that it has serious ambitions on emissions, the Europeans could be left searching for a new role.

Chinese ambition

As the world's second-largest economy, China isn't afraid to take the lead. The fast-emerging industrial power, which in 2012 the International Monetary Fund projected could outpace the US as early as this year, has its sights firmly set on achieving its climate goals.

China plans to see its carbon emissions reach a peak in 2030, before national CO2 output is set to begin to decline.

To reach that objective, Beijing plans to lower its carbon emissions, per unit of gross domestic product, by 60 percent to 65 percent, based on 2005 levels. It also plans to increase its share of nonfossil fuels to around 20 percent of its energy consumption.

On top of these targets, China has its regular five-year plans to ensure that it is on track to deliver its 2030 climate goals.

Indeed, according to some experts, the only question now is the extent to which China will outperform the targets set by its own climate policies. The country's coal consumption has slowed since its national climate goals were drafted — leaving its estimation of emission cuts looking too cautious.

Slowed coal consumption growth and a call to action spurred by China's persistent air-quality issues mean the country is now in a prime position to step up a gear in efforts to curb carbon emissions.

US woes

The fallout for Washington from the shift in power could be less positive. US goods and services trade with China totaled an estimated $659.4 billion in 2015. Exports from the US to China totaled $161.6 billion that year.

Those exports are now at risk.

While Xi has said Beijing wants to keep its trade relationship with Washington open, that could come under some strain if China were to introduce environmental standards on imported goods from the US. American goods, made with high-emission processes, could be granted less favorable status.

On top of this, if Trump delivers on his campaign message of leaving the UN climate deal, the US would lose its voice at the international negotiating table, further weakening its position in dealing with China.

Former ExxonMobil chief Rex Tillerson, who will be the Trump administration's secretary of state, said at his confirmation hearing before the US Senate that it is important for the US to be "at the table" of a global climate accord — suggesting a more conciliatory stance.

But Tillerson also said he doesn't see climate change as an "imminent national security threat" as others might — again casting doubt over whether the administration will remain part of the process.

This uncertainty over where the US stands could be to China's advantage, even though it is unclear how Beijing will choose to throw its weight around in this evolving landscape.

What's certain is that China's readiness to get behind the UN climate agreement means the deal still has the backing of a committed economic superpower. The accord will live to fight another day.