U.S.-China Climate Announcements Lay Foundation for Success in Paris

President Barack Obama gestures toward Chinese President Xi Jinping during a news conference at the White House on September 25, 2015.

Today, U.S. President Barack Obama and Chinese President Xi Jinping concluded their bilateral summit with a suite of new climate commitments and a clearer common vision of how to achieve success at the upcoming Paris conference in December.

These announcements build upon the groundbreaking November 2014 U.S.-China joint statement in which the two presidents put forward ambitious national climate targets for their countries. These targets included a U.S. commitment to reduce emissions 26 percent to 28 percent below 2005 levels by 2025 and a Chinese commitment to peak carbon emissions and nearly double the nonfossil portion of its energy mix by 2030. That November 2014 announcement sent a powerful signal to other countries by demonstrating that the world’s two largest greenhouse gas polluters were taking the steps necessary to help secure a new international climate agreement at the U.N. Framework Convention on Climate Change, or UNFCCC, Conference of the Parties in Paris later this year. The November 2014 announcement encouraged other countries to put their own targets on the table well in advance of the Paris meeting so that the process can move forward on schedule, thus improving the prospects for success.

The new announcements released today demonstrate that the leaders of both nations intend to do what is necessary to reach their national greenhouse gas reduction targets and to resolve key negotiation issues in order to reach a strong new international agreement in Paris. The two presidents are synchronizing U.S. and Chinese policy commitments in some sectors, which will demonstrate that the world’s two largest emitters are moving in tandem. They are also exercising their nations’ resources and international influence to shine a light on the path to success later this year.

Today’s announcements underscore an ongoing commitment to existing policies—such as the U.S. Clean Power Plan—as well as some important new areas of action. Five aspects of the new joint statement are particularly significant.

First, the two presidents outlined a U.S.-China vision for the Paris climate conference that aims to maximize ambition, transparency, and accountability among all nations while also allowing a degree of flexibility for specific developing nations in need. This deeper and fuller common understanding provides an important boost for the prospects of success in Paris. In 2014, shortly after the November joint announcement, U.S. and Chinese negotiators joined other UNFCCC parties at the Lima Conference of the Parties, where language from the U.S.-China announcement was pulled into the multilateral text to overcome a major negotiating roadblock. This new joint vision could similarly be used to help build consensus in December.

Second, China committed to provide $3.1 billion in climate aid for developing nations. To put this in perspective, that amount slightly exceeds the $3 billion that the United States pledged to the Green Climate Fund, or GCF, an important new multilateral fund for investing in developing countries’ efforts to build clean, sustainable economies and adapt to the impacts of climate change. China’s new climate assistance is likely to flow through the South-South Cooperation Fund, China’s bilateral mechanism for providing climate aid to other developing countries in need, and constitutes a large increase from its current funding levels. Until today, China had only promised to deliver $20 million per year through the South-South Fund.

It will be important to ensure that this new Chinese commitment supports the broader GCF effort in which the United States participates. Critical questions do remain regarding how and in what form China’s aid will be distributed. For example, China traditionally provides bilateral climate aid in the form of goods transfers rather than capital support. China might deliver solar panels, for instance, rather than funding a new clean energy project in the recipient country. Additionally, the process for how China determines what goods to provide, where to source them, and which nation receives them have not been made clear. Regardless, the fact that China is putting down a $3.1 billion climate assistance commitment is a very positive development that demonstrates China’s willingness to begin playing a more active and constructive role in this area.

Third, the two nations committed to work together on finance for sustainable development, which could become a groundbreaking new area of U.S.-China cooperation in the future. This announcement was in the form of a shared principle rather than a concrete mechanism. The two nations “agreed to work towards strictly controlling public investment flowing into projects with high pollution and carbon emissions both domestically and internationally” but did not issue any specific new commitments or standards.

This indicates at least a small step forward in Chinese thinking on investment standards. China is leading multiple new investment mechanisms—including the Asia Infrastructure Investment Bank, or AIIB—which stand to provide more than $200 billion in financing for new development projects outside of China. It will be critical to ensure that these new projects support rather than undermine global climate goals. The AIIB recently released a draft standardization framework that does not follow the World Bank and other international financial institutions in restricting funding for new coal plants. The language in today’s U.S.-China statement, however, creates an important opening for discussions on how to align the two nations’ approaches and ensure that international financial institutions are part of the solution to climate change, not part of the problem.

Fourth, both nations outlined key domestic policy actions that will be critical for reaching their post-2020 climate targets. On the U.S. side, President Obama committed to continue the implementation of his Clean Power Plan and other efforts that will cut greenhouse gas pollution and drive clean energy deployment consistent with the U.S. national target of reducing emissions to 26 percent to 28 percent below 2005 levels by 2020.

China, for its part, committed to roll out a nationwide emissions-trading system, or ETS, by the end of 2017 and is further specifying that the nationwide system will cover at least six core industrial sectors, including power generation, iron and steel, chemicals, cement, paper production, and nonferrous metals. China is already running seven regional emissions-trading pilot programs and previously announced plans to unify those programs into a nationwide system by 2017. This new statement reaffirms that commitment and specifies that the system will cover key sectors that are responsible for the bulk of China’s emissions from power generation and industrial production. It is not clear how pricing will be set within the Chinese system and, therefore, to what degree a national cap-and-trade system will affect commercial decisions in China. Nevertheless, this is a potentially important and efficient tool for China to deploy in achieving its domestic climate targets and raises the prospect of potentially linking Chinese cap and trade into global systems at some future date.

Significant new Chinese domestic policy measures that could have an immediate impact include:

  • China will reform its electricity sector to prioritize clean power. China’s power grid has been a major bottleneck for renewable deployment. It has often kept cost-effective wind and solar power off the grid while coal plants operate at high capacity. This new policy will force grid operators to change that approach.
  • Both nations have committed to finalize next stage fuel efficiency standards for heavy-duty vehicles by 2016 and to implement those standards in 2019. Transport vehicles account for around 25 percent to 30 percent of urban particulate air pollution in China and are a growing source of China’s greenhouse gas emissions. China’s transport emissions doubled from 2000 to 2010 and are expected to grow another 50 percent between 2010 and 2020. Beijing is already rolling forward with an accelerated timetable for a nationwide transition to low-sulfur diesel and gasoline. Now President Xi is committing to reduce the amount of fuel Chinese vehicles consume, which will be critical for controlling the nation’s greenhouse gas emissions as vehicle use increases.

Finally, 11 Chinese city- and provincial-level governments are forming an Alliance of Peaking Pioneer Cities, or APPC, under which all are committing to peak carbon emissions earlier than the nationwide 2030 target. Since China issued its commitment to peak in 2030 and to make its “best efforts” to peak earlier, new economic data have opened the possibility that China could peak well before the current deadline and possibility as early as 2025. All of the APPC cities believe that with the right policy mix, they can beat the 2030 target and serve as models for the rest of the nation. The new pre-2030 targets vary by city based on their current economic conditions and ambition. Beijing, Guangzhou, and Zhenjiang have issued the most-aggressive targets: All have committed to peak around 2020. Shenzhen and Wuhan issued 2022 peaking commitments; Guiyang, Jilin, and Jinchang are aiming for 2025. If these cities are successful, it may encourage others to follow suit. It is important to note that the group includes one city in Shaanxi Province, Yan’an, which is among China’s top five coal-producing provinces. Yan’an has a modest target—it is aiming to peak before 2029—but the city could serve as a model for other coal-dependent zones. One of Yan’an’s policy commitments is to “accelerate industrial structure adjustment”—in other words, to find new development drivers that do not depend on fossil fuels.

Overall, this set of announcements makes clear that both nations are moving forward with specific new measures designed to meet and hopefully exceed the post-2020 climate targets they announced last fall. There are many difficult issues facing the U.S.-China relationship, and those difficulties have overshadowed opportunities for cooperation in the run-up to this particular summit. Despite those challenges, President Barack Obama and President Xi Jinping have just made it very clear that the climate partnership is standing strong.

Melanie Hart is Director of China Policy at the Center for American Progress. Pete Ogden is a Senior Fellow at the Center. Greg Dotson is the Center’s Vice President for Energy Policy.