Testifying before the USCC

On April 8, I was invited to testify before the U.S.-China Economic and Security Review Commission (USCC) on China’s green energy and environmental policies. The purpose of the USCC is to “monitor, investigate, and submit to Congress an annual report on the national security implications” of the U.S.-China relationship and to “provide recommendations where appropriate, to Congress for legislative and administrative action.” This particular hearing was divided into four sessions, drawing upon perspectives from the administration, implications of China’s domestic and international policies, and industry.

I was in the esteemed company of Dr. Elizabeth Economy, C.V. Starr Senior Fellow and Director of Asia Studies at the Council of Foreign Relations, and Rob Bradley, Director of the International Climate Policy objective in the Climate Change and Energy Program at the World Resources Institute (and my former colleague).  The Commission specifically asked me to talk about China’s role in the UN Climate Change Change conference in Copenhagen last December, and the implications of China’s actions for the United States and developing countries.

Given the heat China came under immediately following Copenhagen for supposedly “wrecking” the Copenhagen deal, this was an important opportunity to move past the “sound and fury” (to quote my co-panelist Rob Bradley) of the negotiations in December to provide insights and recommendations as to how the U.S. can work constructively with China in the months leading up to Cancun.

In my written testimony, I made several points that I then reiterated to the Commissioners during the hearing.  These were:

  • China is acting on climate change, and they’re acting because they want to.  Questioning the motivations of the Chinese toward climate change was a key aim of the Commission.  If precedent has shown anything, it’s that China engages internationally on global issues where it perceives an alignment with domestic interests. In the case of climate change, China has adopted a similar “scientific outlook” with respect to climate change and the negotiations themselves, bringing an army of academics, scientists, and technocrats who have all probably read the IPCC reports (as opposed to the U.S. delegation, whose roster consisted primarily of political representatives). National concerns over energy and food security, drought, changing monsoon patterns, rising sea levels, and social stability – the consequences of climate change – resonate with both the Chinese leadership and increasingly the Chinese public.  Therefore, China has made significant commitments to address their current and growing contribution to global climate change, most notably a pledge to reduce carbon intensity 40 to 45 percent from 2005 levels by 2020. And since Copenhagen, China has shown that they are not backing down from this pledge either.
  • How can we believe the Chinese are making real progress in their mitigation actions? Multiple on-the-ground government, non-government, academic, and industry partners are working with Chinese partners to build capacity to measure, report, and verify energy and climate data in China. Within China, there is strong evidence that the high-level messages voiced are being echoed on the ground.  While the central government has been investing huge amounts  Lawrence Berkeley National Laboratory (LBNL) has been partnering with Tsinghua University to evaluate many of China’s energy conservation programs. A Chinese NGO called the Innovation Center for the Environment and Transportation (iCET) is partnering with the U.S.-based Climate Registry to create China’s first voluntary emissions registry. The World Resources Institute is training Chinese companies to use internationally standardized greenhouse gas accounting tools and methods.  My colleagues and I at the Yale Center for Environmental Law and Policy have been working for the past two years with the Chinese government to systematically measure environmental performance in all 31 Chinese provinces.
  • The U.S. is falling behind in terms of mobilizing clean energy and technology partnerships with China.  The U.S is poised at a critical juncture to break the “suicide pact” with China and to capitalize on opportunities to cooperate together on climate change.  Unfortunately, the United States is already late in coming to the game with respect to green energy and environmental cooperation with China. The Chinese already have longstanding partnerships with E.U. nations, several developing countries, and others.  For example, China and Japan also announced before Copenhagen a suite of 42 projects in clean energy and environmental cooperation as part of a decade-long partnership on these issues. In relation to developing countries, last November China pledged $10 billion worth of aid to Africa, which includes construction of 100 clean energy projects.  Fortunately, while the U.S. may have shown up late to the game, it’s not over yet.  All the pieces are in place for the United States and China to work together on clean energy research, energy efficiency, renewable energy, clean coal and carbon capture and sequestration projects, and clean vehicle technology through mechanisms such as the ten-year Strategic and Economic Dialogue (S&ED), the Ten Year Energy and Environment Framework, and the U.S.-China Clean Energy Research Center formed last July.

The Commission followed the testimonies with some thoughtful questions that reflected their particular interest in some of the economic and trade implications of China’s climate policies.  A line of rhetoric that has become pervasive in the media and throughout Capitol Hill of late is the notion that China is somehow beating the U.S. in terms of clean energy and technology and that we’re losing jobs to China as a result.  While it’s true that China is putting more than the U.S. in clean energy investments ($34.6 billion versus the U.S.’s $18.6 billion, according to this recent report by Pew), this does not necessarily mean that China is winning the race yet nor is it necessarily constructive to speak singularly in these terms.  However, after hearing from several staffers on Capitol Hill, it seems that this sound byte is what spurs Senators and Representatives these days.  My argument to the USCC was that we need to move past this idea of who’s winning what and figure out where we can run the race together.  As the old adage goes, if you can’t beat ‘em, join ‘em?

One of the Commissioners also brought up border-tax adjustment policies, which are increasingly being debated on Capitol Hill as a provision in an energy or climate bill, to address competitiveness concerns of U.S. businesses who fear economic losses specifically to countries like China if the U.S. takes on significant climate actions and China does not.  This was an issue Todd Stern, U.S. Special Envoy on Climate Change, brought up in Copenhagen and received a vitriolic response from the Chinese, who remarked that China would not tolerate such trade measures because they violate WTO regulations (although the jury is still out as to whether border-tax adjustment policies do actually violate WTO rules).  Both Rob Bradley and I cautioned the Commission in their recommendations to Congress that they should tread carefully in these waters because carbon taxation could go both ways.  The Chinese have been considering taxing importers of energy and carbon-intensive goods, which could hurt the U.S. (take a look at these import/export figures of U.S.-China trade).  Furthermore, I argued to the USCC that a border-tax adjustment policy by the U.S. toward China might not produce the intended policy changes or environmental effects in China, given the source of much of Chinese emissions.  My former colleagues at WRI in conjunction with the Peterson Institute for International Economics produced a fascinating analysis of competitiveness issues between the U.S. and China, looking at energy and carbon intensive sectors such as iron, steel, copper, aluminum, cement, glass, paper, and basic chemicals – all of which represent the biggest sources of Chinese emissions.  What they found is that China’s exports of these carbon-intensive goods to the U.S. are relatively small. I made the point to the USCC that most of Chinese cement, which accounts for over half of China’s CO2 emissions, is consumed domestically.  Therefore, as the study concludes, such policies could actually sour U.S.-China cooperation on climate change and not produce the desired results:

“[...] unilateral efforts like trade measures that attempt to impose comparable costs on carbon-intensive imports may not have the desired effects, and could threaten international cooperation on climate change. Many of the trade-specific measures are intended to bring China to the climate negotiating table. However, China’s exports of carbon-intense goods to the U.S. are relatively small. Therefore, trade measures aimed at leveraging China to adopt stricter emissions regulations domestically would, in fact, provide little incentive and could sour the prospects for international cooperation.”

A full transcript of the hearing, including the Q&A will be available on the USCC’s website soon. When it becomes available, I’ll let you know so you can read about how I gave my speech using an Apple iPad©, encountered a technical snafu, and was called an “early adopter” by the Commissioners.  It was a good icebreaker, but then I was confused when they proceeded to ask me all about the iPad, and not China …

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