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| 09 September, 2018

For climate change, America First means China First

Mustafa Adil is the Head of Islamic Finance under Emerging Businesses for Thomson Reuters. He is responsible for leading various content propositions including Islamic finance, green economy and fintech. Prior to joining Thomson Reuters, Mustafa was a leading consultant with Ernst & Young. He is a qualified Chartered Accountant from the Institute of Chartered Accountants of England & Wales and holds a Bachelors degree in Mathematics from Imperial College in London.

Website: https://mena.thomsonreuters.com/en.html

The U.S. exit from the Paris Agreement threatens to reignite old divisions between developed and developing countries

China is set to dominate proceedings when the United Nations Climate Change Conference next meets in Katowice in December, as the impending exit of the United States from the Paris Agreement (thanks to President Trump), leaves China with the whip hand in driving global climate action.

Despite the stated intentions of the other signatories to the agreement to carry on regardless, the U.S. exit threatens to reignite old divisions between developed and developing countries on how to combat climate change and how to fund that battle.

Developing countries, led by India and China, believed it would have been unfair for them to cut back on the use of cheap fossil fuels while they were still trying to industrialise their economies and, in this way, pull their countries out of poverty. Other developing countries, particularly in Africa and the South Pacific, saw themselves as helpless victims of others’ carbon emissions and wanted financial help to combat the effects of climate change on their countries.

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While some countries in the Middle East, such as the United Arab Emirates (UAE), continued their efforts in reducing their share of carbon footprint and the adoption of newer clean energy.

The annual World Green Economy Summit, taking place in Dubai on 24 and 25 October, is expected to gather world leaders to evaluate the current progress of the global climate given these developments. And developed countries, for their part, didn’t see it as fair that they would have to make hugely expensive changes to their energy sector while India and China continued as before.

Before US exit, Paris Agreement appeared to satisfy everybody
After years of wrangling over these issues, the agreement negotiated in Paris in 2015 appeared to satisfy everybody by allowing each country to determine, plan and report on its own nationally set contribution to fighting climate change, while the richer nations pledged to mobilise $100 billion a year to help the poorer countries.

The glue that bound Paris together was the agreement to the deal of the presidents of the world’s two largest economies and two largest emitters of greenhouse gases: Barack Obama of the United States and Xi Jinping of China. Each also committed $3 billion towards the Green Climate Fund.

But soon after Donald Trump succeeded Barack Obama as U.S. President in 2017, Trump hauled the United States out of the agreement, complaining that it “disadvantages the United States to the exclusive benefit of other countries”. Trump was never convinced that climate change is real and has pledged as part of his ‘America First’ commitment to protect the American workforce from what he sees as the unfairness of many of the U.S.’s international agreements.

The U.S. withdrawal from Paris doesn’t take effect until 2020, when Donald Trump’s first term ends and, coincidentally, the agreement comes into effect. But although still playing a part in the latest round of climate talks in Bonn in May, the U.S. is now much more of a backseat driver. In the meantime, the U.S. withdrawal will leave China questioning its own commitment to the deal and makes possible a renewal of the political disputes that had previously made agreements so hard to reach.

May’s intersessional meeting in Bonn sought to iron out the complex details of the Paris Agreement before it is finalised in Katowice in December, but because progress was so slow, another week’s meeting will be held in Bangkok this September to try to move things forward.

This may not happen.

Participants at the Bonn conference noted a new, more difficult, approach by China, and delegates accused China and other developing nations of reopening the old divide between rich and poor and seeking to renegotiate key elements of the Paris Agreement.

China the world’s largest carbon emitter and world leader in green technology
For all but the poorest of the Paris signatories, there will be costs to be borne regardless of the long-term benefits, and no country will want to bear more than as its fair share. And for China, the U.S. exit changes what constitutes a fair share. Also from China’s viewpoint, just as the country is the world’s largest emitter of greenhouse gases, so it is also a world leader in adopting, developing and promoting green technologies.

After years of pursuing economic growth with little regard to the environment, the government changed tack in 2013 by announcing sweeping plans to clean up the country’s air and water. China is also taking steps to reduce carbon emissions and last year claimed to have met its 2020 emissions target three years early. China is also the world leader in renewable energy investment, accounting for 45 percent of the global total last year, and is a world leader in developing the financial instruments such as green bonds needed to support investment in the sector.

Not only this, China is also extending its green policies across its Belt & Road Initiative, a trillion-dollar undertaking to recreate China’s ancient land and maritime Silk Road trading routes by building infrastructure in at least 60 countries from Central Asia to Africa and Southeast Asia. President Xi declared that the Belt & Road would be “green, low-carbon, circular and sustainable.” This intention as yet lacks legal force, but that may change.

Belt & Road Initiative gives China a commanding position
Ultimately, China is too powerful to be swayed from its long-term goals, and its ever-growing presence in the countries of the Belt & Road gives it a commanding position in pushing not just its own position but those of other developing nations, particularly those who question why they should stick to their emissions targets when the richer nations are failing to stick to theirs or provide the funds they were promised.

With the U.S. out of the reckoning, the main counter negotiator for the developed world is the European Union, a notoriously obdurate body which had complained about China’s obdurate behaviour during the Bonn meeting. The two sides met in Beijing in July to iron out their differences, and provided perhaps some optimism for the Katowice meeting by agreeing to develop long-term, low-carbon strategies by 2020 and to step up efforts before then, as well as to build ‘triangular’ cooperation with developing countries.

Any opinions expressed here are the author’s own.


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