Global strategy dictates China's green stance

CHINA'S new enthusiasm for a green revolution reflects strategic dilemmas that extend well beyond climate change.

china pollution

CHINA'S new, high-profile enthusiasm for a green revolution reflects strategic dilemmas that extend well beyond climate change and a cleaner world. Last week's surprise announcement of a low-start carbon tax in China has been both welcomed and greeted warily as a defensive move with a long-term view typical of China.

Many believe the main objective is not to save carbon but to bolster China's economic opportunity.

This would be done firstly by safeguarding its ongoing licence to pollute and secondly by helping to underpin domestic and export markets for the renewable energy technologies for which China has quickly become the dominant global supplier.

Both depend in part on being seen as a co-operative global citizen.

But given the modest carbon starting price of 10 yuan ($1.59) per ton of carbon, many China watchers say the economic imperative and good public relations are more important than the carbon emissions that may be cut.

China's carbon tax announcement builds on a commitment to pilot a cap-and-trade scheme in selected industrial regions and is in line with the national five-year plan, which for the first time mentions climate change as a state concern.

More pointedly, the carbon tax move coincides with a rapidly growing trade war between China and the US and European governments over market access for renewable energy technology. One high-profile area has been the European Union decision to impose a cost on airlines from foreign countries that do not have equivalent carbon mitigation policies.

More important is a unanimous decision by the US International Trade Commission in November that ruled Chinese solar panel and cell imports were harming the US solar manufacturing industry.

As a result, the US Department of Commerce will soon rule on preliminary tariffs and "critical circumstances", which may mean importers will have to pay retrospective duties on imported Chinese renewable energy products.

The US action was initiated by German manufacturer SolarWorld, whose grip on the world's solar panel industry has been destroyed by the rise of cheaper Chinese exports.

The growing Chinese domination of the sunrise renewable energy sector is being keenly felt in Washington.

In a letter to President Barack Obama, 59 Democrat legislators backed the SolarWorld position, saying the trade investigation "comes at a critical juncture for the US clean energy technology sector and underscores the need to ensure a level playing field for US businesses and workers".

A similar complaint is made against China's wind industry.

China is facing the same trade issues with its aggressive expansion of wind and solar technology exports in Europe.

"We see the solar example and China's aggressive strategy to take over the world market and in wind, this is only just the beginning," wind turbine maker Enercon's Berlin manager, Ruth Brand-Schock, says.

At one level, China's carbon tax plan can be seen in the context of paving the way for its booming -- and heavily state-subsidised -- renewable energy sector. But there are deeper messages as well.

According to John Lee, adjunct associate professor at the Centre for International Security Studies at Sydney University and a visiting fellow at the Hudson Institute in Washington, China's new language on climate change recognises that its traditional twin arguments against taking domestic action will not win through.

These arguments are that the developed world is responsible for past carbon emissions and therefore must take responsibility for future cuts.

The accompanying argument is that with 800 million people still living on less than $2 a day China's primary responsibility is economic growth.

Indeed, China's plans for both a carbon tax and a cap-and-trade scheme are predicated on a firm policy of economy-first.

Speaking in Washington this week, China's lead negotiator on climate change, Su Wei, said China understood that one of the key original principles of the UN Framework Convention on Climate Change -- that nations have different historical responsibilities -- was still in force.

"That also implies that the current division of developed and developing countries would continue," Su said.

China's mixed signals provoke scepticism about how genuine it really is about taking action on climate change.

Lee says China's announcement linking the introduction of a carbon tax with the country's economic stability "would not be acceptable in any liberal democratic system".

"The fact the tax will be levied on large emitters superficially seems quite reasonable but the problem for China is the majority of emissions comes from small to medium sized inefficient producers," he says.

"They are the ones you really need to rein in if you want to reduce emissions in the country."

Lee sees China's carbon tax plans as a way to win a long-standing argument with the West on who should be responsible for carbon emissions -- the buyer or seller.

"If you look at which sectors emit the most carbon in the Chinese economy, the export manufacturing sector emits between 20 per cent and 35 per cent," Lee says. "This sector is largely owned by foreign enterprises, so effectively the tax will be borne by foreign companies, not by Chinese companies."

As China's own forecasts are that coal and oil will provide 70 per cent of the nation's energy until at least 2030, Lee is sceptical of the impact a small carbon tax could have.

"There is a longer-term goal that by 2050 China's energy will be met by renewables to the tune of 50 per cent, but that is clearly not going to happen," he says.

"China is not alone in effectively doing nothing about climate change, but they are trying to put forward a carbon tax in a pretence of trying to do something."

Su says a carbon tax is one of the instruments that can be used to direct the economy towards low-carbon development.

He says officials are still debating whether to use the term carbon tax.

"Whether we call it a carbon tax or environment tax or resource tax or even fuel tax, we have lots of taxes already.

"We need to carefully redesign the category and type," he says.

Su says China is also looking at a voluntary plan to label low-carbon products "in order to try to give a clear signal to business and industry".

For Lee, these measures are defensive, underscoring the acute embarrassment China faced when it was blamed for the collapse of the overly ambitious Copenhagen climate change negotiations in 2009.

"And I think the Chinese have lost the argument on who should bear responsibility for climate change," Lee says.

"All that is being taken into account is how much is China emitting and how much are they due to emit in the future.

"The Chinese realise, whatever arguments they put forward, the pressure will be on them to do something about it and I see the pronouncement of a carbon tax as some sort of token effort that they are serious about it."

On trade, Lee says, disputes over renewable energy must be seen in a broader context of reciprocal market access.

"Even though it is not stated publicly I think the Americans and the Europeans are privately negotiating a separate deal," he says.

They are pushing anti-dumping measures and the currency issue but what they really want is market access to the protected sectors of the Chinese economy."

"If the US and European firms can get that then you will see America and Europe become a lot less vitriolic about the anti-dumping measures," Lee says.

In China the list of protected industries has been a movable feast.

It used to be industries such as telecommunications, construction, heavy industrial machinery, mining, chemicals and media.

But in the past few years China has included renewable technologies, technology platforms and the energy sector.

"The big concern the West has is that China has shown it will preserve every significant, important sector for state-owned enterprises in the name of helping national champions," Lee says.