Climate change remains one of the most active areas of U.S. policy engagement with China. A decade of bilateral discussions and negotiations led to important diplomatic and substantive wins, most notably securing the 2015 Paris Agreement and increasing countries’ collective ambition to address climate change. Recently, challenges in the Sino-U.S. relationship have bled into the climate domain, deepening old obstacles and creating new ones. At home, moreover, China’s policies embody many contradictions: China is simultaneously the largest deployer of clean energy by a wide margin while also housing the largest pipeline of new coal plants. The next U.S. administration’s challenges with China on climate change are three-fold: maintaining climate progress globally even in the face of some backsliding from China, accelerating the U.S. clean energy transition despite China’s essential position in supply chains, and continuing to press for forward movement on China’s emissions reductions efforts.
China: The world’s largest emitter and renewable energy supplier
China is the world’s largest carbon emitter (one spot ahead of the United States), driven by the dominance of coal in its energy system. In contrast to the United States and other developed economies, China’s emissions have not peaked yet. Its main international climate commitment is to peak carbon emissions by 2030, though without specifying the peak level this leaves a lot of uncertainty for climate projections.
Even as China’s annual emissions far outstrip other economies, Beijing’s contributions to addressing climate change are hard to question. Last year, China deployed nearly 300 gigawatts (GW) of wind and solar—a record-breaking year and an order of magnitude larger than the U.S. pace of 40 GW. It has already surpassed its 2030 target for wind and solar capacity. Over half of all vehicles sold in China are now new energy vehicles—electric or plug-in hybrid electric—an increase spurred by many complementary policies for charging even as subsidies have been phased out.
China is also home to the majority of the world’s clean energy equipment manufacturing. Chinese firms produce 60% of the world’s electric vehicles (EVs), 80% of its lithium-ion batteries, and over 95% of its solar wafers. Costs for these products have tumbled globally, stimulating energy policy rethinking around the world, particularly through the widespread cancellation of new coal developments in the Global South. For example, Indonesia and Vietnam have repeatedly revised their coal development plans and have signed up for ambitious Just Energy Transition Partnership goals with mostly Western international donors. With regard to EVs specifically, China-based EV producers (including Chinese firms such as BYD and foreign firms such as Tesla) have begun exporting to other markets, leading to trade tensions in countries seeking to build a domestic EV market.
Despite these consequential trends, China appears to be doubling down on coal at home due to resurging concerns about energy security. Following major energy shortage events in 2021 and 2022, China’s top leaders have embraced a central role for coal in the medium term while cautioning against an overly ambitious replacement of fossil infrastructure with clean alternatives. These policies, which have led to increased coal power generation and the largest permitting wave of new coal-fired power plants in a decade, have reversed recent falling carbon intensity trends (the measure of emissions generated per economic output). They also have generated questions outside of China about the credibility of Beijing’s climate leadership.
Challenges and opportunities for the United States
The United States faces a different set of drivers and obstacles in meeting its climate targets. The United States is making progress, though it still falls short of what is required to meet its 2030 carbon emissions target. Beyond 2030, the United States will need to significantly ramp up its deployment and integration of clean energy if it is to achieve the aspirational goal of 100% clean electricity by 2035. Industrial policies such as the 2022 Inflation Reduction Act (IRA) have heavily subsidized deployment as well as domestic production, leading to a renaissance of clean technology manufacturing. Support for the IRA was generated in part by the desire to reduce risk in the U.S. supply chain and create resilience and redundancy. The two goals—clean tech deployment and China de-risking—are now intertwined; conventional wisdom suggests this linkage is necessary to maintain and strengthen any U.S. political coalition for climate policy. However, China’s lead in manufacturing know-how and scale makes it an indispensable partner to decarbonize quickly.
For the United States, making progress on climate means continuing to deploy clean energy technologies even if China backslides on coal. The world will need to decarbonize energy sectors by around mid-century to avoid the worst effects of climate change. For both the United States and China, there is a clear advantage to being at the forefront of new energy technologies. Particularly in emerging areas like hydrogen and green industrial products, U.S. firms with hefty industrial policy support are now much better positioned to step in and compete. Yet as Chinese firms continue to lead the world in cost and quality for mature clean tech, including solar, wind, and EVs, it will be important to figure out ways to cooperate with Chinese firms to the U.S. advantage. This is an area where targeted policy recourse, as opposed to broad bans, can help reduce the risks of integration. Both U.S. presidential candidates, Kamala Harris and Donald Trump, generally support continuing or ratcheting up tariffs on Chinese imports. The Biden administration recently proposed rules that would effectively ban Chinese EVs on U.S. roads. Trump has suggested in the past an openness to Chinese investment in U.S. auto factories.
The most effective forms of international environmental cooperation have involved a focus on innovation and problem-solving, though this is challenging for the United States and China owing to their different development stages and increasing geopolitical tensions. Prior to Paris, there was optimism about jointly solving key technological and market challenges, in areas as diverse as building energy efficiency and electric vehicles. Today, bilateral climate discussions between the countries’ climate envoys are carefully circumscribed by the Glasgow (2021) and Sunnylands (2023) statements. Several expert working groups have been created to address technical topics. Agreements to control potent methane gas and to expand the included list of greenhouse gases in the next round of Paris Agreement commitments for 2035, due next year, have been rare diplomatic accomplishments in an otherwise fraught relationship. Addressing industrial policies, trade remedies, and technology restrictions for clean energy are not part of the climate envoys’ remit and have instead been elevated to both sides’ senior national security and commerce officials. Little visible progress has been made to resolve key disputes over industrial subsidies and localization.
In the U.N. climate framework, the United States has a strong incentive to push China to set aggressive 2035 targets, reflecting the widespread observation that its 2030 emissions and renewable energy pledges were underwhelming. Space also remains for continued discussion of China’s coal growth, especially if framed in the broader context of how to move both countries’ power systems off of fossil fuels. Climate finance is a key point of contention in the international negotiations, where the United States and China are similarly at odds. While China contributes to finance, it would rather not be seen on the same footing, or as having the same responsibility, as other donor countries. Still, there are opportunities for coordination—if not collaboration—on financing the green transition in third countries.
A longer-term challenge for the next U.S. administration will be to create a constructive relationship when there are both intense conflicts and pressing needs to collaborate. There is time to “get China right” by ensuring that good behavior is reciprocated and communication on key redlines is clear. In the area of climate, defending national interests and firms through intense diplomatic jockeying is to be expected. But managing the political economy of the growing interests and stakeholders should not come at the expense of the long-term goals of the global clean energy transition.
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Commentary
Where are the US and China on addressing climate change?
October 24, 2024