Report

U.S.-China Clean Energy Cooperation: The Road Ahead

Kenneth G. Lieberthal

Executive Summary

Since the Obama administration took office, U.S.-China cooperation on clean energy and climate change has become one of the major issues that is shaping the evolution of U.S.-China relations. This change reflects internal developments in both countries, along with the looming prospect of the Copenhagen Conference in December 2009.

Despite this sea change in the importance of the clean energy and climate change issues, accords on specific cooperative efforts to date have not moved much beyond the U.S.-China Ten Year Framework Agreement on Energy and Environment signed in June 2008. The remaining months of 2009 – which will witness both a presidential summit in Beijing in November and the UN Copenhagen Conference in December – are critical for translating momentum created in the first nine months of 2009 into concrete progress.

U.S. domestic legislation on cap and trade legislation is an integral part of this near-term future. Opponents of the legislation point to potential Chinese competition as part of their argument for opposing passage. China, in turn, looks at the fate of this legislation as a test of whether the United States is going to play a leading role on restraining CO2 emissions. And the Obama administration sees serious cooperation with China on clean energy as helpful in mitigating the arguments against cap and trade that are based on myths about China’s efforts in this sphere. On balance, though, it will be very difficult to pass cap and trade legislation and have the bill signed by the president before Copenhagen convenes.

The United States and China signed a Memorandum of Understanding on climate change, energy, and the environment in July 2009. An “memorandum of understanding” is aspirational. The two presidents, if possible, should sign a bilateral agreement on cooperation in clean energy at their November summit in Beijing. That agreement can move cooperation significantly forward if it clarifies the principles guiding cooperation, the priorities in each of five clean energy areas, and specific implementing tasking and procedures.

The Copenhagen summit is itself unlikely to reach a global agreement on country-specific CO2 targets. Governments should therefore begin to re-frame what will constitute success at Copenhagen to prevent apparent “failure” from sapping the momentum for future negotiations.

In reality, Copenhagen will be highly successful if the parties agree on the architecture of a future agreement, which would require addressing successfully a series of difficult, complex issues such as transparency, capacity, verification, enforcement, and equity. Presently, even the basic approach to reaching country-specific targets has not yet been settled.

The United States and China can leverage their own cooperation on clean energy and climate change in several ways to promote success at Copenhagen. They can work together to re-calibrate the standards for that “success” along the lines just noted. A U.S.-China bilateral agreement on cooperation on clean energy can impart momentum to Copenhagen, given the tremendous importance of both countries in the climate change equation. Finally, Beijing and Washington can use their influence in other key negotiating forums such as the Major Economies Forum to promote mutual understandings that will potentially carry over very effectively into the formal UN Conference of Parties negotiations.

Astute U.S.-China cooperation can make expectations about Copenhagen more realistic and the meeting itself more likely to lay the groundwork for a full agreement before the Kyoto Protocol expires in 2012. But it will take astute leadership at the highest levels in both Washington and Beijing – and effective management of domestic politics in both countries – to achieve these results. The issue could not be more important; unfortunately, the chances of success are at this point quite uncertain.

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