WRI Stories Feed: Next Practice Collaborative: Business in a Zero-Carbon Economy

Mining Megatrends for Innovation: Making a case for bolder action in a changing climate

Eliot Metzger — Mon, 05 Dec 2011 11:03:26 -0500

This article is one in a series of updates WRI’s Next Practice research team is sharing about its ongoing work with business to develop tools and guidance for…

Filling the Sustainability Innovation Gap

Jennifer Morgan — Wed, 12 Oct 2011 13:24:49 -0400

This post originally appeared on the Corporate Eco Forum’s Ecoinnovator blog.

Tomorrow’s leading companies will be those that pioneer innovative…

In Next Practice Collaborative, Top Companies Transition to Low-Carbon Future

Samantha Putt del Pino — Thu, 28 Jul 2011 12:32:23 -0400

The world 20 years ago looked very different from today. There was no widespread use of the internet. VHS movies rather than streaming video were the norm, and few could (nor did) imagine oil costing $100 a barrel. Innovations over this…

Turn Climate-Change Risk Into Business Opportunity

Janet Ranganathan — Wed, 13 Jul 2011 09:35:43 -0400

This piece originally appeared on Bloomberg Government and is reposted with permission.

Extreme weather events and climate- related disruptions are occurring with alarming frequency and…

Risk, Investment, and Opportunity in a Changing Climate

Sally Prowitt — Wed, 29 Jun 2011 11:43:53 -0400

To stay competitive, companies will need to find ways to adapt to the impacts of climate change.

Record breaking wildfires raging in Arizona, massive flooding disrupting lives from Iowa to Vermont — extreme weather events…

Six Things Companies Need to Know About Climate Change Adaptation

Janet Ranganathan — Tue, 21 Jun 2011 13:35:41 -0400

In a survey of global businesses, 86 percent described responding to climate risks or investing in adaptation as a business opportunity. So finds a new report jointly released yesterday by the UN Global Compact, the UN Environment Programme (UNEP), Oxfam and the World Resources Institute.

Already, businesses worldwide are beginning to see the risks and economic impacts of more frequent and intense storms, water scarcity, declining agricultural productivity and poor health. This new study, Adapting for a Green Economy: Companies, Communities and Climate Change makes the business case for private sector adaptation to climate change in ways that build the resilience of vulnerable communities in developing countries.

Here are some important things about climate change adaptation that all companies should know:

1. Climate change adaptation differs from climate mitigation.

Climate change adaptation refers to the set of actions taken by business and others to address the risks and opportunities associated with the physical effects of climate change e.g., changes to temperature, rainfall and ecosystems. These effects occur across the spectrum of business operations, from supply chains to communities, and from operations to customers. Climate mitigation, in contrast, focuses on reducing greenhouse gas emissions. A comprehensive corporate climate change strategy incorporates both climate mitigation and climate adaptation.

Read the Report

2. Climate change is already happening.

Climate change is no longer a distant phenomenon. Recent extreme weather events have been at the limits of modern human experience. A few examples:

In the summer of 2010, one fifth of Pakistan was flooded, affecting 20 million people, inundating thousands of schools and health centers and destroying 2.2 million hectares of crops.
In the new year, torrential flooding submerged an area of Australia the size of France and Germany combined, while downpours in Brazil triggered mudslides that killed more than 600 people, one of the country’s deadliest natural disasters on record. The Brazil disaster followed four consecutive years of torrential winter downfalls, suggesting this destructive weather pattern may soon become the country’s “new normal” to which government, citizens and the private sector must adjust.

3. Climate change creates business risks at multiple points along corporate value chains.

Consider, for example, the impact a 2001 drought in the U.S. Pacific Northwest had on Anheuser-Busch, the world’s largest beer manufacturer. First and most obviously, beer is 90% water. Less intuitive is the fact that water is used to produce barley and to supply the electricity needed to produce aluminum cans. Because irrigation was curtailed in Idaho, barley became scarce and more expensive. At the same time the cost of manufacturing aluminum for cans rose because less water meant less cheap hydroelectric energy. The result: a perfect storm of intersecting forces in the beer supply chain.

4. Preparation is everything – different levels of readiness can lead to very different outcomes.

Companies can do much to prepare themselves, using modern technologies, even with limited resources. The following non-corporate example illustrates this point. Over the past decade, Bangladesh’s Comprehensive Disaster Management Program has combined hazard mapping of hotspot areas most vulnerable to climate impacts, with early warning systems and evacuation policies. When Cyclone Sidr, a category 4 cyclone, hit the country in 2007, the death toll was kept to less than 4,000, while a previous category 4 cyclone in 1991 took an estimated 140,000 lives. The different outcomes in 2007 and 1991 were driven more by Bangladesh’s level of preparedness than by the level of force of the cyclone.

5. Climate change creates business opportunities as well as risks.

Much of tomorrow’s growth for companies is in developing country markets. These markets will likely be hit hard by climate change. Companies that proactively develop products and services that reduce their customers’ vulnerability to climate change will be well positioned to grow their markets.

Two examples follow. Cemex, a global cement company is exploring new markets for low cost, climate-resilient housing for underserved populations starting in Mexico, with a view to expanding to other developing countries, if successful. Swiss Re, one of the largest reinsurance companies in the world, has developed tailored insurance products, including weather risk insurance, for rural poor in developing countries.

6. Climate adaptation is a mainstream challenge.

Climate change affects all aspects of a business, just as it affects all aspects of society. Yet for many leading corporations, climate change actions are still the domain of the environment department and focus on mitigation (e.g. measuring and reducing their greenhouse gas emissions). A few enlightened companies are starting to expand their focus to adapting products, supply chains and operations in response to the consequences of a warming world. We urgently need to grow this number. To this end, Adapting for a Green Economy provides practical recommendations for how internal champions within companies can integrate climate risk into existing management systems.

In summary, climate change is already upon us. Its impacts create risks that ripple through corporate value chains. Being proactive in response to these changes is a business necessity, not a luxury. And in proactively adapting, companies can not only reduce their risks, but also discover new business opportunities building climate resilient products, markets and societies. This report points the way forward.

Making Climate Companies' Business

Samantha Putt del Pino — Tue, 15 Feb 2011 08:10:51 -0500

This piece originally appeared on the website of the World Resources Report.

This paper argues that private sector support of adaptation efforts will be contingent on the strength of the business case to commit time and resources for long-term climate resiliency. The “private sector” is highly fragmented with diverse specialties, interests, resources and capacities. Fully understanding the characteristics of businesses in any given jurisdiction may help policymakers to better target which private sector actors to engage and learn which types of policies may create a conducive environment for facilitating private sector support of governments’ adaptation needs. National governments must clearly identify those business sectors or companies that can best support their climate change adaptation objectives.

Introduction

Responding to the impacts of climate change may carry a price tag of $28-$67 billion for developing countries, which will require a significant investment from both the public and private sectors.¹^,² As governments seek to mobilize resources to increase national adaptive capacities, some will seek to engage the private sector as a critical partner. There is good reason for this. The private sector has expertise implementing infrastructure projects that can support adaptation efforts, like constructing sea walls or executing water conservation strategies. Companies have additional research expertise that can be harnessed to develop new technologies, respond to risks and opportunities, and drive capital flows to adaptation investments more quickly than the public sector.³ Companies also support the economic vitality of the communities where they operate through employment and the provision of needed goods and services. As such, they are critical stakeholders in securing the resiliency of local markets.

Private sector support of adaptation efforts, however, will be contingent on the strength of the business case to commit time and resources for long-term climate resiliency. To this end, governments may be able to develop a portfolio of policy options that create incentives for companies to develop strategies that support adaptation priorities, along with appropriate tools to discourage business activities that may not be well-aligned with the public good.

Designing an effective strategy to engage the private sector will require governments to carefully identify their needs and potential business partners. Delineating and aligning interests for mutual benefits will help national governments focus efforts and effectively engage private sector partners.

Identifying potential private sector partners

While the “private sector” is often referred to as a homogenous unit, it is in reality highly fragmented with diverse specialties, interests, resources and capacities. Fully understanding the characteristics of businesses in any given jurisdiction may help policymakers to better target which private sector actors to engage and learn which types of policies may create a conducive environment for facilitating private sector support of governments’ adaptation needs.

Small and medium enterprises can be critical partners in the provision of goods and services needed by local, poor communities.⁴ In China, 22 million town and village enterprises comprise 30 percent of GDP.⁵ Policies specifically targeted at growing these small and medium enterprises can be tailored to also meet government adaptation objectives.

Some companies – like those in extractive industries – may be highly dependent on local resources and thus may be motivated to become long-term community and government partners. In Mozambique, BHP Billiton’s aluminum operation was adversely affected by the high incidence of Malaria among employees. The company partnered in a government program – the Lubombo Spatial Development Initiative – to control the disease locally, thus improving the company’s productivity and supporting the health of the community.⁶

In climate vulnerable regions, governments may benefit from identifying domestic or foreign solution providers for a specific adaptation need. Providing supportive conditions to promote investment by those companies in the region could build a local cluster of expertise that provides regional competitive advantage. Singapore has become a center of excellence for the water purification industry due to its early recognition of water management issues and consequent investment in associated research and development, which creates an attractive environment for private sector experts in field.⁷

Aligning public and private sector interests

Strategically engaging the private sector may provide valuable allies for governments to meet their climate adaptation goals. A key step to this engagement is to understand where public and private sector interests may align. In the positive alignment case, adaptation activities both supply a public need and meet business objectives.

In a changing climate, there is a growing market demand for solutions that deal with weather stresses in the agricultural sector. Chemical company BASF is supplying customers with stress-tolerant plants, which in turn helps improve local yields of food crops like corn, soy and wheat that are exposed to extreme weather conditions.⁸
Fresh water supplies are critical to effective climate adaptation in many regions. Siemens, in recognition of this growing market need, is working with the Singapore government to supply fresh water to its citizens with sales of a cost-effective wastewater purification system that meets World Health Organization (WHO) standards. The plant in Kranji is expected to meet 20 percent of the city’s water needs by 2012.⁹ Water-scarce Singapore is dependent on imports of fresh water from neighboring Malaysia.¹⁰ Developing domestic capacity for supplying water to citizens, improves the country’s water security while also building a market attractive for private sector innovators.¹¹
Meeting energy needs with clean distributed power resources is a critical component of climate-resilient development. Sunlabob, based in Lao People’s Democratic Republic, has established an enterprise to provide off-grid solar, hydro and biomass energy profitably to rural areas. In doing so, energy access is improved and local entrepreneurs receive training to install and service the technologies, helping to diversify local employment, another need in many communities that may lead to enhanced adaptive capacity.¹²

These win-win examples benefit both public and private interests. Creating incentives to encourage these types of actions and investments can form the basis of a government policy package that leverages private sector resources. Incentives may be in the form of tax breaks for those companies that provide needed services to vulnerable communities or fast-track permitting for beneficial land use or operations.¹³ Governments may also be able to support the growth of new markets by guaranteeing sales through government procurement contracts, or providing targeted workforce development programs.

However, not all private sector adaptation actions, even if well-intentioned, support the public good. In a negative alignment scenario, companies may invest in local infrastructure or irrigation projects but employ foreign instead of local workers, thereby denying local employment opportunities and weakening their capacity to adapt to a changing climate. In some countries, land rights are informal; thus, local people can easily be marginalized and lose their livelihoods when private companies take over the land.¹⁴ Local food production can be impaired by natural resource constraints, which also may be exacerbated by the changing environmental conditions brought by climate change. To improve domestic food security, some public and private sector actors have invested in land in other countries to grow food crops, a practice which can dislocate local people, or limit or eliminate their access to the land and its resources.¹⁵ It also may be necessary to prioritize or balance the objectives of any given intervention. For example, private investment in 900,000 hectares of land in Argentina has bolstered conservation efforts but also has resulted in the dislocation of local people and the loss of livelihoods.¹⁶ Finally, some private sector responses to climate change impacts could be directly counter to the public good. If a company is forced to relocate their facilities in the face of climate change impacts, for example, lost jobs and revenues could exacerbate community vulnerability. In other cases, corporate operations in a community may run counter to that community’s well-being. For example, in some areas, poor quality, and thus cheap, land that cannot sustain year-round production is being put into continuous commercial use by companies, further exacerbating declining subsistence uses for local people.¹⁷

A full understanding of the potential long-term climate and societal risks associated with investments and other private sector activities will help governments to discourage actions that are inconsistent with the public good (such as those described in Chart 1). Collaboration with civil society groups can enhance community representation and help improve transparency, knowledge-sharing and the inflow of expertise to public policy decision makers.¹⁸ At the same time, encouraging private sector participation in adaptation policy discussions can improve policymakers’ understanding of private sector needs and promote greater engagement by the private sector in implementing government adaptation objectives.¹⁹

Chart 1: Illustrative examples of how business action could affect the adaptation of vulnerable populations. Based on examples discussed in Making Climate Your Business, WRI 2009

Conclusion

To engage the private sector effectively in strengthening communities and ecosystems ability to adapt to climate change impacts, national governments must clearly identify those business sectors or companies that can best support their climate change adaptation objectives. Potential partners may include multinational companies with expertise in needed goods or services as well as domestic small and medium enterprises that may be well-positioned to serve local communities. Consulting with a range of civil society actors can improve community participation and buy-in for government efforts, as well as bolster government knowledge of constituents’ needs. Decision makers also must recognize and align to the extent possible diverse, and sometimes divergent, public and private sector interests. Ultimately, they will need to balance these interests so that creative solutions to climate change impacts can be encouraged and those that are counter to the public good can be discouraged.

References

UNFCCC. 2007. Investment and Financial Flows to Address Climate Change. http://www.unfccc.int/resource/docs/publications/financial_flows.pdf ↩
Bystricky, E., Gilbert, A. and Rordorf, J. 2010. Co-benefits of private investment in climate change mitigation and adaptation in developing countries. UKaid and Ecofys. http://www.ecofys.com/com/publications/Co-benefits_private_investment_climate_change_mitigation_adaptation_developing_countrie.htm ↩
Withey, L., Borgerson, K., Herbertson, K., McGray, H., Dixon, J., Morice,, M., Welford, R., and Roeth, H. 2009. Making Climate Change Your Business. World Resources Institute, CSR Asia and SIDA. http://www.wri.org/publication/making-climate-your-business ↩
Withey et al. Making Climate Change Your Business. ↩
Khoday, K. 2007. Mobilizing Market Forces to Combat Global Environmental Change: Lessons from UN–Private Sector Partnerships in China. Review of European Community & International Environmental Law, 16: 173–184. ↩
Acclimatise and Synergy, 2008. Climate Finance, Business and Community: The Benefits of Co-operation on Adaptation. Discussion paper. Oxford, UK. ↩
http://www.siemens.com/innovation/en/publikationen/publications/pof/pof_fall_2008/rohstoffe/singapur.htm ↩
http://unfccc.int/adaptation/nairobi_work_programme/knowledge_resources_and_publications/items/4748.php#basf ↩
http://unfccc.int/adaptation/nairobi_work_programme/knowledge_resources_and_publications/items/4748.php#Siemens ↩
http://www.adb.org/water/knowledge-center/awdo/br01.pdf ↩
http://www.siemens.com/innovation/en/publikationen/publications_pof/pof_fall_2008/rohstoffe/singapur.htm ↩
Withey et al. Making Climate Change Your Business. ↩
Intellecap. 2010. Opportunities for Private Sector Engagement in Urban Climate Change Resilience Building. http://www.rockefellerfoundation.org/news/publications/opportunities-private-sector-engagement ↩
Von Braun, J. and Meinzen-Dick, R. 2009. “Land Grabbing” by Foreign Investors in Developing Countries. International Food Policy Research Institute. ↩
Ibid. ↩
Large, Martin, and Ravenscroft, N. “A global land-grab.” Ecologist 39, no. 2 (March 2009): 87-88. ↩
Von Braun, J. and Meinzen-Dick, R. 2009. “Land Grabbing” by Foreign Investors in Developing Countries. International Food Policy Research Institute. ↩
Chasek, P., Downie, D., and Brown, J.W. 2006. Global Environmental Politics. Westview Press. ↩
Forstater, M., Huq, S., and Zadek, S. 2009. The Business of Adaptation. Climate Policy Briefing Series: Briefing 1. AccountAbility and IIED. ↩

Fact Sheet: Stacking Payments for Ecosystem Services

Nicholas Bianco — Thu, 12 Nov 2009 09:29:42 -0500

Payments for ecosystem services are becoming an increasingly important part of the U.S. business and regulatory landscape. As programs that provide payments for ecosystem services grow, policy makers will need to determine how these various payments should interact with each other.

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(includes footnotes & references)
More WRI Climate Factsheets
More resources on Ecosystem Services

Introduction

Payments for ecosystem services are becoming an increasingly important part of the U.S. business and regulatory landscape. Used properly, these payments can efficiently mitigate greenhouse gases, filter pollution from runoff, protect wildlife habitat, and prevent soil erosion. Recognizing this, the American Clean Energy Security Act establishes a cap-and-trade program that allows firms to “offset” their greenhouse gas emissions through practices that reduce or sequester greenhouse gas emissions elsewhere. Some state governments are also expanding water quality trading programs that allow facilities that discharge water pollutants to avoid expensive facility upgrades by, for example, paying farmers to improve land management practices. There are also long-standing federal programs that pay farmers and forest landowners for providing a range of ecosystem services, such as protection of wildlife habitat and prevention of erosion.

As programs that provide payments for ecosystem services grow, policy makers will need to determine how these various payments should interact with each other. This interaction presents an opportunity to expand the suite of services for which an ecosystem is managed. However, it also creates the risk that multiple payments will be made for the same ecosystem services, possibly reducing the efficiency of payments or diminishing the environmental benefits they were intended to provide. This factsheet offers an initial review of these risks and opportunities. It is part of a larger effort by WRI to develop a comprehensive framework for stacking payments for ecosystem services.

For complete text, Download the PDF (PDF, 4 pages, 160 Kb)

Ensuring Greenhouse Gas Offset Quality in the Clean Energy Jobs and American Power Act

Alexia Kelly — Thu, 05 Nov 2009 09:37:13 -0500

S.1733, the Clean Energy Jobs and American Power Act (CEJAPA) also known as the Kerry Boxer bill , provides a number of important provisions that will ensure that offsets used in the U.S. cap-and-trade program represent real, additional, measurable and verified greenhouse gas (GHG) emission reductions.

This summary is based on the version of CEJAPA released on 10/30/2009 and not subsequent iterations. Inquiries can be directed to Alexia Kelly.

For more information, visit the U.S. Federal Climate Policy home page.

Offsets are used in lieu of reductions from sectors subject to mandatory emission reduction requirements; thus, offset quality is central to the environmental integrity and credibility of the cap-and-trade program. WRI’s review of the environmental quality criteria in CEJAPA affirms that its provisions will safeguard the environmental intent of the legislation. The CEJAPA lays a strong foundation that should be preserved in any future policy for an offset program that will deliver high quality offset credits. Critical program attributes are described below.

The Clean Energy Jobs and American Power Act:

Does not include a list of “per se” eligible offset project types. Per se eligibility lists require the offset program administrator to develop offset crediting methodologies for specified project types, regardless of their demonstrated ability to permanently reduce, avoid or sequester GHG emissions. In order to ensure offset quality, a full scientific review of any potential offset project type is of paramount importance in ensuring that offset projects are able to deliver real emissions reductions. CEJAPA ensures that offset project eligibility determinations are developed through a science-based, publicly-accessible rulemaking process conducted through the appropriate federal agencies with input from scientists and technical experts. (Sec. 733)
Establishes clear, consistent, and rigorous definitions of key offset quality criteria. This includes robust provisions to address additionality, leakage, impermanence, and measurement and quantification uncertainty through science-based, standardized, and transparent methodologies. These provisions will help provide assurance that offsets used in the program represent emissions reduction projects and activities that would not have occurred in the absence of the offset market and are measured against consistent criteria and quality definitions. (Sec. 734)
Includes strong provisions to ensure offset credits sourced from sequestration projects deliver permanent reductions. The bill provides stringent provisions that include buffer accounts, discounting, clear assignment of liability, and insurance mechanisms to ensure proper emissions accounting. These provisions ensure that the emissions reduction targets of the program are met in the event of a sequestration project’s emissions reduction reversal. (Sec. 734)
Places liability for intentional reversals with offset project developers and shares responsibility for unintentional reversals. Release of carbon dioxide stored in forests and soils can occur for a wide range of reasons. Reversals are typically classified as intentional (e.g. premature harvest of forests, tilling of fields) and unintentional (e.g. disease outbreak, pest infestation, forest fire). Clear liability for reversals is an integral part of ensuring the environmental effectiveness of the cap and trade program. Assigning complete responsibility for intentional reversals, and partial responsibility for unintentional reversals, provides a strong incentive for offset project developers and implementers to reduce the likelihood that reversals will occur and to take preventative action to avoid unintentional reversals. (Sec. 734)
Allows for program transparency, adaptation and flexibility over time. The bill allows for both the addition and removal of eligible offset project types over time, and includes a public petition process as a key component of this process. The bill also calls for regular (every 5 years) review and evaluation of the offset program. These are crucial elements of ensuring emissions reduction or sequestration projects receiving offset credit continue to meet high offset quality standards and that the program is able to adapt to changes in scientific understanding over time. (Sec. 733 and 739)
Establishes an Offsets Integrity and Advisory Board and Office of Offsets Integrity. The bill establishes an Offsets Integrity Advisory Board tasked with providing scientific and technical guidance to the offset program administrator as regulations are promulgated. It also establishes a new office of offsets integrity within the Department of Justice to ensure that the offset provisions are enforced and appropriate legal frameworks are in place to administer this unique program. (Sec. 731 and 743)
Establishes one verification program for the entire offset system. A robust verification program is a vital element of a credible offset program. Verification entities and protocols certify that emissions reduction projects meet the requirements of the regulatory offset program and establish the quantity of offset credits to be issued from a particular project. Developing multiple verification programs for U.S. compliance offsets could lead to inconsistencies in the U.S. offset market and compromise the quality of the offset credits issued. (Sec. 736)

China, the United States, and the Climate Change Challenge

Deborah Seligsohn — Wed, 21 Oct 2009 12:41:11 -0400

As December’s climate change talks approach, a new WRI report discusses the successes and challenges to effective regulation in China.

As the two largest current global emitters of greenhouse gases (GHGs), it is imperative that the United States and China work together to support effective domestic energy and climate change programs and an effective international climate regime. As China’s domestic energy policy has transformed over the last several years to incorporate climate-friendly goals – increased energy efficiency and a greater contribution of non-fossil fuels to its energy mix – this opportunity is already becoming a reality, especially as the United States advances comprehensive climate policy.

The new WRI report, China, the United States, and the Climate Change Challenge discusses the successes and challenges to effective regulation in China, outlining the major advances made in implementing effective energy efficiency programs in the past several years. These include targeted programs for both large and small enterprises, specific goals for government officials, and the development of energy statistics infrastructure. It also addresses U.S. competitiveness concerns in relation to the introduction of U.S. cap-and-trade policies, and specific opportunities for enhanced climate change cooperation between the two countries.

Comparison of Chinese and U.S. Energy Statistics

China’s Energy and Climate Policy

China’s energy and climate change policy is based on its own assessment of national interest as outlined both in its 2007 National Climate Change Program and 2008 Climate Change White Paper. China’s climate policy meshes with concerns about energy security, pollution abatement and the cost of energy itself, as well as the impacts of climate change and China’s international reputation.

Section 1 outlines China’s National Climate Change Program, the key components of which are:

Reducing energy intensity per unit GDP by 20 percent between 2006 and the end of 2010,
Increasing non-fossil fuel-based and renewable energy to 15 percent of the energy mix by 2020, and
Increasing total forest cover in China to 20 percent by the end of 2010.

China’s approach is diverse and includes targets and quotas, industrial and equipment standards, energy taxes and financial incentives and penalties. While China has gained some experience with carbon markets through the Clean Development Mechanism (an offset mechanism under the Kyoto Protocol), given China’s institutional strength, as demonstrated by other policies, the country will likely use a variety of tools to continue to implement its climate change policy.

China’s National Climate Change Program

China’s National Climate Change Action Program, published in June 2007, provides for three major mitigation efforts that, in combination, reduce greenhouse gas emissions:

Reducing the energy intensity of GDP by 20 percent over the five years 2006 through the end of 2010.
Increasing alternative energy in the fuel mix to 15 percent by 2020.
Increasing forest cover to 20 percent of China’s land mass by the end of 2010.

The national program is more than a mitigation program. It also contains support for climate science and for preparedness and adaptation. China’s scientists have been active in the global effort to understand climate change and are increasingly involved in developing technical approaches to both mitigation and adaptation.

Although these policies may not provide the environmental certainty of a cap-and-trade system, they can drive emissions reductions and may be more suited to the current development of China’s financial markets and enforcement infrastructure.

U.S.-China Competitiveness Concerns and Cooperation Opportunities

This brief addresses the concern in the United States about potential transfer of carbon-intensive jobs to China. While a carbon cost will not be a major factor in most sectors in the United States, some sectors could be affected. However, this concern can be addressed through adjustments to the United States’ domestic allowance system under cap-and-trade legislation, by coordinated action under an international agreement, or by trade measures. Trade measures are unlikely to be an attractive option as they increase costs for downstream users, threaten export markets and potentially damage international negotiations.

Comprehensive U.S. climate legislation could spur further improvements in China’s climate change programs and policies. Creating incentives in the United States for clean technologies will help drive down the prices of these technologies, making them much easier for China and other major emitters to adopt. The United States can also collaborate with China in areas ranging from research and development to enforcement infrastructure to help China move its own policies forward. Finally, U.S. legislation can encourage China to do more as it positions itself as a global leader.

This brief outlines a number of bilateral and multilateral venues for enhanced cooperation. In the bilateral sphere, the new U.S.-China Memorandum of Understanding to Enhance Cooperation on Climate Change, Energy and the Environment, signed at the first meeting of the revamped Strategic and Economic Dialogue (S&ED) in Washington, D.C. in July 2009, provides a coherent framework for this cooperation. The new MOU incorporates the Ten Year Energy and Environment Framework developed under the previous U.S. presidential administration, provides a framework for cooperative projects and creates a new coordinating committee for both countries’ energy and environment agencies. The challenge will be to follow through on coordination and delineate clear goals and timetables. Many of the structures set up under the previous U.S. administration, not just bilaterally, but also multi-laterally, such as the Asia Pacific Partnership (APP) for Clean Development and Climate and the Major Economies Forum (MEF) have real potential to bring together key players, but they need more sharply defined goals and missions, and the United States will need to clarify funding. All of these programs can support domestic policies in each country as well as both countries’ efforts to reach a global agreement at Copenhagen in December.

To continue reading, download the full report.