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  © 2008 NCUSCR • 71 West 23rd Street, Suite 1901 • New York, NY 10010-4102 • (212) 645-9677 • www.ncuscr.org
 
China’s Role in Addressing Global Climate Changeand Implications for US-China Relations
Trevor Houser
Visiting Fellow, Peterson Institute for International EconomicsDirector, Energy and Climate Practice, Rhodium Group, LLC
 Background Paper for the National Committee on US-China Relations conference “China, the United States and the Emerging Global Agenda,” July 13-15, 2008 at the Wye River Conference Center 
Introduction
Over the past decade the US has experienced a dramatic change in public awareness andsentiment on the issue of global climate change. The findings of the fourth assessment report of the UN’s Intergovernmental Panel on Climate Change (IPCC) that global climate change is theresult of human action and the dire predictions from the scientific community of the effect it willhave on human life has generated a new consensus among the American public that climatechange is a serious threat and warrants an ambitious policy response. This sentiment is reflectedin a host of initiatives at the local, state and regional level to reduce greenhouse gas (GHG)emissions and coalitions of business leaders pressing for action at the federal level. The USSenate has responded by introducing draft climate legislation for debate and efforts in the Houseare not far behind.This surge in policy momentum in the US has provided international climate negotiationswith a needed shot in the arm. US failure to ratify the 1997 Kyoto Protocol followed by the BushAdministration’s withdrawal from the agreement in 2001 cast a pall over efforts to reduceemissions globally. The fact that both of the leading presidential candidates have committed tocut emissions at home and reengaging in negotiations abroad has generated a sense of optimismin the international community that a global deal on climate change may just be within reach.Yet while the US is the single largest variable in the world’s success of failure in meeting theclimate challenge, China is a close second, due to its growing share of global emissions and theeffect it has on the policy debate in the US. This background paper provides an overview of thechanges in China’s economy responsible for country’s expanding carbon footprint and whatBeijing is doing in response, a framework for understanding how these developments are shapingclimate policy in the US and brief comments on what addressing climate change means for US-China relations more broadly.
China’s Evolving Carbon Footprint
Sometime last year, China surpassed the US as the world’s largest greenhouse gas emitteron an annual basis, far sooner than anyone anticipated. At the turn of the century, China wasresponsible 13% of carbon dioxide (CO2) emissions world-wide and was projected to account
 
  © 2008 NCUSCR • 71 West 23rd Street, Suite 1901 • New York, NY 10010-4102 • (212) 645-9677 • www.ncuscr.org
 
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for 20% of the global growth in emissions through 2030.
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By the end of 2007, China wasresponsible for 24% of global emissions and is now projected to account for 42% of the growththrough 2030.
 
Understanding why this upside surprise occurred is critical in assessing whethercurrent trends are likely to continue and what Beijing, and the international community, can doto help China change course.During the first two decades of the country’s economic reform starting in the late 1970s,China came close to decoupling economic growth from energy demand and CO2 emissions.Moving the economy from state-planned towards market-oriented resulted in enormous energyefficiency gains. Management reform at state enterprises, greater competition and liberalizedenergy prices created an awareness of energy costs and incentives to use energy more efficiently.In addition, as households and firms were given more freedom in determining where to spendtheir time and money, China’s economy away from the energy-intensive heavy industry thatdefined Mao Zedong’s rein towards the labor-intensive light industry that’s created the China weknow today. As a result, between 1978 and 2001, China was able to expand the economy at 9% ayear while keeping energy demand and emissions growth to less than half that rate. This meantthat by the turn of the century, Chinese economic activity created less than one third the CO2emissions it otherwise would have if none of these reforms had taken place.
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 Despite widespread expectations that China would be able to continue these heroicreductions in carbon-intensity for decades to come, starting in 2001 the carbon footprint of theChinese economy began to increase dramatically. Over the next six years, total CO2 emissionsdoubled, growing at an average annual rate of 12%, more than three times the average rateduring the previous two decades and outstripping overall economic growth for the first timesince reforms began. Between 2001 and 2007, China accounted for more than 60% of the growthin emissions world-wide.Contrary to what many observers assume, this surge in emissions was driven not by therise of the middle class consumer, but by the reemergence of heavy industry and a change inwhat China makes for itself and what it buys from the rest of the world. In other words, its not airconditioners and automobiles that make China 24% of global emissions, but steel mills, cementkilns and aluminum smelters. Today, industry is responsible for 70% of China’s energyconsumption (in the US it’s less than 25%). The iron and steel sector alone accounts for 18% of total energy demand, compared with 10% for all the households in the country combined.Aluminum production uses more energy than the commercial sector and chemical productionmore than all private transportation.
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International Energy Agency,
World Energy Outlook 2002
, Paris: Organization for Economic Co-operation andDevelopment.
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For a full discussion of China’s evolving energy need see Daniel H. Rosen and Trevor Houser, 2007,
China Energy: A Guide for the Perplexed 
. Washington: Peterson Institute for International Economics
 
 
  © 2008 NCUSCR • 71 West 23rd Street, Suite 1901 • New York, NY 10010-4102 • (212) 645-9677 • www.ncuscr.org
 
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The fact that industry is responsible for the majority of China’s energy needs means that China’scarbon footprint is shaped by its position in the global production chain and impacts the carbonfootprint of countries elsewhere in the world. At only 6% of global GDP, China today accountsfor 35% of global steel production, up from 12% only a decade ago. China’s share of globalaluminum production has grown from 8% to 28% over the same period and China now accountsfor nearly half of all cement and flat-glass produced world-wide.Demand for these carbon-intensive goods is coming primarily from China itself, drivenby the country’s rapid urbanization. Indeed, China has accounted for two-thirds of the globalgrow in demand for steel and cement since 2001. Over the past decade, 200 million Chinese haveeither moved to the city or had a city build up around them. But the country is now making foritself more of the carbon-intensive building materials it used to buy from abroad. In 2002, forexample, China’s steel imports exceeded exports by 450%. Last year, exports exceeded importsby 450% making China the world’s largest steel exporter as well as producer. This change had asignificant impact both on global steel markets and the carbon footprint of other countries. If China had maintained its 2002 level of import dependency in steel through 2007, whoever soldthat steel to China would have needed to increase output by 100 million tons (more than total USproduction today) which would have added 100-200 million tons of CO2 to their carbon balancesheet.Today’s industry-led growth in emissions is also shaping China’s carbon future. The newoffice buildings and apartment blocks that require steel and cement to construct will requireenergy to light, heat and cool for decades to come. And with Chinese cities today being builtmore like Los Angeles than Tokyo, a growing share of the countries energy is consumed movingurban residents around town. Yet with only 45% of the population living in cities at present,there is still a long way to go before China is fully built out. If the next two decades of urbanization look like the last two, China will lock in an unsustainable energy trajectory. Andwith coal supplying 70% of the country’s energy needs at present and oil another 20%,continuing along the current pathway means double China’s CO2 emissions between now and2030.
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The Climate Policy View from Beijing
Contrary to the perceptions of many in Washington, China has long been involved in theinternational effort to address climate change. China is a party to the UN Framework Conventionon Climate Change (UNFCCC), which entered into force in 1994 and provides the foundationfor international climate negotiations. Beijing also signed and approved the Kyoto Protocol andhas been an active participant in the Protocol’s Clean Development Mechanism (CDM). Therehas been relatively little debate over the science of climate change in China, unlike in the US,and Chinese scholars have made significant contributions to the four IPCC assessment reports.
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China Statistical Yearbook,
National Bureau of Statistics
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