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The global fight against climate change will continue after the US withdrawal from the Paris Agreement. Participants at a MERICS conference agree that Germany and China can play a decisive role in keeping the topic on the G20 agenda.

Panel discussion: Brigitte Knopf (MCC), Andreas Löschel (University of Münster), Sabine Fuss (MCC), Yang Fuqiang (Natural Resources Defense Council) and Jiang Kejun, former Director, Energy Research Institute

Germany and China should use the G20 summit in Hamburg to advance the global climate policy agenda. This was the message of a Chinese-German conference, whose participants discussed how to keep up the international momentum after US President Donald Trump had announced his country’s withdrawal from the Paris Agreement.

“Green low carbon development is now an international trend and consensus,” stated Tian Chengchuan, the director of climate change strategy at China’s National Development and Reform Commission (NDRC). “Climate change policy needs to be placed at the heart of economic development and fiscal policies,” said the top official for climate policy in the German environment ministryKarsten Sach, with a view to the G20 meeting.

The conference, “Joining forces in global climate policy: New perspectives for Chinese-German cooperation,” took place on June 30 in Berlin. It was hosted by the Mercator Institute for China Studies (MERICS), the Mercator Research Institute on Global Commons and Climate Change (MCC) and the European Climate Foundation (ECF), in cooperation with China’s National Center for Climate Change Strategy and International Cooperation (NCSC).

While deploring Trump’s decision, participants were optimistic that the US withdrawal had not weakened the resolve of other nations to keep their commitments. The Paris Agreement is still the way forward, said Sach. Trump’s move “has not been and will not be a derailment of the process.” The German climate negotiator and other participants identified several trends that would help keep the agenda on track.

China’s reductions are a game changer

There was consensus that China has emerged as a game changer in the global struggle to reduce greenhouse gas emissions. China is on track to meet or exceed its target to reduce its carbon intensity by up to 45 percent below 2005 levels by 2020, and it will most likely reach the peak of its CO2 emissions ahead of 2030, the deadline it had set in Paris. “China recognizes that it is in its best interest to transition to a low carbon economy,” said Barbara Finamore, Asia Director of the Natural Resources Defense Council (NRDC), an American NGO.

Apart from its domestic efforts, China also received praise for assuming greater global leadership: “China very impressively used its G20 presidency in 2016 to launch green finance,” said Chris Barrett, the Executive Director for Finance and Economics at ECF, referring to a Chinese initiative to draft guidelines for the establishment of a green financial system.

The audience was also reminded that it was premature to count out the United States. ECF Chairman Caio Koch-Weser, the former Vice Chairman of Deutsche Bank, called the “lack of commitment” of the Trump administration “a disgrace.” But he pointed out that companies like Apple and Goldman Sachs supported the low-carbon transition, that 187 US cities had pledged to uphold their Paris commitments and that the state of California stood ready to join Germany and China in fighting climate change.

Climate scientist and MCC Director Ottmar Edenhofer explained why greenhouse gas emissions even in the rest of the United States were likely to continue their downward trend despite the Trump administration’s pledge to revive the coal industry. “The gas price in the US is below the coal price,” said Edenhofer, referring to the boom in shale gas exploration in the United States. ”Therefore I do not believe that we will see a dramatic investment in coal-fired plants in the United States.”

Setting the right price for carbon

But if the economics of coal don’t work, neither do those of international carbon markets, at least not yet. The participants of a panel on emissions trading agreed that China could learn from the European Union’s experiences when launching its own carbon-trading market.The former director of the Chinese NDRC’s Energy Research Institute Jiang Kejun expressed confidence that China’s first nationwide system would launch before the end of this year. But he also reported that there was still debate in China over how many and which sectors would be included in the system.  “I hope that at least four sectors will be covered,” he said, listing the power sector, the semiconductor industry, cement, aviation and non-ferrous metals as possible candidates.

China is not just learning from Germany and Europe, but from its own experiments with carbon trading in seven provinces. “We have gained valuable lessons from these pilots,” said Yang Fuqiang, a senior advisor on climate change, energy and the environment for the NRDC’s China program. Despite all these efforts, Yang deplored the problems of modeling and forecasting caused by inconsistent provincial data and a shortage of historical economic data.

The idea of a carbon tax found prominent proponents at the conference. Koch-Weser called on G20 finance ministers to consider it when looking for ideas on how to price carbon. The European carbon price hovers around 5 EUR per ton of CO2, but according to Edenhofer, carbon would have to cost around 40 EUR to compensate for the current oversupply of fossil fuels. He argued that the revenues from a carbon tax should be used to finance the huge demand for sustainable infrastructure in developing countries.

A panel on green finance discussed the role investors in financial markets can play in supporting a low-carbon transition. The G20 was seen as the best place to define reporting standards and disclosure requirements for environmental and climate risks. Gerrit Hansen of Germanwatch, an NGO, called on governments to move ahead with ambitious regulations at national levels across the G20 and beyond. “There is so much willingness from the private sector and the financial sector, it’s high time to make decisions and move forward,” she said and made a bold suggestion: If the G20 fails to endorse the latest recommendations by a special task force on disclosure of climate-related financial risks, China, Germany and other like-minded countries should move ahead on their own and make these guidelines mandatory within five years.  

South-South cooperation with German participation?

In shaping multilateral and international initiatives, China and Germany can build on a long-standing Sino-German cooperation on climate change mitigation. A panel on low-carbon cities focused on practical aspects of this exchange. The challenges range from avoiding and reducing traffic in big cities to regenerating abandoned industrial spaces.

Sandra Retzer, who heads the programs for Sustainable Urbanization, Transportation and Energy at the German development cooperation organization GIZ in Beijing, gave examples of German-financed projects that resulted in the adoption of climate concepts by Chinese cities, such as a public-private partnership in Chongqing to introduce an e-car sharing scheme. A long-standing exchange program with mayors draws on German experiences with aligning work places with commercial and residential areas. Making the huge Chinese cities “walkable” was “a real challenge for the government,” Retzer said.

But exchanges don’t just go in one direction. Christian Hochfeld, Executive Director of Agora Verkehrswende, a joint initiative by Stiftung Mercator and ECF for decarbonizing Germany’s transportation sector, described how China is increasingly becoming the test bed for digital transportation technologies, for example in the bike-sharing sector.

For the future, China and Germany see opportunities to expand their cooperation to joint projects in third countries, for example in Africa. “China is still a developing country, but it is devoted to South-South cooperation on climate action,” said Wang Tianling, Counselor at the Embassy of the People’s Republic of China to Germany.

It was the tenor of the conference that cooperation, not isolation, should be the answer to dealing with the challenge climate change poses to all of humanity. Or, as Koch-Weser put it: “A central message from the G20 must be that international relations is not a zero-sum game.”