‘A GRAND CHINESE CLIMATE SCHEME’ – the first paper in the “Risoe DTU Climate Paper Series”

caitlin Green Prosperity

Dear Climate-L reader 11. November 2010

The first paper in the “Risoe DTU Climate Paper Series” is now available. It can be downloaded from http://cd4cdm.org/Publications/GrandClimateSchemeChina.pdf

The title of the paper is ‘A GRAND CHINESE CLIMATE SCHEME’ and it analyses the Chinese climate policies and initiatives. It argues that China can, and should, be seen as a climate ‘champion’ that has the potential to change the current market situation both for carbon credits and clean energy technologies.

At COP15, China made an ‘unconditional’ commitment to reduce its carbon emission intensity by 40-45% below 2005 levels by 2020, thus breaking away from its traditional stance of non-commitment in global climate negotiations. While the boldness of this emissions intensity target is debated, it is clear that it stands to radically change China’s approach to, and benefit from, the CDM. Specifically, it can no longer be assumed that China will find it beneficial to export its CERs – indeed she is well positioned to withdraw her credits from the market. Such a move would serve a double purpose: it would help China meet its domestic intensity target by jump-starting a domestic Chinese carbon market; and it could create a credit shortage in the global carbon market, particularly if China can convince her allies in Brazil and India to follow suit, thus forcing particularly Europe to increase investments in renewable energy technology to replace emissions reductions that so far, through the CDM, have been created abroad. As China over the past few years has developed a significant renewable energy industry, she would, by withdrawing the credits, expand the market for her own technology.

Yet another thought-provoking development is that state-owned Chinese developers have already expanded their activities in the African renewable energy sector by entering cooperation agreements with local power corporations and implementing hydro and other renewable energy projects. From here China could continue to be engaged in supplying CERs to a primarily European market, where she has in this scenario herself induced a credit shortage that may send carbon prices soaring and lead to a scramble for CERs from African CDM projects. With her own financing and technology, and cooperation agreements with African governments, China could thus remain a major indirect supplier of CERs, at far-higher CER price than those currently attracted by projects in China. The fascinating thing about this scenario is that China is now in a position to make almost all of this happen on its own.