How America Can Turn China Green

The U.S. ignored Beijing's request that it pay 1 percent of GDP to help China go green. It shouldn't.

Fred Guterl

NEWSWEEK

From the magazine issue dated Feb 23, 2009

Gao Guangsheng has an odd sense of timing. In late October, as the global financial system was collapsing around him, he put the United States, Europe and Japan on notice that they would be getting a bill for a hundred years of pumping the climate full of carbon dioxide. The idea wasn't entirely new—the big industrial powers had been vilified before for despoiling the planet on their way to wealth and modernization, while asking China, India and other poor nations to do the right thing. But the demand took on an entirely new characater coming from Gao, Beijing's climate czar. It didn't hurt that he was able to deliver a precise figure: 1 percent of GDP, which comes to more than $350 billion a year.

Western leaders handled Gao's statement as you might have expected in the middle of an economic crisis: they ignored it. Over the next few months, however, that tactic will be difficult to sustain. As climate talks begin to build toward a climax in Copenhagen in December, when a follow-on to the Kyoto Protocol is due to be drawn up, Gao's challenge stands as a gaping rift. It's the same rift that kept China, India and other relatively poor nations out of Kyoto and gave President George W. Bush an excuse to withdraw, putting climate-change policy on hold for the past eight years. The issue looms large over Hillary Clinton's first trip this week to Beijing as newly minted secretary of state. The longer the issue remains unresolved, the greater the chance that Copenhagen will end in a similar stalemate—and this time there'll be no George Bush to blame.

Given the gravity of the issue, the notion of paying China to solve its environment problems may not be as much of a nonstarter as it sounds. China is a key pressure point of the world's climate problem. Last year it surpassed the United States as the biggest emitter of greenhouse gases. Even so, China's breakneck growth means that most of its mistakes, from a climate standpoint, are yet to be made. China, for instance, has whole cities on the drawing board, waiting to house hundreds of millions of people who are expected to move from the countryside in the next decade or so. But buildings—constructing, heating and lighting them—typically account for about 40 percent of a nation's energy demand. Retrofitting existing buildings in the United States to be more energy-efficient is a lot harder than building green ones in China from scratch. A similar potential holds for automobiles and power plants. China builds 100 or so coal plants every year, and each time it fails to use the most efficient technology it commits the atmosphere to absorbing that much more carbon for the next 30 or so years. From the standpoint of the planet—a ton of carbon dioxide does the same damage regardless of where it comes from—it makes sense for the United States to help fix China.

A cash payment, of course, is out of the question. (Sorry, Gao.) Hillary Clinton won't be handing over a check for climate reparations. The American public is angry enough at the billions of dollars Washington is throwing at the banks and might not take kindly to spending another $140 billion (1 percent of U.S. GDP) every year to bail out someone else's environment. The American public might acquiesce to climate aid to China if it were sold as a kind of trade stimulus or partnership, however.

When it comes to environmental troubles, the United States and China have more in common than meets the eye. Both nations are climate sinners. Both have vast indigenous reserves of coal, the dirtiest form of electricity generation. And both are under considerable pressure to go green. Common problems also lead to common solutions—what works in one country might work in the other. For this reason, some experts think that giving China a green stimulus wouldn't be all that much different from giving one to U.S. firms doing business there, or vice versa. "Even if we spend it at home, we're investing in companies that themselves have to be in China selling these technologies," says Ed Steinfeld, a political scientist and director of the China program at the Massachusetts Institute of Technology in Cambridge. "If we end up investing in China, we have to frame it as something different."

Framing it as assistance to U.S. companies might not be too hard because industry is becoming intertwined. Wal-Mart's "sustainability initiative" would impose energy-efficiency targets on the factories in its supply chain—a decision that could affect thousands of plants. You don't have to go very far from Wal-Mart's headquarters in Bentonville, Arkansas, before you wind up in Shenzhen or Shanghai. Elizabeth Economy, a China expert at the Council on Foreign Relations, argues that governments could promote more of this sort of thing by subsidizing some of the upfront costs—arranging loans through private banks that would ultimately be paid back from savings in energy costs, or paying for audits to make sure efficiencies get carried out down the supply chain.

Partnerships in key technologies could do much to jump-start private investment. In a recent report, Brookings Institution fellows David Sandalow and Kenneth Lieberthal highlight electric cars and batteries as especially promising areas for U.S.-Chinese collaboration. Both require breakthroughs in technology and would benefit from a sharing of resources and know-how. The commitment of governments from two of the world's biggest markets would also go some way toward helping establish standards and address intellectual-property issues. Sandalow and Lieberthal advocate high-profile projects that share technology and expertise. A joint program to develop electric cars, for instance, might not require much more from Washington than paying travel expenses for some Chinese scientists and engineers from Beijing to Cambridge. "Signals that national leaders send on this issue will have an impact on the marketplace" in both China and the United States, says Sandalow. "If leaders in both places jointly say that electric vehicles are a priority, private companies will respond."

Such initiatives might also smooth over the diplomatic problems ahead of the Copenhagen meeting. It would send a signal to Chinese citizens that they are finally getting something from Washington in return for committing to emissions cutbacks and other green measures. Leaders in Beijing could crow about the concessions they won from the West.

It may be time to try a new approach. The Clean Development Mechanism, the carbon-credit trading system born from Kyoto, has provided a market-based way of transferring wealth to developing nations. But it's too small to make a big impact on global emissions and has been criticized for financing clean-energy projects that would have happened anyway. The United Nations Environmental Program, in a report coming out this week, says that Western aid that promotes green industries—wind turbines, solar power and the like—in Africa, Southeast Asia and other developing nations could act as both an economic stimulus and climate fix. Such a program would probably run into the common problem of how to distribute funds where they'll do the most good. A simpler and more effective climate fix might be to go straight at the biggest emitters—both of them.

With Craig Simons in Beijing