By Haibing Ma

Guangdong is releasing a series of policies to ensure a green future. ©

According to media reports, Guangdong province has taken the lead in becoming the pioneer of low-carbon practices in China. Guangdong is one of 13 pilot regions—including five provinces and eight municipalities—that the Chinese government has selected to explore low-carbon development. So far, it is the only pilot region that has issued a comprehensive plan for this development and had it approved by the central government.

In January 2012, the National Development and Reform Commission (NDRC) reviewed and then “approved with positive comments” Guandong’s “Implementation Plan for Low-Carbon Pilot Programs.” Although this plan has not been made public, it reportedly lays out eight “key actions”:

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12th Five-Year Plan, cap and trade, carbon emission, carbon intensity, China, emission trading, energy intensity, green development, Guangdong province, low-carbon, MRV, NDRC, pilot program, statistics

According to a new report from Renmin University, in 2005–09 there were significant differences between China’s statistical data for provincial energy use when aggregated using local government data versus when calculated by a province as a whole. This gap between bottom-up and top-down statistics is also evident at the national versus provincial level.

2011 GDP growth rate: goals claimed by individual provinces are significantly larger than national target of 8%

It’s a well-known fact that the mismatch between national statistics and aggregated provincial data is an ongoing challenge in China. Reports indicate that in recent years, estimates for national energy consumption using aggregated provincial data have been up to 15 percent higher than the national total figure.

And it’s not just energy data that faces accountability issues. The aggregate of the Gross Domestic Product (GDP) statistics reported by local governments, for instance, is often larger than the overall national figure released by the National Bureau of Statistics (NBS). In 2004, the aggregate provincial GDP surpassed the national figure by almost 20 percent. After that, the gap shrank significantly but increased again in the past five years. The 2010 national and provincial GDP data still show an 8 percent gap.

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cap and trade, capacity building, China, energy consumption, energy efficiency, energy intensity, GDP, GHG inventory, statistics

Worldwatch President Chris Flavin, Dr. Bill Nordhaus of Yale University, and Center for Global Development Nancy Birdsall discuss the merits of different carbon pricing policies.

With international climate negotiations rudderless and little hope for passage of a climate bill in the current U.S. Congress, some believe the time is ripe to consider whether there might be a better way to price carbon than cap-and-trade. On March 24, at a round-table hosted by Worldwatch and the Center for Global Development, Dr. Bill Nordhaus of Yale University argued that an international system of harmonized carbon taxes could be a more economically efficient and politically feasible framework to deliver carbon emissions reductions than a cap-and-trade system.

Mr. Nordhous’ thinking is rooted in the lessons of recent history. Most ways you slice it, the last two years have not been kind to carbon markets.  Although the volume of global carbon transactions increased 80 percent between 2008 and 2009, average global carbon prices fell from US $28 to $17 per ton of carbon dioxide-equivalent (CO2e), according to our latest Vital Signs Online trend. This decline in carbon prices, driven mainly by transactions on the European Union Emissions Trading Scheme (EU-ETS), was partially a result of the global recession, which reduced industrial output and, consequently, demand for carbon allowances. But more fundamentally, some are beginning to question the vision of interconnected, international carbon markets that has dominated the discussion of carbon pricing since the 1980s.

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Bill Nordhaus, cap and trade, carbon tax, Center for Global Development, Climate Change, mitigation, Yale University

By Haibing Ma and Alexander Ochs

Recently, a China Daily news report caught Uncle Sam’s attention, presumably at an inconvenient time: just when the U.S. Senate finally admitted to abandoning its plan of issuing a federal climate bill by the end of this year, top Chinese officials were discussing how to launch carbon trading programs under their country’s next Five-Year Plan (2011–15). Serving as China’s overarching social and economic guidance, Five-Year Plans consistently lay out the most crucial development strategies for this giant emerging economy. Once included in the plan, carbon trading will be viewed as part of China’s national goals and will be domestically binding. This occurred most recently with the country’s 2010 energy intensity target, which called for a 20 percent reduction from 2005 levels and was disaggregated into provincial and local targets, with local officials held accountable for achieving them. In short, China seems to be accelerating full-throttle toward a low-carbon economy.

Chinese policymakers have been eyeing a domestic emission-trading scheme for a while. Last August, Xie Zhenhua, Deputy Director of the National Development and Reform Commission (NDRC), announced that China will launch a pilot carbon trading program in selected regions and/or sectors—basically the same message conveyed in the recent China Daily story. On one hand, this reiteration demonstrates that the Chinese government is seriously considering such a market-based mitigation mechanism; on the other hand, the fact that the program’s status is still in discussion a year later shows that putting cap-and-trade into action might be not be that easy in China either.

Here are some of the problems: A non-voluntary emission-trading system cannot work without a mandatory cap on emissions, either for the economy as a whole or for individual sectors. However, China is currently unlikely to set an absolute emission target because this would contradict its long-standing position at international climate negotiations that industrialized countries have a historic responsibility to take the lead in this area. Most Chinese climate officials and experts agree that China could probably peak its emissions between 2030 and 2035, but huge uncertainties remain.

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cap and trade, carbon trading, China, Climate Change, emissions reductions, energy intensity, MRV, NDRC, Tianjin Climate Exchange, U.S., UNFCCC
Pricing Carbon, a new book co-authored by Denny Ellerman with contributions from Felix Matthes, Tuesday's presenters, image courtesy of Cambridge University Press

Pricing Carbon, a new book co-authored by Denny Ellerman with contributions from Felix Matthes, Tuesday's presenters, image courtesy of Cambridge University Press

The European Union’s Emission Trading Scheme (EU ETS) has been an effective mechanism for reducing greenhouse gas emissions and helping the EU meet its commitments under the Kyoto Protocol. At an event entitled “Towards a Low-Carbon Economy” on Tuesday sponsored by the Heinrich Böll Foundation, EU ETS experts, former MIT economist Denny Ellerman, and Felix Matthes of the Öko Institut, described the successes and lessons learned from the European experience and urged the United States to adopt a similar cap-and-trade program.

The EU ETS covers more than 12,000 major stationary emitters including power plants and industrial facilities in all 27 Member States, accounting for about 45 percent of total European carbon dioxide (CO2) emissions. It began operating in 2005, starting with a pilot phase that ran through 2007. The system came under early fire for initial struggles, most significantly data uncertainties regarding emission levels which led to the over-allocation of emission permits and a carbon price collapse in April 2006. However, the 2005–07 pilot phase was just that—an opportunity to test the waters of the new carbon market and work out any major problems that might arise.

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cap and trade, Climate Change, Europe, green economy

With health care legislation out of the way, the U.S. Senate will finally be able to return its attention to climate and energy issues. Last fall, the Clean Energy Jobs and Power Act (CEJAP), the Senate’s version of the comprehensive climate and energy bill that the House of Representatives passed last June, got mired in a bitter partisan stand-off. Since then, policymakers and onlookers have been working to define a compromise that can achieve the magical 60 votes needed to pass climate legislation in the Senate.

Last week, Senators John Kerry (D-MA), Lindsey Graham (R-SC), and Joe Lieberman (I-CT), the architects of a new effort to create a bipartisan climate and energy bill, began circulating an eight-page draft outline in closed meetings with industry and environmental NGO representatives. The draft reportedly includes eight major headings: Refining, America’s Farmers, Consumer Refunds, Clean Energy Innovation, Coal, Natural Gas, Nuclear, and Energy Independence. So far, additional details about these headings have not been elaborated, although the general shape of the compromise is emerging and includes the following:

  • Cap-and-trade system for utilities starting in 2012 and industry starting in 2016
  • Carbon tax on the transportation sector
  • Emissions targets of 17 percent below 2005 levels by 2020 for capped sectors
  • Universal rebate checks from 50 percent of allocation auctions
  • Hard price collar confining allowances between $10 and $30 per ton of carbon dioxide
  • Strategic reserve of 4 billion allowances to be used to control allowance price volatility
  • Support for offshore drilling
  • Renewable energy or clean energy standard, which could include new nuclear, coal with carbon capture and storage (CCS), and natural gas that displaces coal clunkers

Senate liberals and environmental groups have agreed to make concessions on controversial issues like offshore drilling in order to obtain Republican support for a comprehensive climate and energy bill. But some have begun wondering how much compromise is too much. Last week, Senator Bernie Sanders (I-VT) noted, “We don’t have 60 votes to pass a strong global warming bill…. The choice I suspect Senator Kerry is wrestling with is whether it’s better to do something or nothing.”

The bill’s rumored sympathy for hydraulic fracturing, a controversial energy extraction technique that the federal government currently does not regulate, could be one compromise too many. This week, E&E News reported that BP and two other major oil and gas companies have submitted a “discussion draft” proposing “Sense of the Senate” language on the practice, which involves injecting millions of gallons of water, sand, and chemicals into shale formations to extract natural gas.

The draft language would support the legislative status quo, wherein hydraulic fracturing is exempt from regulation under the Safe Drinking Water Act and several other laws. Currently, regulation is left to individual states. The proposed language would affirm that, “States with existing oil and gas regulatory programs have the authority to and are best situated to continue regulating hydraulic fracturing processes and procedures.” It would also recommend that no further disclosure of the chemicals used in hydraulic fracturing is necessary, a requirement that gas companies have argued would endanger their trade secrets. Although “Sense of the Senate” language is non-binding, its inclusion would further alienate environmental groups and demonstrate how fickle the “sense” of the Senate truly is.

Rather than bowing to special interests, a comprehensive climate and energy bill should instead be an honest effort to reduce greenhouse gas emissions, invest in the low-carbon economy, and improve America’s energy security. Natural gas producers should recognize the Kerry-Graham-Lieberman bill as an opportunity to benefit from the environmental advantages that gas offers over coal and oil. Shoe-horning superfluous language into such a bill would exacerbate environmentalists’ complaints about industry’s lack of transparency and oversight. This would not only be petty, but it would endanger potentially fruitful collaboration between the natural gas industry and the environmental community.    

Meanwhile, alternatives to the Kerry-Graham-Lieberman bill continue to illustrate the range of possible Senate outcomes. In December, Senators Maria Cantwell (D-WA) and Susan Collins (R-ME) proposed a cap-and-dividend bill, the CLEAR Act, which would auction all allowances under a carbon cap and recycle the auction revenues back to households. Senators Byron Dorgan (D-ND) and Jeff Bingaman (D-NM) have been promoting their energy-only bill, the American Clean Energy Leadership Act, which abandons cap-and-trade altogether in favor of provisions that support renewable energy and offshore drilling. Meanwhile, in the absence of legislation curbing greenhouse gases, many Republican Senators are concerned that the U.S. Environmental Protection Agency will take on emissions reductions itself. Senator Lisa Murkowski (R-AK) has been leading efforts to prevent such an eventuality.

The Senate has a lot of soul-searching to do between now and mid-term elections in November. The window of opportunity on real climate and energy legislation is small, and the zone of potential agreement seems to be even smaller. The Senate has a chance to pass historic legislation, enabling the United States to signal to the world that the country is serious about climate change and the environment. It must be careful not to lose the public trust on the way.

cap and trade, Climate Change, emissions reductions, natural gas

Tropical storms continue to barrage the Philippines as they have done for nearly a month. Now it’s Typhoon Lupit on the way, headed yet again for the northern islands of the Philippines. The International Rice Research Institute, based in Manila, has called the flooding currently underway in the country “once-in-a-lifetime.” While this is typically a rainy time for the islands, the intensity of this year’s storms is rarely seen.

Typhoon Lupit headed for Northern Philippines

Typhoon Lupit headed for Northern Philippines

Is this climate change rearing its head in the form of more intense storms, as predicted? IRRI admits that it may be unscientific to draw a direct correlation between carbon emissions and these storms right off the bat. However, the Institute has used the events, alongside India’s delayed monsoon season, and long-lasting drought conditions in Australia to draw attention to the affects all these weather events have had on rice – an extremely negative effect in all cases. Rice is by far one of the world’s most important subsistence crops, making up nearly 20% of your average human’s caloric intake (as high as 70% in Cambodia and Bangladesh). The ruined rice crops of 2009 are proving more than ever why climate insecurity equals food insecurity–which leads to political instability.

The Congressional Budget Office skirted over this fact last week when it testified to the Senate on the predicted effects of climate change on the United States’ GDP.  CBO Director Doug Elmendorf cited the fact that “most of the [US] economy involves activities that are not likely to be directly affected by changes in climate” as reason to be wary of passing climate legislation. Since the U.S. agriculture sector only makes up 3% of our GDP, effects on this industry receive little weight and the effects of climate change on other nations’ security receives even less. The costs of food insecurity and global instability simply do not make it into such hard and fast GDP calculations and contribute to the slow progress being made on a U.S. climate bill. The same could be said for a global climate deal as well.  Food security, both domestic and global, needs to be in the minds of our legislators and on the agenda in Copenhagen.

cap and trade, Climate Change, Copenhagen, food security, GDP, natural disasters, US Climate Bill

If the world continues its emitting ways unchanged, we could face upward of 1,000 parts per million of carbon dioxide equivalent (CO2e) concentration in the atmosphere, or a warming of 6 degrees Celsius (10.8 degrees Fahrenheit) compared to pre-industrial periods. This is a business-as-usual case that in all likelihood would result in a very uncomfortable future for the planet and its inhabitants.

Alternatively, the world could step up and address this challenge head-on in Copenhagen. In a newly released excerpt for policymakers from the World Energy Outlook 2009, the International Energy Agency (IEA) reminds us that the energy sector is pivotal in reducing emissions and can smooth the road toward a Copenhagen agreement.

G8 countries have agreed on a maximum allowable warming of 2 degrees Celsius above pre-industrial levels (the world’s temperature has already increased by 0.6 degrees Celsius since the 1850s). To make this happen, science demands limiting carbon dioxide to a maximum of 450 ppm CO2e, or 350 ppm of CO2 alone. It is this alternative path that the IEA models in comparison to the business-as-usual case outlined above.

Efficiency is the heavyweight in this analysis, contributing 57 percent of the world’s total energy-related emissions abatements by 2030. The vast majority of these emissions abatements from efficiency would take the form of improvements at the consumer end, such as more efficient appliances in homes and vehicles on the street. Of course, there is still enormous room for efficiency progress at power plants as well.

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cap and trade, emissions reductions, energy efficiency, renewable energy