Two cents (0.136 RMB) on China + some analysis

While negotiations seemed deadlocked earlier today, measures taken this afternoon may have revived hopes for an agreement in Copenhagen.

Two of the major stumbling blocks to reaching an agreement at COP15 have been the positions of the United States and China. The general feeling from both developing countries and our European friends (see here and here) is that the U.S. offer to reduce emissions is underwhelming. (The U.S. proposes reducing its GHG emissions 17% below 2005 levels by 2020, equivalent to reducing 3-4% below 1990 levels). American suggestions of $10 billion in funding to developing countries through 2012 have also been criticized as inadequate.

Conversely, the refusal of the Chinese to accept MRV requirements -- measuring, reporting, and verification -- claiming that it violates national sovereignty, is a major sticking point with the Americans. It’s been cleverly couched by the Chinese as, We aren't taking [getting?] your funding. And since you aren’t paying for any of these projects, no MRV. Or as Wen Jiabao said on Thursday:

"For developing countries, only those mitigation actions supported internationally will be subject to the MRV." Any "voluntary mitigation actions [that China takes on by itself] should not be subject to international MRV.”

China has indicated that its 2020 carbon intensity goal counts as a voluntary action at the international level, though it will be legally required at the domestic level. These points of contention have held up negotiations for several days, with a pretty pessimistic outlook this morning.

However, by late this afternoon, things just might have shifted. At an event in the evening put on by the BlueGreen Alliance (a uniting of workers and environmental groups to further the agenda for "good jobs, clean environment, green economy"), I ran into Barbara Finamore, the head of NRDC’s China program, who has decades of experience working in the country and who has contacts well-positioned to know how the Chinese delegation operates at international negotiations. (See her quote in the New York Times on December 15. By the way, for transparency's sake, I should note she was my boss when I worked in NRDC's Beijing office in 2007.)

Barbara felt that Secretary of State Clinton’s announcement -- that the U.S. will help raise funding of $100 billion for developing countries to deal with climate change -- could break the logjam. Since the U.S. has made a move, it is now up to China, which has been asking for more concrete steps from the Americans all along, to reciprocate.

According to Clinton (transcript of speech and related article):

"the United States is prepared to work with other countries toward a goal of jointly mobilizing 100 billion dollars a year by 2020 to address the climate change needs” of developing nations.

However, this must be done "in the context of a strong accord in which all major economies stand behind meaningful mitigation actions and provide full transparency as to their implementation.''

In other words, this effort to mobilize funding ("from a wide variety of sources, public and private, bilateral and multilateral, including alternative sources of finance") will commence only if (1) a deal is reached, and (2) the deal must include measures that ensure "transparency" and the ability to conduct MRV. The funding will have a "significant focus on forestry and adaptation" and is "particularly ... for the poorest and most vulnerable" countries.

Several members of the G77 have already sent messages to the Chinese indicating that they are amenable to this plan because they truly need and want the funding, and have asked the Chinese to make a deal possible. (This group includes the Maldives, Ethiopia and Bangladesh. See here.) This is not to say all G77 countries are convinced. Lumumba di-Aping of Sudan, who acts as chief negotiator of the G77, said, "This is a good signal, but it's still insufficient. We need more money." (Quoted here.)

On the Chinese side, some leaders are worried that that MRV could mean intrusive actions, such as factory-level inspections, with foreign experts entering individual facilities to ascertain whether China is living up to its carbon intensity goals. They feel this is a major affront to sovereignty. Beijing says that it will make its efforts transparent, and compliant with national laws and regulations, and this should be good enough. Or as He Yafei, vice-foreign minister, put it, China’s laws would guarantee compliance. (Mentioned in NYTimes article from December 15. Ugh, don't get me started on how this seems preposterous.)

Finamore and others have been attempting to convince parties on both sides that intrusive inspections of this sort are not what MRV is about, and such drastic measures are, in fact, not needed to verify that the Chinese are meeting their commitments. For one, China publishes data about its electricity generation, fuel use and energy use every year. The data are publicly available, and other international institutions (including multilateral lending institutions like the Asian Development Bank) make full use of it.

If the Chinese can continue working toward transparency and publicizing their actions, there is enough information in these and other reports to track progress in emissions reductions. The Chinese can feel that respect for their sovereignty is upheld, while the Americans (the Senate in particular) can be confident that the Chinese are not only taking on some of the global burden, but that the international community can verify progress.

Some of you will ask, How do we know China will actually publish accurate statistics? What if officials fudge the numbers?

For example, in the last Five-year Plan that runs through 2010, there was an energy intensity target, which would work much the same way this new carbon intensity target is supposed to work. Provincial leaders are evaluated in part based on whether they meet this target or not. Don’t they have an incentive to lie?

While there are many examples of this problem in China, and it remains an ongoing concern, there are also several factors that can mitigate the problem, at least when it comes to energy and GHG emissions reporting:

1. The Chinese government needs these statistics, too. As Lily Cheng pointed out, Beijing wants accurate data to work with.

2. A revision to the Statistics Law (more details here) was passed this year and comes into effect in January 2010. It imposes severe penalties (potentially even jail time) for leaders that fake or alter statistics. This should be a big deterrent.

3. Increasing energy efficiency and reducing emissions are things many local leaders want to do voluntarily. According to Finamore, mayors and other officials understand that these measures make enterprises more competitive and that it saves them money.

So the incentives line up in a way that should make energy statistics more believable and accurate. China, of course, can continue to make its domestic situation more transparent and potentially allow more independent auditing. But the measures wouldn’t have to be as intrusive as people think.

Neither the U.S. or China is likely to make a move that makes it look like it is capitulating on key matters -- but the gap between the two sides has begun to close, and thus, Finamore says “the door is open” for some form of an agreement.

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Additional points:

1. This situation could potentially further fracture the unity of the G77 + China grouping. As noted above, Bangladesh, the Maldives and Ethiopia, among others, have contacted the Chinese to express their support for an agreement in the wake of this announcement. Furthermore, in a televised debate, the president of the Maldives, Mohamed Nasheed, even criticized the idea being floated by some of the G77 and China that "no deal is better than making a bad deal." According to The Australian, Nasheed said that "we are in the G77 and we want an agreement from Copenhagen. We do not agree with that viewpoint at all [that failing to make a deal would be better than a bad deal]. We have to have an agreement."

On the other side, in addition to Sudan/G77 head Lumumba di-Aping's intonation for "more money," Brazil has also raised concerns about "intrusive verification," while Ecuador's foreign minister noted that “What we really need are firm mechanisms to reduce emissions from industrialized countries. Financial mechanisms are useful, but not central, not a solution.” (Quoted in the New York Times).

This kind of split is probably not something China wants to preside over. It also wants to avoid the even worse position of being seen as the cause of failure at COP15. This all adds up to more impetus for the Chinese to respond. Since Chinese premier Wen Jiabao arrived on Wednesday, he has met with Brazil, Bangladesh, Trinidad, Ethiopia and Sudan. The U.S. in turn, has been meeting with India (among other G77 members) and may be reaching an agreement. Jairam Ramesh, India's minister of the environment and forestry says that the two countries agree on about "75% of things", and the last 25% is on ... you guessed it, MRV.

2. See this piece about the varying interpretations of when MRV can/should be applied to projects that countries undertake. US says all actions to reduce emissions by developing countries should be subject to MRV. Many developing nations say that only projects that get outside funding should have MRV requirements. This conflict dates back to the Bali Action Plan, and much of the debate centers around the placement of a comma in the text (!), which took delegates more than two hours to discuss. (!!!)

3. If worse comes to worse, another NRDC expert said that a bilateral statement by the US and China to jointly combat climate change might be the next best option. Let's hope it doesn't come to that.

4. Associated Press has a good article on the implications of the U.S. offer on aid.

5. Check out Barbara Finamore's blog at NRDC's website with commentary on Copenhagen, as well as China's environment and its energy situation.