Counter-strategy for low-carbon era

By Lin Boqiang (China Daily)
Updated: 2010-06-07 07:58
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What kind of impact will the coming low-carbon era have on future global economic patterns is a question worth considering.

Trade and investment form the bedrock of the current global economy in which countries reap profits on the strength of their comparative advantages.

This economic globalization means developing countries pay a high price in terms of environmental degradation in order to protect the environment in developed economies.

Varying development levels have resulted in uneven environmental protection criteria across countries.

International trade and direct investment mean low-income countries manufacture pollution-intensive products, which are chiefly consumed in high-income countries.

This is the existing picture of trade relations between emerging economies such as China and India and the developed world.

However, transferring emissions is feasible only if its impact can be confined locally.

That is not possible with carbon dioxide emissions. No matter which country it emanates from, the result is climate change across the world.

Due to differences in productivity and energy efficiency, the level of greenhouse gases emitted during the manufacture of the same product differs from country to country.

Developing countries emit more carbon for every unit of product manufactured than developed nations, simply because of outdated production technology and low energy efficiency.

Hence, the current structural imbalance in global production and consumption is certain to increase carbon emissions.

So, if the shared goal is to reduce carbon emissions, then low-carbon globalization means all countries are in the same boat.

Low-carbon globalization is expected to influence future trade globalization as well as global industrial patterns.

Therefore, developed countries must show more concern about the industrial structure and energy efficiency of developing countries.

Low-carbon globalization is based on the fact that carbon dioxide emissions have global impact and need to be addressed by all.

The low-carbon approach closely connects global economic development and its transition of modes.

If developed countries care little about raising energy efficiency in developing countries, carbon emissions will not reduce significantly.

In this regard, what measures should developed countries take in future?

First, by providing technical and financial assistance, they can help developing countries improve production technology and energy efficiency, thereby reducing the unequal levels of transferred emissions.

Second, they can encourage carbon emission reduction in developing countries through the process of carbon trading.

There are two different but related carbon emission trading systems under the current Kyoto framework.

One is a quota-based trading system that makes carbon emissions tradable by assigning the total emission amount.

The other is a project-based market in which nations that emit less than their quotas are able to sell assigned units to nations that exceed their quotas. These are the Clean Development Mechanism and Joint Implementation strategies.

The international cap and trade system is still in its infancy, and relevant rules are expected to be formulated and perfected in future international climate negotiations.

Since a global carbon trading market is still under implementation, there are just two regional markets now.

One is the European Union market (European Union Emission Trading Scheme) under the Kyoto commitment and the other is the North America market (Chicago Climate Exchange) under a voluntary emission reduction mechanism.

If the right of per capita emissions is granted to developing countries, developed nations can be called on to shoulder more responsibility and support emission reduction efforts in developing countries through carbon trading.

Third, developed countries force developing countries to reduce emissions through a carbon tax, which is highly unfavorable to the latter.

Carbon tax is an environmental tax to reduce carbon emissions and is levied on the carbon content of fuels.

Supporters of the carbon tax argue that the levy can promote the use of alternative energy sources and that revenue from such a tax could be used to finance environmental protection projects or subsidize energy-saving and emission reduction technologies.

Since it is different from the carbon trading system, levying a carbon tax can result in less management cost, and its implementation process is more convenient, impartial, and effect more predictable, they argue.

People who oppose the tax, however, believe that it will reduce the competitiveness of high energy-consuming industries in developing countries and is thus detrimental to their industrialization process.

They also say the carbon tax might turn into a new tool for developed countries to engage in trade protectionism, especially when such a levy is on domestic enterprises, as some Western nations including the US have done.

So, the key question is, how will developing countries face down the tactics of the West in an era of low-carbon globalization.

The author is professor with the China Energy and Economics Research Center, Xiamen University.

(China Daily 06/07/2010 page8)