This guest post is by Tom Hilde, who teaches at the University of Maryland School of Public Policy, specializing in ethics and political philosophy, international environmental policy and institutions, and sustainable development.

The Natural Resources Defense Council this morning posted a perhaps obvious two-point recommendation for agreement between the US and China, and reassurance for the world. Part of the deadlock between the two countries, despite reportedly constant head-to-head negotiations at COP15, remains transparency in measuring, reporting, and verifying (MRV) emissions reductions in China and the US financial commitment to developing countries.

China admitted publicly a couple of days ago that it is unlikely to receive funds from the US. That question has been a confused sticking point leading up to COP15, one regarding which United States Special Envoy for Climate Change Todd Stern said last week, “I don’t envision public funds — certainly not from the United States — going to China…” to which Chinese Vice Foreign Minister He Yafei responded, “I think [Stern] lacks common sense where he made such a comment vis-a-vis funds for China. Either lack of common sense or extremely irresponsible.” That issue is off the table.

Reporting and financing remain tendentious issues. David Doniger at NRDC, as do many others, maintains that the US must take the leadership role in financing assistance to the most vulnerable to the effects of climate change, while China should take the lead on transparency in reporting and emissions reductions performance. Despite domestic resistance among some quarters in both countries, both have much to gain rather than lose. For the U.S., of course, acting on historical responsibilities would vastly improve the country’s tattered international standing. This comes with its own benefits in terms of business, jobs, and security.

For China, one obstacle to its move onto the world leadership stage has been limited international transparency. The country has significant good faith trust from Africa and elsewhere, but the large wealthy nations — many significantly indebted to China — remain wary of Chinese claims to improved mitigation measures and enforcement and fair trade issues in general. In the COP15 context, the U.S. has pressed China (and India) to agree to independent verification measures of their emissions reductions. On MRV, the Chinese have put something on the table, “Audit, Supervise and Assess” – used elsewhere in China on financial issues – for unsupported actions (and largely agree to full MRV for supported actions). Doniger doesn’t explore the contours of what ASA means or how it differs from MRV. Doniger concludes, rather, that:

[S]ome may fear that greater openness will make China more vulnerable to trade measures proposed in U.S. climate legislation.  Actually, it would have the opposite effect.  The better China demonstrates that it is meeting its targets, the less its exposure, because the U.S. bills provide that trade measures will not apply to any country that is doing its part in the fight against global warming.

Yes. But this is a common view. Doniger and many others, such as the U.S. State Department, say that finance and MRV are the keys to “unlocking the stalemate.” But aren’t these precisely the causes of the bottleneck?

A Third Way

Not mentioned in the NRDC piece nor apparently elsewhere at COP15 in the context of climate change negotiations is the elephant in the room (among others – it’s a zoo in there), China’s currency value management. An agreement on this especially between the U.S. and China could expedite a larger climate agreement. The claim advanced by some U.S. economists and critics (and the Obama administration) is that by intentionally undervaluing China’s RMB (renminbi) or yuan, the central Chinese government maintains an unfair trade advantage for China over the U.S. and other competitors in the global market. The government has been concerned this year in particular that any revaluation of the RMB could move the country into a severe economic downturn and has thus recently insisted again on the status quo during talks with the EU. China has repeatedly cautioned the U.S. about statements on the issue.

President Barack Obama pushed the issue of currency control during his visit to China last month. Senate Majority Leader Harry Reid raised the issue again last Friday. The U.S. Trade Representative is apparently using strategic timing and releasing its report this week on China’s performance in meeting WTO obligations. The central concern of many is not merely that currency manipulation gives an advantage for Chinese exports, but that it maintains low labor costs in China and thus draws jobs out of North America and Europe. One of the most urgent problems for the United States is, of course, unemployment, a problem that looks to continue to grow over the next few years even with an economic upswing.

The time may be ripe, and may even be in the works, for cutting a deal on Chinese currency controls in the name of a robust climate agreement. It would not be popular, and very possibly imprudent, to relax demands on China regarding climate change mitigation efforts, but one possibility for healing a deep rift and opening to a broader agreement on climate change could very well be to acknowledge other complex issues which shape the general U.S.-China relationship, such as the issue of currency revaluation.

Jobs are intrinsic to the climate change debate for both countries. U.S. polls show significant American support for substantive climate change regulation but this support is heavily qualified by deep worry about jobs. That can’t be ignored. The U.S. has a serious long-term unemployment problem and existing public and congressional support for climate change policy may well be contingent upon convincingly better job prospects. Notwithstanding President Obama’s recent statements on green job growth, the U.S. public seems for the time-being to take green jobs promises as a matter of optimistic faith.

Apart from concern over losing export advantage by revaluating the RMB, the Chinese government needs to maintain a high employment rate in the face of a rapidly rising domestic income gap. Political stability in China depends on the Party keeping everyone employed. That employment, of course, is tied to China’s rapid economic growth. Revaluation, and the concomitant higher price on Chinese labor, could result in more jobs remaining or being created in the U.S. and Europe. If revaluation could be bargained off with relaxation of environmental demands on China – say, accepting its carbon intensity approach (but on a graduated basis towards eventual actual emissions reductions) – there could be much broader and more sustainable public support in both countries for a climate deal. In the end, this support is vital.

I know this sounds like an absolutely backwards proposal in environmental terms. But if the result of the current negotiations in Copenhagen is a climate agreement undermined by deep-seated economic disagreements, earning little support from the U.S. Congress and the Communist Party respectively, then the likelihood is endless rounds of further negotiations. A more politically sustainable agreement that comes with a promise for future job growth that nevertheless undercuts short-term gains in financing, emissions reductions, or transparency might be offset by the gains in this longer view. Moreover, this agreement would take place bilaterally (negotiators like that) as a side dish to the climate agreement.

The point is that, in environmental and human terms, there is no alternative to a robust and sustainable climate agreement. That doesn’t look likely right now from COP15 for political and economic reasons. Maybe it is possible – at least in the Chinese and American cases – through a frank discussion of job growth and the revaluation of the RMB.

JR:  As always, guest blog posts do not necessarily represent my views.  While China’s current carbon intensity goal is, I think, significantly off of their business as usual path, it is not an environmentally strong goal — indeed, as I’ve said,  it’s comparable to our  inadequate 17% reduction target by 2020.  China  will need to peak in the 2020 to 2025 timeframe, and that can’t be bargained away for currency revaluation.


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