China Is the Climate-Change Battleground

(Bloomberg Opinion) -- Climate change is a menace. The Intergovernmental Panel on Climate Change just issued a report showing how serious the situation is. If warming continues on its current trajectory, the report warns, then by the end of this century average temperatures will be 4 degrees Celsius (7.2 degrees Fahrenheit) higher than at the start of the Industrial Revolution.

That may not sound like a big rise, but in fact the results will be catastrophic. Already, the world has warmed by 1 degree Celsius since the Industrial Revolution started, and the effects are starting to be apparent -- the ice in the Arctic is vanishing, devastating hurricanes like Michael and Maria are becoming more common, and wildfires are gobbling up homes and businesses in California. An additional 3 degrees rise would be far more dire -- large parts of major coastal cities would be flooded and become uninhabitable, global food production would be in danger, storms and heat waves would reach epic proportions, and flooding and starvation would create waves of desperate refugees clamoring for entry to the U.S. and Europe. Even a rise of only 1 more degree -- which now seems inevitable -- will carry serious consequences.

The effort required to halt climate change will be intense -- essentially, the equivalent of a mobilization for war. The IPCC estimates that in order to limit global warming to the relatively safe level of 1.5 degrees Celsius, the world would need to eliminate coal power and invest $2.4 trillion a year in green energy technologies. That's is about 3 percent of global economic output, or 10 percent of global capital formation. It's doable, but daunting.

There's one huge problem with this plan, however -- the bulk of this massive, unprecedented investment will have to be done not in wealthy nations, but in developing countries. And one developing country looms much larger than the rest. China now releases almost as much carbon dioxide as the U. S. and Europe combined:

The true imbalance is much larger than it appears on this graph. Developed countries grow slowly -- perhaps around 2 percent a year. China, because it's still catching up, grows much faster, at around 6.5 percent. That rapid growth is why China's emissions have soared since 2007, even as the U.S. and Europe have made modest progress. As China continues to catch up, its already enormous share of global emissions will only grow, unless it takes dramatic steps to decarbonize its economy. To its credit, China has made moves to limit coal use. But the country's emissions continue to rise.

This leads to a painful but inescapable truth -- no matter how much they spend, no matter how dramatically they change their societies, the U.S. and Europe won't be able to put much of a dent in global warming on their own. Yes, the U.S. should ban coal power, tax carbon heavily and spend lots of money on building green energy infrastructure. But without a huge change in China, none of that will matter -- the battle against climate change will be lost.

That truth will naturally sit uneasily with Americans, who as a group have grown accustomed to being the driver and arbiter of world events. Being dependent on the actions of foreigners to save U.S. cities, crops and homes is disconcerting and unfamiliar. Many -- including pundits and leaders who should know better -- will be tempted to escape into fantasy, declaring that climate science is overhyped, or that a halt in rich-country growth will be enough to solve the problem. Others will desperately cling to the hope that by setting a good example, the U.S. can cause China to change by moral force alone -- ignoring that Europe set a good example by embracing the Kyoto Protocols and the Paris Agreement, and China's emissions barely paused.

But retreating into the illusion of control will do nothing to avert the very real threat of environmental doom. Instead, Americans should think about ways that they can encourage China to reduce its carbon emissions.

One idea is to tax products from China based on their carbon content. Unfortunately, this is likely to have at best a modest effect. There is a popular misconception that U.S. emissions have decreased only because they've been outsourced to China via offshoring of polluting industries. But when emissions are calculated based on how much countries consume, the basic situation between the two nations looks much the same:

A better idea is to actively encourage China to give up coal. China, due to coal use and its manufacturing-heavy economy, uses more carbon to produce each dollar of gross domestic product than most other countries:

There is thus lots of scope for improvement. The U.S. should consider both carrots and sticks to make that happen. ARPA-E, the U.S.'s energy-technology research agency, should be dramatically scaled up. Either all technologies produced by ARPA-E should be given to China for free, or the agency turned into a joint venture with China, ensuring that Chinese companies are able to replace coal with solar and wind as quickly as possible. In many cases, it's bad when China copies American technology -- in this case, it's exactly what the planet needs. Of course, these technologies should also be given to India, Africa and other developing countries seeking to lift their people out of poverty. This technology transfer could be accompanied by direct payments to China to help it replace its coal plants with green alternatives.

Another potential approach is conditional tariffs on Chinese products. Instead of only taxing the carbon content of Chinese-made goods, the U.S. could threaten to put tariffs on all Chinese products unless it agrees to leave more of its coal permanently in the ground. Banning exports of coal from the U.S., and heavily subsidizing exports of solar and wind technology, would also help make coal less attractive around the world. Tariffs could also be placed on coal exporters like Australia, Indonesia and Russia, encouraging them to keep their own coal safely underground.

Even with measures like this, the degree to which the U.S. and Europe can force China into going green is limited. To a large extent, the fate of the planet is now out of the developed world's hands. But that isn't an excuse for doing nothing.

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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