With Billions at Stake, China—Yes, China—Calls for a Better Kyoto Protocol

As Australia's government insists today that any commitment it would make to the Kyoto protocol would mean nothing without the participation of major carbon culprits like China, Beijing made its own noise about the emissions framework last week, calling for a new and improved agreement after the current Kyoto end date of 2012.

China, like India, is not a signer of the pact, since it claims that emissions restrictions would unfairly limit its development. "You cannot tell people who are struggling to earn enough to eat that they need to reduce their emissions," said Lu Xuedu, deputy director at China's Office of Global Environmental Affairs, at the first Carbon Expo Asia, a trade fair held in Beijing last week. But since hundreds of millions of dollars in investments in China's renewable energy industry depend upon Kyoto's Clean Development Mechanism (CDM)—which allows big-polluting developed countries to invest in cheaper emissions cuts in developing countries—Beijing officials and industry leaders want assurances that Kyoto (or something like it) will continue.

Just how many greenbacks are at stake for developing countries? Three billion next year, writes Karan Capoor of the World Bank. Meanwhile, Capoor estimates that the volume of the carbon trading market is nearly $22 billion, which "is four times the GDP of Mongolia and more than twice the GDP of Laos, and the year is not even over." While hordes of businessmen sought a piece of the lucrative emissions reduction pie at Asia's first carbon market trade fair last weekend, Chinese officials sounded a call for an even stricter version of Kyoto by 2008:


"We hope that by 2008, or at the latest 2009, we can reach an agreement, but it is not something that the Chinese government can resolve alone," said Gao Guangsheng, director general of the office of the National Coordination Committee for Climate Change.

Su Wei, Deputy Director of the Department of Treaty and Law at the Ministry of Foreign Affairs, said that China wants targets for the next Kyoto period that are at least as tough, if not stricter, than current levels, which are a 5.2 percent reduction in greenhouse gas emissions from 1990 levels over the 2008-2012 period. Su also asked for a long commitment period. "It should not be shorter than five years...and it might be suitable for it to last 8 to 10 years," he told conference attendees.

Of course, it's easy to call for further emissions caps if you aren't obligated to abide by them. But a system with stronger caps—and a better emissions trading system—is one of the best ways to reduce the emissions of developed and developing countries alike. Indeed, China has an express interest in improving its own environment, considering its massive pollution problems and rapidly dwindling resources of petroleum, natural gas and coal, not to mention arable land and water. Initiatives like the renewable energy law that went into effect early this year have signaled that the Chinese government is turning a new leaf in its attempts at sustainable development. But it will need the continuing support of CDM deals, like this recent landmark $1 billion agreement.

Last year, China sold 60 percent of the developing world's emissions credits through the program. And data show that renewable energy and energy efficiency projects—as opposed to carbon capture projects—are gaining market share, now accounting for 26 per cent of total project-based volumes, more than doubling from 11 per cent in 2005.

Meanwhile, a day after the release of the sobering Stern report, the Guardian reports that the UK is also pushing for a stricter emissions-cap framework by 2008, which might also bring countries like China into the fold.

Tony Blair will lobby the German chancellor, Angela Merkel, to put the need for international cooperation on climate change at the heart of Germany's G8 presidency when it begins in January.

In a clear sign that the issue unites No 10 and the Treasury, Gordon Brown will also be pushing for a radical rethink of the United Nations and the World Bank which, he believes, are not equipped to oversee a carbon trading scheme, including the principles on which carbon emission allocations would be handed out to individual countries.

Downing Street sources said the prime minister wanted a framework that included a target for stabilising CO2 emissions, a global scheme to cap and trade carbon emissions, a global investment fund for new green technologies and action to stop deforestation. The agreement would include three countries that were not part of Kyoto - the United States, China and India.

Until then, Kyoto member countries are set to discuss the 2012 Kyoto deadline at UN climate talks in Nairobi from Nov. 6-17. But there are worries that delegates may struggle to even set a deadline for agreeing to a new framework. While the carbon market continues to grow apace, uncertainty about a new climate plan is fueling worries about the market's future. Says Capoor: "It appears the market is looking at this 2012 deadline and bringing on fewer and fewer" projects.

But could countries like China—and global interest in the carbon trading market—lead to a new, and better framework? And what might that look like?

: : Reuters via : : Planet Ark. The World Bank's recent report, "State and Trends of the Carbon Market," can be found here.

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