Global Economics

China Needs a Green Agenda


Developing nations as well as emerging ones must cooperate if cutting emissions and expanding economies are to go hand in hand

China wants to expand its economy. The world wants to reduce greenhouse gas emissions. The two are not necessarily mutually exclusive but require more valiant commitment from everybody - particularly developed nations.

A growing global trade in Carbon Emission Reduction credits (CERs) - issued by the UN under the Clean Development Mechanism of the Kyoto Protocol - is part of this push. Developed countries can buy credits for their own emission targets by investing in green energy projects in developing countries.

In February, the UN and China said they were discussing setting up a carbon trading exchange in Beijing. If it happens, then China - already the source of more than two-thirds of CERs - would be at the heart of a trade worth US$3 billion in the first nine months of 2006.

It makes sense. According to the International Energy Agency, China will pass the US to become the world's biggest greenhouse gas emitter before the end of the decade.

However, as a developing nation, China is exempt from the Kyoto Protocol's emission reduction requirements. When the topic arose in February, Beijing was quick to say that developed nations should clean up their own acts before accusing their poorer cousins.

It is not surprising that emerging economies resist the push to curb emissions. Cleaner energy is more expensive energy and China produces about three-quarters of its electricity from dirty coal. If the choice is between burning coal or nothing at all, coal will always win.

Meanwhile, the market for carbon credits is heating up. The number of "carbon traders" registered in London - the carbon trading capital of the world - has grown 60% annually since 2002. The point of the credits is to bring emerging economies into a level playing field because any push to cut greenhouse gasses is meaningless without China, India and Brazil.

However, just as emerging nations are an indispensable part of any emission reduction scheme, efforts are also meaningless without the participation of more developed ones, which have shown little leadership to date.

The US and Australia have not even signed up to Kyoto, while Canada and Western Europe have not managed to cut reductions in the last few years, despite Kyoto's calling for emission reductions of 5 million metric tons by 2012.

In the scheme of things, developing nations seem more willing to take a hit to ensure more sustainable development than the purported leaders of the world.


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