The United States is not the only country that made an emissions reduction pledge in Cancun without an implementation plan already in place. China pledged to reduce its greenhouse gas emissions intensity (emissions per unit of gross domestic product) 40-45% by 2020. Although this pledge arguably falls within China’s business-as-usual emissions pathway, the Chinese government knows that it will eventually be asked to make more ambitious targets follow and has thus begun to consider longer-term options to more aggressively bend the emissions curve.
Two alternatives reportedly under consideration are a tax on carbon or a cap-and-trade system. There are several pilot environmental trading programs already underway in China, with new ones planned or likely to emerge in key cities, provinces or regions. While these developments are promising, it is too early to tell which type of system will gain traction or could be most effective at the national level.
Both carbon taxes and cap and trade are facing similar problems in gaining traction in China. Like the United States, the first and perhaps most significant obstacle is political will. Instead of being played out in town halls and talk radio, however, China’s debate is mostly within the government. Some believe that the costs of these programs are too high for China’s rapidly growing economy to bear. Others see them as an opportunity to improve the efficiency of China’s economy and boost energy security or combat the economic threat of climate change.
Political sensitivities surrounding the U.S.-China dynamic in international climate negotiations have also played into the timing of public statements about emissions reduction plans. Furthermore, like in the United States, there are regional differences in economic development and energy mixes that will affect the distributional impacts of both cap and trade and carbon taxes and must be resolved before a system can be successfully designed.
China is also facing a variety of technical and institutional hurdles to the implementation of cap and trade or carbon taxes, some of which are similar and others are different from those in the United States. One important factor is greater sensitivity around monitoring and public disclosure of emissions information, regardless of whether that information can easily be collected. This is also related to ongoing developments in international climate negotiations, where systems for domestic and international measurement, reporting and verification (MRV) of emissions and emissions reduction actions have been highly contentious.
Overall, it is important to remember that implementing a national carbon tax or cap-and-trade system is not something that will happen overnight in China, like building a high-speed rail line. While there is often an image in the United States of the Chinese state as able to make things happen quickly, there are a variety of domestic and international factors that will complicate and slow down the policy making process. And while the opportunity exists for a rogue state or region - ala California or Regional Greenhouse Gas Initiative (RGGI) - to jump ahead, this could be more difficult than it was in the United States. While a Chinese carbon tax or cap-and-trade system appears to be on the horizon, it is premature to say that it has fully arrived.
