From Copenhagen to Paris

The Coming Climate G-2: United States and India

By Richie Ahuja, Jonathan Camuzeaux, Thomas Sterner, and Gernot Wagner

When the world gathers in Paris at the end of this month for the latest round of climate negotiations, many eyes will be on the United States and China—and for good reason. Together, they produce more than two-fifths of the world’s CO2. And they will continue to be the most significant greenhouse-gas emitters, in absolute terms, for the foreseeable future. With that in mind, last November, U.S. President Barack Obama traveled to Beijing to broker a climate partnership with China. At the time, Obama promised to reduce the United States’ emissions by 26–28 percent of its 2005 levels by 2025. China, in return, announced that it would reach its peak emissions by 2030, if not sooner. A year later, during his state visit to Washington in September, Chinese President Xi Jinping followed up on his pledge by committing China to a national cap-and-trade system for reducing emissions from key industrial sectors such as steel, cement, and electricity within two years. The so-called G-2’s commitments are a significant step forward since there is no chance of stabilizing global temperatures if the United States and China do not curb their greenhouse-gas emissions.

But even as China caps its emissions, India’s will be accelerating, raising the question of whether we are looking at the right G-2. For now, we are. But if India continues on that trajectory, the world is unlikely to reach its goal to stop global warming at the oft-cited two degrees Celsius threshold that many scientists say could trigger catastrophic natural disasters. And in that case, India may end up counterbalancing the United States at climate talks, just as China is doing today.

One of the main hindrances to negotiations thus far is not necessarily over absolute emissions levels, but relative emissions. There are many ways to divvy up the climate “pie”: For example, one option is “grandfathering.” This method bases emission quotas on how much each country has released in the past. The United States would account for 23 percent of all fossil-based carbon dioxide emitted since 1970. China accounts for 14 percent, the EU for ten percent, and India for only three percent.

A second option is to base reductions on per capita emission rights. In such a system, the United States and the EU, which release 17 and slightly-over-seven tons per capita, respectively, would be subject to significantly larger reductions than China and India, which release less than seven and under two, respectively. Naturally, developing countries see this method as the fairer of the two.

Regardless of which scenario is used to calculate emission quotas, the current pledges by almost all countries fall short of what is needed to limit global average temperature increases to two degrees. Depending on the scenario, the gaps between current pledges and necessary action differ significantly.

Today, the United States and China have the most to gain or lose, depending on which of the two scenarios is chosen. That, however, changes by 2030. By then, China, much like the EU, will have grown largely indifferent to the two scenarios because the emissions reductions would, in relative terms compared to the others, be similar in either scenario. That will not be the case for India, which is why it will emerge as the most significant counterpart to the United States in any global climate deal: U.S. per capita emissions will still be high, while India’s will still be well below the world average, with the EU and China falling in the middle.

India is also one of the countries most affected by climate change. It suffers from heat waves, erratic rainfall patterns during monsoons, and changing river flows, to name a few. And, it is not simply poor, but also “energy poor,” based on the percentage of the population without access to stable electricity. This poses a significant challenge: India wants—and deservingly so—for developed countries to provide billions of dollars to build the necessary infrastructure needed to lower its carbon output. But so far, little of that money has come in.

Money has always been one of the major sticking points at the climate negotiations. In 2009, at the Copenhagen Climate Change forum, the United States pledged to work with other developed nations to raise $100 billion annually to help developing nations reach their climate targets. But since then, the initiative has stalled. Obama promised $3 billion last year, but some Republicans have signaled their desire to block the contribution.

So far, India has made some positive moves toward a low-carbon future. Earlier this year, it set a target of $100 billion in solar investments by 2022. Solar is still more expensive than fossil-based energy. But the prices of photovoltaic power have been declining rapidly—by 80 percent since 2007 alone—making it an increasingly attractive option. That is partly why India has committed to producing 40 percent of its electricity from non-fossil fuels by 2030. It increasingly makes sense for India to be installing solar power regardless of foreign aid. But foreign aid and low-cost debt, of course, help. As a result, India has, so far, insisted on these monetary transfers.

In the end, the question of transitioning to a clean energy future should and must be a question of financing the installation of clean energy in developing countries. That requires the public policy framework, both in the West and in countries like China and India, to provide the right incentives to guide vast amounts of private money into the right direction. Many governments—both regional and local—such as in the EU, northeastern United States, California, and soon China (with its cap-and-trade program), are increasingly doing so.

In Paris, countries’ commitments to emissions reduction and financing will be the key issues at the negotiating table. It suffices to say, the conference in Paris will not solve these issues, but it has great potential to provide a basis for increasing the ambitions of countries to move forward on both issues. One particularly promising avenue is to create a “carbon club” of key players, such as the United States, the EU, and China, to work toward more ambitious targets and accelerate the global transition to a clean energy economy. It is crucial that these big three are not seen to exclude but rather to invite and support key developing nations such as India, as it also seeks to set the right incentives that will guide investments toward a low-carbon, high-efficiency future.

Published by Foreign Affairs (25 November 2015).

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