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How China and the US will set the global climate agenda

The Brookings Institution’s Ken Lieberthal discusses the opportunities he sees for a China–US clean-energy partnership going into December’s climate change conference.

August 2009

In December, representatives from nearly 200 nations will gather in Copenhagen to negotiate a possible global agreement for reducing greenhouse gas emissions. As these meetings draw near, many in the international community are looking to China and the United Sates, the world’s biggest carbon emitters, to help set the agenda for global climate efforts.

In this video interview, Kenneth Lieberthal, a senior fellow at the Brookings Institution and director of its John L. Thornton China Center, paints a portrait of the path toward Copenhagen and addresses the difficult questions both China and the United States must face in the coming months. He also outlines the scope of opportunities that cooperation on clean-energy development could create, the remaining roadblocks to compromise, and his hypothesis that a clean-energy partnership will emerge between the two countries before December.

Tom Kiely, a member of the editorial board of McKinsey’s publishing group, spoke with Lieberthal in June 2009 at the Brookings Institution, in Washington, DC. Watch the video or read the transcript below.

Video

How China and the US will set the global climate agenda

Ken Lieberthal discusses prospects for partnership before Copenhagen’s climate summit.

The US and China are the world’s two largest carbon emitters. Each of us is responsible for more than 20 percent of global emissions every year. So each of us has to get our act together and do much better than we’ve been doing on this issue or, frankly, we are all in deep, deep trouble. And the question is whether, if you had the US and China work together cooperatively, will each of us be able to do more? And I think the answer to that is clearly yes.

We have complementary technologies. But [our joint potential goes] even beyond that. To date, each of us has been used by climate skeptics in the other country as an excuse not to do more themselves. So, in the US the argument is, “Well, the Chinese aren’t doing anything, why should we pay a price?” And in China, the argument is, “Well, the US is so rich and so strong, if they aren’t doing anything, why should we be sacrificing?” So, if we can work together, if we can get a meeting of minds on this issue, it unlocks tremendous potential in both countries—both cooperatively, but also in the dynamics of the politics of each country to do much better on this vital issue.

Let me give you an example. In carbon capture and sequestration, both the US and China have large coal components to their economies. The US relies on coal for about 50 percent of our power; China for about 70 percent of its power. Burning coal generates a substantial amount of carbon dioxide emissions. You have to figure out some way to capture that carbon dioxide and render it innocuous in terms of climate change.

It turns out that the US and China have very complementary sets of capabilities on this, both on the technology side and on the engineering side. And if we can work together to develop this technology and test it out and scale it up and work out business models, we can bring this onstream much more rapidly than either of us can do alone. And that is the kind of major contribution we can make together toward addressing climate change and also toward advancing, frankly, each of our business interests—by developing technology that will be in enormous demand around the world.

I think if the US and China can demonstrate that we are prepared to do a lot on our own—and to do a lot together—in order to address this issue, it increases tremendously the momentum going into Copenhagen. My view, frankly, is I don’t think Copenhagen will necessarily get to a final agreement on a new framework. I’m hoping it at least gets to an agreement on the shape of an agreement for a new framework and then fill in the details in the year or so after that.

But, no matter how it comes out, the chances are much better for doing well and leading to a good final agreement if the US and China demonstrate that they are serious and they are able to cooperate—bringing together the biggest industrialized country and the biggest developing country to address a common issue that has divided industrialized and developing countries on matters of principle until now.

What we’re hoping to get is a US–China clean-energy partnership, as a formal agreement. If everything goes well, I would expect it to be signed when the two presidents [Barack Obama and Hu Jintao] meet late this year. They’re going to have a summit in Beijing, I think. If we can put it together by then, this will be one of the real highlights of the summit.

That partnership will identify areas where the two sides will focus, especially on getting cooperative, generally public–private partnerships going. It may well provide for technical cooperation, for trying to develop common metrics for some capacity building. In other words, it’ll be an integrated set of the kinds of activities that should build momentum, encourage the public and private sectors on both sides to work with each other, and provide facilitation for all of that.

This is basically a new issue on US–China relations and, as an important issue, has rapidly moved to the center of the relationship. I would argue it’s one of the two or three most important issues that are going to shape this relationship going forward. If we can reach an agreement on a partnership here and fill that with real content, this is the kind of issue that involves cooperation that goes well beyond the security realm and the foreign-policy specialists and that kind of thing.

Energy gets to the core of each economy, involves an array of people who normally don’t deal with each other. And this is an issue that is not going to go away in two or three years. It’s going to be around for decades. So, if we can build a real platform for cooperation here—when I say platform, I mean a whole framework for cooperation here—it will probably, over a period of years, have a profoundly positive effect on US–China relations: expanding the relationship, deepening it, and, over time, reducing the mistrust that currently still exists in that relationship.

If we try to engage on this and find that we really cannot see eye to eye enough to cooperate on it, I think it’s going to have the other effect. I think it will actually become a major additional source of tension and of distrust in our relationship, not that anyone wants that to happen. But when you’re dealing with an issue as profound as where the world is headed—in terms of capacity to deal with a global threat such as climate change—and you can’t reach a basic level of understanding with the other major player in the system, that certainly does not contribute to a perception of mutual confidence or an ability to work together in the future as the world develops.

The biggest failure is that each side has serious doubts about the long-term intentions of the other side of this relationship. It is hard to find a high-level official in China, or an intellectual in China, who doesn’t believe that sooner or later the US will try something to slow down or stop China’s rise. The assumption there is that the US is too zero-sum in its thinking to sit back contentedly as China becomes stronger and stronger and, in a sense, reduces US global dominance. In the US, there is a concern that if China reaches its full potential, it has on its agenda to marginalize the US and Asia. But Asia is the most important region in the world. To marginalize us and Asia is to directly undermine our vital and national interests.

So, each side can handle the short-term things while we’ve learned how to deal with each other quite effectively, but each side really doubts the intentions of the other side. And when you doubt them, you hedge against the downside. You look at the other guy’s hedge and you say, “See, my doubts were justified,” and you can get a self-fulfilling prophecy. So, I think that these big global issues now actually provide the best opportunity to begin to build confidence about the future world that we envisage. And do we see room for the two of us? And do we see an upside to being able to engage in normal big-power relations where you cooperate where you can and try to minimize the downside where you really can’t reach agreement?

And if we can do that, then I think trust will grow increasingly. If we try to engage on these big global issues and really find ourselves far apart, really unable to do what the other side thinks in the minimum necessary to do, then I think we’re in for some real trouble in the future.

We’ve dealt with each other for quite a while, but especially as involvement deepens—for example, in the clean-energy area—a key dimension of that will be not some technology transfer, but I think mostly codevelopment of technology. In other words, cooperative efforts to develop the capacity to take very often what now exists in the lab, but to do test beds to scale up, to develop business models so that you can actually have an impact on the world out there, and to do all of that in a way that protects the property rights and the intellectual property of each of the parties involved.

That’s not going to be easy. The Chinese system is still not very good on some of those issues. And, not surprisingly, our companies are very concerned about those weaknesses. So, we’ve got a lot to work on here. As we talk about these two issues, one being a US–China clean-energy partnership, and the other being the multilateral negotiations for Copenhagen, it’s important for us to keep those distinct. Because when the Chinese deal with Copenhagen, then they also have to be concerned about the Group of 771 and the whole series of other foreign-policy issues that get involved that can really complicate the negotiation of a clean-energy partnership.

And so, I think if we get the clean-energy partnership, if we get the focus on that and can achieve that, it will have a positive spill-over effect with Copenhagen. If we let the two discussions get commingled, then I’m afraid it’s going to make it much more difficult to get to the clean-energy partnership, and, therefore, we might lose the upside for Copenhagen too. So, there’s a subtle but very important management problem in these two streams of negotiations, in part because many of the same people participate in both streams. So these are distinct, but they partly overlap.

China has 220 local energy centers that they’ve set up around the country to facilitate efforts to increase energy efficiency. It turns out, there’s almost no one at any of those centers who knows how to do an energy audit. It’s just not a skill that they’ve mastered. The US has a lot of capability in terms of energy audits. We’ve learned how to do these things. We can train people at every one of those centers; it would cost us very little money to do so. The payoff would be huge, in terms of the capacity of the Chinese to do what they want to do, which is also in our [best] interest to get done, to improve energy efficiency in China.

So, almost everywhere you look, you see this kind of opportunity available. And the rapidity of the change and attitude on this issue—on the clean-energy issue and the capacity to cooperate on it—has been absolutely startling. Face it, any objective analysis of what has to be done in order to get ahead of the curve in dealing with climate change has to leave you very, very worried.

I mean, at best, you’ve got to be somewhat pessimistic—the numbers are so bad and the trend lines are so challenging. But having said that, if you look at the capacity to at least begin to work seriously on this issue, I think one has to be quite optimistic. This has really shifted very, very rapidly recently. Again, I’m not sure whether Copenhagen is going to get a deal done, but I think that the momentum is now shifting in the direction of getting a deal done. I think Copenhagen can mark a major step on the way to a deal that will come in the year or two after that and will actually be very serious. So, there’s some good news even in a macropicture that is very sobering.

Also of interest

For a more in-depth look at clean-energy technologies and the importance of China–US cooperation, see “China and the US: The potential of a clean-tech partnership.” Included with the article is an interactive exhibit that explores how these technologies work and how China–US cooperation could make them economically feasible.

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The material on this page draws on the research and experience of McKinsey consultants and other sources. To learn more about our expertise, please visit the Sustainability & Resource Productivity Practice.