Climate Change vs. the Sino-American Cold War

Daron Acemoglu,

CAMBRIDGE – The last-gasp effort at the United Nations Climate Change Conference (COP26) to keep global warming below 1.5° Celsius, relative to preindustrial levels, was destined to fall short, regardless of how many heads of state and business leaders flew to Glasgow.

For the world to meet even a 2°C target requires collaboration between the United States and China.

Climate change represents a unique opportunity for the two countries to cooperate, and their surprise announcement of a plan to work together on curbing methane emissions provides some hope. But the current geopolitical environment stacks the cards against broad cooperation.

To have even a fighting chance of achieving the Paris climate agreement’s objectives, the world must reduce consumption of coal, oil, and gas to almost zero in the next decade, implying that most available fossil-fuel reserves must remain in the ground. That outcome is not in the cards, despite all the recent decarbonization pledges.

China, for example, is still investing in new coal plants, building more than once per week in 2020. India has nearly doubled its coal consumption over the last decade while refusing to commit to a meaningful net-zero emissions target.

And Russia is doing almost nothing, claiming that its forests, tundra, and swamps will absorb enough carbon to render it carbon neutral by 2060.

The US, too, is proving unequal to the challenge, and it cannot rely on the same excuse as India – or even as China. It can afford to invest much more in renewable energies and to support the broader global transition to cleaner technologies.

Yet it is still subsidizing the fossil-fuel industry, rather than taxing carbon emissions and regulating the big energy companies that bear most of the blame for the problem. (That said, Iran, Russia, Brazil, China, and India are even worse offenders when it comes to fossil-fuel subsidies.)

To reduce emissions and stop the extraction and combustion of existing coal, oil, and gas reserves, there is no substitute for a global carbon tax and sustained support for the development of green technologies.

The European Union has taken the first step toward a global carbon tax by proposing not just a domestic tax on fossil fuels but also a carbon border adjustment mechanism (tariff).

For the carbon tax to have a meaningful impact, it will need to be set sufficiently high. Right now, carbon taxes within the EU range from €116 ($134) per metric ton of carbon dioxide in Sweden to less than €0.10 per ton in Poland, with some major economies, such as Italy, having no carbon tax at all.

But even with a robust European carbon tax and tariff regime, we would still need the US and China to adopt and enforce similar policies in order to keep climate change in check.

Existential challenges sometimes do bring countries together. The US, Britain, and the Soviet Union joined forces to defeat Germany and Japan during World War II. And despite deep disagreements, Europeans and Americans united to confront the postwar Soviet threat.

Could the US and China work collaboratively to combat climate change? Perhaps, but only if there is public pressure to do so in both countries.

At first blush, this appears unlikely. The US political system remains highly vulnerable to lobbying by Big Oil, which is doing everything it can to block or slow-roll meaningful action, while actively greenwashing to buy time.

Moreover, US President Joe Biden’s administration, understandably, is focused on tackling formidable domestic challenges related to infrastructure, poverty, inequality, and polarization before next year’s midterm elections, when his Democratic Party may lose its congressional majorities.

Meanwhile, the sixth plenum of the Communist Party of China has just commenced in Beijing, where the focus will be on consolidating President Xi Jinping’s rule and the CPC’s dominance over the population.

The Chinese leadership understands that it must maintain tight control over data and media, while still delivering sufficient economic growth to stave off discontent within the country’s growing middle class.

As a result, climate change is not an immediate priority for the CPC, and a global carbon tax would be a major impediment to its main objectives because it would eliminate a major source of Chinese exports’ cost advantage: cheap coal.

It also would force a much faster economic restructuring away from fossil fuels than the current leadership would like.

Despite the two countries’ recent hopeful announcement on methane, we cannot, therefore, bank on political elites in the US or China to make climate change a high priority.

We do not need to. In both countries, there is significant public demand for meaningful climate policies. Around 70% of Americans accept that global warming is happening and would support a carbon tax on fossil-fuel companies, and 86% would like more funding for innovation in renewables.

Even progressive Democrats’ more ambitious “Green New Deal” proposals are popular with voters.

There is also a demand for stronger climate policies within China (notwithstanding Western media caricatures of a docile population that is wholly subservient to the Party).

Even as the CPC presides over one of the most intrusive campaigns of media manipulation and repression in history, it must heed public sentiment. Clean air and other environmental concerns are hot-button political issues in China, and the country has a tradition of climate activism.

The European experience has shown that such activism can be very influential. Although polarization and other policy priorities have crowded out climate concerns in the US, this could easily change once some of those items are checked off the list (as may happen with Biden’s infrastructure and “Build Back Better” plans).

In China, it is difficult to forecast how the authorities will respond to climate activism. They may try to suppress it.

But, ultimately, Xi needs a certain level of public support to maintain his grip on the CPC (even if he has succeeded in sidelining many rival factions).

He knows that his legitimacy – not to mention his legacy – may come to hinge on whether he can respond effectively to mounting concerns about the climate and the environment.

Meaningful US-China climate cooperation would produce major knock-on benefits, by dialing down tensions in other areas such as trade or the status of Taiwan.

Just as the Cold War drove cooperation between the US and European powers, the climate crisis could still lead to less hostile Sino-American relations.

The outcome will not depend on backroom deals in Glasgow, but on whether Chinese and US leaders feel public pressure to move in that direction.

Daron Acemoglu, Professor of Economics at MIT, is co-author (with James A. Robinson) of Why Nations Fail: The Origins of Power, Prosperity and Poverty and The Narrow Corridor: States, Societies, and the Fate of Liberty.

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