US-China Climate Commitment first step in road to phasing out coal and welcoming increased renewables says IISD

FOR IMMEDIATE RELEASE

WINNIPEG—14 November 2014—The U.S. and China’s joint climate commitment is a strong boost for the international process and should pave the way for a phasing out of the use of coal and increased use of renewable energies, according to the International Institute for Sustainable Development (IISD),

This important step comes directly after Ban Ki Moon’s successful New York Summit, and very early on the “Road to Paris 2015” and the international agreement expected there. But what does the announcement tell us about how the two countries will meet these commitments, and what steps might they and other countries take next?

“The Road to Paris will see countries pledging what they can deliver within their domestic political constraints,” said Peter Wooders, group leader of the Energy program at IISD. “This realism is a pragmatic first step and a change from the ‘top down’ commitment process which has largely stalled the UNFCCC, and which the U.S. could never ratify in any event, given division in Congress.”

IISD analysis notes that the U.S. and China have been able to make this commitment thanks to the common factor of coal, a major source of electricity generation in both countries. The “Shale Gas Revolution” in the U.S., its existing mix of power plants which allow ready switching between coal and natural gas, as well as the opportunity to import hydro power from Canadian provinces, give the U.S. the opportunity to significantly reduce projected emissions. In China, further increases in coal mining and supply are not the low-cost option they were once thought to be, and financial and environmental drivers – with the air quality of Beijing the most well-known issue – will reduce the reliance on coal.

“The use of coal has traditionally been under-priced, i.e. subsidized. Financially, the exploration, mining, transport and construction of coal plants has been supported around the world. Environmentally, we have not fully accounted for the air pollution and other costs,” said Wooders. “When these costs are taken into account – which they should be – renewable technologies and energy efficiency become much more attractive. But this is a major change to the business models around electricity generation, and will bring resistance from the potential losers and lobbying from the potential winners. The Chinese government in particular – as China does not currently have the scale of shale gas available to the U.S. - will need to support the energy transition through good policy.”

IISD’s work in China, and more broadly, focuses on some of the key tools needed:

• the identification of subsidies to coal and renewable energy suppliers, allowing for a debate on their costs; the strong link between the government’s renewable commitments and the development of their renewable technology industries (“green industrial policy”);
• how the fiscal system can be made to work for sustainable development (“greening the financial system”);
• sustainable public procurement as an enabler of change; and the creation of low-carbon economic zones;
• the more general policy implementation support which comes from understanding who is impacted and how much, and how these impacts may be mitigated or the vested interests confronted.

The door is now open for renewables, and can be pushed wider.

And what of Canada? Its government has aligned its climate change policies – including overall targets – to that of the U.S. in the past. Both countries recently introduced regulations on coal-fired power generation, essentially banning new coal plant construction and – in the case of the U.S. – imposing constraints on existing plants. For Canada to follow the U.S. in terms of an overall target, however, it will have to find savings elsewhere. It – and other countries with relatively low coal generation – will need to move to reductions in oil and gas consumption and production now; they do not have the luxury of the one-off gain from the phase-out of coal.

For more information please contact Sumeep Bath, IISD media and communications officer, at sbath@iisd.org or +1 (204) 958 7740.