Hamburg (Brussels Morning) Climate change appears to be accelerating the convergence of global governance, leading to a level-playing field for the post-fossil economy.
This week, both the European Union and China detailed ambitious and sweeping plans to limit greenhouse gas emissions. Whilst the European Union presented the “Fit for 55” climate package, China, symbolically, picked up the relay. Beijing held the launch ceremony for its long-planned national emissions-trading programme, launched on July 16. The trading market opened with 48 Yuan per tonne today.
China is in tune
China’s new ETS (Emissions Trading System) is the outcome of an EU-China cooperation programme involving technical assistance. It is set to create the world’s largest carbon market and double the share of global emissions trading. Significantly, the Chinese climate envoy, Minister Xie Zhenhua, attended the event.
The emerging ETS platform is part of China’s new “market mechanisms” regulatory framework, designed to reduce its carbon emissions. China’s emissions-trading system focuses only on its own companies but the policy message is of global consequence. China is currently the world’s biggest Green House Gases (GHG) emitter and the objective is to reach a peak before 2030 before reaching the net zero objective by 2060.
Pushback and the quest for a level-playing field
For the European Union, harmonised industry standards and coordination on carbon pricing is the only way to achieve a “level-playing-field” between the EU economy and the rest of the world, preventing so called “carbon leakages.”
Beijing’s decision to hold the ceremony today can be symbolically read as an expression of support for European policy and a signal to European industries that China does not plan to undercut its economies with lower standards. In short, it is possible to pursue climate-saving policies without loss of global competitiveness.
The EU’s Fit for 55 package unleashed a barrage of violent criticism in the EU. Industry representatives and consumer lobbies worry about the economic impacts of the measures proposed. The College of Commissioners was divided yesterday along the fault lines corresponding to national interests. Many voiced concerns that the Commission’s proposal could cause the “death” of European industry.
On the opposite front, others see the Green Deal unleashing new economic potential and strengthening Europe’s competitiveness. Enel CEO Francesco Starace, for instance, says he is ready to embrace the Green Deal transformation. Seven days ago, he announced that the company would not invest in coal and gas exploration in Sardinia. The island, says the manager of Italy’s leading international utility, should have a renewables-powered future.
Flooding brings home a sense of urgency
While politicians wrangle over the cost and speed of decarbonisation, the victims of climate change present us with the bill of a heavy human toll. At the time of writing, 106 people have died and 1,300 are missing after torrential rains and floods in Europe.
Belgium, the Netherlands, France, the UK and Switzerland are similarly suffering. Liege was evacuated while London saw in one day, a month’s worth of rainfall.
Among the most controversial measures of the Fit for 55 is the CBAM Carbon Border Adjustment Mechanism. Critics focus their wrath on a carbon-import tax plan, which has been in the works for months. The measure has drawn condemnation from the bloc’s trading partners in the developing world, while making corporates responsible to account for their emissions across their supply chains.
Europe’s CBAM, however, is not as unilateral a measure as it appears. A major policy shift in policy could be happening in the United States. Democrats in the Senate are considering fees on imported goods from countries with weaker limits on carbon emissions than the U.S. A draft of the upcoming budget resolution released on Wednesday foresees “methane reduction and polluter import fees.”
Such import fees could help pay for some of the trillions of dollars worth of spending expected in the Democratic budget reconciliation package in an overhaul of the fiscal system. Interestingly, the move seems to gather some support from the other aisle of the Senate.
“Our current fossil-fuel economy has reached its limit,” said European Commission President Ursula von der Leyen. “We know that we have to move to a new model.”
In parallel with the transformation of the single market set in motion by the Green Deal, Brussels is weaving a network of international agreements to support worldwide energy and environmental policy transitions, as the EU top climate official Mauro Petriccione told Brussels Morning in an earlier, comprehensive interview, in anticipation of the Fit for 55 package.
“Standards, fiscal instruments and price levers”, Petriccione pointed out, “will change production models, product types and value chains. But the prices of natural resources and raw materials will also change in order to adapt them to reality”.
This, it goes without saying, can only be the fruit of convergence of the global economies towards a new system of rules for the world trade and markets.
After a recent meeting held with the Chinese President Xi Jinping and the French Emmanuel Macron, German Chancellor Angela Merkel, suggested that the EU is ready to strengthen policy communication and coordination on climate ISSUES with China. If Beijing does its part, Europe may find itself in a framework of competitive cooperation, reaping some benefits from China’s 14th Five-Year Plan.