China: superpower climate rent-seeker?

Is China using climate change to con the United States and its allies?

 As the Bonn climate talks continue, U.S President Obama and China’s new President Xi Jin Ping kicked off their “California summit.”  They will discuss a host of issues during their unusually informal two day meeting at the former Annenberg Estate, “Sunnylands.”  Climate change is on the agenda.

 It may be difficult for the two leaders to announce any real progress on the thornier issues confronting them.  On day one of the summit Obama said that the U.S. and China “have a whole range of challenges on which we have to cooperate, from nuclear North Korea and Chinese President Xi and wife arrive CAmissile programs proliferation to issues like climate change.”  Throw in rampant Chinese theft of American intellectual property and climate could provide the feel-good pronouncement they will be looking for. However, while Obama will be looking for a public relations tidbit, Xi appears to be serious, though not about protecting the environment.

 International climate diplomacy could offer China a golden opportunity for rent-seeking, by choking off free-world competition while gaining competitive advantage for its own industries. All the while, China will continue to cash in on production of “green” energy products such as solar and wind which are heavily subsidized by its competitors’ taxpayers.

 China, which emits 25% of man-made CO2 – the most of any nation, announced that it will place a ceiling on greenhouse gas emissions beginning in 2016, the year after the UN aims to sign a successor treaty to the Kyoto Protocol in Paris and “aims to cut the energy intensity of its economic output by between 40-45 per cent by 2020.” Global warming campaigners greeted this announcement with enthusiasm as they see it as removing the major U.S. objection to a UN climate treaty – U.S. stated unwillingness to sign on to emissions restrictions which exempt China.

 CFACT Executive Director Craig Rucker, said, “is China actually going to atone for its climate sins and strap its industries with a carbon cap?  While that is the message being drummed out by the media, it is not quite the full picture CFACT uncovered when we met with Chinese delegates this week in Bonn. We were told the Chinese cap and trade program is more akin to a project or experiment, or cynically maybe even a PR ploy, than it is to a bona fide emissions trading system similar to what they have in the E.U.”

Chinese delegates told Mr. Rucker that only 8 cities are involved in the project, and there will be no penalties for non-compliance.  Oversight will be given to a Chinese government bureaucracy in conjunction with a national NGO, but importantly no international verification will be allowed.  The program will expand to another 7 or 8 cities in 2014 or 2015, but is not currently planned to be national in scope, nor likely to lower overall emissions which are continuing to escalate at a rapid pace.

China U.S. flags fused “China has never allowed any meaningful transparency in its climate or any of its activities,” Rucker said, “I don’t think any serious analyst can have confidence that China will not build in plans to cheat on any climate commitments it makes before they are even implemented.”

Consider this from China Scholar David Shambaugh: “China is, in essence, a very narrow-minded, self-interested, realist state, seeking only to maximize its own national interests and power. It cares little for global governance and enforcing global standards of behavior (except its much-vaunted doctrine of noninterference in the internal affairs of countries). Its economic policies are mercantilist and its diplomacy is passive. China is also a lonely strategic power, with no allies and experiencing distrust and strained relationships with much of the world.” We encountered this quote from China Goes Global: The Partial Power in a piece the Washington Post ran by Fareed Zakaria on Wednesday. It is superb. Let’s hope the President read the Post.

Manufacturers must consider whether they are willing to subject themselves to the high costs and stifling regulations they can face in the E.U., Australia or the United States, or opt instead for China.  Communist China is open for business. How many enterprises have chosen to skip out on western regulator’s combination of bureaucratic indifference and obstructionism,?  They can choose instead to deal with Chinese officials eager to connect their supply chain and smooth the path to production.   Any bribery or corruption is likely to be viewed as the less expensive cost of business.

 When Xi landed in California, he encountered an Obama eager for a diplomatic success to help him put domestic scandals behind him. Obama may prove the perfect patsy for a Chinese long climate con.

 Obama with Xi CA summitObama took pains to keep global warming out of his campaign for reelection. Despite impatience, environmental activists stuck by him. Minutes after victory the President pivoted and climate was back. Now the enviros want Obama to make climate a key part of the California summit. For China this lines up nicely.

 Todd Stern, the chief U.S. negotiator at the UN climate talks said that, “forceful cooperative action between the US and China is more critical now than ever… such action will be good for each of the countries individually, and good for the whole world.” If Barack Obama is on board with Stern, China can join the U.S. in making happy sounding climate and environmental declarations while maneuvering the U.S. to further hamper its economy.  China is ready to take up the slack.

 The U.S. should soberly evaluate any Chinese proposals by recognizing that China’s aims are simple – to advance its own national interests while weakening its competitors. Barack Obama will find that China will eagerly shorten its journey toward becoming the world’s other superpower by indulging in environmental rent-seeking on a superpower scale.

 We may hear joint China-U.S. declarations of climate cooperation come from California, Bonn or during the month’s ahead. If we do, the American negotiators will be dreaming of finally rewarding their Green supporters with the climate policies they’ve been demanding.

 The Chinese will be dreaming of beating the competition.

Obama Xi CA summit conf table

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About the Author: CFACT Ed

  • Frederick Colbourne

    I generally agree with the positions of CFACT but must disagree with the thesis presented in this article.

    In my opinion, although rent-seeking is rampant in the global energy sector, the rent-seeking is driven by American and European beneficiaries. China is merely free-riding.

    There are many definitions of “rent-seeking”. The general concept is: To derive or attempt to derive excess return from the factors of production compared to the return if the market were free from regulation by law or policy.

    One implication is that the rent-seeker lobbies the government to enact laws, regulations and policies to facilitate the generation of economic rent.

    “Law and policy” includes restrictions on trade, regulations mandating environmental conservation measures, policies and subsidies that favour use of one source of energy in preference to another.

    As between the USA and China, it appears that the US regulates energy more than does China as compared to the free market for energy, which accounts for the favourable attitude coal in China and its demonization in the US. Further, the US mandates the production of ethanol from maize corn, not a free-market choice.

    Rent-seekers in the US and Europe might wish to stop the free-riding, but fear a trade war. This is evidenced by the recent spat between the EU and China. EU anti-dumping laws were applied to Chinese solar panels. China retaliated against French wine imports.

    The leakage of economic benefits from the EU to China arises from EU policies that facilitate rent-seeking through subsidies for solar power.

    The solution is not to ostracize China, but to rescind laws and policies that distort the global energy sector: repeal rules that mandate biofuel production and eliminate all subsidies for solar and wind power. Maintain strict rules for clean burning of coal, but repeal rules that penalize coal based on CO2 prodcution.

    The fact that the laws, rules and policies are not Chinese, but American and European is evidence enough that the roots of rent-seeking behaviour are not in China.

    • Scott Scarborough

      Yes, but if China can come up with an agreement that furthers these types of activities (ethanol production, coal demonetization, etc.) on the part of the United States while committing themselves to do nothing but what perhaps they have already decided to do as an experiment anyway…that would be considered rent-seeking. And rent-seeking can always be unilaterally stopped by either side by the nature of the activity.

    • MHG

      The roots of the rent-seeking may have come from others. Yet China saw it and decided to get in on a good thing. If China develops for-show carbon restrictions to restrict American competition and cash in on subsidies seems like rent-seeking to me.

  • Bartender

    Rent seeking or not China will continue to cash in on production of “green” energy products while choking the US economy. The biggest losers will be the hard working taxpayers and the continuing thousands of men, women and children in third world countries dying every day from lack of basic food, water, and carbon-based energy. Carbon-based energy is the only answer to eradicating world poverty and preventable diseases.

    • J.P. Katigbak

      I hope carbon-based energy should still be an answer to eradicating world poverty and preventable diseases that still persist, as of now. But first, people like me should continue to look more closely at the ideological and philosophical doctrine of environmentalism that remains a sort of dilemma that has led to confusion, deceit, interference with people’s day to day lives, and a lot more concerns. It is time to take action on that doctrine before confusion sets in. Thank you very much. – J.P.K.

  • kuhnkat

    “The Chinese will be dreaming of beating the competition.”

    No dream with the line up of panderers to America’s enemies across the table.

  • mjhiggs

    Climate Change/Global Warming is all about control by the Left elitists. The green weenies won’t be happy until we are sitting around in our huts reading by candlelight “Chairman Obama’s Little Green Book” which reveals how he saved the planet.