China and the U.S. have now announced commitments to manage emissions prior to the Copenhagen Summit. This is hugely significant since these two countries contribute approximately 55% of the entire world’s CO2 emissions.
But each country’s respective path for addressing CO2 emissions are significantly divergent. President Obama publicly committed to a reduction of CO2 emissions of approximately 17% by 2020. That is approximately 1 million metric tons annually in CO2 emissions, which is more than the entire annual CO2 emissions of Germany.
China, however, has only committed to a reduction in “carbon intensity” which means it will reduce emissions as a percentage of its annual Gross Domestic Product (GNP).
The following is a “back of the table cloth” calculation on what this means: The World Bank estimates that China’s GNP in 2009 increased by 9% and they are on track for a similar increase in 2010. So China’s carbon intensity management would have to achieve approximately an ANNUAL 9% carbon intensity reduction in CO2 emissions to maintain the status quo if its annual economy grows at 9%. What this means is that even if China were to immediately achieve a 17% reduction in CO2 emissions matching President Obama’s 2020 goal it would only take a few years at China’s recent GNP growth to overwhelm this reduction result and return China to annually increasing its CO2 emissions.
So where is China coming from in proposing this type of system that manages the rate of increase and is not a commitment to actual emission reductions? An insight comes from the Union of Concerned Scientists’ calculation of per capita CO2 emissions by country. It calculates that each American represents approximately 20 tons of annual CO2 emissions, while China’s annual per capita emissions at approximately 5 tons–or one-fourth the per capita emission of Americans, half that of Germans and about equal to that of Mexico.
Let’s explore further the ramifications of China’s carbon intensity proposal. What if its per capita CO2 emissions were to grow up to Germany’s level, which is half of the U.S.’ current per capital emissions? That would mean China’s CO2 emission would double from its world leadership level equaling the COMBINED CURRENT annual emissions of both China and the United States. In other words, the United States could totally eliminate its CO2 emissions and if China “managed” its carbon intensity so that the per capita emissions were only half of the current U.S. levels we would see NO NET REDUCTION in CO2 emission for the two countries that account for more than 50% of the world’s CO2 emissions.
So where is this heading? The obvious answer is that however symbolic the gestures by China and the United States, the numbers don’t add up to a total reduction in CO2 emissions. In fact, China’s future emissions growth could swamp targeted reductions by the U.S. and Europe.
One potential future action by the U.S. in cooperation with Europe and Japan is to take unilateral action by placing an import tariff on carbon emissions. These three economies represent over half of the world’s annual GNP so if they decide to price CO2 emissions in their global trade, the world will have to respond accordingly. And just such a tariff is in the proposed H.R. 2454 American Clean Energy and Security Act of 2009.
Being an optimistic entrepreneur, I see an alternative future enabled by businesses that are figuring out how to be price competitive at lower CO2 emission levels. The world’s entrepreneurs are discovering how to profit by offering solutions that “cost less, mean more.” And as importantly, American consumers are searching for these solutions as they realize that it is not in their self interest to annually import $453 billion in foreign oil that represents 65% of our trade deficit, to continue eating cheap fast food that has created an unaffordable health crisis in obesity and to continue buying “cheap” Chinese imports that are produced through massive air emissions.
The numbers say that however significant the political commitments being made by China and the U.S. in Copenhagen, the reality is that the world must execute its Green Economic Revolution to create the changes in technology, production and consumption to truly impact our environmental and economic future. The optimistic perspective is that the Chinese and American businesspeople are two of the best in the world and they will move past their governments’ limited commitments to solving our world’s environmental and economic problems in pursuit of winning sales from an Awareness Customer market segment that could represent $10 trillion annual international gross domestic product by 2017.