Shadow Government

How Much Is the U.S.-China Climate Deal Worth?

Since the failure of the 2009 climate summit in Copenhagen, both the United States and China have largely retreated from big international agreements, each waiting for the other to move first. This week’s bilateral accord sets the stage for future international discussions. That would seem to be a big deal. Early analyses of the U.S.-China ...

Photo by Feng Li/Getty Images
Photo by Feng Li/Getty Images

Since the failure of the 2009 climate summit in Copenhagen, both the United States and China have largely retreated from big international agreements, each waiting for the other to move first. This week’s bilateral accord sets the stage for future international discussions. That would seem to be a big deal.

Early analyses of the U.S.-China climate deal have ranged from wildly enthusiastic to cautious to dismissive. But beyond the pleasantries of a signing ceremony, how serious are the agreement’s achievements?

Drawing on experience with trade negotiations, there are at least four questions worth asking before getting too excited about the agreement:

1. How does the agreement differ from what we expected?

If we start by setting aside issues of timing and assume that all benefits from an agreement will be delivered immediately, there’s still a question of how to value those benefits. In particular, an agreement in which we promised to make the sun rise tomorrow morning would not actually offer much — the sun was expected to come up with or without our urging.

This is an issue with the climate deal. China just committed to start reducing its emissions by 2030. But in a 2012 article, the Guardian quoted analysts as saying: "barring any significant changes in policy, China’s emissions will rise until around 2030 — when the country’s urbanization peaks, and its population growth slows — and then begins to fall."

There does not seem to be a large gap between a priori expectations and ultimate commitments.

2. How much do we discount future promises?

If an agreement is implemented over time, there is a question of how to value actions promised for the future. Other things equal, a front-loaded agreement will be more credible and deliver quicker results than a back-loaded one. For a one-off agreement, implemented over time, there is the additional question of how to discount future promises.

There are both encouraging and discouraging examples of future promises in agreements past. In 1994, APEC leaders committed to the "Bogor Goals," whereby the developed countries would achieve free and open trade and investment by 2010, while the developing countries would do it by 2014. These are mostly the same countries that just agreed to try pursuing a Free Trade Area of the Asia Pacific to achieve free and open trade sometime in the unspecified future.

A more encouraging example from the world of trade concerned promises from the same time period at the WTO to liberalize trade in textiles and apparel. Those promises were back-loaded and did not seem especially credible at the time, given a long history of renewing that protection. The commitment was to eliminate a system of bilateral quotas by 2005. Lack of faith in that promise was a big reason that developing countries were reluctant to engage in new trade talks in 1999 and 2001. But when the time came, the Bush administration and other nations made good on the pledge.

3. How valuable is it to set the stage for future progress?

Even if China’s emission reduction commitments under the agreement are modest, it can be important to have China adopt the principle that it ought to be making commitments under international environmental regimes. If Chinese engagement in such talks is a prerequisite for success, then surely there is some value in Chinese acceptance of the idea.

This approach, too, has a history in trade talks. In the Uruguay Round of trade negotiations, a major goal was to address high levels of agriculture protection. As it turned out, the talks (from 1986 to 1994) made little headway in freeing agricultural trade. They did, however, turn hard-to-negotiate barriers such as inspection requirements into easy-to-negotiate barriers (usually tariffs). This was seen as valuable, because there was a general belief that a new round of talks would soon follow and the stage had been set for significant liberalization.

As it happened, that next set of negotiations was slow to start (it ultimately kicked off in Doha in 2001) and has yet to conclude. In hindsight, tariffication looks like less of an achievement.

For climate negotiations, the administration cannot take for granted that success in Beijing will translate into progress in Lima next month or Paris next year.

4. Can the agreement win domestic support?

International agreement is half the battle — getting domestic support can be as hard, if not harder. In the case of the climate agreement, much of the heavy lifting will need to be done by future presidents and a reluctant congress.

International trade agreements have recently been waylaid at home. FTAs between the U.S. and South Korea, Colombia, and Panama were held up for years before they were finally pushed through Congress. The delay exposed American negotiating partners who had extended themselves to get the deal done years earlier.

The climate agreement will face less immediate difficulty than a trade agreement because it does not require Congress’ explicit approval. But this strength is also its vulnerability. The agreement provides no surety that future presidents will feel bound by President Obama’s handshake nor that Congress will appropriate funds to support proposed joint projects.

Support may also grow wobbly when environmentalists, a core Democrat constituency, look closely at the agreement. The deal calls for the Chinese to pursue zero-emitting energy sources such as solar, wind, and nuclear. The first two win easy support back in the United States, but nuclear is more problematic. One of the cleanest sources of base load power, nuclear energy often makes environmentalists uneasy. The agreement also calls for joint projects on carbon capture and sequestration (CCS), a process that pumps waste carbon dioxide from coal plants back into the ground. Environmental groups are divided on CCS, with some viewing it as a path to a cleaner future and others arguing against anything that perpetuates our reliance on coal.

This week’s agreement offers relatively little in the short term, it doesn’t promise future trajectories much different from those each country was on, nor does it ensure domestic support for overcoming future hurdles. There is real value to having the United States and China standing on the same side of climate action and to keeping open the possibility for future bilateral and multilateral cooperation. This is a gamble, though. If President Obama cannot muster sufficient domestic political support to meet his commitments to China, the United States will be exposed internationally. To reap the potential gains from moving forward globally, there remains hard work to be done building a consensus at home.

Phil Levy is Senior Fellow on the Global Economy, The Chicago Council on Global Affairs, and teaches strategy at Northwestern University’s Kellogg Schoool of Management.

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