China Must Pay a Price for Climate Inaction

China’s economy is limping back to life after President Xi Jinping’s ill-fated “zero covid” decree, but there is one big victim: the country’s efforts to tackle climate change. China’s carbon emissions recently recorded their largest annual jump and are on track to reach an all-time high. Fueled by new Chinese Communist Party (CCP) language that posits coal as the mainstay of the energy system, domestic production and consumption have ticked up. As has approval of new coal-fired power stations.

Xi’s signature “dual carbon” goals—for China to peak emissions before 2030, and to reach carbon neutrality by 2060—are not yet at risk. But that’s only because of Beijing’s preponderance for setting its climate targets so low to begin with. However, the cost of China now meeting these goals is only going up, and the room for them to do more is shrinking.

The problem is that for the CCP leadership the only thing that matters at present is ensuring a short-term economic bump. Xi’s modest annual growth target of 5 percent must be achieved at all costs. That’s why if we are to have any hope of stopping runaway climate change in time, the West needs a strategy that is as much about climate sticks as it is about carrots. It’s about time we see climate inaction on the same par as human rights abuses or even incursions to international peace and security.

By far the biggest stick available to the west is implementing new green tariffs. These tariffs would increase the cost to China of exporting carbon intensive goods such as cement, steel and aluminum to regions like the European Union where local manufacturers are already subject to strict regulations on their own pollution. For the first time, it would mean a direct hip pocket cost for climate inaction on the Chinese trade balance sheet. It would help force Chinese manufacturers to adapt to lower polluting methods.

In October, the European Union will begin implementing a “carbon border adjustment mechanism” (CBAM), due to be fully operationally in its coverage by 2026. In the United States, both Republicans and Democrats have already taken steps to prepare for a similar scheme. A bill to calculate the emissions intensity of industrial materials produced domestically was recently passed, and there is a possibility of a follow-up to the CHIPS and Science Act or a new standalone “Foreign Pollution Act” bill will put in place the cornerstone of a future scheme—though that is still some time away. In the meantime, the United States and the European Union are also negotiating a green steel deal that will be an important placeholder by individually placing some tariffs on China absent a wider scheme.

The Middle Kingdom hates the idea of green tariffs. For them, trade and climate should never be discussed in the same sentence. It’s easy to see why. Deloitte estimates China will be the most exposed market (behind Russia) to the EU’s new scheme, with €6.5 billion of trade from China affected to begin with. The United Kingdom and Canada are also considering similar schemes. Persuading others like South Korea and Japan—which already have or are implementing domestic carbon markets—to follow suit would help tighten the screws on Beijing by covering over a quarter of their export market. Just as important will be getting developing countries like South Africa (and perhaps even India over time) to also do so to avoid fragmenting the global trade environment they already complain of.

It’s crucial these countries can not only come together, but that they then stick together. When dealing with China, it is always better to move in packs. Unfortunately, Brussels has a propensity for wanting to play the good cop with China to Washington’s bad cop. For instance, a recent commitment by the EU to “better understand and address China’s concerns” with their scheme has raised eyebrows.

Diplomacy therefore still matters. It can also show the foreign policy hard heads in Beijing who continue to set the small playing field for China’s international climate agenda, that this issue is fundamental to China’s global standing and not one that cannot be geopolitically horse traded. Given his proclivity for the opposite, Wang Yi’s return as foreign minister has likely made that job harder in recent weeks.

The bottom line is the world is running out of time for dialogue alone to solve the climate crisis. In May, the World Meteorological Organization said that by 2027 we were more likely than not to breach the 1.5 degrees Celsius temperature limit, widely considered by scientists to be a climate tipping point.

Yet in the face of this, Xi is only standing firm. During a recent visit by U.S. climate envoy John Kerry, Xi defended the pace and intensity of China’s actions, which he said “should and must be” determined free of outside interference. And while the resumption of climate talks between the United States and China is a welcome step forward in the geopolitical milieu of the broader relationship, Beijing clearly feels it owes nothing more to Washington.

It’s time get tougher. For the last decade or more, the cornerstone of the West’s approach to China on climate change has simply been to encourage the country to play a part in combatting it. That has had some impact. In 2009, China was prepared to walk away from a proposed global deal in Copenhagen that posited developed and developing countries should be treated the same. But by 2014, China stood alongside the United States and put forward its own plan to reduce emissions that helped pave the way for the Paris Agreement. A shifting domestic zeitgeist as air pollution in Chinese cities, and a greater awareness of the impacts of climate change taking hold was far more consequential for changing the attitude of the CCP leadership. The west needs to help that shifting domestic sentiment along.

For its part, China would say its installed more renewable energy last year and sold more electric vehicles than the rest of the world combined. China is also on track to double its goal for installed solar and wind capacity this decade. But absent a more concerted effort by Beijing, none of this is likely to matter much. More than two-thirds of the world’s installed coal-fired power capacity will soon be in China, if over 300 mooted new plants are built. By the middle of the century, China will also overtake the United States as the world’s largest historical emitter. This will remove its bifurcated defense against responsibility that because it did not cause the issue, it has no responsibility for fixing it.

If the West can move quickly to implement new green tariffs, it won’t take us long to know if they have been effective. In 2025, China along with the rest of the world will be required to set new targets to reduce emissions for a decade ahead. For its part, the United States will be under particular pressure to take a big step up from its goal of a 50 percent to 52 percent emissions reduction by 2030, buoyed by the Inflation Reduction Act’s new measures. Having finally peaked emissions at the end of this decade, the key question for China will be whether they can put them into structural decline. If it doesn’t, the consequences will be felt by us all.