Tags: Asia, China, Climate Change, Copenhagen, Jason Simpkins

Copenhagen Talks Getting Back on Track, but China May Not Climb Aboard

By , Money Morning •

U.S. Secretary of State Hillary Clinton yesterday (Thursday) broke a major deadlock in negotiations at the United Nations Climate Change Conference (COP15) in Copenhagen, but China's aversion to transparency could keep a deal from being brokered.

For months developing countries have blamed the lack of a cohesive global response to climate change on the unwillingness of the world's richer nations to help finance green projects.

However, that all changed yesterday when Clinton said the United States would be willing to support a $100 billion fund to help emerging countries finance green energy initiatives.

But Clinton also said that U.S. aid would only come if developing countries, namely China, reported on the progress they're making toward curbing carbon emissions.

"The U.S. is prepared to work with other countries to jointly mobilize $100 billion a year by 2020," Clinton said at a press conference.

The announcement couldn't have come at a more crucial time, as the talk's Danish hosts, among others, earlier in the day said they had given up hope that a deal would ever be reached.

"We will not have a draft. There is no draft. We are facing a situation where it is possible that nothing comes out of COP15 unless the heads of state decide to come up with it themselves," said Mohamed Nasheed, president of the Maldives - an island country that threatens to be submerged by rising seas. "I am very nervous and very disappointed."

However, rumors that the talks had reached a dead end were silenced by Clinton's announcement.

"I would hold tight and mind the doors - the cable car is moving again," Yvo de Boer, executive secretary of the U.N. Framework Convention on Climate Change, told reporters. "It's good there's now been a statement of support for a clear number on long-term finance."

However, U.S. support of the $100 billion fund is contingent on certain conditions. And the biggest proviso has also been a point of contentious debate - that developing countries, namely China, provide detailed reports of their progress on reducing CO2 emissions. 

"It would be hard to imagine, speaking for the United States, that there could be the legal or financial commitment that I've just announced in the absence of transparency from the second biggest emitter, and now I guess the first biggest," said Clinton. "There has to be a willingness to move toward transparency in whatever forum we finally determine is appropriate. So if there is not even a commitment to pursue transparency that's kind of a deal breaker for us."

Will Chinese Silence Crush Copenhagen?

China for years has refused to allow a global supervising body to monitor its promised emissions cuts. Other rapidly growing countries, such as Indonesia and India have indicated they would be open to having their efforts to curb carbon emissions verified by a global monitor, but China continues to object. 

Vice Prime Minister He Yafei acknowledged the U.S. offer to commit funds to emerging markets as "a good step," but that China is only willing to entertain "dialogue and cooperation that is not intrusive, that does not infringe on China's sovereignty."

"We are willing to enhance and improve national communication. The purpose is to improve transparency. We are also willing in voluntary fashion to explain and clarify, if need be. We can also consider international exchange, dialogue and co-operation that is not intrusive, that does not infringe upon China's sovereignty," said He.

 "The announcement [by Clinton] isolates China rather than the Chinese blurring lines to isolate us. China needs to rejoin the effort and start playing a constructive role," He added.

At best, Beijing may only accept checks on emissions efforts that use international funds. That could be problematic for U.S. officials, who envisage the kind of "measuring, reporting, and verification" present in nuclear arms reduction treaties and trade deals.

As justification for its position, China argues that the West grew rich by polluting the atmosphere and so it is unfair to now impose costly limitations on its fast-growing economy. Moreover, there is a suspicion that the U.S. and its Western counterparts are using climate change as an excuse to stifle China's economic growth, and its subsequent emergence as a global superpower.

But as far as the West is concerned, the reason Beijing balks at demands for more transparency is that it has something to hide. For instance, the U.N. body in charge of managing carbon trading has suspended approvals for dozens of Chinese wind farms after questions were raised about whether or not they qualify for funding under the Clean Development Mechanism (CDM).

The CDM is a program designed to direct funds in the form of carbon credits from wealthy countries to developing nations. But projects only qualify for those credits if applicants can prove that they would not have been built anyway. The question in this case is whether or not Beijing deliberately lowered subsidies to make the wind farm projects eligible for funding.

The United Nations is currently reviewing 25 wind-power projects that applied for carbon credits. And according to analysts, the problem may not stop there. China has by far been the world's biggest beneficiary of the United Nation's CDM program in the past five years, having received 153 million carbon credits - almost half of the total amount issued - worth more than $1 billion, according a Financial Times analysis.

China insists that its green energy projects, and the credits it's received for them, are completely legitimate.

"The Chinese government wouldn't adjust subsidies just to bag CDM money," Yang Zhiliang, general manager of Accord Global Environment Technology, one of China's leading CDM consultants told the FT.

Still, the West remains weary of the nation's central government. Beijing has pledged to reduce carbon emissions per unit of gross domestic product (GDP) by 40-45% in the next ten years. But that promise will ring hallow in Washington so long as the global community lacks the ability to accurately gauge China's progress.

Of course, if the West isn't satisfied, Vice Premier He has said China isn't looking for a handout anyway.

"Financial resources for the efforts of developing countries [to combat climate change are] a legal obligation," He told the FT. "That does not mean China will take a share - probably not . . . we do not expect money will flow from the United States, United Kingdom [and others] to China."

However, if China - boasts the dual title of world's fastest growing economy and the world's largest emitter of greenhouse gas - isn't on board with the proposed funding arrangement there's little chance it will go through.

But if the Copenhagen summit ends without a deal, He says China won't be to blame.

"China will not be an obstacle [to a deal]. The obstacle now is from developed countries," he said. "I know people will say if there is no deal that China is to blame. This is a trick played by the developed countries. They have to look at their own position and can't use China as an excuse. That is not fair."

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