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London's Policy on Climate Change Should Begin in Beijing

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By: Simon Zadek

Is Westminster or even Number 10 driving the UK's impacts on climate change, or are such matters being determined eastwards in Beijing. Does that matter and what should we do about it?

China's success in reducing its carbon emissions will be core to the UK's own emissions score. Officially, the UK's greenhouse gas emissions have fallen by almost 30% over the last two decades, from 788 million tonnes in 1990 to 566mt in 2009. But this media-friendly downward trend turns ugly if you measure emissions linked to the goods that Britons consume rather than what they produce. Many of the former take place it China, which if added in increases the UK's 2009 carbon footprint by over 50%. As China's industries become less carbon intensive, so do some of the UK's imports, assuming the UK does not substitute clean Chinese imports with dirtier imports from elsewhere.

China does not have a stand-alone climate change policy. Instead its goals for greening its economic growth are laid out it in its 12th National Plan framing its climate-related goals, including its headline planned reduction in carbon intensity of 40-45% by 2020. Increasing. China produces more than 50% of the world's wind turbines and solar modules. Environmental protection under the new national plan is considered a 'pillar industry', along with information technology, new energy, energy conservation and clean-energy vehicles. These industries could contribute 15% by 2020, up from approximately 5% now.

China's accession to the club of high-tech nations is being secured through the world's biggest green bet. It has implemented the world's largest green stimulus of US$201 billion, (compared to the US$94 billion in the United States). Investment in environmental protection is expected to top US$450 billion by 2015, US$807 billion in the power sector, US$304 billion to US$457 billion in renewable energy and US$600 billion in smart grids.

The UK will become a consumer of China's rise as a producer of high-speed trains, solar panels, electric vehicles and aircraft. But its own production will be a pale reflection of China's vision and practice. Green growth policies between the two nations are at opposite ends of the spectrum. Whilst the Chinese government is turning China into a green giant, the UK is doing the opposite, cutting public investment in pursuit of a smaller state and the approval of the infamously short-term focused investment community that dominates the country's political economy. And the payoff - in the face of policy uncertainty, clean technology investment in the UK collapsed in 2010 to a paltry US$3.3 billion, a fraction of its 2009 high of US$11 billion.

China's outward investment may, however, clean up the UK's green act, albeit at a price. China's overseas stock of investments today is a modest US$350 billion or so, barely a third of the US$1 trillion of foreign direct investment (FDI) in China. Premier Wen quietly predicted at the recent World Economic Forum meeting in Dalian, however, that outward investment would be on a par with FDI within just a few years. The trillion-dollar question is whether this immense flow of capital into the global economy can be harnessed to support international green growth, including in the UK. China would certainly welcome the opportunity to build the UK's renewables industry, upgrade its power grid and replace its ageing train system with a version of its very own high-speed network. Elsewhere in the world, notably in Africa. A forthcoming report by the Chinese-government sponsored China Council for International Co-operation on Environment and Development to Premier Wen will propose policy instruments to green China's wave of outward investment.

The UK's climate policy is, frankly, of little consequence to the climate. With emissions of 520 Mts out of a global total of over 30Gts, there is little that the UK can quantitatively contribute without turning off the whole economy. But there are two ways in which the UK can provide leadership in shaping a sustainable global economy. The UK's hosting of a disproportionately large part of the investment community provides it with an opportunity to promote co-ordinated policy interventions across global financial markets. Reducing short-termism, alongside greater transparency and stronger investor governance frameworks could shift investor behaviour to count longer-term outcomes including climate. Current debate about the financial transactions tax illustrates the opportunity and the challenge.

A second leadership opportunity for the UK concerns its capacity for social, rather than policy, innovation. Three billion middle class folks by 2020 will consume way, way more than our planet can handle. We need more than technology upgrades, business re-engineering, and a refitted urban environment. Call it a change in consumer behaviour, a transformation in lifestyles, a values shift or even a spiritual awakening for those with a suited disposition. Whatever you call it, we need more than the geeks can deliver, even those from China. The UK has demonstrated its capacity to catalyze social innovations. Fair trade, community economics, animal rights, social enterprise, corporate responsibility and collaborative consumption are all micro-movements that have flourished in the Anglo-Saxon world.

London's climate policy will be made in Beijing, along with much that will determine the shape of the UK's future economy. But London still has a card it can play, its role in shaping the global financial community, which in turn is the custodian of our investable assets for our collective future. And the UK's citizens, whilst not in the policy seat, could provide leadership in demonstrating new forms of consumption that reduces our ecological footprint. In these senses, Beijing's climate as well as its practice could continue to be shaped in London.

Read the counter argument to this blog here

Watch Simon Zadek at the Intelligence Squared debate, 'London's policy on climate change should begin in Beijing' this Thursday at the Royal Society, London, in association with the IHT and supported by Shell.

Simon Zadek works on sustainability issues worldwide and is writing in his personal capacity. He is Senior Visiting Fellow at the Centre for International Governance Innovation and Senior Fellow at the Global Green Growth Forum. He blogs regularly at www.zadek.net