Climate diplomacy enters a new phase

The clear consequence of President Trump’s decision to withdraw from the landmark Paris accord is that, the global climate agenda would be pushed to the back burner at least for the entire tenure of his presidency.

The ‘domino effect’ is forcing a few other countries to follow suit. During 2010-15, the US significantly increased its climate-related spending and outward investment in developing countries. It committed nearly $15.6 billion on bilateral programmes for promoting clean energy, sustainable infrastructure and land use. Moreover, the US used to bear about one fifth of the administrative budget of the UNFCCC and, was the largest contributor to the IPCC, the two most important international bodies on climate change.

The proposed budget cuts by the Trump administration could dry up the endowment of the Green Climate Fund (GCF), set up in 2010, as a part of an international pledge to mobilise $100 billion from advanced to the poorer nations by 2020. The US committed $3 billion and till date has transferred only $1 billion to GCF, which currently possesses a kitty of $10.3 billion.

Moving ahead, the EU (European Union) and China, have rightly stepped in to fill up the leadership vacuum and counter the voices seeking to slow the fight against global warming. Both these powers are largely seen as the only viable diplomatic alternative to the US leadership, as the world wrangles over how to build on its commitments to the Paris accord.

In 2016, China signed the historic deal with the US for clean energy partnership and, cooperated with them to lead the Paris summit to fruition. In the last, World Economic Forum President Xi voiced his unequivocal commitment to the Paris Agreement, as China realised the distinct opportunity for it to expand its influence on the global stage. China has suspended construction of 103 new coal-fired power plants, and announced plans to invest more than $360 billion into renewable energy by the end of the decade.

According to the People’s Bank of China, the country will need $600 billion a year to realise its dream of a “Green economy”. China’s green credit, as it stands today, is almost 10 per cent of the total banking sector portfolios. China today is the world’s largest issuer of green bonds. The Chinese government has already mobilised massive policy and fiscal support, to enable sustainable mobility and urban infrastructure and put in place the framework for a robust domestic carbon market.

However, there are some important questions. What will China’s mode and scope of engagement with the rest of the world be to lead the complicated highly political climate negotiation process? How much acceptable will be the ‘Chinese model’ of climate leadership, given that China is the largest emitter of greenhouse gases? As China attempts to grow green, are dirty industries likely to migrate to the poorer countries? Will China become a new hegemon in the evolving power dynamics? As the US withdraws, who will drive innovations and technological progress for low-carbon growth? Will China, the largest manufacturers of wind and solar equipment, be able to sustain its market dominance, with US backing off from clean energy transition and the market dipping?

The cooperation between EU and China marks a turning point in climate negotiations and global diplomacy. Perhaps we are on the verge of experiencing a multipolar, collective leadership forcing the world to look beyond the Western alliance that dominated the scene for long.

China and the EU need to act together and significantly intensify their political, technological, economic and scientific cooperation on climate change and clean energy. In the past, the US did the heavy lifting to convince China and some other major emerging economies to commit to climate change mitigation. The EU too invested major efforts in building coalitions with developing and under-developed nations, vulnerable to climate risks. For the EU continuing the past momentum seems indispensable, mostly by engaging and collaborating with China, India and, other major GHG emitters. However, the looming challenges over Brexit, cross-border migration and, rising threats of terrorism make it difficult for EU to lead a globally coordinated effort on climate change.

US’ scepticism on climate change provides an opportunity for countries like India and China to act on their common interests such as transformation of the coal sector, rapid deployment of renewable and electric vehicles, building sustainable urban infrastructure and, collaboration on R&D and cross-border transfer of climate-friendly technologies.

India has always practised smart climate diplomacy. To stay on course on its INDC (Intended Nationally Determined Contribution ) pledge, the government needs to accelerate the pace of important reforms and mainstream climate change in public policy and investment decisions. Adaptation to climate change is already an important agenda in India’s regional cooperation strategy for South East Asia. However, ultimately, it is both India and China’s intent to formulate and pursue common goals, accept sensible compromises between competing interests, and support poorer, climate-vulnerable countries. Without a stronger political alliance, wiser diplomacy and superior statesmanship, the coalition will at best be limited to technical cooperation, without making substantial headway in the global climate dynamics.

Whoever assumes the leadership needs to do a lot of homework. The Paris Agreement only sets out the broad contours of procedures and requirements — the details are still to be formulated . To enable the global stocktaking of national efforts and make the five-yearly review process a powerful tool, transparency and MRVs (Measuring, Reporting and Verifications) are essential. The development of the transparency framework will be an essential part of the negotiations in the coming years.

Trump’s decision will temporarily cut the flow of multilateral climate finance in developing countries. But in the long term it will shift the focus on ‘crowding in’ and catalyse private investments. Innovative instruments (climate bond, social impact bond, catastrophic risk insurance, etc), will provide new flows, greater efficiency and effective development impact.

The writer is a Partner of infrastructure and government services at KPMG. The views are personal

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