Why the US-China Climate Deal Matters

Few bilateral deals repeatedly deliver game changing moments. However, the China-U.S. Joint Statement 2015 marks another milestone that resolutely pushes countries towards an agreement on climate change in Paris this December.

While the Joint Statement is comprehensive in its scope and provides far greater detail on the range of domestic actions that will be taken by both sides (including the announcement of a national carbon market), the show stopper is surely the $3.1 billion commitment made by China to help developing countries tackle climate change.

First, this is $3.1 billion in public resources. And, far from being a notional commitment, China is expected to get the funds moving by the end of this year. Though this commitment will not be counted towards the $100 billion by 2020 goal that developed countries have, it certainly puts pressure on other large developing countries to contribute resources.

This funding will be routed through the Chinese South-South Fund and not the Green Climate Fund (although it does note that the Fund will help build capacity in developing countries to access Green Climate Fund resources). Despite little clarity on what the money will be spent on, the fund’s governance arrangements, and the standards and safeguards that will be put in place, this commitment substantially increases the pool of funding available for developing countries and, for that alone, the announcement must be applauded.

Second, the Chinese commitment on climate finance will put pressure on the United States to make good on its existing commitment of providing $3 billion to the Green Climate Fund. Such pressure is welcome as it may help to address those doubtful of making major contributions to an international fund when other competitor countries are not doing so.

Third, this announcement comes right before finance ministers gather in early October in Lima, Peru where they will meet at the sidelines of the World Bank/IMF meeting to discuss climate finance. With efforts underway to address climate finance before countries meet in Paris to grease the wheels on other crunch issues, this Joint Statement has just given a major boost to this approach.

Fourth, it is also notable that the Joint Statement emphasizes the need for bilateral investments to encourage low-carbon technologies and climate resilience. This falls short of a commitment to also reduce or discourage carbon intensive or “brown” investments; however, the text maintains an opening to continue discussing the role of public finance in mitigating greenhouse gases.

Keen observers of the textual negotiations will appreciate major movements on at least three issues. It is worth bearing in mind that the compromise language developed in the 2014 Joint Announcement, such as the appendage term “in light of national circumstances” that was added to the principle of “common but differentiated responsibilities and respective capabilities” provided negotiators with a politically acceptable anchor.

First, transparency provisions for the Paris agreement have been a thorny issue. With this announcement, there is an agreement in principle that the existing transparency provisions are inadequate. It recognizes that transparency provisions have to include both action as well as support provided to developing countries. Moreover, transparency provisions are expected to “provide flexibility to those developing countries that need it in light of their capacities.” Such textual acrobatics might be what is needed to get countries on board.

Second, China and the U.S. both have endorsed a global goal of “low-carbon transformation” within the 21st  century. While this falls short of a total global decarbonization as many sides have been pushing for, a convergence on an overarching global goal is a significant development.

Third, the language on who is responsible for providing finance has also broken new ground. The Joint Statement moves beyond the traditional developed-developing dichotomy and welcomes the provision of resources from countries “willing to do so.”

Taken together, these three movements on language (on transparency provisions, global goal, and responsibility to provide resources) provide a promising basis to unlock difficult positions that have withheld negotiators from making progress. They also go a long way in providing some color to the emerging contours of the Paris agreement.