China and US should unwind environmental imbalance

When it comes to US-Chinese imbalances, the environment and the economy are strikingly similar.

By John Foley, Breakingviews.comPublished: 5:53PM BST 08 Sep 2009
The G20 world leaders meeting in Pittsburgh on September 24 probably won’t do much about either. But they could at least start to recognise that that the only fair solution involves joint effort.
In economic terms, China and America are interlocked, but out of kilter. China produces too much and consumes too little. In the US, the reverse is true. There’s an environmental parallel. By using China as their manufacturing centre, countries like the US have outsourced their industrial pollution.

Together, the US and China account for more than 40pc of carbon emissions. But industry accounts for 70pc of China’s total energy usage while in the US consumers use 70pc of the nation’s fuel.
China’s politicians want the same right to pollute that America had in its industrial adolescence. Of the world's accumulated carbon emissions, China contributed just 8pc, versus the US’s 28pc. US politicians look at the source of future emissions and say there’s no point acting before the People’s Republic.
The logjam requires new thinking. First, industrialised nations need to admit that it is unrealistic for a transition economy to cap emissions, in effect putting a ceiling on growth. Instead, G20 leaders should push for a widespread global carbon tax – that the US would agree to pay as well as developing nations like China.
Second, the cost of clean up should be shared across the rich-developing divide. Industrialised nations are already talking about offsetting some of their carbon emissions by investing in other countries’ projects. But a big financial commitment is also needed. A Beijing University study suggested the cost of reducing China’s emissions could be $438bn a year. That’s big for China – but just 1pc of the G20’s GDP for 2008.
Whatever the obstacles, both sides must act. The US has its responsibility as a global citizen. China faces social unrest sparked by environmental issues. The financial crisis may be starting to recede, but a global-warming crisis would be immeasurably more destructive. A percentage point of growth is a small price to pay.