Low-carbon economy war new power games
Published: Apr 12, 2021 07:03 PM
Illustration: Tang Tengfei/GT

Illustration: Tang Tengfei/GT

US President Joe Biden has invited 40 heads of state to the Leaders Summit on Climate on April 22 and 23. This has heated up the global competition over the low-carbon economy. This new competition could even be called "a new global green and low-carbon economy war."

As climate change becomes a more and more urgent issue, climate governance has become a new lever for countries to enhance their global influence and demonstrate their leadership in international affairs. Currently, more than 110 countries, including China, have made major commitments to achieve carbon neutrality by 2050, hence limiting global temperature from rising further.

These major commitments reflect a rare consensus among countries. But there are many questions to be answered. We still don't know how to achieve these commitments. Nor what they will be achieved by. We are still not clear about what rules will be used to achieve the goal, and who will take the lead in achieving them. Moreover, how funds will be invested to achieve these goals remains unknown.

In this regard, 2021 can be considered the year that China starts its journey to achieve carbon neutrality. It can also be regarded as the year when the world's low-carbon economic competition begins. These new starts have quite obvious impacts on the transformation of the international landscape, and the game of great powers.

From the perspective of global discourse, an international competition to reshape the rules of low-carbon economics has begun. In order to achieve carbon neutrality, many countries have increased the pace of addressing climate change and developing a low-carbon economy. But we are facing a new round of international games and negotiations on relevant topics such as the identification of new green low-carbon industries, formulation of various low-carbon standards including emission reduction, and the agreement of various green rules including carbon trading. Various market access thresholds including green finance need to be addressed as well. 

From the perspective of international economic and trade, a restructuring of green economics and trade patterns has appeared. Carbon neutrality forces countries to speed up economic transformations. The development of clean energy is faced with great opportunities, while traditional fossil energy is at risk of being transformed or abandoned. The value chain of raw material production, import and transportation, has also shifted accordingly. The new international economic and trade structure, with a green industry at the center, will gradually become mainstream - supporting the world economy in the future. Strategic cooperation, interest games and trade competition will become main battlefields of competition among major powers on the road of carbon neutrality.

From the perspective of technological innovations, a research and development race around new green industries is already steaming ahead at full speed. As a place of strategic importance, Europe, the US and other traditional developed countries have increased investment in the race. They have also upgraded it with equal importance to other high and new technology industries. Green technology has become an important driving force of low-carbon economy development and competition. It is providing a solid foundation and competitive advantage for subsequent technology transfer and green industry upgrading. If emerging economies do not follow suit, they may lose this new round of industrial revolution, which is clearly characterized by industrial upgrading for green growth.

From the perspective of fund flows, an international investment and financing shift driven by green industries has already taken place. In the future, international capital will favor new green industries with potential and production capacity. Preferential policies for green industries in various countries will also become new conditions to attract high-quality foreign investors. New investment and financing rules focusing on environmental information disclosure, green equity financing ratios, green supply chains, carbon financial markets, new energy technology, low-carbon legal support, as well as resource valuation, will become hot topics in financial market, such as investment, securities and insurance.

The Biden administration, which led the US back into the Paris Agreement, is promoting its new climate proposal, the Green New Deal. It can be anticipated that it will not stop the fierce competition in many related fields with China. This is an attempt to display US' might as a global leader. The upcoming Leaders Summit on Climate is only a new starting point. It is more about suppressing China in terms of international discourse, economic and trade rules, capital flows and technological innovations.

China aims to have carbon dioxide emissions peak before 2030, and achieve carbon neutrality before 2060. This is China's great contribution to global low-carbon development. China, which still plays the role as the world's factory, has not completed industrialization. China has only 30 years to reach carbon neutrality from carbon dioxide emissions peak, far less than the time for developed countries. China's mission to reduce emissions will be difficult. It will have to be achieved, to some extent, at the expense of economic growth. This is China's responsibility as a global power. Moreover, this is China's contribution to humanity as a positive response to climate change.

The author is professor and executive dean of Chongyang Institute for Financial Studies at Renmin University of China, and secretary-general of the Green Finance Committee of China Society for Finance and Banking and Finance. opinion@globaltimes.com.cn