Opinion: Regulatory Shakeup Gives Boost to Climate Change Reform

China is undergoing an enormous government restructuring, strengthening policy integration among government agencies. A major reform that has been little-noticed outside the climate policy community is the move of the Department of Climate Change from the National Development and Reform Commission (NDRC), the influential economic planning agency, to China’s new Ministry of Ecology and Environment (MEE).

Released on Monday, the organizational reform plan, or “San Ding Fang’an,” lays out the MEE’s mandate, organizational structure and staffing details. The MEE’s mandate on climate policy has three parts — to develop macro-level climate strategy, plans and policy; to jointly lead climate international climate change negotiations together with other relevant ministries; and to implement and coordinate affairs related to the United Nations Framework Convention on Climate Change.

What is the implication of these changes in China’s future climate policy? Shall we expect more-ambitious goals, or the contrary? What specific policies and actions can we expect from the new MEE?

Seen in the context of China’s broader, multiyear effort to improve environmental management, the migration of climate policy authority into a increasingly comprehensive and robust environmental regulatory system, led by the MEE, will likely strengthen China’s greenhouse gas reduction efforts. And specifically, there are certain things that we might expect — and hope for — if China is to create a truly effective climate policy strategic system.

Harbinger of new policy

The new climate change policy mandate signals that China considers climate change to be a part of its long-term domestic environmental strategy and an important component of the ecological civilization vision that President Xi Jinping has been articulating for China. At a national conference on environmental protection attended by six members of the Politburo Standing Committee, Xi emphasized the importance of establishing a national climate change strategy. High-level pronouncements like this one are often a harbinger of formal policy coming down the line, and we are now seeing some early steps in this direction under the MEE.

Until recently, Chinese policymakers have tended to see climate change through the prism of development and international diplomacy, as opposed to thinking about it as an environmental concern. In international climate negotiations, China has emphasized that its carbon reduction responsibilities must be balanced against its developmental rights, a position reflected in the fact that the climate change department was part of the NDRC. It was after the 2009 Copenhagen climate change summit that climate change and carbon mitigation became part of China’s political agenda. Since then, one of the shortcomings of Chinese climate policy has been that it lacks a firm legal basis. Correcting this would fall in line with the MEE’s mandate to develop a macro-level climate strategy, plans and policy.

The goals set in China’s 12th and 13th Five-Year Plans — reducing carbon emissions per unit of gross domestic product by 16% and 18% respectively — are legally binding and undoubtedly powerful in the context of China’s political framework. However, a law on climate change or a legal definition of carbon dioxide as a pollutant would be a far stronger spur for policy action. Unfortunately, the proposal for a national climate change law, suggested as early as 2009, has not yet made it onto the State Council’s legislative agenda. The transfer of the climate portfolio from the NDRC to the MEE might change that. There are three ways this could happen.

The first approach would be to give climate policy a firmer institutional foundation — to classify greenhouse gases as pollutants that are legally subject to environmental law. Climate policy could conceivably be integrated into China’s Environmental Protection Law, which will likely see revisions when the MEE announces its work plan.

The second approach would be to redefine the term “environment” in the law to encompass climate, making dangerous climate change a direct target of China’s increasingly assertive, legally mandated environmental protection efforts.

The third approach would be for China’s legislature to finally create a stand-alone climate change law. At this early stage, the MEE is being structured around traditional environmental concerns — air pollution, water quality, waste management, nuclear safety, etc. Each of these areas is governed by a separate law that mandates a focused government response.

Targeting specific sources

Undoubtedly, China has made great strides in climate policy. The highlights include a commitment to peak energy-related carbon dioxide emissions by 2030, setting national carbon intensity targets in the 12th and 13th Five-Year Plans, developing national and subnational greenhouse gas Emissions Control Plans, and launching phase one of the national carbon market. In addition, low-carbon-development pilot programs have been implemented in six provinces, 79 cities, two counties, and 67 industrial parks.

These are high-level actions that work through the national and local economies, which is to be expected given the NDRC’s broad macroeconomic purview. In contrast, the MEE’s environmental protection mandate will bring it closer to the specific sources of emissions. The national carbon market, if implemented well, will reduce emissions at the source.

If climate policy is folded into China’s environmental protection law, it will likely be implemented according to the existing environmental management system. The main pillars of this system are environmental quality and pollutants emissions standards, monitoring, reporting and verification (MRV), and environmental impact assessments. Within this environmental management system, we might see China setting greenhouse gas emission standards for power plants, vehicles and energy-intensive industries, as in Europe and California, where standards systems play an important role in bringing down emissions.

This would increase the transparency of greenhouse gas emissions data more than ever before because the creation of a source-based emissions inventory would likely be the first step in bringing carbon under an MRV regime. The Environmental Protection Law and other laws on air, water and solid waste require pollutants emission data to be publicly disclosed to the public, but greenhouse gas emissions currently have no such requirement. Bringing transparency to carbon emissions would be a huge step forward.

Chinese leadership

Few doubt that China will play an increasingly important role in global climate governance. America’s withdrawal from the Paris Agreement comes at a time when China has been ramping up its climate leadership. Xi has highlighted climate change as a central pillar of China’s contribution to global environmental protection efforts on several occasions. He has described China’s role as including “tuidong he yindao” — promoting and leading.

The former Ministry of Environmental Protection had a good track record implementing international environmental compacts like the Montreal Protocol. The new Kigali Amendment to Montreal Protocol, passed in September 2016, regulates hydrofluorocarbans, the greenhouse gas pollutant used in most cooling technologies.

How will the MEE contribute to this leadership drive, given its mandate to help lead international climate negotiations?

China has a chance to show leadership in green cooling transition, which sits right at the intersection of the Kigali Amendment and the Paris Agreement. Green cooling transition means improving energy efficiency, contributing to Paris Agreement goals, and replacing refrigerants into climate-friendly options of air conditioners and refrigerators, required by the Kigali Amendment. As China produces over 70% of the world’s air conditioning units, showing leadership in green cooling would be very critical.

Bringing green principles to China’s Belt and Road Initiative will be another way for the country to show its leadership, but it will take a big effort to strike a balance between China’s economic interests and environmental responsibilities. Innovative strategies are needed here to go from rhetoric to practice.

Ready for policy challenge

The concern that removing climate policy from the NDRC’s mandate might weaken activity in this area is a valid one, since the NDRC remains a powerful overall policy planning body within the Chinese government, and carbon mitigation requires that we rethink economic fundamentals. Pollution control traditionally focuses on end-of-pipe abatement measures, whereas climate change mitigation is only truly practical when it addresses the front-end utilization of energy resources.

But the MEE seems ready to take this on. Minister Li Ganjie has emphasized “optimizing four structures” in explaining the newly released “Three-Year Blue Sky Defense Plan.” They include China economic, energy, transportation and land-use structures. Allowing the MEE to play a central role in decarbonizing and greening China’s economic growth will be critical if China wants to have a truly ambitious climate policy.

This makes green finance, green insurance, green pricing, and of course carbon pricing more important than ever. Putting a price on climate change risk and incorporating this into investment decisions and infrastructure development will prove to be a key approach to merging climate and economic policy.

We can expect China to continue making progress in local environmental protection and global climate change mitigation. Challenges certainly remain, but the creation of the MEE reflects a genuine dedication at the highest levels of China’s leadership to build an “ecological civilization” that offers a clean environment at home and much-needed climate leadership in the world at large.

Hu Min is the founder and a senior adviser of the Beijing-based think tank Innovative Green Development Program. He is also a nonresident senior fellow at the Tsinghua Brookings Center of The Brookings Institution. Diego Montero is a strategic adviser at the Innovative Green Development Program.