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THIS POST IS A PRESENTATION OF AN UNRESOLVED ECONOMICS PUZZLE IN THE PROPOSED CLIMATE ACTION PLAN OF REDUCING FOSSIL FUEL EMISSIONS

1. BACKGROUND: Climate scientists have determined that the use of fossil fuels since the industrial revolution has caused carbon dug up from under the ground to be released into the atmosphere. It is argued that because fossil fuel carbon is not part of the current account of the carbon cycle it acts as a perturbation that causes atmospheric CO2 concentration to rise and thereby to cause warming by way of the greenhouse effect of carbon dioxide. Climate scientists have also determined that such warming is unnatural, human caused, and harmful to nature and to the planet itself and that therefore it cannot be allowed to continue. Climate scientists have therefore proposed that human intervention in the form of climate action is necessary to moderate the rate of climate change to no more than 1.5C above pre-industrial levels or no more than 0.5C above current levels. The proposed climate action is to reduce global fossil fuel emissions and to continue to reduce global fossil fuel emissions until it is eliminated altogether.
2. UNITED NATIONS CONFERENCE OF PARTIES: Since the Kyoto Protocol of 1997 that was later re-written as the United Nations Framework Convention on Climate Change or UNFCCC, the United Nations held a series of Conference of Parties (COP) to come to an international agreement for reductions in global fossil fuel emissions as a global project to which all nations will subscribe and with which all signatories will abide. All 25 COPs held so far have failed to produce such an international effort. Though the so called “Paris Agreement” at COP21 in 2015 is often advertised as an international agreement for reductions in global fossil fuel emissions, the language of the agreement as “Intended Nationally Determined Contributions” and that the Agreement consists of a collection of “agreements” that don’t agree makes that interpretation impossible particularly so since the emission reduction is not an obligation but an intention. 
3. POST PARIS AGREEMENT CLIMATE ACTION:  Since 2015, the UN’s role as a cheerleader in brokering a global effort to reduce global fossil fuel emissions has consisted mostly in holding more COPs, emphasizing the dangers of the extreme RCP8.5 “business as usual” temperature forecast, and demanding that national leaders show greater “AMBITION” in their climate action plans. This plan depends on the effectiveness of cheerleaders that include Antonio Guterres, Leonardo DiCaprio,  Sir David Attenborough, and Pope Francis.
4. CLIMATE ACTION IN THE POST PARIS AGREEMENT WORLD: With the Paris Agreement for global fossil fuel reductions being an agreement to not agree, the state of global climate action today is dependent on the AMBITION of national governments or super-national governments such as the EU that has proceeded so far as a kind of heroism contest egged on by activists. In this contest, the European countries led by the EU along with the UK, Canada, and perhaps Australia have emerged as climate heroes as they have adopted aggressive climate action plans. However, these heroic climate action countries are up against an economics trap created by a non-global “agreement” to cut global emissions.
5. THE ECONOMICS TRAP OF A NON-GLOBAL MOVEMENT TO CUT GLOBAL EMISSIONS: Although the world of humans is separated into nation states, they are connected by economics. This connection is vast and complex and involves cross border investments, stocks, bonds, monetary policy, technology, intellectual property rights, and so on and so forth but most importantly in this respect, the nations of the world are connected by trade. International trade is so important, that even though we think of our civilization in terms of the nation states, we are really one huge global economy because we are connected by trade.
6. THE ANOMALY OF NON-GLOBAL EMISSION REDUCTION PLANS IN THE CONTEXT OF TRADE:  Because nation states are independent nations in some respects but global in terms of trade, a climate action decision by an individual nation state will not lead to global emission reduction. This is because any national climate action plan by a single nation state will increase the economic cost of production and make that nation state less competitive in international trade and hand over a cost advantage to nations that do not have a national climate action plan. The cost advantage of non-climate-action takers will cause their production and exports to rise by virtue of demand from climate action taking nations. The net result will be that economic activity {and fossil fuel emissions} will decline in climate action taking nations but with a corresponding rise in economic activity {and fossil fuel emissions} in non-climate-action taking nations. In the net there may be no emission reduction. This is the Catch-22 of national level emission reduction plans. 
7. ECONOMICS PROFESSOR WUSHENG YU OF THE EU EXPLAINS:  The EU has an ambition of being climate neutral in 2050. It is hoped that this can be achieved through a green transition in the energy sector and CO2-intensive industries, as well as through altered consumer behavior such as food habits and travel demands among the EU population. However, should the EU implement its most ambitious decarbonization agenda, while the rest of the world continues with the status quo, non-EU nations will end up emitting more greenhouse gases, thereby significantly offsetting the reductions of EU emissions. This is the conclusion of a new policy brief prepared by economics experts at the University of Copenhagen’s Department of Food and Resource Economics. For every tonne of CO2e emissions avoided in the EU, around 61.5% of that tonne will then be emitted somewhere else in the world. This carbon leakage, as it is known, will result in a global CO2e savings of 385 kilos only. The policy brief is based on the conclusions of a purposely-built economic model. The model, part of the EU Horizon 2020 project EUCalc, seeks to describe various pathways to decarbonizing the EU economy. “Obviously, the EU’s own climate footprint will be significantly reduced. But the EU’s economy is intertwined with the rest of the world through trade relations, which would change as we implement a green transition in our energy sector, industries and ways of life. Part of the emissions that Europe “saves” through an extensive green transition could possibly be ‘leaked’ to the rest of the world through, among other things, trade mechanisms, depending on the climate policy of other countries,” according to economist and brief co-author Professor Wusheng Yu, of the University of Copenhagen’s Department of Food and Resource Economics. “If the world beyond the EU does not follow suit and embark on a similar green transition, the decline in global greenhouse gas emissions will effectively be limited and well below the level agreed upon in EU climate policy,” adds co-author, economist and Yu’s department fellow, Francesco Clora. Less exports, more imports. In the most ambitious 2050 scenario as calculated by the EUCalc model, the EU pulls all of the green levers for production and consumption in various sectors, including the industrial and energy sectors. In this scenario, a green transformation of CO2-intensive industries (e.g. concrete, steel and chemicals) will incur new costs for new green technologies, which in turn, will increase the price of products. This could impact the competitiveness of EU products on the global market and be advantageous to China and the United States, who would be continuing their production of similar, yet cheaper goods. The prediction is that fewer goods would then be manufactured in Europe, which would lead to an increase in new imports to satisfy consumer and commercial demand. Similarly, a phase-out of fossil fuels by the EU would lower global demand, thus making them cheaper. In response, non-EU countries would be likely to import and consume larger quantities of fossil fuels. Finally, more climate-friendly consumer behaviour in the EU could end up pushing part of the saved CO2e out into the rest of the world as well. For example, while a decrease in red meat consumption by Europeans may reduce imported feed grains such as soybean, it may also result in increased imports of food grains and other plant-based foods, the latter of which would increase emissions in the rest of the world. So what should the EU do? Should Europe simply throw in the towel and drop its high ambitions for a better global climate? Certainly not. But we must make sure not to go it alone. “A green transition in the EU alone cannot significantly reduce global greenhouse gas emissions. We need to find ways to get others on board. Otherwise, the impact of our efforts will be largely offset by increased emission elsewhere, making it impossible to meet the Paris Agreement targets.
8. IN A RELATED POST WE SHOW THAT CLIMATE ACTION NOT GLOBALLY COORDINATED AND CARRIED OUT AT THE NATION STATE LEVEL DOES NOT REDUCE FOSSIL FUEL EMISSIONS: [LINK] 

AS A REAL LIVE EXAMPLE OF HOW THIS WORKS, CONSIDER HOW MUCH OF THE WEST’S FACTORIES HAVE BEEN MOVED TO CHINA WHERE EMISSIONS NOW GO ON CHINA’S EMISSION ACCOUNT AND NOT THEIR’S.

THIS IS A DRAMATIC CASE OF HOW NATIONAL CLIMATE HEROISM WORKS AND WHY SUCH HEROISM HAS NO GLOBAL CLIMATE ACTION INTERPRETATION.

RELARTED POST ON THE EXPORT OF WEST’S FACTORIES TO CHINA: [LINK]  

EXCERPT FROM THAT POST

(1)China is the world’s largest emitter of fossil fuel emissions.With a population of 1.4 billion and per capita emissions of 7.2 metric tonnes of CO2 per person, China’s total emissions are 10.08 gigatons of CO2 that represents about 27.5% of global emissions. The climate change focus on China derives from this significant statistic. Overlooked in this statistic is that these emissions come mostly from export oriented manufacturing and not from consumption with much of the industry consisting of overseas manufacturing facilities of Western business enterprise. Although China is the largest economy in the world with a gross national GDP of $27 trillion in 2019, this figure is driven largely by industry and by population and not by consumption and living standard. A partial list of Western business enterprises that operate their factories in China, provided by JIESWORLD.COM, appears below. These factories and their products are of the West by the West and for the West but their emissions appear in China’s account. The West has exported its emissions to China.

(2) An important sector of export oriented industrial production in China that contributes to much of the fossil fuel emissions noted above, is the manufacture of solar panels, wind turbines, and electric cars for export. The importer of these products benefits from emission reduction but the emissions for their manufacture accumulate in China’s emission account. In 2019 China exported about $18 billion of solar panels with total energy production capacity of more than 200 GW. The export of wind turbines that year was $12 billion with energy capacity of more than 400 MW. Thus, much of the West’s manufacturing emissions including the emissions from the manufacture of renewable energy equipment is offloaded to China. {Footnote: China’s domestically installed renewable energy capacity is about 400 GW divided almost equally between wind and solar}.

(3): With regard to the wealth of China described as the largest economy in the world, it should be noted that the gross GDP of the country was $14.4 trillion in 2019 compared with $21.4 trillion for the USA but in terms of purchasing power parity (PPP), the adjusted PPP GDP are China $25.3 and USA $17 trillion. This PPP-GDP comparison is the basis of the assessment that China is the largest economy in the world – but this direct comparison of PPP-GDP as a measure of the wealth and standard of living is flawed in a financial context because the poorer you are and the lower your cost of living, the higher your PPP-GDP gets. The GPD assessment also contains the hidden flaw that China’s GDP derives not from consumption but from export oriented industrial production that makes goods for export to the West at lower cost than would be possible in the West. In terms of per capita consumption, China lags way behind the West with $3,224 per person in 2019 compared with $45,000 in the USA. The analysis provided above implies that significant social and structural differences make it impossible to make a direct comparison of gross national GDP and that therefore from the consumer’s point of view, China is not the richest country in the world.

(4) A similar error is found in a direct comparison of emissions. First, emissions in China are primarily industrial emissions and not consumer emissions. Second, much of these emissions come from two sources that have a direct link to the West. These are, (i) Western firms that have chosen to locate their factory in China, and (ii) Chinese factories that are making solar panels and wind turbines for the West. The ownership of these emissions must therefore have a more rational distribution than a single minded consideration of national boundaries. An implication of these complexities is that climate action emission accounting must be global because it cannot be understood on a country by country basis. 

(5) There is also a cultural issue in the emission confrontation between China and the West. Absolute literal truth no matter how ugly is a foundational principle of Western Civilization. Confucian philosophy contains the Li Principle. It affirms that manners are a primary means by which we express moral attitudes and carry out important moral goals. Confucian views on ritual extend this insight further by emphasizing the role that manners play in cultivating good character and in finding the conceptual boundaries of manners. What we call etiquette, social customs, and ritual Confucians see as expressions of Li , something we would understand as decorum. It expresses moral character and attitude. Li expresses the principle that good etiquette and good manners cultivate and express good intentions and good character. {SOURCE: Cline, E.M. The Boundaries of Manners: Ritual and Etiquette in Confucianism. Dao 15, 241–255 (2016). https://doi.org/10.1007/s11712-016-9490-1 (abbreviated and edited)}

(6) CONCLUSION: We propose in this post that the arguments presented in items (1) to (4) above imply that a confrontational attitude of the West with respect to China’s emissions contains serious weaknesses because the complexity of this issue is not taken into account.The Chinese response to Western demands for a greater climate action role of China is best understood in this light and in terms of the principle of Li in Confucianism.

An additional consideration is that a demand that China should live up to its commitments in the Paris Accord overlooks the weaknesses and inconsistencies in the details of what is called the “Paris Agreement” as discussed in a related issue on this site: LINK: https://tambonthongchai.com/2020/04/04/11245/

Here Xi Jinping has risen above the petty arguments in items (1) to (4) to calm the discourse with declarations of good intentions and expressions of good character that should probably be understood in terms of the Principle of Li in Confucianism. A bitter confrontation is not in either party’s interest because of the deep economic linkages described above.

Yet, these expressions of Li may have been taken literally in the West. The communication is likely made difficult by cultural differences.

A SMALL SAMPLE OF THE LONG LIST OF WESTERN BUSINESSES THAT OPERATE THEIR FACTORIES IN CHINA

Abercrombe & Fitch, Abbott Laboratories, Acer Electronics, Adidas, AGI- American Gem Institute, Agrilink Foods, Inc., Allergan Laboratories, American Eagle Outfitters, American Standard, American Tourister, Ames Tools, Amphenol Corporation, Amway Corporation, Analog Devices, Inc., Apple Computer, Armani, Armour Meats, Ashland Chemical, Ashley Furniture, Audi Motors, AudioVox, AutoZone, Inc., Avon, Banana Republic, Bausch & Lomb, Inc., Baxter International, Bed, Bath & Beyond, Belkin Electronics, Best Foods, Big 5 Sporting Goods, Black & Decker, Body Shop, Borden Foods, Briggs & Stratton, Calrad Electric, Campbell ‘s Soup, Canon Electronics, Carole Cable, Casio Instrument, Caterpillar, Inc., CBC America, CCTV Outlet, Checker Auto, Cisco Systems, Chiquita Brands International, Claire’s Boutique, Cobra Electronics, Coby Electronics, Coca Cola Foods, Colgate-Palmolive, Colorado Spectrum, ConAgra Foods, Cooper Tire, Corning, Inc., Coleman Sporting Goods, Compaq, Crabtree & Evelyn, Cracker Barrel Stores, Craftsman Tools, Cummins, Inc., Dannon Foods, Dell Computer, Del Monte Foods, Dewalt Tools, Dial Corporation, Diebold, Inc., Dillard’s, Inc., Dodge-Phelps, Dole Foods, Dow-Corning, Eastman Kodak, EchoStar, Eclipse CCTV, Edge Electronics Group, Electric Vehicles USA, Inc., Eli Lilly Company, Emerson Electric, Enfamil, Estee Lauder, Eveready, Fisher Scientific, Ford Motors, Frito Lay, Furniture Brands International, Gateway Computer, GE General Electric, General Foods International, General Mills, General Motors, Gentek, Gerber Foods, Gillette Company, Goodrich Company, Goodyear Tire, Gucci, Haagen-Dazs, Harley Davidson, Hasbro Company, Heinz Foods, Hershey Foods, Hitachi, Hoffman-LaRoche, Holt’s Automotive Products, Hormel Foods, Home Depot, Honda Motor, Hoover Vacuum, HP Computer, Honda, Honeywell, Hubbell Inc., Huggies, Hunts-Wesson Foods, ICON Office Solutions, IBM, Ikea, Intel Corporation, J.M. Smucker Company, John Deere, Johnson Control, Johnson & Johnson, Johnstone Supply, JVC Electronics, KB Home, Keebler Foods, Kenwood Audio, Kimberly Clark, Knorr Foods, Kohler, Kohl’s Corporation, Kraft Foods, Kragen Auto, Land’s End, Lee Kum Kee Foods, Lexmark, LG Electronics, Lipton Foods, L.L. Bean, Inc., Logitech, Libby’s Foods, Linen & Things, Lipo Chemicals, Inc., Lowe’s Hardware, Lucent Technologies, Lufkin, Mars Candy, Martha Stewart Products, Mattel, McCormick Foods, McKesson Corporation, Megellan GPS, Memorex, Merck & Company, Mitsubishi Electronics, Mitsubishi Motors, Mobile Oil, Molex, Motorola, Motts Applesauce, Multifoods Corporation, Nabisco Foods, National Semiconductor, Nescafe, Nestles Foods, Nextar, Nike, Nikon, Nivea Cosmetics, Nokia Electronics, Northrop Grumman Corporation, NuSkin International, Nvidia Corporation, Office Depot, Olin Corporation, Old Navy,
Olympus Electronics, Orion-Knight Electronics, Pacific Sunwear, Inc., Pamper’s, Panasonic, Pan Pacific Electronics, Panvise, Papa Johns, Payless Shoesource, Pelco, Pentax Optics, Pep Boy’s, Pepsico International, Petco, Pfizer, Inc., Philips Electronics, Phillip Morris Companies, Pierre Cardin, Pillsbury Company, Pioneer Electronics, Pitney Bowes, Inc., Plantronics, PlaySchool Toys, Polaris Industries, Polaroid, Post Cereals, Pfister, Pringles,
Praxair, Proctor & Gamble, PSS World Medical, Pyle Audio, Qualcomm, Quest One, Ralph Loren, RCA, Reebok International, Reynolds Aluminum, Revlon, Rohm & Hass Company, Samsonite, Samsung, Sanyo, Shell Oil, Schwinn Bike, Sears-Craftsman, Sharp Electronics, Sherwin-Williams, Shure Electronics, Sony, Speco Technologies, Skechers Footwear, SmartHome, Smucker’s, Solar Power, Inc., Stanley Tools, Staple’s, Steelcase, Inc., STP Oil, Sunkist Growers, SunMaid Raisins, Sunkist, Switchcraft Electronics, SYSCO Foods, Sylvania Electric, 3-M, Tamron Optics, TDK, Tektronix, Inc, Texas Instruments, Timex, Timken Bearing, Tommy Hilfiger, Toro, Toshiba, Tower Automotive, Toyota, Toy’s R Us, Inc., Tripp-lite, Tupper Ware, Tyson Foods, Uniden Electronics, Valspar Corporation, Victoria ‘s Secret, Vizio Electronics,
Volkswagen, VTech, WD-40 Corporation, Weller Electric Company, Western Digital, Westinghouse Electric, Weyerhaeuser Company, Whirlpool, Wilson Sporting Goods, Wrigley, WW Grainger, Inc., Wyeth Laboratories, X-10, Xelite, Xerox, Yamaha, Yoplait Foods, Yum Brands, Zale Corporation.