President Hu Jintao of China was lauded at the UN climate change summit last week for his bold plans to counter global warming, reports China Daily. His remarks represent a turn-around in China’s attitude and policy.
It is all very reminiscent of the Slave Trade Act of 1807, which banned the international trade of slaves in the British Empire. For fear of becoming economically uncompetitive, the British went on to tirelessly campaign against the practice elsewhere.
A few months ago, the shoots of the green revolution in China were already to be seen and were discussed here. The market forces were creating green technologies to transform the global economy.
As predicted, the dangerous protectionist policies once suggested by Paul Krugman have been shelved. Unfortunately, so have the progressive environmental policies once suggested by President Barack Obama and his administration.
Market skeptics claim that China’s new position arrives in the face of domestic pressure, to reform pollution policy which impose harmful externalities on its citizens.
But this is to confuse the separate issues of pollution (water supply, contaminated crops, etc.) and climate change – It would be possible for the Chinese government to appease its people on a case-by-case basis without retarding economic growth too much.
Unfortunately, the citizens suffering as a result of China’s rapid industrialisation, have no such ability to affect national policy until democracy arrives. The change merely reflects China’s unique ability to think in the long-term – a characteristic also derived directly from the autocratic nature of its government.
It makes sense for China to begin preparations for the green economy now, rather than postpone it. The arguments for getting a head-start are obvious, provided you can afford to do so. They are positioning themselves to make money off the global green revolution.
Now that the government is on board, and not just Chinese firms investing in green technology as observed a few months ago, the international element of the plan will begin. If China is to impose costs on its economy to reverse climate change, it will not suffer alone.
The ability to pollute becomes a competitive advantage in a world fighting climate change. Production and jobs will flow to countries with lighter regulation in a process known as ‘carbon leakage’. Goods can be produced cheaper when the traditional costs aren’t supplemented by an expensive carbon permit.
The Chinese government recognise this, as the British Empire recognised this when popular opinion in that country turned against slavery. It took a while, but eventually slavery was abolished entirely within the British Empire. In the meantime, they went about ensuring that their competitors weren’t enjoying any competitive advantage by employing free labour.
The British navy routinely seized ships belonging to competitors and exerted economic pressure on trading partners to eliminate the practice. Observe now as China similarly goes about eliminating the competitive advantage enjoyed by countries less enthusiastic about carbon emission reduction, through a combination of diplomatic pressure and economic incentives.
It is hoped that the coming months will see formal moves by China to cut down on carbon emissions. If so, this may some day be considered a moment comparable in importance for the fight against climate change, to the Slave Trade Act of 1807 and its impact on the battle to abolish slavery.
China’s policy is no doubt supported by their unfavourable position in the scramble for the world’s remaining resources. Although recent years have seen an explosion in Chinese possessions abroad, increasing energy prices and the finite nature of their domestic coal supply will see money increasingly flow out of China into the hands of energy-exporting nations.
Thus, China desperately wishes to see the global transition to the green economy sooner rather than later. Let’s be grateful to China, and the market forces. They may have succeeded where democracy and people power in the West have failed.
© The Free Marketeer 2009