By: Our Correspondent

When it comes to the rising climactic toll from greenhouse gases, the next two decades or so are critical for both China and the global climate pact. The efforts of China and other developing countries will be crucial to achieving the Kyoto Protocol target of stabilising CO2 so that global warming is kept within the 2°C threshold agreed by the Group of Eight industrialized countries. That is because, although the 30 countries of the Organization for Economic Cooperation and Development are responsible for 70 percent of accumulated carbon dioxide in the atmosphere, present-day emissions from developing countries currently surpass those from OECD countries – in fact, under UNFCC rules, they are entitled to increase in the near future. Inevitably, China’s growth path is at the center of this discussion.As world leaders meet in Copenhagen this December to attempt a new global climate agreement, there are three things the international community must do.

First, it must cooperate with China in the herculean task of transforming from an energy-intensive to a low-carbon economy. China has already adopted national targets to reduce energy intensity by 20 percent, and air pollution by 10 percent by 2010. Assuming that these targets continue into the next decade, and economic growth remains steady, this means that by 2020, China aims to avoid more than 58 gigatons of CO2 emissions – effectively the world's largest mitigation programme.

This aggressive emission reduction initiative has so far been conducted by China entirely on its own, at substantial cost. For example, the Chinese government's ‘Top 1000 Energy Conservation Action Plan' works with China's largest companies to impose binding agreements to reduce energy consumption by 100 million tons of coal equivalent in five years. By the time it is completed, the government will have invested 25 billion renmimbi in this initiative, in effect awarding USD 36.60 for each ton of coal equivalent reduction, besides investments made by the companies themselves.

China is facing increasing difficulty in meeting these ambitious targets. By mid-2008, China was only half-way to its 2010 target for reducing sulphur dioxide emissions, and just over one-third of the way to meeting the targets for reducing energy consumption and carbon dioxide emissions. Financial and technical assistance will be essential if these national targets are to be met.

Second, the international community must recognise that the Clean Development Mechanism (CDM) is far from meeting its aims. The logic of the CDM is simple: buyers or investors from developed countries purchase certified emission reduction (CER) credits generated from project owners in a developing country. The income from credits provides the incentive for developing-country project owners to undertake emission-reducing projects, while developed-country buyers use their purchased credits to help meet the stringent caps on emissions in their own countries.

From the beginning, CDM was expected to promote technology transfer for global climate mitigation, by promoting cooperation between countries with environmentally-friendly technologies and those without. This has not occurred for various reasons.

CDM certification is complex, bureaucratic and costly – US$150,000-500,000 per project – so provides no incentive to innovative solutions undertaken on a small to medium scale.

Professional carbon traders carry out two-thirds of all CDM transactions in China. Price, not technology transfer, is their main interest. As a result, CDM projects in China consist largely of small hydro and wind power, which do not access the hi-tech solutions that China needs to achieve reductions on a large scale. Such solutions would include lower-cost wind power and low wind speed turbines, photovoltaic building materials and large-scale solar energy systems, advanced bio-refineries and cellulosic biofuels, water photolysis and energy storage options. CDM's project-by-project approach on its own cannot achieve China's national strategic aims of phasing out old technologies and replacing them with new ones capable of driving structural change in the economy.

Third, the CDM must be supplemented by a new international mitigation plan that is equal to the task at hand. Such a plan would link rich and poor countries to take action together. Developing countries – the hosts – would specify their own reduction targets, and define the technology, financial investment and institutional capacity needed to meet the targets. Developed nations – the partners – would review the proposal and negotiate some basic commitments: sharing the target, transferring technologies, and allocating finance. The plan would incorporate national targets, independently monitor and verify reductions, and find the money to make it happen.

While public-sector financing will be the first and most important source of finance, private companies should also be invited to participate. Some technologies are currently too expensive for developing countries, or require further investments to adapt them to the Chinese context. Through a joint mitigation plan, intellectual property rights could be negotiated through a package that would bridge the high demand for environmentally-friendly technologies in China and the commercial interests of technology vendors in the partner countries. High-volume transactions carried out in this way would greatly reduce supply costs.

For example, China's national electricity grid could become one percent more efficient if it used smarter real-time grid management systems, thus avoiding 400 million tons of CO2 emissions every year. Transportation, China's fastest growing industry sector, likewise has great potential for energy saving and emissions reduction. The objective of increasing fuel efficiency by 15 percent by 2010 could be broken down into specific targets, each one linked to concrete technical solutions. Very few countries have experience of managing such large-scale emission reduction programmes, so capacity building – for individuals as well as institutions – should also be a part of the joint mitigation plan.

Prospects of reaching a new global climate agreement at Copenhagen are dim – yet our common need to meet global climate targets requires emergency action. The beauty of joint mitigation plans undertaken in this way is that they do not rely on a single global deal being reached. Countries serious about tackling climate change now will be able to take practical and immediate action for deep reductions. Countries committed to fundamentally altering emission patterns in their own economy will be able to access support to do so.

Policies adopted by China in the 1980s and 1990s to attract foreign direct investment have made major contributions to the country's rapid economic growth. Today, a new round of open policies and open markets is needed in order for China to move towards becoming a low-carbon economy. These kinds of deals will benefit us all.

Dr Lailai Li is Director of the Stockholm Environment Institute's Asia Center in Bangkok.