Mr. Wan Gang, Vice Chairman of the 13th CPPCC National Committee, Chairman of the Zhigong Party Central Committee, President of China Association for Science and Technology
Mr. Wang Zhongwei, Chairman of Counsellors’ Office of the State Council
Mr. Wang Zhan, Vice President of China Society of Economic Reform
Mr. Chen Qun, Vice Chairman of the Central Committee of China Democratic League, Chairman of Shanghai Committee of China Democratic League, Vice Mayor of Shanghai Municipal People’s Government
Ladies and Gentlemen,
It is my great pleasure to join you at today’s Forum. Of all the remarkable changes that have occurred in China in the last 40 years, none is more striking than the evolution of China’s global role. China has taken its place as an economic power and as a central player and voice in the global sustainable development efforts.
That is cause for pride and celebration. However, I note that the theme of this Forum, “Marching Towards Opening to the Outside World at a Higher Level” is not about celebrating the past; it is very much future-oriented. We will be discussing ways in which China can do more, can open even more widely, can have an even greater impact on the future of humanity and of our planet. I applaud the organizers and the State Council Counsellors’ Office for this choice of themes and would like to share some thoughts for you to consider today.
China’s emergence as a global leader in development is happening at a challenging moment. Because as much as China has changed in the last 40 years, the world has changed even more. Many of those changes have been positive. There have been technological changes that would have been inconceivable then; the internet had not yet been created, desktop – let alone laptop – computers, cell phones. The advances in genetic research and biotechnology were similarly only the stuff of science fiction then. Global progress in poverty reduction and in increasing life expectancy, efforts in which China has made large contributions, have laid a foundation for the achievement of the more ambitious Sustainable Development Goals by 2030.
At the same time, there have been some less positive changes in the world. Worsening inequality has become a highly destabilizing factor in societies around the world, fueling a backlash against globalization. The technologies I just mentioned are changing labor markets and threaten to worsen inequality by excluding large groups of people from the economic benefits of technical progress. Most of all, and the topic I will focus on today, is the accelerated pace at which the world’s climate is warming.
One month from today, on September 23 at UN Headquarters in New York, the Secretary-General will personally host the 2019 Climate Action Summit. The Summit will showcase a leap in collective national political ambition, and it is intended to demonstrate massive movements in the real economy in support of the agenda. Together, these developments will send strong market and political signals and inject momentum in the “race to the top” among countries, companies, cities and civil society that is needed to achieve the objectives of the Paris Agreement and the Sustainable Development Goals.
The problem of climate change has now reached a level of urgency that pushes each of us to draw on all our knowledge and experience to devise an approach that will be adequate to the challenge. So, my message to everyone here at this Forum today is this. Climate change is the defining issue of our time and now is the defining moment for action. Our ability to achieve any of the SDGs will be greatly weakened if we do not confront climate change head on; the impact of warming on the world’s poorest, on the spread of diseases, on food security and nutrition, on infrastructure and on urban settlements, and so on, could be devastating. It is therefore essential to integrate climate change issues into economic policy making, investment decision-making, etc.
As climate change is a defining global challenge requiring global solutions, let us work together to: a) use our best science to analyze the situation and motivate us to action; b) use the central insights of economics to shape our response; and c) use our considerable experience with global governance to shape our approach to implementation. We need an agenda that is based on these three pillars; science, economics and governance.
The science is now unambiguous, and inexorable. Recent reports from the World Meteorological Organization indicate that June 2019 was the hottest June since it began its analysis one hundred years ago, that July 2019 matched and possibly exceeded the hottest month since it began analysis. The five years 2015-2019 are the hottest five years ever. Between 2000 and 2016, the number of people exposed to heatwaves was estimated to have increased by around 125 million persons, compared to the period between 1986 and 2008, according to the World Health Organization. The recent unprecedented heat wave in Europe was widely reported, with the highest temperatures on record in Belgium, Germany, Luxembourg, the Netherlands, and the United Kingdom. Some national climate projections are staggering; the Swiss National Center for Climate, estimates that on current trends hottest day temperatures there will rise up to 5.5 degrees C by 2060.
The insights of economics are an essential tool in shaping our response to this situation. The problem of climate change is rooted in market failures of massive proportion, as was stated in the ‘Stern report’. Virtually every form of market failure that we know of is contributing to this problem. What exactly are the market failures? First is the classic public goods problem; every actor knows that the brunt of the solution of the problem rests with others, and therefore feels that he can cheat a little, be a little lazy, be a little more focused on today’s growth, or profits, and let others bear the burden. The result is that no one does enough and the effort fails.
There are also enormous asymmetries of information and of impact that are making it much more difficult to act effectively. The inter-temporal asymmetry is a critical one; climate change requires us to act today, incur costs, even heavy costs, in order to prevent a problem that is still decades away. When the IPCC report warns of consequences in 2050, or even 2100, it is extremely difficult to motivate people and countries in 2019 to make sacrifices to avoid those problems. They feel that they have enough problems today without worrying about things that will happen in 30 years or longer. In many cases people are being asked to accept those costs today although they will not be alive when the greatest benefits are realized. In public health we know that preventative medicine is vastly more cost effective in saving lives than is emergency care when a serious illness hits. And yet time after time we find people unwilling to take relatively low-cost steps today that will prevent expensive health problems in the future. How to change that mindset when it comes to climate?
And there is an asymmetry in the distribution of the cost burden of slowing greenhouse gas emissions across the developed and developing countries of the world. Mitigation must inevitably be focused on reducing new emissions, and it is developing countries who are now becoming increasingly large emitters, and who will bear the bulk of the burden that effort. That burden is disproportional to the burdens that will be borne by developed countries, who have the primary responsibility for the existing stock of gas caused by past emissions. The tension between these two groups of countries is another obstacle to solving this problem.
The world has considerable experience with the economics of market failures. The most important lesson is that unless governments act, individual countries, and companies, and individuals, making the intelligent decision in response to the incentives they face will make the problem worse. Only government action can prevent this.
So, climate change mitigation is most of all a governance problem. It requires finding local, national, and global mechanisms that can overcome the resistance that we are encountering and support the strong actions that are needed. One of the most important new features of the 2030 Agenda is in fact its emphasis on governance – both governance as a goal in itself and the importance of good governance as an enabler of the entire 2030 Agenda. Achieving the progress that is needed in climate change mitigation will require the world community to develop major innovations in governance, ones that can also support realization of other parts of the 2030 Sustainable Development Agenda.
What are the governance innovations that are needed to solve the climate change mitigation challenge? I am pleased to note that China frequently expresses support for new and stronger global governance mechanisms and institutions, to ensure that developing countries’ voices are heard more fully than they have been. Climate change is an issue that should be at the forefront of this movement. We must together agree on a workable global governance mechanism that can address this problem.
The solution to the temporal asymmetry, the fact that people today are being asked to pay a price to help the people of the future avert climate change disaster, is one that is relatively easy to see – although not at all easy to win support for. Governments need to act to change carbon prices today to reflect the future costs that will result from emissions. Technological solutions to reduce emissions will be useful too, but they need to be designed based on the right price signals or else they will not achieve their needed outcomes. Carbon taxes, shadow carbon prices to use when analyzing the financial viability of investments, are all essential. Global action is needed to advance this agenda; more on this below.
The solution to the asymmetry of cost burden between the developed countries who produced most of the stock of greenhouse gases and the developing countries who are producing increasing shares of new emissions is also conceptually clear, although, again, very difficult to implement. A mechanism to shift a fair share of the costs from wealthy countries to developing countries can be devised; global funds to subsidize low-carbon infrastructure and utilization of new innovative forms of sustainable development finance, for example. This can only succeed if there is good will on all parts; it requires an unprecedented level of global coordination.
The public goods problem underlies all these difficulties and is the key challenge that must be confronted at the upcoming Climate Action Summit and at the COP 25 to be held in Santiago, Chile in December of this year. We no longer have the luxury of time to squabble; we and our children and our grandchildren will pay a heavy price if we fail to take the necessary actions now. Now is the time to agree on new and credible commitments to accelerate mitigation actions, to address the carbon pricing problem, and to accept a fair sharing across countries of the burden of mitigation.
To sum up, sustainability must be at the heart of discussions on economic development. My suggestion to all participants in today’s Forum is to recognize this reality and make this a theme of discussion; how to add “in a low carbon way” to every topic. For example, how can China open further to the world in a way that advances low carbon development solutions. How can China be a source of finance and other support for low carbon infrastructure and economic growth along the Belt and Road? How can China lead by action and example in this defining effort of our time?
We wish you good luck in the work you are all doing toward that goal and offer our continued support to your efforts.