PwC on Sustainability

November 2014

What are the Business Implications of the U.S.-China Climate Change Agreement?

Earlier this month, Presidents Obama and Jinping, who preside over the world’s two largest economies and emitters of greenhouse gases, announced an “historic agreement” on climate change. The U.S. will double the speed of its current pollution reduction trajectory and aim to further reduce greenhouse gas emissions by 2025 while China has agreed to cap its global warming pollution by 2030.

Beyond the benefits to the environment from a reduction in carbon pollution, many government and business leaders will keep a close eye on what this agreement may mean for international trade, future policy, operations and business development. It could induce China to invest in new technologies and efficiencies, resulting in dramatic changes. News has already surfaced, for example, about a plan to jointly build a coal plant in China that would store a million tons of carbon dioxide a year while producing large amounts of fresh water -- that feat alone would be an example of unprecedented progress. The implications for technological advancement and production practices could be monumental if both countries put their best and brightest scientists to work finding new solutions. Areas companies should look for changes in the near future as plans get underway to effect transformation include:

  • Reduced trade barriers for green products and services. This could mean lower costs, increased efficiencies and a more rapid spread and adoption of new technologies.
  • China’s future policies on carbon pricing. Under China’s current five-year plan, it is piloting carbon taxes in some areas and cap and trade in others. If China moves further toward carbon pricing, that could increase demand for green products.
  • China’s potential deployment of carbon capture and storage (CCS) at scale. This could move the technology down the cost curve.
  • U.S. and Chinese adoption of innovation and timing of implementation. How quickly will the US and China have to innovate and implement new efficient technology to meet their stated 2025/2030 goals, and what does that mean to your business strategy?

While it may be unclear how the U.S.-China agreement will influence carbon pollution policy and action with other heavy-emitting countries, companies would do well to watch developments unfold here. The lessons learned could prove valuable on many fronts, from investment to production practices to R&D. If you have thoughts on the agreement that you would like to share with us, or if would like to discuss the possible implications to your business, contact us.

Click here to read more on the business implications of recently proposed EPA regulations.


 

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