No hoax: Climate change is a business and political opportunity for countries like China

By Elliot Bullman

Matthew Kahn,Professor of Economics at the University of Southern California, says that forChina, climate change is no hoax, but a business and political opportunity.

While Americans were preoccupied with election returns last month, China sent some of its clearest signals yet that it will continue to pursue an international leadership role on issues including climate. At an international climate change summit in Marrakech, the Chinese governmentreasserted its commitmentto reduce its greenhouse gas emissions.

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The government announced that its aggregate emissions will peakby 2030 or earlier, and that its emissions per dollar of economic output will decline sharply.

Professor Kahn says that, “for 25 years I havetaught my economics studentsthat climate change represents the ultimate “free rider problem.” To slow global climate change, we need to reduce aggregate global emissions. Yet each individual nation’s efforts are too small to “solve” the problem, so it has only weak incentives to take costly mitigation actions, and strong incentives to “free ride” on the benefits of emission reductions by other countries”.

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From this perspective, President-elect Trump’s pledges to“cancel” the Paris Agreementanddismantle President Obama’s carbon mitigation initiativesfollow standard economic logic. If the United States backs out of commitments to reduce national emissions, it still benefits from other countries’ efforts.

Why, then, is China pressing ahead with low-carbon initiatives?Kahn´s researchsuggests several motives. Chinese leaders want to improve the quality of life in their nation’s cities by reducing air pollution; win large shares of promising export markets for green technologies; and increase China’s “soft power” in international relations. Taking aggressive action to cut carbon emissions helps China in all three areas.

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