Initiative for U.S.-China Dialogue on Global Issues

While many leaders in both the United States and China recognize the need to act on climate change, the two countries are largely caught in a stalemate on who should act first. Neither one wants to impose punitive measures like carbon taxes unless the other reciprocates because these damage the country’s relative position. Officials in the United States argue that China produces twice as much CO2 emissions as the United States. Conversely, Chinese officials point out that, the United States produces three times more emissions per capita. Both sides make valid arguments, but this mentality inevitably leads to inaction. Therefore, for the proposed system to be practical, it must benefit both sides financially.

Pollution is causing tangible damage not only to the environment, but also to people and profit. The United States wants China to curb its pollution because a recent study found that 29 percent of San Francisco’s pollution comes from China. Meanwhile, the life span in Northern China, where most manufacturing occurs, is 5.5 years shorter than in Southern China. Internationally it is estimated that 2 million people die each year because of pollution. These numbers translate to real damage to the world economy. Those 2 million deaths cost the global economy $225 billion a year. This number does not even include the $5 trillion cost to welfare loss as a result of pollution-caused sickness. In China, the welfare loss is 7.5 percent of the country’s GDP and the annual labor income loss is almost one percent. The United States experiences similar losses as a consequence of pollution. If Trump is as concerned with financial benefits as he claims, it is logical that he seek to maximize profit accounting for externalities caused by pollution.

Many green initiatives are already outcompeting fossil fuels. The Electric Power Research Institute estimates that smart grid technology has a benefit-to-cost ratio of 4:1, will save the United States billions, and uses less energy. At the same time, alternative energy sources are surpassing fossil fuels. Tesla recently announced the release of solar shingles that are cheaper than traditional shingles, and also produce electricity. In fact, even without subsidies, solar panels are now the superior method of generating energy in many sunny states. Therefore, it seems only natural that a president wholly concerned with profit be interested in implementing green initiatives.

From a purely financial perspective, the United States and China should cooperate on green initiatives. In 2004 China started tracking “Green GDP,” which was a measure of the GDP accounting for loss to the economy as a result of pollution. However, this measure quickly fell out of use because by 2009 the measure, which already underrepresented the amount of pollution produced, indicated that China’s pollution tripled in five years. The United States and China should revive this measure and use it as the basis for policy regarding the effect of climate change. For instance, both countries should implement a subsidy for each solar panel unit equal to the product of the expected amount of energy produced and the cost to society from the pollution created to produce the same amount of energy. Applying this, the estimated cost to society per ton of CO2 emitted is $37. Meanwhile, the average family in the United States consumes 1000kW of energy per month and would save 100 tons of carbon dioxide over the 28-year lifespan of the average solar panel. Therefore, in this example the government would subsidize $3,700 of the $50,025 cost to install these panels.

The United States is perfectly positioned to take advantage of solar panels because of how
much of the country can profit from solar energy production due to its sunny location. Additionally, six of the top ten largest solar panel companies, including the five largest, are all Chinese companies. Thus, China will be happy to produce the solar panels that the United States can use to produce power. All the while, since solar-power is a technology and not a fuel, efficiency increases and prices fall with time. By cooperating on green initiatives, the United States and China can both benefit financially, and it would be foolish of President-elect Trump to ignore this opportunity to profit.

David Lysenko is a sophomore in the School of Foreign Service at Georgetown University majoring in international political economy.