The nearest China has to a bottom line is its commitment to reduce the ratio or energy to GDP by 20% by 2010 over 2005. The White Paper, for the first time, is able to show progress against this target. It reports that energy intensity fell by 1.8% in 2006 and 3.7% in 2007. This is welcome, but with double-digit GDP growth, China’s carbon dioxide emissions from fossil fuel consumption and other industrial activities have grown by about 10% over the last two years, contributing to two-thirds of global emissions growth (see MNP, 2008).

Although the White Paper contains little new in terms of policy, two announcements give some insight into China’s thinking on the shape of any future international agreement on climate change. The Kyoto Protocol’s Clean Development Mechanism, which funds emission reductions in developing countries, receives a ringing endorsement in the White Paper. The CDM is a “comparatively effective and successful cooperation mechanism” which “should continue to be implemented after 2012.” China’s positive disposition to the CDM is not surprising: by value, China is host to just over half of all CDM projects.

But external observers are more critical. The most fundamental flaw of the CDM approach is that any reduction of emissions on account of CDM in a developing country allows a tonne of emissions more in the developed country which buys the CDM credits. Reductions in emissions in both developed and developing countries will be needed if dangerous climate change risk is to be averted.

More promising is China’s proposal – not actually included in the White Paper but announced at the press conference releasing the Paper – that developed countries should establish a fund of about 0.7% of GDP to help developing countries finance climate change action. This reiterates a proposal put forward by China and the G77 (Group of 77 developing countries) at one of the UN climate change negotiations earlier in the year.

This is exactly the sort of initiative developed countries should be embracing. The funding claim is a gambit one, and the idea that these funds should all be administered by a UN body impractical. But the basic idea that rich countries will have to put significant public funding into the international effort to combat climate change was the missing element in the Kyoto Protocol. The Garnaut Review recommends a 0.3% of GDP Low Emissions Technology Commitment which all developed countries would enter into as part of the next climate change treaty, about $US 100 billion, at least half of which would have to be discharged in developing countries. Compare this to the minimal undertakings made so far by rich countries, such as the $US 6 billion multi-year commitment made to date to the World Bank Clean Investment Funds.

If the West were to respond constructively to China’s international funding proposal, it would then be in a position to ask China and other developing countries what more they would be prepared to commit to. This would need to be more than voluntary participation in an offset mechanism, such as the CDM, but not so much as to destroy the fundamental principle underlying international climate change action, namely that of common but differentiated responsibility. The Garnaut Review recommends immediate steep emission reductions for developed countries, but the containment rather than the immediate cutting of emissions in China and other developing countries. It proposes that developing countries would be allowed to grow their emissions until 2020 at about half the rate of the growth in their economies.

The US, Australia and other developed countries need to bring China and other developing countries into the international mitigation regime. A positive response to China’s proposal for a coordinated international public funding effort on climate change would greatly enhance the prospects of this occurring.