China, Germany Lead the Race Toward a Low-Carbon Economy

As countries around the world set emissions targets and ramp up their national climate policies, the race toward a vibrant low-carbon economy is under way, and there is a growing consensus that the United States will not take the lead.

A report from Deutsche Bank Group’s Climate Change Advisors found that when considering all of the world’s major emissions and climate change policies as a measure of movement toward a low-carbon economy, China and Germany are extremely well positioned. The U.S., meanwhile, lags far behind.

“The countries that move first to a low-carbon economy are definitely going to have a head start in terms of relative growth rates,” said J. Scott Holladay, an economics fellow at New York University School of Law’s Institute for Policy Integrity.

“In the not-too-distant future there is going to be a huge market for green energy, and it feels like the Scandinavian countries and Germany are leading that charge, and China is quickly catching up. In the U.S., it doesn’t seem to be a huge policy priority.”

Gigaton by Gigaton

The Deutsche Bank report identified 154 new policy initiatives announced in countries around the world since October, clearly representing the run-up and then follow-up to the Copenhagen climate summit in December.

The new emissions pledges would result in a reduction of annual emissions of about 2.8 gigatons. Add that to all the emissions policies already in place, and, if implemented successfully, they could reduce emissions by 9 gigatons in 2020. That would still fall 3 to 5 gigatons short of the goal of the “stabilization pathway" — the total needed to keep CO2 levels below 450 parts per million and the global temperature rise less than 2 degrees Celsius.

Notably, the biggest contributors to the additional 2.8 gigatons of emission reductions since October are China and Brazil.

China set a target for emissions intensity reduction, which is a measure of greenhouse gases released per unit of GDP, of 40 to 45 percent below 2005 levels by 2020. Brazil set a hard emissions target of about 20 percent below 2005 levels by 2020. Each would result in almost a gigaton of emissions reduction on its own.

“Based on that, you can assume that there will be a market response,” said Kate Brash, assistant director of the Columbia Climate Center at Columbia University and part of the modeling team that contributed to the Deutsche Bank report. “The ambition is clearly not particularly high [in the U.S.].”

Germany already leads the pack in many ways, having long ago established feed-in tariffs that reward consumers for producing renewable electricity and feeding their excess power into the grid; the Deutsche Bank report calls feed-in tariffs “an integral underpinning of any prosperous green economy.”

China, meanwhile, has installed renewable energy capacity per unit of GDP that exceeds both Germany and the United States. Last year, it became the world's largest investor in clean energy, putting $34.6 billion into low-carbon technologies, almost twice the U.S. investment, according to a report from Pew Charitable Trusts. As Holladay points out, though, this may position the country well economically, but it does not imply much about its environmental and global warming mitigation potential.

“The rubber meets the road when you look at emissions per GDP data,” he said. “The renewables are a step in the right direction, but when you look at the emissions per person or emissions per GDP data, I think the U.S. and China are both kind of lagging.”

A Chunk of $2.3 trillion