China's suspension of dialogue with US may further delay climate agenda

China's suspension of climate dialogue with the US has raised concerns that progress on some issues could be delayed, such as the implementation of a global cross-border emissions trading mechanism and bilateral collaboration in key decarbonization technologies, according to industry experts.

The announcement by Beijing over the Aug. 6-7 weekend, on the back of US House of Representatives Speaker Nancy Pelosi's visit to Taiwan, comes ahead of the COP27 summit in Sharm el-Sheikh, Egypt, in November where global consensus on climate issues is key to a successful outcome.

"Without any doubt, every time the US and China collaborated, it enabled some progress in the global climate agenda," said Mo Zhengchun, Principal with China's policy think tank Innovative Green Development Program or IGDP.

"Apparently, halting the current collaborations will have significant impact on both countries, especially considering the upcoming COP27 in Egypt," he added.

"Topics that are subject to more international collaboration would face greater challenges, such as international aviation and shipping, and green finance provision for developing countries," said Caroline Zhu, senior energy transition analyst with S&P Global Commodity Insights.

"Such sectors are already lagging in decarbonization pace and taxed with greater uncertainty," she added.

Depending on the evolution of the China-US relationship, even some non-governmental bilateral exchange with Chinese entities, such as state-owned enterprises, quasi-governmental research institutes and industry associations, could be paused, Zhu said.

Bad timing

The suspension of talks comes at a time when US-China climate dialogue had become relatively constructive despite escalating geopolitical tensions. Experts have labeled climate dialogue between the two economic superpowers as "ping-pong diplomacy in the new era" as it is an area for collaboration in the midst of various ongoing disputes.

In April 2021, US Special Presidential Envoy for Climate John Kerry and China's Special Envoy for Climate Change Xie Zhenhua released a joint statement in Shanghai committing to "discuss concrete actions" in industrial and power sector decarbonization, focusing on key technologies like green hydrogen, energy storage and grid reliability, as well as carbon capture, utilization and storage or CCUS.

They also committed to collaborating in mitigating methane emissions and controlling emissions from international aviation and shipping.

After several rounds of difficult negotiations in Glasgow during COP26, the US and China in November 2021 came up with a surprise joint statement with more areas of collaboration under the Paris rulebook Article 6, aimed at establishing a global cross-border emissions trading scheme.

While the building blocks of Article 6 had been finalized at COP26, some gray areas needed more clarity to ensure smooth implementation, especially on how carbon credit registries worldwide were expected to be connected, and how to effectively avoid the double counting of emissions reduction efforts.

These talks at COP27 could be impacted.

Competition over cooperation

IGDP's Mo said the US has been pushing for a global diversification from China's control over clean energy supply chains and technologies that are crucial in tackling climate change, such as solar PV, electric vehicles and chips.

"China believes the US does not regard climate change as a standalone agenda. Instead, the US has built an increasingly tightened connection between its climate agenda and its strategic plans for trade and national security," Mo said.

He said it is unlikely that the US and China's climate change partnerships would remain distinct from other issues, and it was only a matter of time before strategic rivalry in other areas impacted their collaborative climate agenda.

"Now is the time for both countries to confront such competition," he said.

In early July, the International Energy Agency warned that China's share of key solar equipment manufacturing exceeded 80%, and for key some components was set to touch over 95%, representing a level of geographical concentration in global supply chains that governments needed to address.

Hope for resolution

It remains to be seen whether there are efforts to find a resolution.

"Currently, the scope of the suspension in climate collaborations remains uncertain," Mo said. He said it is unclear whether the suspension was only limited to conversations between Xie and Kerry, or whether communication between academic bodies, research institutes and other multilateral talks were affected.

"This is just a 'suspension' of climate dialogue, which implies that it is likely to be resumed. When to resume depends on how US-China bilateral relations will evolve," said Yao Lixia, Senior Research Fellow with the Energy Studies Institute at the National University of Singapore.

Yao said that considering recent geopolitical tensions and the energy crisis, energy transition will have less priority than energy security in the near term, but not be compromised in the long term.

"Will the tension be thawed before COP27? All remains to be seen," Mo said.