Win the trade war and lose the world? Why US and China need to focus on war against climate change

3 January 2019

Dr. Lin ZHANG, Assistant Professor, School of Energy and Environment, City University of Hong Kong

Win the trade war and lose the world? Why US and China need to focus on war against climate change

As scientists, we acknowledge the existence of climate change; as economists, we know the potential huge economic cost of catastrophic events. Calculating how the knowledge we accumulate every day impacts the economic cost of climate change is not an easy task.

Thanks to William Nordhaus and Paul Romer, the Nobel laureates for Economic Sciences in 2018, we can investigate how technological innovation impacts the cost of climate policies. Integrating endogenous growth into climate economic analysis shows that developing countries like China can reduce climate change mitigation costs by 90 per cent if knowledge spillover between sectors and regions is present. This figure is about 20 per cent for advanced economies like Europe and the US.

To make this happen and drive the technology transfer, helping to build the global knowledge-sharing platform and the innovative capacity of developing countries is key. Inter-governmental cooperation can help knowledge spillovers flourish and substantially lower the cost of climate mitigation.

Knowledge diffusion through international trade has played a major role in technological improvement in emerging economies. However, since US President Donald Trump began pursuing his pro-fossil-fuels agenda, efforts for climate change mitigation by the US government have taken a back seat.

To make things worse, the ongoing trade war between China and US has imposed a stringent regulation on technology transfer, and the Trump administration has long complained about the “forced technology transfer” in China. China’s efforts on climate change mitigation have been weakened to accommodate its economic burden from the trade war. It is expected that the mitigation cost will rise significantly. Both countries are seeking ways to win the trade war. But it is likely that the whole world has to pay the price, in the form of losing the climate change war.

Technology transfer, access to technology and diffusion strategies are some of the crucial elements for solving adaptation challenges. Both the US and Chinese governments must push for wider communication between their nations for the greater good. We need to win the climate change war for ourselves and for future generations.

Source: South China Morning Post (