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Sunday, July 02, 2017

China and International Trade in Coal Fired Power Plant Technology

The NY Times has published an interesting piece documenting that China is simultaneously promising to reduce its own GHG emissions while it is exporting its technology and providing the financing for developing countries to build new coal fired power plants.  Throughout the developing world, nations such as Pakistan have a great need for more energy and electricity.  Nations such as Pakistan promised no carbon reductions at the COP 21 Paris 2015 meetings. So, the Times shouldn't be surprised that Pakistan will be generating more power using coal.

The NY Times appears to be calling China a "hypocrite" that it is talking a "green game" at home while continuing to contribute to the global climate change challenge.  I think this is unfair.  In truth, as we argue in this 2017 paper and in our 2016 book,  China has strong incentives to reduce its local air pollution. The leadership is aware that coal power and coal burning greatly elevates local air pollution.  This desire to improve the health of its own people (combined with rising per-capita income) fuels a desire to move up the energy ladder to cleaner fuels such as natural gas and renewables.  The U.S and Europe have followed a similar path as they developed.  

Poorer nations need energy and they need cheap energy.  Coal power offers this mix. Of course, this exacerbates the challenge of climate change.  A more nuanced point that the New York Times could make relates to general equilibrium. At the same time that China's Own GHG emissions may start to decline, its actions may help to raise GHG emissions in other nations as it trades technology with these nations (such as Pakistan).   We must avoid double counting here.  If Pakistan's GHG emissions rise because  it imports coal power plant technology from China, do you point a finger at Pakistan or China? Is the New York Times now opposed to international trade? Or is it opposed to trade in "dirty goods" and "dirty technologies"?  Would the New York Times really prefer that Pakistan not use coal power?  Yes, there are social costs associated with LDC coal use but there are also benefits.  The New York Times is implicitly assuming that LDC nations such as Pakistan could have the same benefits from energy and impose fewer social costs if they used cleaner fuels and renewables rather than coal. Is this "free lunch" true?