China and India: more cooperation than competition in energy and climate change.

Author:Siddiqi, Toufiq
Position:Sino-Indian Relations - Report
 
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Energy and climate change are two important areas in which there is much more cooperation than competition between China and India. After a few years of trying to outbid each other for oil and gas exploration and production licenses, both have found it more productive to bid jointly for many such contracts. Even though neither China nor India has agreed to limits on their emissions of greenhouse gases, both are committed to reducing the carbon intensity of their development, by 40 to 45 percent from 2005 levels by 2020 for China, and 20 to 25 percent over the same time period for India. To achieve these goals, the two countries have launched major programs to install power plants using renewable energy sources and nuclear energy, and to increase the efficiency of energy use. It is unlikely that either China or India will agree to absolute reductions in greenhouse gas emissions from their present levels soon, but they may be willing to cap them at future levels that still permit their future per capita income to become comparable to that of countries in Western Europe. At the recently concluded United Nations Climate Change Conference in Cancun, China was strongly supportive of a continuation of the Kyoto Protocol for a second commitment period, but India indicated that it may be willing to explore other approaches suggested by the United States, the EU and small island nations. Though their paths to addressing climate change may begin to differ, it is highly likely that China and India will continue to share the same strategic goal of achieving parity with the West in terms of standard of living of their populations, even if it means higher emissions for another decade or two.

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Competition for scarce natural resources has been an important determining factor in human development. Tribes of hunter-gatherers fought over land and the flora and fauna that surrounded them, and early agricultural societies that existed along rivers fought deadly conflicts over getting their share of the water. Kingdoms large and small traded or battled for iron, gold and other metals, as well as precious stones. The beginning of the Industrial Revolution in Western Europe and the input materials it required were major reasons for the expansion of colonialism.

The horrors of two world wars during the 20th century, and of a cold war that almost became hot, convinced most countries that it was better to buy commodities needed for economic development than to occupy countries militarily. This lesson was confirmed by the high cost the United States has incurred since its occupation of Iraq in 2003. The largest commodity in global trade today is energy--oil, coal and natural gas. Oil is the fossil fuel with the smallest reserves-to-production ratio. (1) Europe has been a net importer of oil for more than a hundred years. The United States lost its energy self-sufficiency and became a large importer of oil during the decade following the Second World War, and China went from being a net exporter of oil to a net importer during the 1990s. As countries around the world industrialize and become more affluent, concern is growing that there may not be enough oil at affordable prices to accommodate the development needs of these countries. China and India are by far the two most populous nations and have high rates of economic growth and energy demand. Between 1990 and 2010, the total energy used in China has almost tripled and that in India doubled during the same period. (2)

Essentially all energy sources can be used to generate electricity, provide heating and cooling for homes and offices, and run industrial processes. However, the world's transportation systems are still almost completely dependent on oil. Energy used for transportation has been growing faster than for any other use, and total oil requirements have increased faster in the BRIC countries (Brazil, Russia, India and China) than anywhere else. The growth in the number of automobiles sold in China has been so rapid that it overtook the number sold in the United States in 2009 (assisted, of course, by the decline in sales within the United States due to the economic recession). (3) Starting from a smaller base, automobile growth in India is expected to be even faster, estimated at a compound annual growth rate of 14 percent between 2009 and 2020, compared to China's estimated 6 percent during the same period. (4) A rapidly growing middle class, along with the availability of inexpensive vehicles such as the Tata Nano for less than $3,000, are expected to power this growth. The rapid growth of vehicles in China and India has led many to claim that the two countries will become strong competitors for new sources of oil. This is true mainly in the sense that all countries are competing for additional sources of oil, and countries such as China and India in which the demand for oil is growing fast and domestic supplies are inadequate are under greater pressure to do so. (5) China imported about 4.3 million barrels per day (million b/d) in 2009, and India about 2.2 million b/d. (6) Both countries now rank among the top five net oil importers in the world, along with the United States, Japan and Germany.

Most of the world's proven oil reserves are controlled by state-controlled enterprises or Western-based, politically well-connected, multinational oil companies such as Exxon, Chevron, BP and Total. As latecomers to the group of major oil importing nations, China and India have to meet much of their rising demand by signing new exploration and production agreements in less established oil producing countries, as well as making long-term supply contracts for oil and gas from traditional producers such as Saudi Arabia and the United Arab Emirates.

During the past few years, China has signed oil production or purchase agreements with Angola, Iran, Iraq and other countries. For example, it owns around 40 percent of Sudan's major oil company and Chinese companies China National Offshore Oil Corporation and Sinopec have separately bought out BP's share to take full control of Argentina's second largest oil and gas producer; they have also joined Chevron in a deepwater natural gas project off the coast of Indonesia. (7) Indian companies have discussed or signed contracts with Kazakhstan, Australia, Ghana, Iraq and Thailand, among other countries. (8)

The Industrial Revolution was based, inter alia, on the large-scale availability and use of iron and coal. America's rise as a great industrial power was based on plentiful domestic supplies of these, as well as oil. Technologies to extract oil and gas from thousands of feet underground and to transport it economically over thousands of miles by tankers and pipelines were important factors in the rise of the United States to its preeminent role in the world during the 20th century.

By the latter part of the 20th century, it had become clear that the enormous increase in the production of goods brought with it a corresponding increase in "bads," i.e., pollutants that were being dumped on land and into the rivers and oceans generating other negative externalities as a result. Some of these pollutants were related to the extraction of oil (such as the massive BP oil spill in the Gulf of Mexico in 2010), processing in refineries and transportation (e.g., the Exxon Valdez accident in the waters off Alaska). Further, radioactive wastes from nuclear facilities were simply being taken offshore and thrown into the oceans. The visible deterioration in the condition of the seas and the impact on fisheries, coral reefs and tourism finally convinced the global community to take action.

The major problem in addressing these issues was that, whereas the extraction of resources, primarily on land and in near-offshore areas, was regulated by national laws or the laws of two or three adjacent countries, waste was freely dumped into the global commons (defined here as consisting of the oceans and the atmosphere). To prevent a continuation of such activities, a number of landmark treaties and conventions were signed and ratified, though not always by all countries. These include the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, which was adopted in London in 1972 and is frequently referred to as the London Convention. A subsequent protocol was developed to amend the convention to include the ban on ocean disposal of radioactive wastes and incineration of hazardous materials at sea. (9)

The International Convention for the Prevention of Pollution from Ships was adopted in 1973 and modified by the related protocol of 1978 (commonly known as MARPOL 73/78). (10) After years of difficult negotiations, the 1982 United Nations Convention on the Law of the Sea (commonly referred to as UNCLOS III) entered into force in November 1994. Thus, while many of the problems related to the "ocean commons" are being addressed, there has not been comparable progress in tackling the problems associated with the "atmospheric commons." The crowning achievement in this area is the Montreal Protocol on Substances that Deplete the Ozone Layer, which was adopted in 1987 and subsequently amended four times, and which actually resulted in reducing the emissions of such substances. Similar international efforts to reduce the greenhouse gases that are largely responsible for global...

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