Emerging Market Economies To Play Key Roles in Paris Agreement

Emerging market economies are expected to play key roles in the implementation of the Paris Agreement, which will set new standards for greenhouse emissions in the 177 pledged signatory countries. Some of the world’s largest emerging market economies, notably China, have seen a continued increase in emissions, given their economic and demographic growth patterns.

That said, emerging market (EM) countries will play a “crucial” role in responding to the goals set in the Paris climate agreement, according to Alex Wolf, emerging markets economist at Standard Life Investments, a global asset manager with roughly $373 billion under management. “Emissions in most developed countries have plateaued, or even begun to decline, in recent years. Major emerging economies, in particular China and India, are expected to see their emissions rise substantially.”

Mainly driven by continued and significant economic and demographic expansions, emerging economies have moved forward on a number of fronts. Success in achieving the emission reduction and global temperature limiting targets will “hinge on the ability of developing countries to balance urgent poverty reduction needs with new climate commitments,” Wolf said in a published note to clients this week.

China’s dominant role among the emerging markets and global energy consumption will undeniably move the country  to play a what could be central role in global efforts outlined in the Paris Agreement.

Published data shows that since 2006, China has been the world’s largest greenhouse gas emitter. And by 2014 China alone made up 27% of total carbon dioxide emissions worldwide–mainly due to China’s reliance on coal to meet its energy needs. Although coal consumption has likely peaked (see chart below), China alone still accounted for around 50% of total global coal consumption in 2014. Fossil fuel consumption in the country has grown rapidly over the past decade. One fact of note: While OECD energy demand in 2014 was 2.5% slower than in 2004, demand in China rose by more than 80% in that period.

Growth from China made up 59% of the increase in total energy demand growth since 2004 (see Chart 11). This sharp rise in fossil-fuel consumption has done severe damage to China’s environment, endangered public health and put them in a decisive position regarding future efforts to control emissions.

Chinese leaders today are attempting to “balance the needs of a developing economy but also understand that if energy demand continues unabated, environmental degradation could present an existential threat,” Wolf said. For this reason, he notes, China has played a what has become a more active role in climate change negotiations over the past two years. Since the climate talks in Copenhagen in 2009, where China was seen playing an “obstructionist” role, the country has reversed course and used its influential position among developing countries to push for progress on climate change, while unilaterally strengthening its domestic policies. Some positive effects are already being felt, says Wolf.

Energy demand growth in China dropped significantly in 2015, growing only 1%. More importantly, the increase in energy supply from renewables exceeded the total increase in energy demand in China. As a result, energy supply from fossil fuels fell by 1.4% in 2015, according to published data.