November 2009
John F. Kennedy School of Government, Harvard University

Enhancing national competitiveness to sustain economic prosperity is at the heart of concerns in both the United States and China regarding climate change policy. These two countries are the largest emitters on the planet. U.S. firms and labor unions are concerned that if the United States passes domestic climate legislation and China does not, the Chinese will have a competitive advantage in pollution-intensive technologies and products. In turn, the Chinese government believes it cannot agree to reduce its emissions while continuing to industrialize and develop economically, without technology transfer and financing from industrialized countries, especially the United States.

This paper explores the question of how to reconcile both countries’ need for economic advancement, which is increasingly intertwined, with the imperative need to reduce greenhouse gas emissions (GHGs). How technology transfer occurs in practice, and how low-GHG technology transfer specifically might occur, based on prior experience with China, are examined. Particular focus is devoted to the following questions: How could U.S. firms benefit economically from low-carbon technology transfer to China? And, how could China acquire the technologies it needs to continue its rapid progress of industrialization in a more climate-friendly manner? The paper is aimed at finding a partial solution that would be likely to bring both the United States and China into an international climate change mitigation regime. The ideas proposed herein certainly do not resolve many other important challenges, such as how to provide for adaptation assistance, or how to help least-developed countries attract support for improving energy access in a climate-friendly manner.

A “deal” is proposed in this paper, whereby all major-emitting countries, including the United States and China, agree to reduce emissions through implementation of significant, mutually agreeable, domestic emission-reduction.

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