ChinaDialogue: Latest responses to France and the ecological new deal

Response to Wang Tao

Sun, 20 Jan 2008 09:31:41 -0500

Wang Tao: I would like to clarify a couple of issues you raised related to my paper. The fact is that the largest single source of FDI to mainland China is not OECD countries, but Hong Kong, which accounts for about 1/3 of FDI (other major non-OECD sources are Taiwan and Singapore, as well as the tax havens BVI and Cayman Islands. So the level of standards in these countries affect the quality of their FDI, in the absence of stricter requirements in China. As I point out, ambitious domestic environmental regulations and/or enforcement by Chinese authorities are lacking. On that point, it appears that multi-nationals are held to a higher standard than domestic enterprises in some cases, simply because they must comply to retain their "license to operate". Unfortunately, you did not pick up on the key thought in my paper: By opening CDM eligibility to majority foreign-owned enterprises, China would have an effective tool to ameliorate unintended negative consequences of FDI, as the added value of CERs would offer a new economic incentive for foreign investors to voluntarily go “beyond compliance.” This could be a targeted incentive to attract quality foreign investment, despite pressure to roll back preferential tax treatment and other incentives. A more in-depth look at CDM as a driver of FDI was published in the UNCTAD journal, Transnational Corporations here [pdf] Anne Arquit Niederberger Policy Solutions policy@optonline.net

Re: comment 3.

Wed, 05 Dec 2007 06:47:57 -0500

Thanks Tao Wang for your comments on mine. The challenge for all of us then is to find a 'win-win' solution to this set of issues, in order to create a better local and global environment. the Chinese people must be the main beneficiaries, but I believe such a solution is possible. could I suggest that you lay out the situation as you see it now, step by step and then we look at an overall solution? I am willing to discuss this with different groups in China, including the government, with whom I work on mine safety. Dave

A breath of fresh air

Tue, 04 Dec 2007 09:27:47 -0500

Brice Lalonde is a breath of fresh air. Thnaks dongying for doing this excellent interview. Re the CDM's in China there is such a large potential number of conversion/replacement possibilities from old (coal)plant to new that Chinese firms would not lose relative amounts of business if the CDMs wer opened up to foreign firms. In any event there could be a ratio agreed between domestic and foreign. At the moment the system works to encourage design and production of clean technologies in China itself and this is a good thing; but the scale of the use of CDM required is huge. There is too much money chasing too few projects at the moment. So this mismatch needs to be solved. We should also bear in mind that new coal plant will also help get rid of the smog (particles and other combustion gases like sulphur dioxide, not just reduce C02) and dramatically improve people's health and local environments. Dave Feickert, Energy and mine safety adviser working in China

windfall profit?

Tue, 04 Dec 2007 19:25:57 -0500

Dear Dave,thanks for your explanation. I did a bit search and found a 2006 article in a magazine named “development and cooperation” published by a German non-profit organisation “InWEnt” held similar point to you. The author, Dr. Anne Arquit Niederberger says that Chinese government has this rule with intention to ensure local development benefits. I think it is understandable. In her article she suggested that China should allow CDM project to foreign comanies “as perks for foreign investors to contribute to a sustainable development of the Chinese economy”. I agree with her. But let’s look for more information provided in her article. First, she said “Over half of export products are manufactured by foreign-invested enterprises, and export activity generates one-third of Chinese GDP. Over 70 percent of FDI in China goes to wholly foreign-owned enterprises.” So certainly foreign investments in China already have a booming business with sizable profit and the majority of investment, as well as profit goes to wholly foreign-owned enterprises without involving Chinese enterprises, I doubt China need to use revenue from CDM to make it more attractive to FDI, or would that affect FDI’s decision at all. Second, she also cited an OECD report in 2001 on the overall impacts of FDI on China’s environment. It read “a substantial fraction of FDI flows to pollution-intensive industries; multinationals’ home-country (environment) standards affect the standards they employ in their affiliate’s operations in China, and there is a tendency for investors from Asian countries, who account for the majority of FDI to China, to have lower home-country standards than OECD investors”. My question is then, if as Ambassador Brice Lalonde says that business does not go to China to avoid environmental regulations, why would these FDI in China use lower standard in China. Manufacturing in China is already much cheaper than in OECD countries due to low labour and resource cost, holding the same environment standard as in home country would still be profitable, then why not? Isn’t it because of pursuit of profit maximising? And now we know by using lower environmental standard in the investment at the first place and then upgrade them later with better technology that is already in hand, the foreign company can even get anther windfall revenue from CDM credit! I am afraid I cannot agree with that. If at this moment there are too few CDM projects with a too large potential of carbon reduction in China, why not go to the many inefficient Chinese plants help them to reduce emission and get as many CERs as allowed? Alternatively, I would agree to allow CDM for foreign joint ventures if the CER revenues can be fairly divided between foreign and domestic, and a large portion is used specifically to improve local development benefits or to help low carbon technology transfer to the domestic partner. But I am definitely opposing to open CDM to wholly foreign-owned enterprises. If interested, the article can be found at http://www.inwent.org/E+Z/content/archive-eng/03-2006/tribune_art3.html Tao WANG---Tyndall Centre for Climate Change Research & Sussex Energy Group

Two questions

Tue, 04 Dec 2007 07:38:20 -0500

1. Regarding to the energy saving light bulbs made in China, did Brice say what is the rare material that is used in the production of these bulbs? I come across any information on this before, it will be very interesting to know more. 2. What does Brice mean that only Chinese companies are eligible to use CDM, as recipient of low carbon technology and revenue? Does that mean even not for foreign joint ventures? If it is allowed for foreign owned companies, how would CDM projects then, when there is no recipient from developing countries, facilitate low carbon technology transfer? and how does this comply with CDM's initial purpose of encouraging developed countries to help developing countries reducing their emission? Tao WANG---Tyndall Centre for Climate Change Research & Sussex Energy Group