Energy and Climate Policy

This blog post is adapted from a new discussion paper from the Energy Security and Climate Change Program: “Applying Blockchain Technology to the Electric Power Sector.” 

This post is about a new book, “Digital Decarbonization: Promoting Digital Innovations to Advance Clean Energy Systems,” edited by Varun Sivaram. It is available as a paperback or e-book on Amazon, and you can also download a free PDF copy here. Digitalization is all the rage in energy circles. The International Energy Agency published a major report last year proclaiming that the global energy system was on the cusp of a new, digital era. And indeed, advances in artificial intelligence and computing power, the falling cost of digital equipment such as sensors, and the connectivity provided by the Internet are transforming the way energy is produced, transported, and consumed. Many cheer on these trends because of the potential for digital innovations to make energy systems cleaner and more efficient. But digitalization is not inherently clean. That’s a prominent theme in a new CFR book published today, Digital Decarbonization, which features an all-star lineup of thirteen expert authors, ranging from university professors to corporate executives to the energy czar of New York state. The authors highlight the dramatic potential for digital innovations, from self-driving cars to smarter grids, to reduce energy-related greenhouse gas emissions. But they also warn that digital technologies could instead increase emissions by making it easier to obtain and use fossil fuels. Listed below are the diverse topics the book covers (and if you’re looking for Cliffs Notes, my introductory chapter to the book offers a sneak preview into each of the subsequent chapters): PART I: THE DIGITAL WAVE OF CLEAN ENERGY INNOVATION Stephen D. Comello, (Stanford University) “Trends in Early-Stage Financing for Clean Energy Innovation” David G. Victor (University of California, San Diego), “Digitalization: An Equal Opportunity Wave of Energy Innovation” PART II: DIGITAL OPPORTUNITIES IN ELECTRIC POWER, TRANSPORTATION, AND DATA SCIENCE Lidija Sekaric (Siemens), A Survey of Digital Innovations for a Decentralized and Transactive Electric Power System Ben Hertz-Shargel (EnergyHub), How Distribution Energy Markets Could Enable a Lean and Reliable Power System Peter Fox-Penner (Energy Impact Partners), The Implications of Vehicle Electrification and Autonomy for Global Decarbonization Rohit T. Aggarwala (Sidewalk Labs), Autonomous Vehicles and Cities: Expectations, Uncertainties, and Policy Choices Kyle Bradbury (Duke University), How Data Science Can Enable the Evolution of Energy Systems Sunil Garg (Uptake Technologies), Applying Data Science to Promote Renewable Energy PART III: MANAGING THE RISKS OF DIGITAL INNOVATIONS Erfan Ibrahim (Bit Bazaar), Managing the Cybersecurity Risks of an Increasingly Digital Power System Jesse Scott (Eurogas), Managing the Economic and Privacy Risks Arising From Digital Innovations in Energy PART IV: POLICY RECOMMENDATIONS Richard Kauffman and John O’Leary (Office of the Governor of New York), How State-Level Regulatory Reform Can Enable the Digital Grid of the Future Hiang Kwee Ho (Nanyang Technological University, Singapore), Lessons from Singapore’s Approach to Developing Clean and Digital Energy Systems Digital innovations stand out against the landscape of clean energy innovation. Whereas technologies such as advanced nuclear reactors, next-generation batteries, and new projects to capture and store carbon dioxide all struggle to raise private funding, digital technologies in energy are successfully attracting a new wave of venture capital investment in cleantech (figure 1; credit: Stephen Comello). So unlike other technology areas, where policymakers must seek to stimulate investments in innovation, policymakers face a different challenge when it comes to digital innovations. Here, policymakers need to harness these technologies –which the private sector is already funding—to reduce, rather than raise, carbon emissions and mitigate risks such as those of cyberattacks and privacy breaches. To find out more on how exactly to do so, I hope you’ll download a copy of Digital Decarbonization. Digitalization presents a rare opportunity to rapidly transform energy systems that are tend to be frustratingly slow to change. Making sure that the changes we do get advance an ultimate goal of decarbonization couldn’t be more important.

This is a guest post by David R. Mares, the Institute of the Americas chair for Inter-American Affairs and professor for political science at the University of California San Diego and the Baker Institute scholar for Latin American energy studies at the James A. Baker III Institute for Public Policy at Rice University. Mexico’s energy reform has taken important first steps but to come to full fruition, several additional critical reforms remain to be designed and implemented, including another constitutional reform. The task of adopting and implementing new reforms is all the more difficult because not only did the government of Enrique Peña Nieto oversell the short-run benefits of the package of reforms, including energy, adopted at the beginning of his term but also his administration is linked with other, broader political failures, including corruption scandals and the mishandling of the economy. Peña Nieto’s missteps have wrested credibility from the political system and make it unlikely that a mainstream candidate could put together a governing coalition with sufficient political support to adopt the next stage in Mexico’s energy reform. That’s why a political outsider would be more uniquely positioned to further energy reform, should that be a credible political choice. Once Andrés Manuel López Obrador (AMLO) wins the election, he could have the credibility to put together a coalition with the support of the Mexican people that could justify the next stage in Mexico’s energy reform.  Whether he will do so remains an open question, but the next stage of the energy reform is unlikely to happen without him. Stage III of the Mexican Energy Reform The first stage of the energy reform in Mexico was President Calderon’s 2008 reform that was designed to strengthen Pemex without breaking Pemex’s monopoly position. After a fractious national debate, the reform was adopted because it was promised it would make Pemex an effective national oil company. The failure of that reform led to stage two in Mexico’s energy reform, which was the constitutional reform instituted under President Peña Nieto. This constitutional reform was intended to make Mexico’s energy sector more efficient and able to meet the power, gas and oil needs of a growing economy, with a small nod to generating more clean energy. By design, it allowed Pemex to lead the process by permitting the national oil company (NOC) to select the best properties for its own exploitation in Round Zero before opening the bidding process to companies other than Pemex. The first auctions for oil and gas blocks did not go well, partly due to falling oil prices and partly because terms reflected Mexico’s relative inexperience with auctions. However, more recent auctions have gone extremely well. Foreign capital has committed to investment over the life of their contracts of almost $150 billion, and some new fields have already been discovered. Winning bids including seventy-three companies from twenty countries attest to the interest in Mexico’s energy future. There’s been less success in developing the infrastructure to get new energy and more imported energy to end users and the government has not solved the theft from Pemex oil pipelines or Pemex’s CAPEX and its pension liabilities. Given Pemex’s dominant position, the company needs to develop a better business model. To generate capital, it needs to take the steps taken in Brazil, Colombia, authorized in Peru, and maintained in Argentina after the renationalization of YPF: privatize some stock in the NOC. The sale of the stock would require a constitutional amendment, but would not put Pemex in the hands of private equity holders and its stock price would provide a basis for evaluating how well Pemex was reforming. The government and Pemex have already modified the weight of the Petroleum Workers’ Union on Pemex’s governing structure and balance sheet, but the pension obligations that were made with Pemex need to be restructured and funded through other mechanisms. Building a New Political Coalition for Energy Reform While these necessary reforms have a technocratic nature, they cannot be adopted by technocrats or political leaders by simple decree. The first two stages of Mexico’s energy reforms rested on the backs of strong political coalitions behind them. The next stage will also require a political coalition. Unfortunately, the political system that generated the first two reforms has been discredited in the eyes of the Mexican people by actions both within and outside the energy sector. The clearest sign of disappointment with the process is AMLO’s widely expected victory in a few weeks. AMLO represents a new political coalition. López Obrador will need to convince that new coalition that when his government continues to attract private capital into Mexico’s energy sector, the benefits of a strong and efficient energy sector will benefit the Mexican people and not go into the hands of corrupt officials or the economic elite. His restructuring of Pemex needs to emphasize that the company is a means to promote the country’s interests in a rejuvenated energy sector, not to benefit oil workers and the PRI party at the expense of Mexican society. So What Will AMLO Do? The three pillars of the Mexican economy over the past decades have been manufactured exports under NAFTA, remittances from Mexican migrants to the United States, and oil exports. AMLO has an ambitious agenda for generating public goods as well as rewarding the groups who supported his victory. The income earned from manufactured exports under NAFTA will likely stagnate, if not actually decrease, even if NAFTA is successively renegotiated, and could decrease more substantially if NAFTA is terminated. Remittances have probably peaked because Mexico’s demographics and growing economy result in fewer Mexicans going to the United States for work; U.S. policy will likely enhance that decline. Oil exports have fallen as reserves and production have been falling, and it will take up to ten years for significant new reserves to be discovered and produced. Those efforts will require companies following through on their promised investments as well as new investment.  AMLO will need an energy sector that generates revenue during his six-year term and credibly paves the way for greater future benefits that will be distributed to the Mexican people. Such nationalist messages could strengthen his political coalition as he implements his reforms of what has become an illegitimate political system. AMLO’s political discourse radicalized when López Obrador and half the Mexico electorate believed that he had been deprived of previous presidential election victories in the extremely close and controversial election in 2006 and a close second in 2012. But when López Obrador was mayor of Mexico City from 2000-2005 he was pragmatic, worked with the private sector, and was perceived as an effective leader. Analysts say lack of technology and funds required to modernize Mexico’s oil sector could lead to an additional output plunge of 700,000 b/d by 2020, unless the next administration takes some definitive action. Output is expected to rebound slightly this year and is currently averaging 1.9 million b/d, down roughly 5 to 10 percent from 2017. Pemex is targeting 1.95 million b/d for 2018. Pemex’s natural gas production has also been declining, and fuel theft has plagued the country’s refining sector. López Obrador has said he will not seek a constitutional change to reverse the 2014 energy reform and will respect the legitimate contracts signed under the reform. There is hope that AMLO can be like President Lenín Moreno of Ecuador and implement reforms from the left with a significant role for the private sector. Will AMLO take this path? We won’t know until he begins to govern, but the Mexican economy and the Mexican people need him to enact reforms that allow Mexico to reap the benefits produced by their energy sector.

During last week’s international energy industry gathering in Houston, CERA Week, U.S. Secretary of Energy Rick Perry introduced a new buzzword for the Trump administration’s energy policy: “energy realism.” 

As senior officials from the Organization of Petroleum Exporting Countries (OPEC) gather in Houston for the international industry gathering CERA Week, they will be listening carefully to speeches by the CEOs of the largest U.S. independent oil companies about the prospects for the rise in U.S. production in 2018 and 2019. Likely, they won’t like what they hear. U.S. industry leaders are saying U.S. shale production could add another one million barrels per day (b/d) or more on top of already substantial increases, if oil prices remain stable. Best C-suite guesses from Texas are that a sustained $50 to $60 oil price could result in a fifteen million b/d mark for U.S. production in the 2020s, up from ten million b/d currently. U.S. shale’s capacity to surprise to the upside is likely to leave OPEC producers with some soul searching to do as they consider their strategy for the second half of the year and beyond. OPEC has received some unexpected help to make space for rising Iraqi and U.S. oil exports from the sudden collapse of Venezuela’s oil industry where workers, faint from lack of food, are abandoning their posts to emigrate or worse to sell stolen pipes and wires to make ends meet for their families. Energy Intelligence Group is reporting this week that Venezuela’s oil production has fallen to 1.4 million b/d last month, down from 1.8 million b/d just last autumn. But ironically, a further collapse of Venezuela’s oil industry could make OPEC’s deliberations harder, not easier, if it ruptures the conviction of the current output reduction sharing coalition. If too many Venezuelan oil workers abandon their posts at once out of desperation, the country’s fate could more closely mirror Iran in 1979 when a crippling oil worker’s strike brought Iranian oil exports to zero and rendered the Shah’s rule untenable. The U.S. also continues to mull additional sanctions against Venezuela, including oil trade related restrictions, to pressure Caracas to restore democratic processes inside its borders. Trading with state owned PDVSA is becoming more difficult but Venezuela has been using U.S. tight oil as a diluent for its heavy oil. Historically, during many past oil disruptions, OPEC’s Arab members like Saudi Arabia and Kuwait have increased exports to prevent oil prices from skyrocketing. Kuwait especially is likely to argue that will be necessary to keep oil prices from going too high since it is keenly aware that the high prices of the early 2010s were exactly what stimulated the very U.S. shale oil investment and energy efficiency technologies that are plaguing the long run outlook for OPEC oil today. Studies on how digitization of mobility can eliminate oil use has led many organizations, including some large oil companies, to speculate that oil demand could peak sometime after 2030. The argument that the OPEC cuts need to be abandoned sooner rather than later could also sit well with Russia’s oil oligarchs who have been unhappy to see continued cooperation with OPEC that has left some one to two million b/d of potential Russian projects on hold. But Saudi Arabia could worry that a premature relaxing of the “super” OPEC coalition agreement could bring prices lower than the $70 it is targeting to keep its domestic spending on track and to position state oil firm Saudi Aramco for a successful five percent initial public offering (IPO) sale. It has been seeking a long lasting condominium with Russia to prevent a return to destabilizing competition for market share. Expanding U.S. exports have eaten away at Mideast sales to Asia. Russia is also looking to sell more oil and gas eastwards. All this leaves OPEC (and its partnership with Russia) in a quandary. Traditionally, OPEC’s Gulf cooperation council members, Saudi Arabia, Kuwait and the United Arab Emirates have made extra investments to carry spare capacity to respond to sudden supply shocks and/or to punish usurpers who could challenge OPEC for market share. But in the age of U.S. oil abundance, OPEC’s Gulf members are questioning whether this approach continues to make sense. In a world where peak oil demand is being mooted, will “the shareholder” (eg ruling royal governments) order national oil companies to spend billions of dollars to develop new spare capacity, even if it could not be needed? But if producers fail to make those investments and oil prices ratchet up to extremely lofty levels, can that propel a faster acceleration to low carbon electric cars, shared mobility services, and oil saving devices, hurting those very same oil producers even more harshly in the long run? China is clearly positioning itself to take advantage of such an eventuality with a multi-trillion dollar industrial export policy for renewables and clean tech of its own making. The overall uncertain situation has led to some incoherent commentary by OPEC leaders. On the one hand, some leaders talk about the global oil field three percent decline rate in near hysterical terms as potentially leading to an epic supply crisis in the coming years. They cite this risk as a reason to keep oil prices high. On the other hand, even as they sound that alarm, they are not willing to bet with their own pocketbooks on making major investments to plug that supposed hole. The alternative option for OPEC to restart the price war seems equally toothless, especially if those flooding the market do not appear to be able to survive the sustained revenue drop to make it an effective threat. Citi projects that even with expected declines in production in certain non-OPEC producing countries, continued increases from Brazil, Canada, Africa, and global natural gas liquids will overwhelm losses elsewhere, even without a higher than expected contribution from U.S. shale, assuming geopolitical events don’t create an unexpected cutoff of a major producer. It is in this context of confusion that the United States needs to consider the dangers of altering a suite of energy policies that are working. The United States is well positioned to supply individual U.S. refiners with heavy crude from the Strategic Petroleum Reserve (SPR), should it find that new sanctions or internal strife means those refiners have to abandon Venezuelan heavy oil imports. In other words, the SPR is not superfluous. Corporate efficiency standards for U.S. cars help constrain U.S. domestic oil use, freeing up U.S. refined products and crude oil for export and enhancing the role of U.S. energy production to constrain OPEC and Russian market power. Free trade agreements with Canada and Mexico are ensuring a strong nearby pipeline market for rising U.S. surpluses of natural gas. U.S. assistance for its clean tech industry prevents China from monopolizing benefits that can come to an economy when higher oil prices prompt countries to shift more quickly to energy saving technologies and renewable energy. The Trump administration needs to slow down in busting with tradition when it comes to energy. Some of the tried and true policies of the past are contributing to this administration’s mantra of energy dominance. They need to focus on the old saying “If it ain’t broken, don’t fix it.”

This post is co-written by Joan Ogden, professor of environmental science and policy at UC Davis and director of the Sustainable Transportation Energy Pathways (STEPS) program at the campus’ Institute of Transportation Studies. The United Kingdom is moving forward with a novel plan to lower carbon emissions in home heating by injecting low carbon hydrogen into the country’s natural gas grid. National Grid’s Cadent Gas and Northern Gas Networks, together with Keele University, have been studying how to safely add hydrogen (H2) to natural gas residential networks to clean up the country's heating sector which constitutes a fifth of the U.K.’s total carbon emissions. The pilot, if successful, would put more teeth behind the idea of natural gas as a bridge to lower carbon substitutes. However, there are many technical barriers to the practice that could be more than meets the eye. Hydrogen embrittles many of the steels used for natural gas pipelines, creating the potential for dangerous leaks. Some sections of the U.K. system already have advanced materials more suitable for hydrogen transport but adjusting end-use appliances to be hydrogen blend ready still needs to be done. The current hydrogen blending pilot will begin with safety work in 130 homes and businesses in a limited geography to convert appliances and avoid any dangerous leaks. Recent U.S. studies suggest that transporting a hydrogen-natural gas blend over an existing natural gas pipeline network safely is technically possible at levels between 5 to 15 percent hydrogen by volume, assuming the system in question is in top notch maintenance with no potentially dangerous cracks or leaks. Current European regulations allow between 0.1–12 percent hydrogen in natural gas lines. All analyses stress the critical importance of a case by case assessment before introducing hydrogen into a natural gas system. Officials are saying the U.K. system can specifically accommodate 20 percent given its history and materials. For residential use, U.K. officials believe some six million tons of carbon could be saved if the program could extend across the country. But blending does not necessarily enable major reductions in greenhouse gas (GHG) emissions in transport applications, unless the “green” hydrogen—that is hydrogen produced from renewable sources as opposed to chemically “reformed” from methane—can be separated from the blend and then delivered to a highly efficient fuel cell vehicle. At this juncture, our newly published survey article of the latest science shows that costs to do so are currently prohibitive. Blending into existing networks ultimately limits the scale of possible H2 fuel adoption, because of the technical constraints on the allowed hydrogen fraction. For these reasons, locations such as Germany or California that intend to make a large H2 fueling push for automobiles are likely to build out separate networks, rather than relying on upgrading existing natural gas distribution systems. Natural gas is already in wide use as a fuel for fleet vehicles, medium-duty work trucks, and short haul drayage trucks. Liquefied natural gas (LNG) is increasingly being used in long haul freight applications. By contrast, hydrogen fuel cell vehicles are just beginning to be adopted in some early adopter regional settings, mainly for light-duty passenger applications. About 5,500 hydrogen cars are on the road today. Interest in using hydrogen fuel cells for zero emission medium- and heavy-duty transport is also growing. A few dozen hydrogen fuel cell buses and work trucks are being demonstrated. California policy makers were hoping synergies between natural gas fueling infrastructure and hydrogen could ease transition costs of shifting to hydrogen to get deep cuts in transport related GHG emissions. But our work suggests that biogas could be a better fit in the coming years. We find that it is not going to be commercially rewarding to re-purpose or overbuild natural gas fueling station equipment and storage for future hydrogen use. Ultimately, a dedicated renewable hydrogen system would be needed for hydrogen to play a major role in reducing transport-related GHG emissions. In the meantime, California is investigating the benefits of greening its current truck fleets by blending cleaned up bio-methane, so called renewable natural gas, into the natural gas fueling system in the state. Injection of landfill gas would be one of the more commercial and productive alternatives, for example. However, the bio-methane resource is smaller than the future potential of hydrogen manufacturing, which has led California to continue to promote a pilot for hydrogen fuel cell vehicles and infrastructure in select markets such as Los Angeles, as one of the central pillars in its strategy toward a zero-emissions, low carbon future.

This guest post is co-authored by Joshua Busby, associate professor of public affairs at the Robert S. Strauss Center for International Security and Law at the LBJ School at the University of Texas at Austin; Sarang Shidore, a visiting scholar at the LBJ School at UT Austin; and, Xue Gao, a PhD Candidate at the LBJ School at UT Austin. This post discusses the findings in two recent papers by the authors investigating the feasibility of reducing emissions in China and India. With the current U.S. administration turning sharply against the Paris agreement and carbon mitigation actions, attention has turned to other countries to take the lead, notably China and India. The two countries have reaffirmed their commitments to the Paris agreement even as the United States has announced its intent to withdraw under President Trump. The ability of both China and India to meet or even exceed their Paris commitments will be critical to the accord’s success. However, both countries face serious barriers to reducing emissions, motivating critical inquiry into how feasible their decarbonization plans really are. From China, we have seen mixed signals in recent years. Though some reports show a sharp turn away from coal-fired power, China’s greenhouse gas emissions are projected to rise in 2017, raising questions about whether declining coal use in China was an artifact of a slow economy or faulty government data. In India, as we have written previously on this blog, the scale-up of renewable energy has begun with vigorous government support, but challenges remain. While declining prices for solar have brought it to near grid parity with coal, rock-bottom prices in solar auctions have raised concerns about low margins for developers and a potential solar bubble.   Assessing the Major Sectors One way to assess the feasibility of greenhouse gas emissions mitigation in China and India is through sectoral analysis. For both countries, we have completed separate sectoral studies in the journal Energy Research and Social Science (the China piece is free to download until January 20, the India piece is behind a paywall.  we are happy to provide readers with copies via Twitter). In the articles, we analyze the feasibility of reducing greenhouse gas emissions (GHGs) in the main sectors responsible for emissions. The figures below break down emissions by sector in each of these countries in both 2010 and 2030 (projections). We assess feasibility in two dimensions: what we call political/organizational feasibility and techno-economic feasibility. Political/organizational feasibility is underpinned by the premise that government or market fragmentation is harmful for collective action. A government with power fragmented among many different agencies or between the central government and state and local governments would have difficulty formulating and implementing coherent policy. And in an economic market where production is divided among many firms, behavioral change by any one of them would have limited impact on the overall market. By contrast, in more concentrated political institutions and more concentrated economic markets, the actions of a few policymakers and firms can have far-reaching effects on limiting greenhouse gases.   We first assessed the degree of fragmentation in the government and market spaces. Sectors where both the state and the market were fragmented were graded as low. In sectors where there was concentration, our grade was higher with some additional consideration given to the relative power balance between the government and firms. The second dimension, techno-economic feasibility, also depends on two factors. First, for each emissions-producing sector in each country, we assessed how close the technologies in use were to the cleanest and most advanced technologies available worldwide. For example, we asked if cement plants in India were as efficient as the best plants worldwide (they were close). And second, we assessed how costly it would be to upgrade the technologies in use to get to the global gold standard. If a particular sector in either China or India already used efficient technologies and it would be very expensive to upgrade them, we graded the techno-economic feasibility of reducing emissions as low. By contrast, if the technologies in use were inefficient and it would be cheap to upgrade them, we scored techno-economic feasibility as high. Other combinations yield mixed cases. In our final analysis, we evaluated the intersection of both dimensions of feasibility to make an overall judgment on the potential for greenhouse gas emissions reduction in India and China. Here are our key takeaways from both studies:   The electricity sector is a challenge in both countries. Electricity production in both China and India tends to be quite fragmented from the market standpoint and relies heavily on coal. We found that the scope for emissions mitigation in the coal sector in China was more promising than that in India, given government concentration in the largely state-owned industry. For both countries, we found that there was ample room for efficiency gains in the electricity sector, but these would likely be expensive.  In China, where the renewables sector is more established (indeed, China was projected to install an extraordinary 54 GW of solar capacity in 2017), we also found further renewables scale-up to be challenging given a more fragmented regulatory environment. While these barriers are not insurmountable, both countries will require sustained government attention and expenditure to reduce the role of coal and scale-up renewables in order to reduce emissions.   Buildings are low-hanging fruit but ironically just out of reach. In both countries, energy consumption in buildings is responsible for a significant share of emissions through electricity consumption and, in China, heating demand. The countries’ building sectors have a lot of potential for low-cost emissions reductions, and energy efficiency technology is easily available. However, in each country there are thousands of construction companies, and the state’s responsibility for regulating construction  is fragmented between the central government and state/provincial/local governments. This market and political fragmentation stymies rapid efficiency gains.   Cement and fertilizers in India are already efficient, but there is room for improvement in China. The cement and fertilizer industries already are near world efficiency standards in India, limiting the scope for further gains given current technology. Neither sector in China had achieved global efficiency standards, so there was considerable scope for further efficiency gains, though fertilizers were more expensive to reform than cement.   Steel, cement, and oil refining are the most feasible sectors for reducing emissions in China. In China, steel, cement, and oil refining were the most feasible sectors for major emissions reductions. In all three, we assess the costs of efficiency gains to be manageable. Both steel and cement markets are fragmented, but given high government concentration and power in both, we think the Chinese government is in a good position to regulate these sectors. Oil refining is a little different. Production is concentrated between state-owned companies CNPC and Sinopec. Because government policy is fragmented (hence limiting the impact of public policy), we actually found that the two companies have enormous room to make major emissions reductions if they were so inclined.   Road transport and petrochemicals appear promising in India. Road transport and petrochemicals were evaluated as the most feasible sectors in India for emissions reductions, with a range of technical interventions that were judged to be economically viable. In India, both sectors have a limited number of producers. Automotive production is both concentrated and lightly regulated with the power balance favoring a handful of automobile producers, meaning Indian car makers could potentially organize and collectively improve their efficiency standards through market-led interventions if they were so inclined. While assessing the motives of actors was beyond the scope of our study, the potential loss of market share to foreign competition might be one reason the auto industry might try to improve efficiency.   On the petrochemicals side, both government power and the market are concentrated, and powerful regulators ought to be able to improve energy efficiencies.   Road transport in China is a mixed bag. The vehicle production market is very concentrated in China. The government is fragmented but still possesses more power than producers. This limits the scope for self-regulation by auto companies, but the government lacks the capacity to issue coherent policies. That said, many interventions in this space are reasonably inexpensive. The sector could improve efficiency potentially through centralization of government regulation or more liberalization that encouraged private producers to self-organize and bring their vehicles up to global efficiency standards. China may well be trying the former with bold plans to ramp up electric vehicle production.   Addressing agriculture-related emissions tends to be difficult in both countries. There are hundreds of millions of farmers in India, many of whom are quite poor. Because they constitute the largest electoral constituency in the country, imposing costs on them through emissions mitigation actions is especially challenging. Fertilizers in China also appear to be a difficult industry to decarbonize. Fertilizer production is fragmented, the market is liberalized with limited government regulation, and the costs of policies to improve efficiency were judged to be costly.   Steel has a ways to go in India. Steel production is fragmented in India, and many of the measures to bring the sector up to international standards are expensive. Though government concentration is high, the sector has liberalized with power residing more on the market side, making efficiency gains through regulation also a challenge. The government might need to enhance its authority, particularly through tougher enforcement of efficiency standards under the so-called Perform Achieve and Trade (PAT) scheme, to be able to make gains in the steel space.   Conclusions We recognize that there are major differences between the two countries. India is an long-established federal democracy with a legacy of a strong bureaucracy, while China is an authoritarian one-party system in which the central government has further expanded its authority of late. While both face severe air quality problems, China is more industrialized but also richer and better able to invest in climate mitigation goals. Despite their differences, both countries face strong challenges of developing coherent national policy. As Elizabeth Economy and others have documented, China has long faced difficulties enforcing environmental policy at the provincial and local level, given strong preferences for economic growth. Indeed, the now classic model of Chinese governance in the reform era is called “fragmented authoritarianism.” While the Chinese government has re-centralized authority in some domains in recent years, some sectors such as fertilizers and renewables remain decentralized. For its part, India faces a similar, though perhaps magnified, problem. Some sectors are constitutionally concurrent responsibilities of both the Indian federal government and states. That complicates policy coordination. That said, the current government of Narendra Modi is the strongest in thirty years, which has enabled the Indian federal government to impose its will more decisively in a some areas, notably its ambitious effort to scale-up solar power. Even in these cases however, implementation requires state-level collaboration so the problem does not entirely go away. What these brief observations signal to us is that large countries face some common problems, and factors other than regime type may matter as much or more for whether countries can mitigate their greenhouse gases in different areas. This is one of the most important takeaways from our comparison between these two large, politically dissimilar Asian giants. In sum, we see this stylized sectoral analysis as a way to reveal the structural barriers to and opportunities for collective action and emissions mitigation. We hope that the analytic approach we have developed can help practitioners anticipate the barriers to implementation and where it might be most productive to focus policy action.          

This post is authored by Lindsay Iversen, associate director for climate and resources at the Council on Foreign Relations' Greenberg Center for Geoeconomic Studies. You can follow her on twitter @lindsayiversen. The latest UN climate summit will click into higher gear this week as senior leaders converge on Bonn, Germany. This year’s summit is not expected to have the fireworks and fanfare of Paris, where a major agreement was reached in 2015. There, 196 signatories offered national pledges outlining how they would reduce emissions and agreed a framework for increasing emissions reductions over time. Many of the specifics, such as the data countries would need to report to demonstrate progress, or what expectations would be for raising ambition, were left for future summits. It is these and other details of the Paris rulebook that negotiators are tackling in Bonn. Since President Donald Trump announced that the United States would leave the Paris accord, world leaders from Beijing to Brussels have gone out of their way to voice their commitment to the deal. But their outspoken support masks a more fragile reality. The Paris deal has barely begun. Already, warning bells are being rung about poor progress toward countries’ initial pledges and the uncomfortable fact that those pledges don’t come anywhere near to fulfilling the Paris agreement’s stated goal of keeping overall warming to 2 degrees Celsius above the historical baseline. Small, developing countries signed up for Paris because they believed major countries’ assurances that they would work hard to achieve the 2 degree limit. For committed signatories, preserving that tenuous trust is essential to the survival of the deal. How the United States behaves at the Bonn summit will be important to the deliberations and to the Paris accord’s future. Despite the fanfare with which Trump announced the U.S. exit, the United States remains a formal member of the accord until 2020. It holds leadership positions in critical working groups at the Bonn talks, and it is still a critical voice in the consensus-based negotiating structure. It will be difficult enough to reach agreement on the Paris rulebook without the United States playing the kind of constructive role it did under the Obama administration. If the United States chooses to play a negative role, it could do serious damage not just to this summit but also to the entire Paris rulemaking enterprise. This is not an idle concern; there is precedent for this sort of outcome. At a meeting of G7 health ministers that wrapped up earlier this month in Milan, the United States was a diffident participant until the last days of the meeting. It then introduced a number of new, hardline demands—striking all references to climate change in the draft communique, for instance, and refusing to endorse a clause supporting the Paris accord. The U.S. posture horrified other ministers. As one European negotiator told BuzzFeed News, “As with the rest of the G7 process, the United States didn’t engage for months. And now, just this week, they have erected a wall and came back with extreme positions.” The tactic was an effective one, however. The final communique uses the phrase climate change only once, and only as part of the proper name of the Bonn summit. Though the links between climate change and public health were ostensibly a core part of the meeting, the final communique said simply, “We acknowledge our discussions on impact of the climate and environmental-related factors on health.” There are some indications the United States will not repeat an obstructionist tone in Bonn. A controversial U.S.-sponsored side event on the benefits of coal and other fossil fuels was led by mid-level officials rather than recognizable administration figures. And, the U.S. negotiating team is led by career diplomats with experience in climate talks. The small delegation has kept a low profile so far, easing the fears of many climate hawks that the U.S. team would seek to undermine the summit, but the final outcome remains to be seen. President Trump returned this week from Asia to a Washington no less chaotic or politically toxic than the one he left. Domestic woes may leave the president anxious for a base-riling gambit. The temptation to be destructive in Bonn could be high. Supporters of the deal should do all they can to avoid that outcome, encouraging the political leadership in Washington to stay out of the fray. The president, even as he announced the U.S. withdrawal from the Paris accord, indicated that he was open to the United States returning if the terms of the deal changed. Though Bonn negotiators seem unlikely to adopt the administration’s fossil fuel-friendly domestic agenda, keeping a low profile and an open door will be beneficial to the administration if it is serious about seeking better terms in the future. That strategy avoids needlessly antagonizing diplomatic partners now and preserves options for the United States should new developments make the Paris agreement more attractive later. And, given that 71% of Americans—including 57% of Republicans—support the accord, remaining at least neutral during the Bonn talks could come in handy during the 2018 mid-term or 2020 Presidential elections. For now, barring a change in policy or a change in U.S. leadership, Paris is a deal for other countries—the signatories that have stood by their commitments and are continuing the work of bringing them to fruition. The Trump administration has repeated its assertion that it has nothing to gain from Paris and has no intention of participating in the accord as constituted. If the United States cannot be a constructive participant in the Bonn discussions, it should have the courage of its convictions and stay out of the way of others interested in doing so. It should heed the timeless medical pledge: First, do no harm.