[First published by Thomson Reuters Foundation News]

By Yang Zhong and Prajwal Baral

China has seized the opportunity of global leadership on climate change and sustainable development, thanks to leadership vacuum created by US President Donald Trump’s withdrawal from the Paris Agreement on Climate Change and utter disregard for multilateralism.

On Monday, July 16, the EU and China issued a joint statement, adopting Leaders' Statement on Climate Change and Clean Energy among others.

This is significant because the EU and China together account for almost one third of the global economy and almost 40 percent of the global green house gas emissions, with any domestic and regional climate action having global impact. China also started and led a green finance study group during its G20 presidency in 2016, which continued under German presidency in 2017 and has gained further momentum under the Argentinian presidency in 2018 in the form of sustainable finance study group.

China’s international leadership will certainly take a long time to yield measurable results.

The domestic leadership on these issues however deserves closer attention as this could translate into immediate environmental benefits in China and the surrounding region.

The Chinese government has increased its emphasis on higher quality growth instead of just economic growth, mainly because of visible environmental deterioration and burgeoning middle class that cares about environmental wellbeing more than ever before.

The investment in renewable energy in the country has already reached a record level. According to Brookings Institution, 36.6 percent of China’s total installed electric power capacity in 2017 was attributed to renewable energy.

Many energy experts in China believe that coal consumption has already peaked in the country and is surely on the decline. China’s national socio-economic blueprint - the 13^th five-year plan (2016-2020) has also prioritized overall green development.

Last year, the country released its first green development index that ranks provincial governments based on 55 different parameters ranging from air quality, carbon emissions and energy consumption efficiency to research spending. This index for the first time in Chinese history has set a path for national development that is based on environmental and social well being.

The National Development and Reform Commission (NDRC) this month has officially issued a guideline for environmental pricing that is hoped to accelerate green development on market terms as opposed to traditional command-and-control approach. For instance, an energy intensive industry will no longer receive favourable electricity prices and the regions with water shortage will be charged more for water use.

According to the UN Environment, China’s green investment needs are estimated to be between $450 billion and $600 billion per year and this is expected to grow in line with China’s GDP in the short term. The public resources alone are insufficient to meet this demand, hence market based environmental pricing is certainly a step in the right direction.

Such pricing mechanism is hoped to incentivize market participants to integrate ecological product pricing in the near future, and also encourage local authorities to adopt other forms of green policies such as compulsory renewable energy quota and carbon emission trading. Because of China’s extensive ties with the global economy, in particular through its ambitious Belt and Road Initiative (BRI), what it does at home will likely shape the global environmental well-being.

We hope that the ongoing China-US trade dispute does not act as a deterrent to exemplary leadership of China on climate and the environment.

We believe that China is not going to backtrack on its domestic environmental commitments because the country leadership and general public is already invested into building an ‘Ecological Civilization’, the Chinese aspiration of moving from good economy to quality economy by ensuring a harmony between human and nature. The stakes are already high.

Yang Zhong is Senior Manager of Strategic Cooperation at Zenity Environment, Beijing

Prajwal Baral is Managing Partner at Hornfels Group Ltd., Moscow