the distortions associated with fossil fuel subsidies and the impacts associated with carbon
leakage are concerned.
Given the political importance of managing
the transition to a market-led economy and
slower but higher quality economic growth at
home, policy support for measures to disclose
climate-related financial risks and develop
effective carbon pricing mechanisms are well
aligned with China’s strategic priorities.
7.1.2 Outcome
The targeted outcome is a global market risk
disclosure structure and carbon pricing mechanisms that optimally allocate capital across all
aspects of the global energy system, maintaining
energy security while achieving the goals of the
Paris Agreement.
To achieve such an outcome China could
adopt two distinct strategic governance
pathways:
(1) collaborate with G20 states to support the
development, adoption and implementation
of FSB TCFD energy sector recommendations, and;
(2) support the phase-out of fossil fuel subsidies
and establish carbon pricing mechanisms that
are fit for a low-carbon, energy-secure
system.
7.1.3 Using the G20 and Other
Multilateral Platforms
to Drive Reform
Given that the TCFD was established by the
Financial Stability Board, whose board members
include the central bankers of all G20 major
economies, the G20 is well placed to drive further development and adoption of TCFD recommendations. Further, while the commitment to
fossil fuel subsidy phase-down wasn’t reaffirmed
at the G20 2017 Hamburg meeting, the G20 has
been pivotal in global subsidy reform since 2009.
China could therefore use the experience of G20
to drive reforms in partnership with other leading
G20 economies.
There is currently no single institutional or
organisational home for the governance and
coordination of carbon pricing. However, China
could work with several multilateral organisations to expand the effectiveness of carbon pricing, such as at the UNFCCC on transferable
allowances, the EU and the Carbon Pricing
Leadership Coalition on linking and carbon
clubs, or with the WTO on border adjustment
measures.
7.1.4 Rationale for Action
In the case of China, greater transparency of
capital markets may help foster confidence in
foreign investors. More broadly, as a major
energy consumer, China will benefit from optimal capital allocation in the energy sector
through the transition, which would help avoid
possible supply crunches that may result from
investors failing to appreciate transition risks and
investment requirements. Finally, as a
carbon-pricer, China has an interest in international carbon pricing to avoid damaging the
competitiveness of its heavy industries.
From the perspective of China’s partners,
Chinese-state backing of TCFD recommendations, fossil fuel subsidy reform, and the establishment of effective carbon price mechanisms
will all help stimulate development and implementation. Further, China’s partners will benefit
from an equalisation between increasingly
penalised OECD carbon-intensive sectors and the
competitive advantage of Chinese carbonintensive exports.
7.1.5 Strategic Pathways
(1) G20 states support development, adoption
and implementation of FSB TCFD
recommendations
Developing and adopting the TCFD framework
could be achieved by China working with G20
member states and future Chairs to establish a trilateral working group under the G20 process. This
could bring together the Financial Stability Board
(FSB), the G20 Energy Ministerial and energy
sector participants in the Business 20 dialogue,
with a view to unlocking some of the challenges of
TCFD development and implementation. In the
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W. Jigang and P. Webb
leakage are concerned.
Given the political importance of managing
the transition to a market-led economy and
slower but higher quality economic growth at
home, policy support for measures to disclose
climate-related financial risks and develop
effective carbon pricing mechanisms are well
aligned with China’s strategic priorities.
7.1.2 Outcome
The targeted outcome is a global market risk
disclosure structure and carbon pricing mechanisms that optimally allocate capital across all
aspects of the global energy system, maintaining
energy security while achieving the goals of the
Paris Agreement.
To achieve such an outcome China could
adopt two distinct strategic governance
pathways:
(1) collaborate with G20 states to support the
development, adoption and implementation
of FSB TCFD energy sector recommendations, and;
(2) support the phase-out of fossil fuel subsidies
and establish carbon pricing mechanisms that
are fit for a low-carbon, energy-secure
system.
7.1.3 Using the G20 and Other
Multilateral Platforms
to Drive Reform
Given that the TCFD was established by the
Financial Stability Board, whose board members
include the central bankers of all G20 major
economies, the G20 is well placed to drive further development and adoption of TCFD recommendations. Further, while the commitment to
fossil fuel subsidy phase-down wasn’t reaffirmed
at the G20 2017 Hamburg meeting, the G20 has
been pivotal in global subsidy reform since 2009.
China could therefore use the experience of G20
to drive reforms in partnership with other leading
G20 economies.
There is currently no single institutional or
organisational home for the governance and
coordination of carbon pricing. However, China
could work with several multilateral organisations to expand the effectiveness of carbon pricing, such as at the UNFCCC on transferable
allowances, the EU and the Carbon Pricing
Leadership Coalition on linking and carbon
clubs, or with the WTO on border adjustment
measures.
7.1.4 Rationale for Action
In the case of China, greater transparency of
capital markets may help foster confidence in
foreign investors. More broadly, as a major
energy consumer, China will benefit from optimal capital allocation in the energy sector
through the transition, which would help avoid
possible supply crunches that may result from
investors failing to appreciate transition risks and
investment requirements. Finally, as a
carbon-pricer, China has an interest in international carbon pricing to avoid damaging the
competitiveness of its heavy industries.
From the perspective of China’s partners,
Chinese-state backing of TCFD recommendations, fossil fuel subsidy reform, and the establishment of effective carbon price mechanisms
will all help stimulate development and implementation. Further, China’s partners will benefit
from an equalisation between increasingly
penalised OECD carbon-intensive sectors and the
competitive advantage of Chinese carbonintensive exports.
7.1.5 Strategic Pathways
(1) G20 states support development, adoption
and implementation of FSB TCFD
recommendations
Developing and adopting the TCFD framework
could be achieved by China working with G20
member states and future Chairs to establish a trilateral working group under the G20 process. This
could bring together the Financial Stability Board
(FSB), the G20 Energy Ministerial and energy
sector participants in the Business 20 dialogue,
with a view to unlocking some of the challenges of
TCFD development and implementation. In the
644
W. Jigang and P. Webb