After the pandemic, the global economy has gradually recovered. But the economic recovery is not as rapid as we imagined; it is also showing signs of slowing down. For low-income countries, the global rollout of vaccines is still too slow. Additionally, the entire supply chain process was congested. We are currently at a turning point in the global economy, with supply chains and supply sides constrained by the pandemic, and inflation issues are all issues we must face. This is different from the situation after the 2008 financial crisis. Previously, problems arose in financial regulation, but now many transformation issues are emerging simultaneously, which indeed requires our close attention.

The economic transformation is mainly focused on several aspects. Globally, the economic focus is shifting toward Asia, especially China. Although India's economy developed about 15 years behind China's, it is catching up. Moreover, technology is largely interconnected, and information and communication technology is helping us solve many problems. Biomedical science is advancing rapidly, the medical field is constantly innovating, and the energy sector is transforming to address climate change. Low-cost, powerful technologies are emerging more frequently, not only driving social progress but also helping us realize more possibilities.

In 2018, global carbon dioxide emissions reached 36 billion tons, calculated based on production and growth levels. In the 1970s, global carbon dioxide emissions were 14 billion tons, much lower than today.

China's economy is large and has high carbon emissions. India still cannot compare with China in terms of emissions; its economy is much smaller, and only its population is comparable to China's.

If we look at the major carbon-emitting economies in the world (Figure 1), China currently ranks first with 10.2%, the United States 5.3%, and India 2.6%. About 70% of global carbon emissions come from the top seven economies (China, the United States, the European Union, Canada, Mexico, India, and Japan).

After the 26th United Nations Climate Change Conference (COP26), we hope to see multidimensional cooperation among countries, as well as commitments and concrete actions from each country. If these major emitters do not take action and lack cooperation among themselves, no matter how hard we try, the results will be minimal.

Figure 1: Carbon emissions by country around the world

Many people wonder how to reduce the annual emissions of 35 to 40 billion tons. This is a challenge in itself, but we still face an even greater resistance. The global economy is expected to maintain an annual growth rate of 3% and continue to grow for decades, with economies like China rapidly transitioning toward developed and high-income countries. Therefore, how to control carbon emissions amid rapid economic development is a bigger issue. Under what conditions can the temperature rise be controlled within 1.5 degrees? Some have calculated that if warming is controlled within 1.5 degrees, annual carbon emissions should be limited to 14 billion tons. By 2050, carbon investment in major global economies must also decrease by 7% annually. At the same time, it requires about $3 to 3.5 trillion in global investment annually, with the public and private sectors accounting for roughly 50%-50%. How to achieve more carbon reductions through public-private partnerships is a major challenge.

Middle-income countries are a powerful driving force, but after the pandemic, many countries have struggled, with much of the compressed disposable income in public finances, which has had a profound impact on cooperation between developed and middle-income countries.

Energy prices are now rising rapidly. To address this challenge, it is necessary to promote a green economy, which requires a series of mechanisms, plans, and pathways, such as further expanding sources of non-carbon energy and improving energy efficiency, especially as urbanization and construction progressively develop over the next 30-40 years, with a focus on developing these technologies. On the other hand, we need carbon capture and carbon cleaning technologies. But these will still take decades to achieve. At the same time, we should also develop plans for carbon energy, which of course does not mean we will stop using carbon energy. If these two are unbalanced, it will lead to economic turmoil, and now this trend is already emerging.

This situation made everyone uneasy. We hope people will pay attention to finding ways to replace traditional fossil fuels as the economy continues to develop. Without alternatives, our current approach is neither balanced nor ideal, so a more suitable solution is necessary.

In the energy transition process, major transformations are always disruptive. For example, employment may decline, or you may suffer losses during the process. To ensure the transformation succeeds, we should focus on income distribution. During this process, we should seek some financial support mechanisms to cushion the impact of these transformations; otherwise, it will trigger public resistance. The public and private sectors must take on these responsibilities and work together.

This summer, climate disasters have occurred frequently and have wide coverage. In July this year, floods and hurricane disasters basically covered the entire globe (see Figure 2). The climate change report released by the United Nations Intergovernmental Panel on Climate Change (IPCC) also addresses these issues, emphasizing that we must prevent climate change from escalating into a greater disaster.

Before carbon trading emerged, there were successful trades of environmentally harmful substances, such as sulfur dioxide. Sulfur dioxide is a source of acid rain, and establishing an emissions pricing system for it is very effective. In contrast, ozone is different; it is directly regulated through international agreements. CO2 and other greenhouse gases are more difficult to trade for two reasons: first, there are more and more complex sources of CO2 emissions; Second, monitoring and measuring greenhouse gas emissions is difficult. However, promoting carbon trading does not require covering all emission sources. China has already launched a carbon emissions trading system, the United States has a California trading system, and the EU has a more mature carbon trading system—all of which are signs of progress in carbon trading.

Here, I emphasize a mandatory system. First, we must price our carbon prices. Carbon trading is actually the best way because it can turn economic incentives into value, enabling us to achieve goals aligned with desired economic behavior and sustainable growth.

Carbon prices are market prices and actually reflect the marginal cost of reducing carbon dioxide emissions. The carbon trading system can reduce and minimize emission reduction costs, forcing high-emission companies to purchase carbon emission permits, thereby achieving price and cost balance. A carbon tax cannot achieve this; it lacks a mechanism to ensure that emission reductions are made in low-cost areas.

Carbon trading also creates a level playing field, especially in technologies for economically utilizing carbon, encouraging technological innovation and progress, thereby helping us achieve a green economy. Compared to traditional technologies, new technologies must have a level playing field, and we are already working toward and making progress in this direction.

Figure 2: Distribution map of flood disasters from January to July 2021

From an international perspective, carbon reduction cooperation is extremely difficult. If carbon trading systems can be combined under reasonable pricing and coverage, we can establish an international carbon market. China aims to reach carbon peak within the next 10 years, which is feasible. However, India cannot reach this target before 2030. Some important mechanisms require our attention, such as how to fairly allocate the global carbon budget, since carbon budgets span time, space, and borders. Developed countries will achieve carbon neutrality by 2050, and what happens between now and 2030 is crucial. Some major countries, including China, have also made very clear commitments: China's carbon neutrality by 2060 is feasible, and India's commitment to achieve carbon neutrality by 2070. Every country has its own rhythm and timing, and that's understandable.

Globally, whether at the micro or macro level, cross-border technology transfer is necessary. I want to emphasize here that cross-border transfer of accessible technology is crucial, as it directly affects whether success in temperature control can be achieved in the future.

We already have some very powerful tools in hand, some of which have actually existed for a while, and these tools are quite affordable—at least much cheaper than before. For example, wind and solar power are now priced at one-fifth of what they used to be (see Figure 3). Alternative energy sources to fossil fuels already exist, and these are capital-intensive. At the very beginning, the investment required was quite substantial, especially for poor countries.

Figure 3 Solar Cost Schematic (2010–present)

We can also look at the semiconductor field, which is not an entirely unrelated topic. Because this involves technology, such as IoT automation, semi-automation tools, heating tools, and so on, these technologies are becoming increasingly affordable. Do you still remember the prices and sizes of semiconductor chips ten years ago? What is the price of chips around 8mm? Currently, phones use 5nm chips, and in a few years we'll have 3nm chips (see Figure 4).

Figure 4: Schematic of chip specifications

There are also agricultural sectors and biotechnology that already have such technologies, giving us more security in food production and food supply than before. Google uses artificial intelligence to construct 3D protein structures, enabling us to predict three-dimensional protein structures with great accuracy, laying a solid foundation for research in biopharmaceuticals, biomedicine, and vaccines. When discussing carbon peaking and carbon neutrality, seeing other industries develop rapidly, I remain relatively optimistic and positive. I am now more optimistic than before because I see commitments from many countries and cooperation among many companies in this area.

(This article is compiled from live speech records and PPT presentations and has not been reviewed by the speaker.) ）

Compiled by:

Liu Jingyi is a policy researcher at the Urban Development and Land Policy Research Center of Peking University-Lincoln Institute