The US/China climate agreement: 5 takeaways for business leaders

Earlier this week, the United States and China released their first joint climate agreement since 2021, reigniting the possibility of cooperation between the world’s two biggest emitters of greenhouse gasses. Full of promising language but light on specifics, the so-called “Sunnylands Statement” renews superpower cooperation, at least potentially, heading into COP 28 in Dubai. 

The agreement represents “more of a political gesture of positive intent rather than an action plan,” said Taylah Bland, senior program officer for the China Climate Hub at Asia Society Policy Institute. “The Sunnylands Statement serves as a signal that engagement on the issue of climate change between both parties has resumed and is on the right path.”

Here’s a breakdown of what business leaders should know, and expect, from the new agreement.   

• The agreement says nothing about phasing out fossil fuel demand. That means that Western companies hoping to reduce their Scope 3 emissions, and reliant on China for their raw materials and supply chains, must look elsewhere for meaningful reductions in fossil fuel burning in China, which continues to rely heavily on coal, for its power generation.
• The transition to renewable energy is set to accelerate. Both countries agreed to pursue efforts to triple renewable energy capacity by 2030. They also plan to restart the U.S.-China Energy Efficiency Forum to “deepen policy exchanges on energy-saving and carbon-reducing solutions in key areas including industry, buildings, transportation, and equipment.” Lastly, both China and the U.S. aim to advance the development of at least five, large scale CCUS projects by 2030, including direct point capture from industrial and power generation sources — meaning that big utilities, and the companies reliant upon them, may benefit from the controversial nature of CCUS and prolong the lifetime of big natural gas plants and carbon-intensive industrial processes. 
• Tackling plastic pollution will require developing the circular economy. One of the shorter sections in the agreement, both countries said that they are “determined to end plastic pollution,” a timely declaration given both parties’ current engagement in the negotiations for a Global Plastics Treaty in Kenya. Both countries have mostly been silent or inactive on reducing their use of plastics in their products and on instituting meaningful plastic recycling programs. If national governments pass stringent regulations that may have to change.  
• Methane reduction is finally getting the spotlight. Methane is a short-lived, highly potent and often overlooked greenhouse gas, and the vast U.S. livestock and agriculture systems produce copious amounts of it. Various efforts are underway to tackle methane emissions, but large ranchers and farmers have mostly been able to avoid the public outcry that besets Big Oil. The agreement clarifies that both the U.S. and China will engage in methane reduction policy dialogues moving forward, including technical exchanges. The statement also promotes “the deployment of technologies to enhance synergy of controlling GHG emissions and air pollutants, including NOx, VOCs, and other tropospheric ozone precursors.” The U.S. and China also agreed to host a Methane and Non-CO2 Greenhouse Gases Summit at COP28.  
• COP28 just got some tailwinds. Both countries recommitted to the goals of the Paris Agreement, a step that some see as an indicator for the prospects of significant action at the upcoming climate conference. Big U.S. corporate executives have long looked to multinational agreements and international forums such as COP for guideposts and tools for tackling climate change — expectations that have often gone unmet. With the governments of China and the U.S., which often clash in other areas, shaking hands on climate action, international cooperation has entered a new era.    

The Sunnylands agreement establishes a runway for future collaborations. 

“The joint statement by both climate envoys provides a strong platform for both Xi and Biden to further engage in proactive discussion,” said Bland, “and potentially lead to further statement or more specific actions to be taken as we approach COP28 and beyond.”