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1、China Council for International Cooperation on Environment and Development(CCICED)Secure and Green Trade:Five Recommendations for Improvingthe Security and Sustainability ofSelected Soft and Hard CommoditiesCritical to Chinese TradeCCICED Special Policy Study ReportCCICEDAugust,2023aSpecial Policy S
2、tudy MembersCo-chairs*:Craig Hanson International Co-Leader;Managing Director,Programs,World Resources InstituteYU Miaojie Chinese Leader;Deputy Secretary of the Party Committee,President and Professor,Liaoning UniversitySpecial Policy Study Members*:Anne Rosenbarger Fellow for Project POTICO in the
3、 People and Ecosystems Program,World Resources InstituteCaroline Winchester Senior Manager,Supply Chains Strategy,World Resources InstituteFU Xiaotian Director,China Food and Natural Resources Program,World Resources Institute ChinaPENG Liqing Food and Agriculture Modeler,World Resources InstituteTi
4、na Schneider Director,Forest Governance and Policy World Resources InstituteRod Taylor Global Director,Forests Program,World Resources InstituteTIAN Wei Associate Professor,School of Economics,Peking UniversityCHEN Xinyu PhD Student,National School of Development,Peking UniversityCHEN Zhuoyu PhD Stu
5、dent,National School of Development,Peking UniversityHU Qishan PhD Student,National School of Development,Peking UniversityResearch Support Team:FAN Shenggen Chair Professor and Dean,Academy of Global Food Economics and Policy,China Agricultural UniversityJIANG Haiwei Assistant Professor,School of I
6、nternational Economics and Trade,Central University of Finance and EconomicsLI Zhiyuan Deputy Director and Professor,Department of World Economics,School of Economics,Fudan UniversityMA Xiangjun Professor,Department of Economics,Liaoning University Moazzam Malik Managing Director,Global Delivery,Wor
7、ld Resources Institute Morgan Gillespy Program Director,Food and Land Use Coalition at World Resources InstitutePAN Yishan Secretary of the Party Committee and Professor,Liaoning University Tim Searchinger Senior Fellow and Technical Director,Food Program,World Resources InstituteYU Hongjun Deputy D
8、irector of School Affairs Committee,Former Executive Deputy Secretary of the Party Committee and Professor,Peking UniversityZHAO Wei Program Officer,UN Food and Agriculture Organization China OfficeZHOU Haobo Former Secretary of the Party Committee and Professor,Liaoning UniversityZHANG Yuyan Member
9、,Academic Department of the Chinese Academy of Social Sciences;Director,Institute of World Economics and PoliticsCoordinators:FU Xiaotian Director,China Food and Natural Resources Program,World Resources Institute ChinaCHEN Xinyu PhD Student,National School of Development,Peking University*The co-le
10、aders and members of this SPS serve in their personal capacities.The views and opinions expressed in this SPS report are those of the individual experts participating in the SPS Team and do not represent those of their organizations and CCICED.Table of ContentsEXECUTIVE SUMMARY d1 CONTEXT 11.1 CHINE
11、SE GOVERNMENT ASPIRATIONS 11.2 EXTERNAL DEVELOPMENTS 22 POSSIBLE IMPLICATIONS FOR SEVERAL SOFT COMMODITIES IMPORTANT TO CHINESE TRADE 62.1 SOYBEANS 62.2 BEEF 82.3 PALM OIL 92.4 IMPETUS FOR“DEFORESTATION-AND CONVERSION-FREE”SOY,BEEF,AND PALM OIL 103 POSSIBLE IMPLICATIONS FOR CHINESE INDUSTRY SUPPLY C
12、HAINS 123.1 DEFINITION 123.2 STYLIZED FACTS OF CHINAS EXPORT CARBON EMISSIONS AND CARBON INTENSITY 123.3 QUANTITATIVE ANALYSIS OF FACTORS INFLUENCING EXPORT CARBON EMISSION 144 POLICY RECOMMENDATIONS 16REFERENCES 23ACKNOWLEDGE 26bcList of FiguresFigure 1:Canada-EU Trade in Environmental Goods,in mil
13、lion 3Figure 2:Chinas soybeans consumption between 2014-2020(million tons)6Figure 3:Global soybeans importers 7Figure 4:Chinas gradually growing imports of soybeans 7Figure 5:Chinas beef production and imports 8Figure 6:Global beef importers(2000-2030)8Figure 7:Per capita beef consumption in China(2
14、011-2021)9Figure 8:Chinas consumption and imports of palm oil 10Figure 9:Technologies that enable due diligence and traceability across the value chain 18List of TablesTable 1:Export carbon emissions in WIOD industry in 20104 12Table 2:Export carbon emissions in WIOD industry in 2014 13Table 3:The m
15、ain regression results 14Table 4:Main estimated coefficient in WIOD industry 15List of BoxesBox 1.Corporate examples of traceability 18Box 2.Syngentas Revert program 18Box 3.Corporate and government-led examples of due diligence and traceability 20EXECUTIVE SUMMARYA number of recent external develop
16、ments at the intersection of trade,supply chains,and sustainability will impact China.For instance,new international trade policies are putting a price on carbon and tackling deforestation.New international agreements are requiring signatories(including China)to improve the sustainability of its eco
17、nomic(including trade)activities.Accelerating corporate trends are signaling that companies and financial institutions will increasingly focus on reducing greenhouse gas emissions from their global supply chains.Finally,trends indicate that domestic Chinese consumers are increasingly desiring produc
18、ts(whether domestically sourced or imported)to be sustainably produced.These developments will particularly impact Chinese trade in a handful of commodities,most notably soybeans,beef,palm oil,and industrial goods(e.g.,electrical equipment,machinery,textile products).For China to successfully respon
19、d in a manner that meets Chinas aspirations for trade security and carbon neutrality,we propose five policy recommendations:A.China could integrate sustainability or“green”criteria into all its global supply chain arrangements.A good start would be the signing of a green value chain partnership amon
20、g China and ASEAN countries(scheduled for September/October 2023 at the China-ASEAN Environment Collaboration Forum).B.China could negotiate and sign a trade agreement with Brazil to secure long-term supplies of legal and sustainable soy and beef.To give such a landmark trade agreement the profile i
21、t deserves,China and Brazil could jointly announce the agreement at either the G20 Ministerial Meeting on Agriculture to be held in mid-2024 in Brazil(where sustainable agriculture will be a focus topic)or at the 30th Conference of the Parties to the UNFCCC to be held in late-2025 in Belem,Brazil.Th
22、e trade agreement would be a natural evolution of the historic meeting in Beijing between Chinese President Xi Jinping and Brazilian President Lula in mid-April 2023.C.China could negotiate and sign a trade agreement with Indonesia and Malaysia to secure long-term supplies of legal and sustainable p
23、alm oil.The trade agreement would build upon recent progress by China with both nations.For instance,in November 2022,Chinese Vice Minister and China International Trade Representative from the Ministry of Commerce(MOFCOM)called for green trade of palm oil at the China-Indonesia Agricultural Trade P
24、romotion Event.In April 2023,the China Chamber of Commerce of Import and Export of Foodstuffs,Native Produce and Animal By-Products signed a Memorandum of Understanding(MOU)with the Malaysian Palm Oil Board regarding increasing the stability and sustainability of palm oil supply chains.D.China could
25、 leverage the power of both market and policies to drive the low-carbon transformation of trade patterns of industries.With the help of market mechanism,the booming coal price will lead to a lower export carbon emission in China.Raising the price of energy from fossil fuel sources will eliminate ind
26、ustries with heavy pollution and lower the carbon emission in export by market mechanism.The market is an important force to lower carbon emission,while government should also take actions actively thorough a“destruction”comes after“construction”way.E.China could develop incentives for green product
27、s in the regional trade agreements.China could consider cutting the import tariff on green products and further advocate green tariff cuts in the World Trade Organization and other regional trade agreements,such as RCEP and CPTPP.d11 CONTEXTA suite of Chinese government aspirations and external deve
28、lopments will impact the degree to which China can achieve trade and supply chain security in a manner that is also long-term sustainable.1.1 CHINESE GOVERNMENT ASPIRATIONSThree Chinese government aspirations or ambitions are particularly relevant for the nexus of trade,supply chains,and sustainabil
29、ity.Aspiration 1:Achieve carbon peaking before 2030 and carbon neutrality before 2060In 2020,the Chinese government announced an aspiration to peak national carbon emissions before 2030 and achieve carbon neutrality before 2060(United Nations,2020).In this context,“carbon”means carbon dioxide equiva
30、lent(CO2e),which encompasses all greenhouse gases(GHGs).These climate aspirations cover all major sectors of the economy,including energy generation,transportation,food systems,land use,and more.In addition,there are signs that China is beginning to consider the climate footprint of trade(Xi,2022).T
31、he“14th Five-Year Plan for High-Quality Development of Foreign Trade”calls for establishing green and low-carbon trade standards and certification systems and calls for exploring the development of a life-cycle carbon footprint tracking system for traded products.The Ministry of Ecology and Environm
32、ent also is studying the development of green trade policies(Yicai,2023).Aspiration 2:Achieve food and energy security and resiliency Food security and resiliency is critical to Chinas national security.In 2020,President Xi Jinping stated that“food security is an important foundation for national se
33、curity”(Xinhuanet,2020)and that every actor should take responsibility for securing food supplies(Peoples Daily,2021).Moreover,Chinas new“dual circulation strategy”encourages China to reduce its international supply chain uncertainties(CCICED,2021).Together,these are calls for an appropriate combina
34、tion of self-sufficiency and open trade.Likewise,energy security is critical to Chinas national security.Chinas 14th Five-Year Plan for Modern Energy System prioritized the establishment of a modern energy system that addresses both sustainability and supply security issues.It requires the promotion
35、 of green and low-carbon energy transformation through strengthening clean energy industry,implementing renewable energy substitution actions,promoting the construction of a new power system,and gradually increasing the proportion of new sources of energy(NEA,2022).The Report to the 20th National Co
36、ngress of the Communist Party of China(hereafter“CPC report”)reinforces the importance of ensuring energy security while gradually achieving the carbon peaking and neutrality targets.Based on Chinas energy and resource endowment,China seeks to advance initiatives to reach peak carbon emissions in a
37、well-planned way,including better control over the amount and intensity of energy consumptionparticularly of fossil fuelsand a transition toward controlling both the amount and intensity of carbon emissions.Aspiration 3:Transform from manufacturing country to a manufacturing powerChinas industrial g
38、reen upgrading refers to the transformation and upgrading of traditional industries into green and sustainable industries.This concept is in line with the new development concept proposed at the 20th National Congress of the Communist Party of China,which emphasizes the need to promote coordinated 2
39、 2economic,social,and environmental development.This development blueprint for high-tech industries is a key part of Chinas industrial green upgrading.The Chinese government has identified high-tech sectorssuch as new energy,biotechnology,and information technologyas priority areas for development.T
40、hese industries have the potential to reduce environmental pollution and improve resource utilization,which are essential for achieving sustainable development.The Chinese government has implemented various policies and initiatives as well as increasing investment for R&D and tax incentives for thes
41、e sectors.Chinas industrial green upgrading also involves the optimization of traditional industries.The government has implemented measures to improve energy efficiency,reduce emissions,and promote the use of renewable energy in traditional industries such as steel,cement,and petrochemicals.To ensu
42、re the success of industrial green upgrading,China has also strengthened environmental regulations and enforcement.The government has implemented strict pollution controls and imposed penalties on violators.It also has encouraged the adoption of cleaner production methods and promoted circular econo
43、my practices.1.2 EXTERNAL DEVELOPMENTSA number of recent external developments will impact the nexus of trade,supply chains,and sustainability,as well.For instance,new international trade policies are putting a price on carbon and tackling deforestation.New international agreements are requiring sig
44、natories(including China)to improve the sustainability(including avoided deforestation)of its economic(including trade)activities.Accelerating corporate trends are signaling that companies and financial institutions will increasingly focus on reducing greenhouse gas emissions from their global suppl
45、y chains.Finally,consumer trends indicate that domestic Chinese consumers are increasingly desiring products(whether domestically sourced or imported)to be sustainably produced.International trade policies EU CBAM:The Carbon Border Adjustment Mechanism(CBAM)is a policy proposed by the European Union
46、(EU)that would impose a carbon border tax on certain imports from countries that do not have equivalent carbon pricing policies.The aim of the tax is to level the playing field between domestic producers and foreign producers who are not subject to the same carbon costs.The CBAM would cover a range
47、of goods,including steel,cement,aluminum,fertilizers,and electricity.CBAM means challenges as well as opportunities for China.As the worlds largest exporter,the CBAM could result in higher costs for Chinese exporters and consequently lower competitiveness in the European market,if China does not tak
48、e significant action to reduce its carbon emissions.Meanwhile,the policy also presents opportunities for China to accelerate its transition to a low-carbon economy and promote its green industries.The policy could encourage China to invest more in renewable energy and other green technologies,which
49、would create new opportunities for the green transformation of supply chains.EU Deforestation Regulation:The EU Regulation on Deforestation-free products(EUDR)prohibits the placing on the EU market covered commodities(soy,cattle,palm oil,coffee,cocoa,rubber and wood)and certain derivatives(such as c
50、hocolate and beef)that were produced on land deforested or degraded after December 31,2020.Covered commodities and products also must be produced in accordance with local laws.The EUDR requires that companies,domestic and international,placing these products on the EU market conduct due diligence to
51、 assess the risk associated with these products and submit a due diligence declaration stating that no or negligible risk was foundincluding the provision of geographic coordinates or a polygon 3of the area of production.The European Parliament voted to pass the regulation in April 2023,and a final
52、vote in the European Council is expected shortly.Companies are required to comply with the regulation starting 18 months after the regulation enters into force.Small and medium-sized enterprises have 24 months after entry into force before they need to comply.While the regulation applies to companie
53、s not countries,those countries that produce or process covered commodities that are placed on the EU market will likely receive increasing requests for clarification of local laws governing production and processing,as well as requests for information about where products processed in China were so
54、urced from in order to comply with the geolocation requirement.Other marketssuch as the United Kingdom,Norway,and the United Statesare developing or considering similar demand-side measures,pointing to a likely shift in market norms towards traceability and due diligence requirements in global commo
55、dity supply chains.Regional trade deals:The regional trade deals,such as the Regional Comprehensive Economic Partnership(RCEP)and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership(CPTPP)have significant impact on China.The RCEP agreement involves 15 countries in the Asia-Paci
56、fic region,accounting for around 30%of the worlds population and GDP.As a founding member,China will benefit from reduced tariffs,increased market access,and improved trade and investment flows within the region.However,China also will face intensified competition from other member countries,particu
57、larly in areas where it has traditionally been strong,such as manufacturing.The CPTPP agreement,which includes 11 countries across the Asia-Pacific,is a high-standard free trade agreement that covers a wide range of sectors,including goods,services,and intellectual property.China is not a member of
58、the CPTPP but has expressed interest in joining.Joining the agreement would require China to meet the high standards of the agreement.For example,the CPTPPs environment chapter requires its parties to take practical measures to promote the effective enforcement of their environmental laws,to commit
59、to high standards of transparency and to consultation with respect to the laws.These items could entail costly economic reforms and restructuring,but may also bring opportunities,just as the following diagram about the trade structure changes relevant to the EU-Canada CETA agreement in 2017.Figure 1
60、:Canada-EU Trade in Environmental Goods,in millionSource:Eurostat,Statistics CanadaFurthermore,the RCEP and CPTPP agreements are seen as a response to Chinas growing economic influence and its Belt and Road Initiative.These agreements provide other countries in the region with an alternative option
61、for economic integration,which could reduce Chinas regional dominance.4020526Pipes and tubes for recycling purposesPrefabricated building structuresEnergy-efficient machineryMeasuring equipment for pollutionn levels4862871,0464,3114421,2434,9403981,1284,1084 4While the RCEP and CPTPP agre
62、ements present opportunities for China to expand its economic influence and deepen its economic ties with other countries in the region,they also pose challenges in terms of the need for economic reforms and the need for conforming with related environment standards and requirements.Additionally,the
63、se agreements represent a potential shift in the balance of power in the region,which could have implications for Chinas regional and global influence.Glasgow Declaration on Forests and Land:The Glasgow Leaders Declaration on Forests and Land Use represents a commitment by country leaders to collect
64、ively halt and reverse forest loss and land degradation by 2030 while promoting sustainable development and an inclusive rural transformation.The Declaration was launched at the November 2021 United Nations Climate Change Conference(COP26)and was signed by 141 countries,including China.As part of th
65、is commitment,countries agreed to facilitate trade and development policiesinternationally and domesticallythat promote sustainable development,sustainable commodity production,and sustainable commodity consumption that work to the mutual benefit of signatories and that do not drive deforestation an
66、d land degradation.Kunming-Montreal Global Biodiversity Framework(GBF):The GBF is a new global agreement designed to safeguard the worlds biodiversity(CBD,2022).It was signed by 196 countries(Vandvik,2023),including China,in December of 2022 at the Conference of Parties to the Convention on Biologic
67、al Diversity.GBF goals are to halt biodiversity loss,sustainably use biodiversity,equitably share biodiversitys benefits,and adequately implement financial resources and technology.The GBF includes a number of targets,including(a)protection of 30%of the worlds land,ocean,and freshwater ecosystems by
68、 2030,(b)restoration of 30%of the worlds degraded ecosystems,(c)and cessation of unsustainable use and trade of wild species,and(d)policy measures to have companies monitor,assess,and transparently disclose their risks,dependencies,and impacts on biodiversity.Underpinning all of this,GBF calls for s
69、ustainable production systems and legal trade practices that are aligned with biodiversity conservation goals in order to prevent further degradation and biodiversity loss in exporter countries.Given the amount of imports into China from countries with high levels of biodiversity,the GBF will have i
70、mplications for Chinese international trade.Corporate trends SBTi:The Science Based Targets Initiative(SBTi)is a partnership between CDP,the United Nations Global Compact,WRI,and WWF.This initiative provides a framework for companies to set science-based targets to reduce their greenhouse gas emissi
71、ons,and also provides support and technical assistance to those companies.The goal of the SBTi is to limit global warming to 1.5C,and targets set through SBTi must align scientifically with this goal.As of May 2023,nearly 2,500 companies representing one-third of the worlds market capitalization hav
72、e set science-based targets through SBTi(SBTi,2023a).Science-based targets validated by the SBTi must include all Scope 1 emissions(from assets owned by the company)and Scope 2 emissions(from purchased electricity)as defined by the Greenhouse Gas Protocol.If a companys Scope 3 emissions(those from i
73、ts supply chains)comprise 40%or more of its total emissions,then those emissions also must be included in targets(SBTi,2023b).This attention to scope 3 emissions means that these companies will increasingly focus on reducing greenhouse gas emissions from their global supply chains,which will include
74、 the agricultural products,manufactured goods,and other raw material they purchase(including those processed in and re-exported from China).ESG investing:ESG investing,sometimes referred to as“sustainable investing”or“responsible investing”,describes investing that incorporates environmental,social,
75、and governance-related issues(OECD,2020).ESG investing balances traditional investing(focused solely on immediate financial returns)with ESG 5considerations to form a longer-term perspective,considering both a companys financial performance as well as its societal impacts.The PRI(Principles for Resp
76、onsible Investment)is a UN-supported organization that represents the largest coalition of organizations committed to ESG investing and also supports signatories in their efforts to engage in responsible investing.As of year-end 2022,the PRI had 5,319 global signatories,representing$121 trillion in
77、assets under management(PRI,2023).As more and more investors adopt ESG investment principles,the sustainability of the raw materials and products companies trade domestically and internationally(including those processed in and re-exported from China)will come under increasing scrutiny.A case in poi
78、nt is financial commitment to deforestation-free soft commodities.As of November 2022,more than 30 financial institutions with combined assets under management of more than US$8.7 trillion have already signed up to the commitment to use best efforts to eliminate agricultural commodity-driven defores
79、tation(for palm oil,soy,beef,pulp&paper)from their investment and lending portfolios by 2025 and publish credible progressa critical step toward reversing deforestation globally and aligning the sector with a Paris Agreement-compliant 1.5C pathway(UNFCCC,2022).Consumer trendsAs outlined in a recent
80、SPS on greening soft commodity value chains(CCICED,2020),“tomorrows markets”are increasingly demanding more sustainable food consumption and production.This trend is not relegated solely to European and North American consumers;domestic Chinese consumers are moving in this direction,too.With the rap
81、id rise of the concept of green development and green lifestyles,more and more Chinese consumers regard choosing green products as a sign of high-quality life.According to a survey in 2022,74%of consumers interviewed prioritize green and environmentally friendly products or brands in their daily liv
82、es.Green products are more in line with the pursuit of safety,health,and environmental friendliness in life.According to the survey,69%of consumers expressed that they accept green products at higher prices than regular products,79%of consumers will incorporate their moral values into their daily sh
83、opping,and 82%of consumers express willingness to purchase sustainable branded products(SynTao,2022).Particularly with regard to food,according to a survey conducted in 2021,more than 90%of consumers are willing to pay a premium for low-carbon food,and more than half of consumers are willing to pay
84、a premium of more than 10%(Xinhuanet et.al.2022).6 62 POSSIBLE IMPLICATIONS FOR SEVERAL SOFT COMMODITIES IMPORTANT TO CHINESE TRADEThe confluence of these Chinese government aspirations and recent external developments will likely have a number of implications for several key soft commodities that a
85、re important for Chinese trade.“Soft commodities”are raw materials and their derivatives that are grown or produced by the agriculture and forestry industries.These include plant-and animal-derived material for use as food,fiber,feed,medicines,cosmetics,detergents and fuels(CCICED,2020).In this stud
86、y,we focus on three such commodities for which China is a major global importer:soybeans,beef,and palm oil.2.1 SOYBEANSSoybeans are vitally important to the Chinese economy.As the largest processor of soybeans in the world,China processes more than 80%of the soybeans it produces and imports into oil
87、 and meal for animal feed(Figure 2).Around 15%of Chinas soy consumption is for direct human food(e.g.,tofu,soymilk,soy sauce)and derivative human food products(e.g.,soy protein for sausage)(USDA,2022).China is a major player in the global soybean trade.China is the worlds largest soybeans importer(F
88、AOSTAT and USDA,2023),accounting for 60%of global soybean trade(Figure 3).These imports met 86%of Chinese consumption needs in 2021(FAOSTAT,2022).Chinas imports have steadily grown since 1996,mainly to meet the need of its domestic livestock industries(Figure 4)and are expected to continue growing t
89、hrough 2030.Figure 2:Chinas soybeans consumption between 2014-2020(million tons)Note:Numbers may not add to 100 due to roundingSource:China Zhiyan Consulting Group.2021.In 2020,Chinas Soybean Market Will Exceed 350 billion RMB,of which Pressing Consumption Accounts for 82%.3%14%83%2001520
90、40020084%84%85%84%83%82%13%13%11%12%13%15%3%3%3%3%3%3%million tonsProce ssingDirect foodLosses or other usesSeed7China and Hong KongNorth Africa and Middle EastRest of worldLatin AmericaOther Asia and OceaniaEast AsiaEuropean Union203020252020201520102005Million metric tons2252
91、0007550250Figure 3:Global soybeans importersSource:USDA.2021.USDA Agricultural Projections to 2030.Figure 4:Chinas gradually growing imports of soybeansSource:FAOSTAT.2021.Production and Trade Balance.China imports soybeans mainly from Brazil,the United States,and Argentina,which combined
92、 consist of around 95%of Chinas total soybean imports.In 2020,China brought in 64 million tons(accounting for 62%of Chinas total soy import)from Brazil,26 million tons(accounting for 25%of Chinas total soy import)from the United States and 8 million tons(accounting for 7%of Chinas total soy import)f
93、rom Argentina(Feng,2022).Soy expansion is a large driver of conversion of forests and grasslands(Song et al.,2021).There are two types of impacts:“direct impacts”when forests and savannas are immediately converted to soy production and“delayed impacts”when forests are first cleared for other lower-e
94、conomic-value land uses(mostly cattle grazing)and then later those pastures are converted into soybean fields(Schneider et al.,2021).From 2001-2015,soy directly converted 4 million hectares of forest and had a delayed impact on another 4 million hectares,mainly in the South American countries Brazil
95、 and Argentina(Weisse and Goldman,2021).In 2019,one third of South American soybean planted area was located in the Cerrado(FAOSTAT and USDA,2023),the most biodiverse savanna ecosystem in the world.In 2020,264,000 hectares of soy was harvested from land deforested within the past five years In the C
96、errado(SEI,2022).Soy-driven deforestation has large greenhouse gas consequences.In 2020,Brazilian soybean-driven deforestation and conversion resulted in 28 million tonnes of CO2e from native vegetation(11%of the countrys annual land use change emissions)Projected520102005ProductionNet im
97、portsConsumption20006040200Million tons8 8(USDA,2021).Therefore,reducing the deforestation and savanna conversion associated with soy production will be an important component of Chinas efforts to align its soy sourcing and trade with its goals of carbon neutrality and meeting global agre
98、ements on biodiversity conservation and climate.2.2 BEEFChina is the worlds largest beef importer.From 2010-2020,beef imports to China grew 110%to 3.4 million tons per year(Figure 5),accounting for 33 percent of the worlds total exported beef(FAOSTAT,2023).Chinas import of beef is projected to conti
99、nue to grow for the rest of this decade(Figure 6).Figure 5:Chinas beef production and importsSource:FAOSTAT.2023.Food Balances.Figure 6:Global beef importers(2000-2030)Source:USDA.2021.USDA Agricultural Projections to 2030.From 2016 to 2021,the annual growth rate of beef consumption in China was 7.5
100、 percent(CAAA,2023).In 2022,Chinas beef consumption reached 1.1 million tons,ranking second among nations in global beef consumption(CAAA,2023).From 2011 2021,per capita beef consumption of China grew from 4.53 kg/capita/year to 6.95 kg/capita/year,a growth of about 50%(Figure 7)(CAAA,2023).This gro
101、wth could be attributed to the dietary transition in China driven by growth in GDP per capita.200006420ProductionNet importsConsumptionmillion tons2000Million metric tons2005203020252020206420Hong KongCanada and MexicoChinaNorth Africa and Middl
102、e EastOther Asia and OceaniaEast AsiaUnited StatesRussiaEuropean UnionProjected9Figure 7:Per capita beef consumption in China(2011-2021)Source:CAAA.2023.Review of Chinas Beef Industry Development in 2022 and Outlook for 2023.The largest source of imported beef into China is Brazil,accounting for mor
103、e than 40 percent of imports by weight.Next in line are Argentina(15 percent)and Uruguay(10 percent).Brazils exports to China were valued at 7.5 billion in 2022(China Custom,2023).Cattle ranching for beef,however,is by far the largest direct driver of deforestation in the Brazilian Amazon(Searchinge
104、r et al.,2019),and the Brazilian Amazon is the area of the planet experiencing the largest levels of deforestation per year(GFW,2023).Tropical deforestation in the Amazon releases significant amounts of greenhouse gas emissions and severely threatens biodiversity.2.3 PALM OILPalm oil is a versatile
105、and important commodity to China,with 80%of its domestic consumption used for food and 20%used for industrial purposes(Oilcn,2019).Palm oil is particularly popular in the food industryaccounting for 17%of Chinas vegetable oil consumptiondue to its high saturated fat content which makes it resistant
106、to high cooking temperatures and makes it stable.It is essential for a wide range of food products such as instant noodles,traditional snacks,fast food,ready-made products,industrial bakery,candy,chocolate,and edible oils.Additionally,palm oil is utilized for industrial oleochemicals such as soap,ca
107、ndles,make-up,and lubricants.Since China does not produce palm oil,imports make up 98%of the countrys total consumption(FAOSTAT,2021).China has become the third largest consumer and the second largest importer of palm oil in the world(Jiang,2020),with its imports accounting for 14%of global palm oil
108、 imports in 2020(FAOSTAT,2021).Chinas imports grew rapidly through 2009,followed by a decline by 2016 and a subsequent resurgence in growth(Figure 8).Indonesia and Malaysia supplied 71%and 27%,respectively,of Chinas imported palm oil in 2019(CRR,2021).And,in fact,17%of Indonesias exports in 2021 wer
109、e to meet Chinese consumption demand(Statista,2023).Oil palm cultivation in Southeast Asia is the dominant factor in deforestation and peat conversion in the region,with the associated greenhouse gas emissions and loss of biodiversity habitat in one of the most biodiverse regions of the planet.The c
110、arbon and biodiversity consequences associated with clearing tropical forests are significant.For Indonesia,one third(3 million hectares)of its primary forest loss in the past 20 years is due to oil palm expansion(SEI,2022).Therefore,to achieve its carbon neutrality and biodiversity goals,China will
111、 need to address the carbon emissions and biodiversity losses embedded in its palm oil supply 200202000Kg/per capita1010chain.This requires avoiding conversion of natural tropical forests and peatlands,while enhancing oil palm productivity(yield per hectar
112、e)on existing plantations.Otherwise,the long-term security of Chinese palm oil supply may be at risk.Fortunately,Indonesia has reduced deforestation associated with palm oil between 2018-2020 to only 18%of the level in 2008-2012,despite continued increase in palm oil production.This proves the possi
113、bility to balance the demand for palm oil products with conservation of tropical ecosystems(SEI,2022).Figure 8:Chinas consumption and imports of palm oilSource:FAOSTAT.2021.Production and Trade Balance.2.4 IMPETUS FOR“DEFORESTATION-AND CONVERSION-FREE”SOY,BEEF,AND PALM OIL EU Regulation on deforesta
114、tion-free products:The new regulation requires due diligence from Chinese companies to ensure that the products(processed in China)including soy,beef,or palm oil placed on the EU market are not linked to post-2020 deforestation,as well as not violating local laws on production and processing.Failure
115、 to meet these standards could result market access restrictions,limiting the ability to sell products to markets within the EU and in other regions.Kunming-Montreal Global Biodiversity Framework:The GBF calls for sustainable production and trade aligned with biodiversity conservation and the preven
116、tion of degradation and biodiversity loss in exporter countries.Since China was a co-host country of the GBF(which was adopted by nearly all countries in the world),global expectations are that China will fulfill GBF goals in its domestic activities and international trade.Glasgow Declaration on For
117、ests and Land:The Declaration includes a commitment among signatories to“facilitate trade and development policies,internationally and domestically,that promote sustainable development,and sustainable commodity production and consumption,that work to countries mutual benefit,and that do not drive de
118、forestation and land degradation”.China is a signatory to this Declaration,and the country has already publicly committed to avoiding trade deals for soy(and other products)that drive deforestation or conversion of other natural ecosystems(WEF,2022).SBTi:The Science Based Targets for Forest,Land,and
119、 Agriculture(FLAG)will help Chinese companies set reduction targets for Scope 3 GHG emissions in line with Paris Agreement(SBTi,2022).332 Chinese companies have committed to climate action through SBTi,and 20 companies among them are in the food and forest sectors or are restaurant chains and agricu
120、lture-related trading companies(SBTi,2023a).For 5201020052000ProductionNet importsConsumpiton987654321011example,the big fast-food restaurant company Yum China,which owns the exclusive operation and authorized operation rights of KFC,Pizza Hut,and Taco Bell,has recently signed to commit t
121、o the SBTi in 2021(Yum China,2021).Yum China has pledged to decrease its Scope 3 GHG emissions from purchased goods by 66.3%per ton of goods purchased by 2035 relative to 2020(Yum China,2022).There are other schemes to advance sustainable sourcing.For example,for SAI accredits certification bodies t
122、o audit production facilities,companies that do a substantial amount of sourcing from contracted suppliers can join the Signatory Member programme,which requires that the company issue a plan for moving company-owned and supplier facilities to SA8000 certification over time,and report publicly on pr
123、ogress(FAO,2003).12123 POSSIBLE IMPLICATIONS FOR CHINESE INDUSTRY SUPPLY CHAINSWe have already discussed the overall impact of the CBAM in the section 1.By imposing additional carbon tariffs on foreign products with higher emission but lower levels of environmental regulations,CBAM resolved the envi
124、ronmental externalities of international trade to some extent,ensured fair competition between domestic and foreign suppliers and facilitated global low-carbon development.However,given the different levels of development and situations of different countries,there are quite large differences in car
125、bon market prices and measurement standards among countries.The implementation of the CBAM remains a big challenge and needs to overcome several obstacles.Based on this,this section introduces another way of reducing carbon emissions from exports,which is to emphasize the role of the market and rais
126、e the price of traditional fossil energy,to reduce Chinas carbon emissions.Therefore,we define and pursue the carbon emissions of the value added of export commodities in China,and further study the correlation between Chinas export carbon emissions and energy price to make further policy implicatio
127、ns.3.1 DEFINITIONFirstly,it is important to establish a clear definition of carbon emissions of the value added of export commodities.This measure calculates the amount of carbon emissions generated during the production of the total value added of an exported commodity.Total value added refers to t
128、he difference between the market value of a product or service and the sum value of its inputs.We take iPhone X as an example to further illustrate total value added of a commodity.The lens may be made in Japan,the screen in South Korea,the audio processors in the US,the chips in Chinese Taipei,the
129、buttons in Chinese Mainland,and the assembly process in Chinese Mainland.The Chinese value added in the export of an iPhone X is the value of the parts made and assembled in China.If the total value of the iPhone X exported from China is$409,and only$104 is attributed to Chinese value added,then the
130、 carbon emissions of value added for this iPhone X would only include the carbon emissions generated during the production of the$104 worth of Chinese value added.3.2 STYLIZED FACTS OF CHINAS EXPORT CARBON EMISSIONS AND CARBON INTENSITYOnce this definition is established,we can calculate the carbon
131、emissions of value added for different export industries using the world input-output table and energy consumption formula.For instance,we find that Chinas carbon emissions of added value in the electric industrys exports,such as the iPhone X,were approximately 4.05 million tons in 2014.In the table
132、 below,we present the export carbon emissions for different industries according to the World Input-Output Database(WIOD).These figures illustrate the amount of carbon emissions generated during the production of added value in exported goods in each industry.Table 1:Export carbon emissions in WIOD
133、industry in 2014 WIOD Industry Export carbon emission(ten thousand ton)Manufacture of computer,electronic and optical products 405Manufacture of electrical equipment 295Manufacture of textiles,wearing apparel and leather products 247Manufacture of machinery and equipment n.e.c.21413Manufacture of ba
134、sic metals 197Manufacture of chemicals and chemical products 196Manufacture of fabricated metal products,except machinery and equipment 146Manufacture of other non-metallic mineral products 115Manufacture of furniture;other manufacturing 111Manufacture of rubber and plastic products 104Manufacture o
135、f other transport equipment 57Manufacture of motor vehicles,trailers and semi-trailers 57Manufacture of coke and refined petroleum products 39Manufacture of food products,beverages and tobacco products 35Manufacture of paper and paper products 22Manufacture of wood and of products of wood and cork,e
136、xcept furniture 20Mining and quarrying 16Manufacture of basic pharmaceutical products and pharmaceutical preparations 15Crop and animal production,hunting and related service activities 7Printing and reproduction of recorded media 3From Table 1 we can get a clear picture of export carbon emissions.H
137、owever,we can see that the export carbon emissions are positively related to the total amount of exports and the above table cannot tell us the carbon emission effectiveness in different industries.To make things clearer,we divide the export carbon emissions by the total value added in this industry
138、 and get the export carbon emission intensity.The results for the different WIOD industries are shown in the table below.Table 2:Export carbon emissions intensity in WIOD industry in 2014 WIOD Industry Export Carbon Emission Intensity (ton/ten thousand dollar)Manufacture of furniture;other manufactu
139、ring 71Manufacture of basic metals 59Manufacture of chemicals and chemical products 57Manufacture of other non-metallic mineral products 45Printing and reproduction of recorded media 45Manufacture of coke and refined petroleum products 44Manufacture of paper and paper products 39Manufacture of rubbe
140、r and plastic products 37Manufacture of fabricated metal products,except machinery and equipment 35Mining and quarrying 26Manufacture of electrical equipment 24Manufacture of other transport equipment 23Manufacture of machinery and equipment n.e.c.21Manufacture of textiles,wearing apparel and leathe
141、r products 21Manufacture of wood and of products of wood and cork,except furniture 20Manufacture of motor vehicles,trailers and semi-trailers 20Manufacture of computer,electronic and optical products 18Crop and animal production,hunting and related service activities 15Manufacture of food products,b
142、everages and tobacco products 13Manufacture of basic pharmaceutical products and pharmaceutical preparations 13The table shows that furniture manufacturing has the highest carbon intensity,71 tonnes per ten thousand 1414dollars,while hunting and food products have the lowest carbon intensity of all
143、manufacturing industries.The average carbon intensity in heavy industry is obviously higher than that in other manufacturing sectors.Taking the total volume of heavy industries into account,there is a large potential for all these industries to reduce their carbon emissions.3.3 QUANTITATIVE ANALYSIS
144、 OF FACTORS INFLUENCING EXPORT CARBON EMISSIONIn this section,we apply the econometrics model and study the impact of fuel prices on export emissions.According to Chinas energy structure,coal is one of the most important fuel in China.It is the main source of energy,and also the main source of carbo
145、n emission.Therefore,we use the coal prices as the main indicator in this regression.Our regression model is shown as follows.ln(Export Carbon Emission)ijt=0+1*lnpChina,t+*Xijt+t+i+ijtln(Export Carbon Emission)ijt=0+1*lnwindpChina,t+*Xijt+t+i+ijtIn this regression,i means country,j means industry an
146、d t means year.Ln(Export Carbon Emission)ijt measures the log value of export carbon emission in year t country i and industry j.The independent variable is lnpChina,t,the log value of coal price in China in year t.Xijt relates to a series of control variables,including the log value of per capital
147、income,the GDP growth rate,and the different ratio of secondary industries.We put all these control variables into the regression to alleviate the confounding problem which may be caused by missing some key variables.Finally,we put t and i into the regression to control the time trend as well as all
148、 the invariant country characteristics.Besides,we also replace the independence variable to lnwindpChina,t,the wind price of year t,to test the clean energys impact on export carbon emissions.Our main interest is 1 among all the estimated coefficients.It represents the price elasticity of export car
149、bon emission and shows that one percent change in coal price will result in 1 percent change for export carbon emission in total.Regression shows that the 1 equals to-0.129 with statistical significance at 1%level,which means that when the coal price goes up 10%,Chinas export carbon emissions go dow
150、n 1.29%,while for clean energy,the according coefficient is positive and statistically insignificant.On the one side,differing from traditional energy prices,clean energy prices are stabilized by government subsidies,and we need a more sophisticated econometric method to estimate the influence of cl
151、ean energy price.On the other side,the results indicate that compared with subsiding on clean energy,taxing on traditional fossil energy is more efficient on carbon emission reduction in China.TABLE 3 THE MAIN REGRESSION RESULTS (1)(2)Dependent variable ln(EEX)ln(EEX)Ln(p)-0.129*(0.0378)Ln(windp)0.1
152、22 (0.0836)Control Variables Yes YesCountry FE Yes YesObservation 29585 21217Amount of ij pairs 2176 2176R-squared 0.036 0.015Standard errors in parentheses *p0.01,*p0.05,*p0.115Based on these findings,to further analyze the differences across industries,we restrict the sample to China and repeat th
153、e above regressions for different industries.Therefore,we can get the price elasticity for specific industries.We put the different industries estimates together in the following table and we can find some industry results from it.Table 4:Main estimated coefficient in WIOD industry WIOD Industry 1 C
154、oeff Manufacture of basic metals -0.43Manufacture of machinery and equipment n.e.c.-0.34Manufacture of computer,electronic and optical products -0.30Manufacture of motor vehicles,trailers and semi-trailers -0.23Manufacture of textiles,wearing apparel and leather products -0.23Manufacture of other no
155、n-metallic mineral products -0.17Manufacture of paper and paper products -0.13Manufacture of food products,beverages and tobacco products -0.13Manufacture of chemicals and chemical products -0.04Manufacture of electrical equipment -0.04Manufacture of basic pharmaceutical products and pharmaceutical
156、preparations -0.01Crop and animal production,hunting and related service activities 0.03Manufacture of rubber and plastic products 0.03Manufacture of furniture;other manufacturing 0.04Manufacture of fabricated metal products,except machinery and equipment 0.05Printing and reproduction of recorded me
157、dia 0.06Mining and quarrying 0.15Manufacture of other transport equipment 0.24Manufacture of wood and of products of wood and cork,except furniture 0.39Manufacture of coke and refined petroleum products 0.52This sub-regression gives us strong and intuitive interpretations.Firstly,the carbon emission
158、s of exports in manufacturing industries(basic metal,machinery et al)have negative correlation with the coal price.It is very intuitive.All the industries are industry which highly rely on coal.When the coal price goes up,the production costs of these industries go up simultaneously,which drives the
159、 entrepreneurs in these industries to use cleaner technology and reduce carbon emission.Secondly,the carbon emissions of exports in mining or substitutes(wood or petrol)have positive correlation with the coal price.When the coal price goes up,more entrepreneurs will try to find other alternatives,dr
160、iving larger demand in these industries.Therefore,the additional demand will drive more production and increase the total carbon emission in this case.16164 POLICY RECOMMENDATIONS In light of Chinese government aspirations(section 2.1),emerging external developments(section 2.2),and implications for
161、 commodities critical to Chinese trade(sections 3 and 4),we propose several policy recommendations:(A)integrate sustainability(or“green”)criteria within global supply chains,(B)secure a sustainable soy and beef trade agreement with Brazil,(C)secure a sustainable palm oil agreement with Indonesia and
162、 Malaysia,(D)leverage the power of both the market and public policies to drive the low-carbon transformation of trade patterns of industries,and E)develop incentives for green products in the regional trade agreements.The first applies to Chinese trade overall.The second and third focus on soft com
163、modity trade.The fourth and fifth focus on trade in industrial commodities.A.Integrate sustainability criteria within global supply chainsChina could integrate sustainability or“green”criteria into all its global supply chain arrangements.The 14th Five-Year Plan(FYP)for High Quality Trade Developmen
164、t provides a foundation for this.For instance,the 14th FYP calls for:Establishing green and low-carbon trade standards and certification systems;Improving green standards,certification,and labeling systems and promoting international cooperation and mutual recognition;Promoting the integration of do
165、mestic and international green and low-carbon trade rules and mechanisms;Exploring the establishment of a carbon footprint tracking system for the whole life cycle of foreign trade products;and Conducting green and low-carbon trade cooperation,among other things.One concrete step for doing this is f
166、or China to incorporate collaboration on sustainable trade and supply chains into existing frameworks for regional economic,trade,and environmental collaboration.A good instance of this is the signing of a green value chain partnership among China and ASEAN countries(scheduled for September/October
167、2023 at the China-ASEAN Environment Collaboration Forum).B.Secure a Sustainable Soy and Beef Trade Agreement with BrazilChina could negotiate and sign a trade agreement with Brazil to secure long-term supplies of legal and sustainable soy and beef.To give such a landmark trade agreement the profile
168、it deserves,China and Brazil could jointly announce the agreement at either the G20 Ministerial Meeting on Agriculture to be held in mid-2024 in Brazil(where sustainable agriculture will be a focus topic)or at the 30th Conference of the Parties to the UNFCCC to be held in late-2025 in Belem,Brazil.T
169、he trade agreement would be a natural evolution of the historic meeting in Beijing between Chinese President Xi Jinping and Brazilian President Lula in mid-April 2023,which resulted in the Brazil-China Joint Statement on Combatting Climate Change that included:“We commit to broadening,deepening and
170、diversifying our bilateral cooperation on climate issues,in areas such as,transition to a sustainable and low carbon global economy We intend to engage collaboratively in support of eliminating global illegal logging and deforestation through effectively enforcing 17their respective laws on banning
171、illegal imports and exports.”Such a trade agreement is in the national interests of China and of Brazil.It would ensure long-term,stable supplies of soybean and beef(and thus improve Chinese food security)in a manner that is aligned with emerging international trade policies,meets international agre
172、ements signed by China(e.g.,Glasgow Declaration on Forests and Land,Kunming-Montreal Global Biodiversity Framework),satisfies corporate trends(e.g.,SBTi),and meets growing consumer trends see section 2.2.Such an agreement would be aligned with the ambitions of Chinese agricultural companies,too.For
173、instance,COFCOs Sustainable Soy Sourcing Policy states,“We expect suppliers to collaborate in increasing our soy supply chain traceability,eliminating deforestation throughout our supply chain and transitioning towards soy production free from native vegetation conversion,so as to protect critical e
174、cosystems such as the Amazon,Cerrado and Gran Chaco”.Such a trade agreement is in the national interests of Brazil,as well.It would help the country eliminate illegal conversion of forests and other natural ecosystems(e.g.,President Lula has publicly stated that ending illegal deforestation is one o
175、f his top priorities)and bring in much needed finance and know-how for boosting supply of sustainably grown soy and beef.As a result,such a trade agreement aligns with Brazils national sovereignty,national laws,and national ambitions.Moreover,Brazil is already working to meet similar trade arrangeme
176、nts now being put forth by the European Union(i.e.,the EU Deforestation Regulation)and the United Kingdom(i.e.,the revised Environment Act),so a China-Brazil trade agreement would not place any additional burdens on Brazil.Building blocks of a China-Brazil sustainable soy and beef trade agreement co
177、uld include:Standards and certification The agreement would define what qualifies as“legally”produced and traded soy and beef and,ultimately,what qualifies as natural ecosystem“conversion-free”soy and beef.The agreement could build on the learnings and infrastructure developed for voluntary efforts
178、to create pragmatic regulatory standards or a public sector certification system.Fortuitously,voluntary definitions,standards,and associated certification systems have already been developed(or are in the process of being developed)with industry input.For example,the Consumer Good Forums Forest Posi
179、tive Coalitionled by 21 companies with a market value of US$2 trillionhas developed Soy and Beef Roadmaps that lay out commitments and actions the group will implement to remove soy-driven and cattle-driven deforestation and ecosystem conversion from their supply chains.The Soft Commodities Forum,le
180、d by the World Business Council for Sustainable Development,is a collaboration of six leading agribusinesses that identifies solutions to eliminate soy-driven deforestation and conversion of native vegetation in the Brazilian Cerrado.Members also have established procurement commitments,including CO
181、FCOs requirement that suppliers collaborate to eliminate deforestation and transition towards soy production free from native vegetation conversion.Furthermore,the Roundtable on Responsible Soy offers certification for responsibly produced soy.Due diligence and traceability The agreement would artic
182、ulate the means of traceability and due diligence.In this context,due diligence is the process of assessing and reducing the risk that soy or beef imports are linked to illegal or unsustainable practices.Traceability is the ability to follow a product from production/harvest all the way to the distr
183、ibution stage of the supply chain.An array of tools already are available to support due diligence and traceability(Figure 1).When used in combination,due diligence and traceability can verify a commoditys origin,the chain of custody,and compliance with the trade agreement(e.g.,legality,sustainabili
184、ty).Voluntary traceability systems are already in place and being used by numerous companies with operations in Brazil(Box 1).Brazilian government-led efforts at the state and national 1818level can also provide stepping-stones.For instance,the state of Par successfully implemented the public-privat
185、e partnership“Green Protocol of Grains”to eliminate illegal deforestation associated with soy,rice,and maizewhich covers 96%of production(Planeta Campo,2022).Brazil also has successfully implemented a national control system for the origin of forest products(SINAFLOR)to provide a federal oversight s
186、ystem over the forest sector across all states(FAO and WRI,2022).Figure 9:Technologies that enable due diligence and traceability across the value chainSource:CCICED.2021.Global Green Value Chains:Cinas Opportunities,Challenges and Paths in the Current Economic Context.Box 1.Corporate examples of tr
187、aceabilityBunge traces 100%of its direct soy purchases to the farm level in the Brazilian regions with higher risk of soy-related deforestation,publishing quarterly traceability reports(Bunge,2020).It also launched a program to trace 100%of its indirect soy supply to the farm level(Bunge,2021).COFCO
188、 International plans to be able to fully trace its direct soy supply in Brazil by 2023(COFCO International,2021).JBS and Marfrig,the largest and second largest animal protein producers in the world,have been tracing 100%of their direct beef supply in the Amazon region for nearly a decade.Together th
189、ey represent more than 50%of all Chinese imports of beef from Brazil(Trase,2021).Both companies have committed to new systems to trace 100%of their indirect suppliers to the farm level and to zero deforestation in Brazil(Bloomberg,2020).For them,traceability is important to meet export country food
190、safety requirements,as well.“Restore,produce&protect packages”If Brazil is to increase its supply of soy and beef to China over time without converting forests or other natural ecosystems into agricultural land,then Brazil will need to increase yields on existing croplands and grazing lands.In other
191、 words,Brazilian farmers and ranchers will need to simultaneously restore productivity to degraded areas,boost production yields,and protect the nature that remains.Numerous scientific studies demonstrate that this is possible in Brazil(Cohn et al.,2014,Cardoso et al.,2016,Ermgassen et al.,2018),and
192、 the country has a track record of productivity improvements.The trade agreement could include provisions for exchange of agricultural know-how,inputs,and financing to support sustainable intensification of Brazilian soy and beef production.Programs that demonstrate the feasibility of doing this alr
193、eady exist(Box 2).Production areasTransparency and blockchain tools allow for identification of actors(how are goods flowing and who is responsible)Combined they allow for data-based decision making by governments and companies in efficient and scalable fashionnSatellite based monitoring solutions a
194、llow for idenntification of impacts(what is happening in the ground)informationngoods19Box 2.Syngentas Revert programOwned by ChemChina,Syngenta is one of the worlds largest agriculture input suppliers.Within just two years,its Revert program has enabled supply of conversion-free soybeans from more
195、than 100,000 hectares in the state of Mato Grosso,Brazil and aims to get 1 million hectares into the program over the coming few years.In the program,farmers agree to restore degraded pasturelands into soy production and avoid converting any more forests or natural grasslands.In return,Syngenta prov
196、ides the production inputs(e.g.,seeds,soil enhancers,fertilizers,technical assistance),Brazilian agricultural extension agency EMBRAPA provides input on agronomic practices,and Brazilian commercial bank Ita provides commercial-rate long-term loans to participating farmers.Satellite imagery(freely av
197、ailable to all parties)combined with farm location data ensures adherence to each“restore,produce&protect”package.Notably,the Revert program is a commercial arrangement,not a philanthropic arrangement.Source:Interview with Syngenta team,2023.C.Secure a Sustainable Palm Oil Agreement with Indonesia a
198、nd MalaysiaChina could negotiate and sign a trade agreement with Indonesia and Malaysia to secure long-term supplies of legal and sustainable palm oil.The trade agreement would build upon recent progress by China with both nations.For instance,in November 2022,Chinese Vice Minister and China Interna
199、tional Trade Representative from the Ministry of Commerce(MOFCOM)called for green trade of palm oil at the China-Indonesia Agricultural Trade Promotion Event.In April 2023,the China Chamber of Commerce of Import and Export of Foodstuffs,Native Produce and Animal By-Products(CFNA)signed a Memorandum
200、of Understanding(MOU)with the Malaysian Palm Oil Board regarding increasing the stability and sustainability of palm oil supply chains.The MOU includes a call to jointly explore and implement palm oil traceability systems.The CFNA also signed the MOU with RSPO to co-work on sustainable palm oil in C
201、hina.A natural evolution of these developments would be a sustainable palm oil trade deal between China and each of these countries.As with the aforesaid China-Brazil trade agreement,optimal timing of a palm oil trade deal announcement would be within the next two years given the focus of G20 2024 a
202、nd the UNFCCC COP in Brazil.Such a trade agreement is in the national interests of China.It would ensure long-term,stable supplies of palm oil for China in a manner that is aligned with emerging international trade policies and international agreements,while addressing corporate and consumer trends
203、see section 2.2.Such a trade agreement would be in the national interests of Indonesia and Malaysia,too.Both nations seek to halt illegal clearing of forests and draining of peatlands for oil palm plantations.Indonesia even has a moratorium on all conversion of primary forest and peatlands to oil pa
204、lm.Furthermore,both nations are demonstrating that they can remain palm oil export superpowers while dramatically driving down rates of deforestation.As evidence,in recent years Indonesia has had the greatest reduction in primary forest clearing among nations,while in Malaysia primary forest loss ha
205、s leveled off(GFW,2023).This recent performance indicates that adherence to a sustainable palm oil agreement with China would be feasible.Moreover,as with Brazil,Indonesia and Malaysia will already need to meet similar trade arrangements now being put forth 2020by the European Union and have set up
206、a joint task force with the EU to work towards implementing the requirements.Building blocks of sustainable palm oil trade agreements with Indonesia and with Malaysia would be similar to those described for soy and beef for Brazil,namely:Standards and certification The trade agreement would define w
207、hat qualifies as“legally”produced and traded palm oil and,ultimately,what qualifies as forest and peat“conversion-free”.Fortunately,definitions,standards,and associated certification systems have already been developed.Both Indonesia,via the Indonesian Sustainable Palm Oil(ISPO)system,and Malaysia,v
208、ia the Malaysian Sustainable Palm Oil(MSPO)system,have mandatory palm oil certification standards.In addition,the Roundtable on Sustainable Palm Oil(with more than 5,400 members globally)has a voluntary standard for ensuring no deforestation,no peatland conversion,and fair treatment of farmers that
209、has achieved strong industry uptake.A trade agreement could include measures to support smallholders to achieve certification and thus ensure access to the Chinese market.As an example of such a measure,RSPO is providing support to the Indonesian province of Jambi to enable smallholders to gain ISPO
210、 certification as a stepping stone towards the more stringent RSPO certification.The Palm Oil Collaboration Group is generating industry alignment around an independent reporting framework and independent verification of sustainable palm oil.Trade agreements between China and Indonesia and Malaysia
211、could specify standards for legality and sustainability that build on existing systems such as ISPO,MSPO and RSPO.Due diligence and traceability The agreement would articulate the means of traceability and due diligence.Systems are already in place,including numerous voluntary systems applied by com
212、panies,and government-led traceability systems that are built into regulatory systems(Box 3).An example of a government-led traceability system is Indonesias Timber legality verification system(also known by its Indonesian acronym as SVLK).The system is recognized by the EU as compliant with the EU
213、Timber Regulation.The EU waived due diligence requirements for SVLK-licensed timber to facilitate market access.Similarly,a trade agreement on palm oil could recognize operational traceability systems in Indonesia or Malaysia as sufficient for the conduct of due diligence by companies importing palm
214、 oil into China.Box 3.Corporate and government-led examples of due diligence and traceabilityThe Malaysian Sustainable Palm Oil(MSPO)Certification Scheme is a required government certification for all oil palm plantations,independent and organized smallholdings,and palm oil mills which includes a tr
215、aceability requirement.MSPO certification covers 98%of Malaysias licensed planted area.As of mid-2020,a quarter of smallholders had been certified under MSPO(Yap et al.,2021).The Indonesian Sustainable Palm Oil(ISPO)Certification Scheme,a required government standard for palm oil production,was intr
216、oduced in 2011.ISPO requires legal and regulatory compliance but does not currently include a formal traceability requirement(Nurfatriani et al.,2022).Musim Mas,one of the worlds largest palm oil companies,has committed to achieving a 100%deforestation-free supply chain by 2025 by reaching 100%trace
217、ability to plantation by 2025(including indirect suppliers).The company already traces 100%of product from its own plantations and 93%from third-party owned palm oil mills since 2021(Musim Mas,2021).21Sime Darby is the worlds largest producer of certified sustainable palm oil sourcing from its own a
218、reas,third-party production areas,and third-party mills.As of March 2022,Sime Darby had traced more than 70%of its global supply chain to plantation.Sime Darby uses this traceability data to assess compliance with its zero deforestation commitments.As of the first quarter of 2022,64%of its global vo
219、lumes are deforestation-free(Sime Darby,2022).The China Chamber of Commerce of I/E of Foodstuffs,Native Produce and Animal By-products(CFNA)is developing a due diligence system(Sustainable Soft Commodities Supply Chain Information Sharing Tool)to help their member companies to evaluate the sustainab
220、ility risk of soft commodities supply chains such as palm oil,soybean,etc.This tool is piloted through both international and Chinese companies.“Produce&protect packages”If Indonesia and Malaysia are to increase their supply of palm oil to China over time without converting forests or peatlands into
221、 oil palm plantations,then the two countries will need to increase yields on existing plantation area,including on smallholder plots(which tend to have lower yields than industrial-scale plantations).To support this,the trade agreement could include provisions where China offers innovative agricultu
222、re financing that helps smallholder growers remove old low-yield oil palm trees,purchase hybrid high-yielding oil palm varieties,and cover the five-year income gap before the newly planted trees bear fruit.Agricultural know-how,inputs,and financing to support sustainable intensification of palm oil.
223、Lower import tariffs China could have lower import tariffs on palm oil shipments that demonstrate they are legal and conversion-free(via the certification and traceability provisions described above).D.Leverage the Power of Both the Market and Policies to Drive the Low-Carbon Trade Patterns and Indu
224、stry Supply Chains Invisible Hand Market-Based on our studies in last section,the first policy implication is that the market mechanism is our tool to achieve environmental goals.We find that when the coal price goes up 10%,Chinas export carbon emissions go down 1.29%.Precisely,when the price of coa
225、l goes up,the Chinas export of carbon emission goes down.This is because as the price of coal goes up,Chinese exporters find coal is relatively more expensive than other kinds of energy,and therefore they use less coal but more other relatively cheaper energy.Since coal is a nonrenewable energy,the
226、more we use,the less we have and price of coal is in an ascending channel.With the help of market mechanism,the booming coal price will lead to a lower export carbon emission in China.To sum up,the raising price of energy from fossil fuels will eliminate industries with heavy pollution and lower the
227、 carbon emission in export by market mechanism.Visible Hand Government-Market is an important force to lower carbon emission,while government should not only rely on market but also take actions actively.First and foremost,government should lower carbon emission in a way that destruction comes after
228、 construction.In other words,government should promote the“construction”of green industry in the first step.After the green industry is established and developed,government then started to limit the traditional“dirty”industry and reshape the economy.More precisely,we need a mature green industry as
229、a preparation for the abolish of fossil energy.If we do not fully prepare the green industry but close the dirty industry in first step,there will cause severe economic imbalance,such as forced power rationing to achieve green targets.2222Second,we need infrastructure to back up the foundation of th
230、e green industry.The development of green industry is important,but the development of supporting infrastructure for the green industry is more important.Take the survey in Gansu Province as an example.Gansu as an inland province with deserts has abundant sunshine and wind power resources.Local gove
231、rnment has only developed a few solar power plants and wind power plants.Limited development of green industry is caused by the limited consumers to buy their green energy.Local energy consumers are limited due to the deserts and culminate.Furthermore,the transmission line is not enough to send thos
232、e green energy to the east part of China,where power demand exceeds supply.To sum up,infrastructure backing the green industry is vital for the development of green industry.It is important to build a single energy market from Xinjiang to Shanghai,which be an incentive to develop green energy.Third,
233、it is inevitable that an economic shift from dirty industries to green industries will lead to unemployment.A cut on heavy industries and mining could result in job loss in those industries.Government needs to prepare for the unemployment during the economic transformation from dirty to green.E.Deve
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262、ps:/ K.H.J.,Alcntara,M.P.,Balmford,A.,Barioni,L.,Neto F.B.,Bettarello,M.,Brito,G.et al.2018.Results from On-The-Ground Efforts to Promote Sustainable Cattle Ranching in the Brazilian Amazon.Sustainability 10(4):1301.https:/doi.org/10.3390/su6ACKNOWLEDGE We offer special thanks to the Chie
263、f Advisors of CCICED Advisory Committee,Professor Liu Shijin and Mr.Scott Vaughan,as well as Mr.Zhang Huiyong,Ms.Liu Kan,Ms.Mu Quan,Mr.Brice Li,Ms.Samantha Zhang,Mr.Isaak Bowers,and other colleagues of the CCICED Secretariat and Support Office in providing feedback,information,and organization and c
264、oordination support.In the consultation process of the study,we were honored to receive valuable comments from a wide range of stakeholders from academia,the private sector and non-governmental organizations.We would like to thank Anne Rosenbarger(WRI),Caroline Winchester(WRI),JIANG Haiwei(Central U
265、niversity of Finance and Economics),LI Zhiyuan(Fudan University),MA Xiangjun(Liaoning University),Moazzam Malik(WRI),Morgan Gillespy(FOLU at WRI),PAN Yishan(Liaoning University),YU Hongjun(Peking University),YU Xin(WWF),XU Jin(TNC),ZHAO Wei(FAO),ZHOU Haobo(Liaoning University),ZHANG Yuyan(Chinese Ac
266、ademy of Social Sciences)and everyone else who provided support for different aspects of the report.Our thanks also go to colleagues who assisted in the research,meeting organization and other logistics at the World Resources Institute,Peking University,Liaoning University,and the Foreign Environmen
267、tal Cooperation Center of the Ministry of Ecology and Environment.We would like to thank staff who contributed to the organization and research of the report,including Anne-Marie Belley,LI Bo,Sarah Stettner,in the WRI Global Office and FAN Xiaoyu,ZHANG Yanping,WAN Jian,HU Haizi,MENG Jiaxi,WEI Ran,an
268、d XU Jinghan in the WRI China Office.We would like to thank staff who contributed to the organization and research of the report,including Ji Yu and Zhao Keyu in Peking University and Zhou Jingyu in Liaoning University.We appreciate the cooperation of all the members in the SPS as well as contribution made by the Chinese and international senior advisors and advisory experts.We appreciate the hard work of the SPS coordinators,Ms.FU Xiaotian and Mr.CHEN Xinyu.This Report was submitted by the Special Policy Study on Trade and Supply Chain.