Low-carbon future offers a golden opportunity for the EU and Beijing to pull together

Andrew Hammond says the EU and China have much to gain from closer collaboration in tackling climate change – in sharing technology and experience, and in shaping the landscape of the clean energy economy

PUBLISHED : Monday, 11 July, 2016, 4:54pm
UPDATED : Monday, 11 July, 2016, 7:03pm

Beijing hosts on Tuesday and Wednesday a China-EU summit hosted by Chinese President Xi Jinping (習近平), Chinese Premier Li Keqiang (李克強), European Council president Donald Tusk and European Commission president Jean-Claude Juncker. The important meeting, held in the framework of the jointly agreed 2020 strategic agenda for cooperation, will focus on bilateral political and economic relations, in addition to global and regional issues, with climate change at the fore of this.

Among the other key items on the table are discussions on the completion of a comprehensive agreement on investment, China’s market economy status, mobility and migration, foreign policy cooperation, and an ongoing human rights dialogue between Brussels and Beijing. There will also be preparatory talks for the G20 summit, to be held in early September in China.

Green business to reap China’s environmental policy rewards

It is global warming, however, where the most fruitful bilateral dialogue could be held, and leaders will be assessing the implementation of the 2015 EU-China climate change declaration. Under this, agreed shortly before last December’s Paris summit, both parties agreed to cooperate on developing a cost-effective low-carbon economy.

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Collectively, the EU and China account for around one third of global greenhouse emissions. The reason why EU-China discussions on climate change are so cooperative is that, fundamentally, both share a vision of a prosperous, energy­secure future in a stable climate and recognise the need for bilateral collaboration on this agenda. Their 2015 agreement, for instance, agreed to intensify cooperation in domestic mitigation policies, carbon markets, low-carbon cities, greenhouse gas emissions from the aviation and maritime industries, and hydrofluorocarbons.

The window of opportunity to collaborate may not remain open indefinitely

Both sets of leaders recognise there is a massive “win-win” opportunity from accelerating the transition to a low-carbon future, and bolstering economic growth in both China and Europe at a time of uncertainty about the global economy. And this collaboration looks set to only deepen, including on emissions trading, with Beijing’s plans to establish a nationwide emissions trading system by 2020.

China’s planned investment in the green economy is staggering. Chinese domestic investment is already planned of more than £200 billion (HK$2 trillion) in renewable energy and £380 billion in “smart grids”, not to mention the £170 billion committed to tackling chronic air pollution. This investment is buttressed by Beijing’s policy commitments on the climate, clean air and energy agendas. In recent five-year plans, for instance, a strategic direction has been set for the economy, to change the country’s development model from low-grade labour-intensive manufacturing towards a greater emphasis on services and innovation.

For instance, China has expressed ambition of achieving up to a 40-45 per cent reduction in carbon intensity by 2020, a mammoth ambition that may not be fully realised. Another signal of the seriousness of Beijing’s ambitions is the fact that it is using the experience of its subnational pilot trading schemes to inform development of its future national model. Here, Beijing is proving open and willing to learn from Europe’s experience, while adapting its models for China’s domestic circumstances.

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Europe has clear strengths in areas that China (now the world’s largest emitter of greenhouse gases) needs here. European firms are leaders in clean technology. For instance, as the United Kingdom renews its own energy infrastructure, the opportunities for companies in China are enormous.

Importantly, this collaboration will not just be one-way traffic. Indeed, China is already the world’s largest manufacturer and user of solar panels and the largest investor in renewable energy, and it is increasingly possible that technology transfer will be a two-way process.

To be clear, there is still a way to go before China has a fully fledged carbon market, and both parties have yet to develop new low-carbon standards in key industrial sectors. However, the direction of travel is clear: cooperation could build low-carbon industries in a range of sectors, and also align Europe more closely to the world’s future largest economy.

In this context, it is important for Europe, a key architect of the Kyoto Protocol before last year’s Paris agreement, to continue to lead the fight against climate change. EU heads of state have signed up to a deal that will see a 40 per cent cut in greenhouse gases by 2030 compared to 1990 levels.

However, numerous parties have highlighted that, welcome as these commitments are, they may need to be enhanced further. This is reflected in the fact that some EU countries, including Germany, are potentially willing to go beyond the 40 per cent figure.

It is clear that the EU and China have much to gain from a deeper partnership on this agenda, but the window of opportunity to collaborate may not remain open indefinitely. Now is the time to intensify cooperation to bolster growth, and define the landscape of the 21st-century clean energy economy.

Andrew Hammond is an associate at LSE IDEAS (the Centre for International Affairs, Diplomacy and Strategy) at the London School of Economics