The EU and China: Prospects of Cooperation on Climate and Energy
This is part of our special feature on Europe-China Relations.
The announced withdrawal of the United States on 1st of June 2017 from the 2015 Paris Agreement on climate change mitigation increases the importance of the European Union (EU) for implementing the Agreement and demands more commitment and action from the EU, its Member States and its citizens. In addition to adopting more ambitious policies at home and remaining engaged in critical climate diplomacy, the EU needs to engage and motivate additional actors in the fight against climate change. The EU has already started to look for alternative interlocutors, sub-state interlocutors in the US: NGOs, businesses, cities, or states that showed interest in continuing to work towards the Paris goals. The governor of the State of California, Edmund Brown, was received with great enthusiasm in Brussels in November 20171 and there are plans for Brussels to host the Secretariat of the Covenant of Mayors for Climate and Energy. At the same time, EU officials and international media expressed great hopes regarding the partnership that EU and China can develop in the field of climate and energy policy.
Engaging China is essential for the process of implementing the Paris Agreement because China is the leading global emissions emitter (26.83 percent of the GHG emissions). China is key to the process of managing climate change and an essential player in a successful global energy transition. In addition, recent experience has shown that a climate agreement is very unlikely to deliver if at least two great powers with relevance and a great stake in the issue do not participate. In the 2000s the EU managed to persuade Russia to ratify the Kyoto Protocol and that led to the protocol producing legal effects. The US-Chinese cooperation was very important in the process of concluding the Paris Agreement. The pre-agreement the US and China reached on the 11th of November 2014 paved the way for the signing of the Paris Agreement.2 Through the emission reduction targets that the US and China committed to in November 2014 they hoped “they can inject momentum into the global climate negotiations and inspire other countries to join in coming forward with ambitious actions as soon as possible, preferably by the first quarter of 2015.”3
Experts based in Beijing strongly believe that China will remain committed to the Paris Agreement, although many doubt that China will go beyond merely implementing the commitments taken in 2015.4 In a recent intervention at an event in Brussels, a high Chinese official made the following statement: “we are aware that the EU is more advanced in the process, but we will not shy away from implementing the Paris Agreement.”5
The EU and China: challenges for cooperation on climate and energy
The announcement of the US withdrawal from the Paris Agreement took place in the White House Rose Garden on the 1st of June 2017 and, ironically, coincided with International Children’s Day and, less ironically, with the EU-China summit taking place in Brussels. This triggered declarations by EU leaders and (to a lesser degree) by Chinese leaders that reiterated the determination of the EU and China to continue fighting climate change and to cooperate in this regard. Unfortunately, the rhetoric was not fully backed by deeds. China refused to sign the EU-China 2017 Summit Declaration that provided, among other things, for closer cooperation in the fields of climate and energy, a declaration that has been carefully pre-negotiated by the European Commission’s Directorate-General for Climate Action (DG-CLIMA) and their Chinese counterparts for months.
The fact that, in the end, China refused to sign the Summit Declaration showed that cooperation in the field of climate and energy can be sometimes the “victim of broader politics.”6 The summit failed in ironing out the EU-Chinese tensions around trade issues, the Chinese dumping of steel on the EU market, the access of European investors to the Chinese market (including for investing in the energy sector and green goods and services) and the unwillingness of the EU to recognise China as a market economy. The limited access that European investors have to the Chinese market, while the Chinese companies enjoy greater access to the EU market, is a great source of discontent in the European Commission. In recent years, Chinese companies have invested in the European energy sector. China Investment Corporation acquired 30 percent of GDF Suez’s gas-producing sub-branch and China National Nuclear Corporation (CNNC) and China General Nuclear Power Group (CGN) acquired shares in two reactors to be built at Hinkley Point in the UK.7
In addition to their economic differences, the EU and China often disagree on political and security issues such as human rights and the militarisation of islands in the South China Sea. Political disputes have recently spilled over into areas such as energy and climate cooperation. The visit of Dalai Lama in September 2016 to the European Parliament in Strasbourg triggered a cancelation by China of the visits that the Members of the Committee on the Environment, Public Health and Food Safety (ENVI) and the Committee on Industry, Research and Energy (ITRE) of the European Parliament were due to undertake in China.8 China felt that the visit of Dalai Lama clashed with the EU’s stated commitment towards the “One China Policy” and was perceived as interference in the Chinese internal affairs.9 It took until November 2017 for MEPs that are part of the European Parliament’s Delegation for relations with the People’s Republic of China to get to meet again their Chinese counterparts.
Elite interviews conducted in Brussels in November 2017 revealed additional factors that make difficult the cooperation between the EU and China in the field of energy and climate. The dialogue between the EU and China is made difficult by the fact that the real power is not fully in the hands of the institutions with which DG-CLIMA and DG-Energy cooperate openly and officially, the National Development and Reform Commission’s (NDRC) Department of Climate Change, and, respectively, the National Energy Administration (NEA), but rather lies in the hands of the Communist Party of China (CPC). Good working relationships with high officials in these agencies are jeopardised in case they lose their influence in the party. Exchanges are also limited by the classification of energy information as a “state secret.” For instance, EU experts that were supposed to engage with Chinese experts on electricity grid resilience had limited access to the Chinese grid maps. Consequently, it was difficult for European counterparts to make suggestions on grid restructuring and better interconnection.10 Despite its high rate of renewable energy deployment (especially solar photovoltaic systems (PV) and wind capacity), deployment happens away from the highly populated Eastern coast and electricity transmission infrastructure is missing. Consequently, China experienced recently a high rate of curtailment. In 2015, the solar PV curtailment rate was 31 percent in Gansu province.
Partnership and trust between the EU Brussels-based institutions and China is undermined by the Chinese practice of approaching certain Member States bilaterally. The Chinese 16+1 initiative supports Chinese investment in Central and Eastern European countries in particular in three priority areas: “infrastructure, high technologies, and green technologies.”11 Sources in the European Commission complained that China and the EU Member States do not report to the Commission on the discussions and agreements they reach in the 16+1 framework. The lack of information prevents the Commission from optimally engaging with China on energy and climate issues.
Despite all these difficulties, the EU is aware that it needs to engage China on climate change, even more so now that the US is leaving the Paris Agreement. With the US disengaged, the EU and China need to remain involved and work together if the Paris Agreement is to remain relevant. Despite their disagreements, there are a few areas where there is greater potential for cooperation between the EU and China.
The EU and China: cooperating on decarbonisation and energy transition
Closer EU-China relations in the fields of decarbonization and energy are essential to the process of implementing the Paris Agreement. The interviews conducted in Brussels, with respondents at the centre of EU climate and energy policymaking and involved in shaping the EU-China bilateral relations, showed that there is optimism regarding the potential for EU-Chinese joint work on decarbonisation, especially as the US is taking a step back from climate governance.12 This goal is formally included also in the EU-China Roadmap on energy cooperation (2016-2020) proclaiming that “China and the European Union have a mutual interest and role to promote low-carbon development, protect the environment, address climate change and encourage clean energy development.”13
In order to deliver on the promise, information exchanges have been constant and regular over the last two years between the EU Commission’s DG-CLIMA and its Chinese counterparts in the National Development and Reform Commission (NDRC).14 The staff in DG-CLIMA in charge of the negotiations taking place under the United Nations Framework Convention on Climate Change (UNFCCC) have been in regular contact with their Chinese counterparts throughout the Agreement’s negotiation process and preparing subsequent Conference of the Parties (COPs).15
Fostering the transition to a low-carbon energy system is key to the Paris implementation process and is an area in which the EU is interested in establishing international partnerships: global leadership of the European Union on the clean energy transition is required. As a global market place for clean technologies is being unlocked at an unprecedented scale, the European Union is using its external policies to share its experiences in this area and to mainstream the shift to a low-carbon global economy, first and foremost by developing strong partnerships with countries and regions.16
When it comes to cooperation on renewable energy and green energy products, the last year has seen an increase of the contacts and a mushrooming of the cooperation platforms established between the EU and China17 and in particular DG-Energy of the European Commission and the National Energy Administration of China. Such initiatives include: the EU-China Energy Dialogue and several annual meetings and workshops that bring together officials from both the EU and China.18 The framework of the Energy Dialogue cooperation is focused towards renewable energy, smart grids, energy efficiency in buildings, clean coal, nuclear energy and energy legislation.
The EU also cooperates with China towards the implementation of the Paris Agreement in the framework of initiatives such the Clean Energy Ministerial, a global forum promoting policies and sharing best practices in order to accelerate the transition to clean energy. Currently, given the retreat of the United States from global climate policy, the EU, China and Canada place an important emphasis on this cooperation platform. Another initiative that brings EU and China together is “Mission Innovation,” through which 22 leading economies and the EU promised to double (from $10 billion to $20 billion/year) their clean research and development (R&D) spending in the next five years. Such platforms can foster exchanges and cooperation in certain key areas.
Both the EU and China seem to have a great interest in exchanges on and harmonisation of regulation applicable to carbon markets and renewable energy. Public opinion concerned with environmental affairs, strong environmental groups and parties at home will push for more stringent domestic environmental regulation.19 According to the regulatory politics model advanced by Kelemen and Vogel “the existence of these more stringent domestic standards in turn reduces the economic costs (or generates positive incentives) for domestic producers to support international agreements that impose similar standards on foreign jurisdictions.”20
The claim that industry will be “regulated out of business” is often used in the EU circles to argue against additional environmental regulation. In addition, the industry argues that they are losing their competitive edge if the environmental standards elsewhere are lower. If the EU adopts stringent environmental rules at home, it has a strong interest to make sure that such rules are spread internationally. Energy-intensive industry has warned the EU institutions that the migration of European industry to locations with laxer environmental regulation and no or limited prices attached to carbon, might happen if the global pricing of carbon does not take place. The effective pricing of carbon on the Chinese market will reduce the likelihood of carbon leakage.21
The European Union is aiming to export its policies applicable to carbon markets, renewable energy and energy efficiency to China. One senior official central to EU climate policymaking over the last twenty years highlighted that China can emulate EU policies such as the Clean Energy Package and that China can follow “the example of the EU policy as the EU is implementing measures supporting the energy transition.”22 This shows the EU’s desire to act as a directional leader in relation to China and other countries around the world. However, before exporting the EU Emissions Trading System (EU-ETS) and its inclusive energy market model, the EU has additional work to do in order to make sure they are functional at home.
The European Union is currently the host of the most advanced emissions trading system in the world. Despite the fact that the EU-ETS has not worked perfectly in recent years and is currently undergoing substantial reform, it still constitutes an area in which the EU exercises intellectual leadership.23 Countries around the world have looked at the EU-ETS in the attempt to develop their own emissions trading system. China was very interested in using the European expertise on emissions trading in the process of upgrade its provincial systems to a nationwide system. A project worth 10 million Euro and administered by DG-CLIMA facilitates the knowledge exchange on carbon market design and emissions trading systems between the EU and China. The Chinese are building capacity in this field by trying to reproduce the success and avoid the mistakes of their European counterparts.24 The knowledge exchange on the EU-ETS between the EU and China started before the US announced its withdrawal from the Paris Agreement and has intensified recently: funding has doubled and is coming now from the EU Partnership Instrument rather than relying on international cooperation and development funding. The hope is that the EU-ETS and the Chinese ETS will constitute the backbone of an integrated global ETS.
Cooperation on energy regulation is stipulated in the EU-China Joint Declaration on Energy Security of May 2012.25 We would expect the EU, given its reputation as a promoter of norms and regulatory frameworks abroad, to be the main exporter of standards and regulations. However, in the field of renewable energy, China is well-equipped to shape rules and markets.26 China and its state-controlled companies are leading developers and producers of renewable energy technology. In China, the solar PV construction and installation business is blooming, and Chinese manufacturers provide cheap imports for markets in India and the EU. In the EU a lower demand and the lack of competitiveness led to a fall in domestic PV module production by 16 percent to 2.7 GW in 2016.27 The EU established in 2013 a quota (of 7 GW) for solar panel imports from China and a minimum price in order to prevent product dumping on its market and to protect EU manufacturers. These measures were a compromise to a very heated EU-China trade dispute happening in the early 2010s and were partially reversed in 2017. The measures impacted on the intensity of the EU-China energy technology trade of recent years limiting to a degree the access of European customers to cheaper solar PV technology.
China is also a leader when it comes to deploying renewable energy technology. In 2017, China “reached its 2020 solar power target three years ahead of schedule, after installed capacity topped well over its 105 GW target.”28
This solidified the Chinese leadership in the field of renewable energy development and cast doubts on the EU being the one showing the way or exercising directional leadership in this field. The main solar power advocacy group in Europe (SolarPower Europe) asked for enhanced European action in this regard, asking the EU to increase its renewable energy target to 35 percent by 2030 (instead of 27 percent).30
Other areas identified as showing potential for regulatory cooperation are the areas of energy efficiency and energy market design.31 The EU and China released in 2012 a statement that commits them to cooperation in order to enhance “the efficiency of electricity markets and support China in its reform process towards low carbon economy.”32 Substantial effort has been dedicated by the EU in the last decade to liberalising its electricity market and empowering consumers, while China’s Five Year Plan on Electricity Development published in November 2016 aims to liberalise network electricity prices. The European Union is in a position to share from its experience in this field. Areas of cooperation also include the electricity market reform in order to facilitate the sustainable inclusion of renewable energy and to price it adequately.
Adapting the electricity market and the energy systems to the increasing deployment of renewables is a process that both the EU and China need to undergo. The German Energiewende led to sudden fluctuations in the country’s power grid and the excess of power that resulted from it could not be enjoyed by consumers in Germany’s neighbouring countries given their outdated national grids. Germany is a leader when it comes to the deployment of solar PV technology in power generation on the continent and the European grid had to adapt to the speed of the German energy transition.
However, the risk of curtailment in Europe remains low.34 Most European Union states are on track in reaching their 10 percent electricity interconnection target by 2020 and 15 percent electricity interconnection target by 2030.35 Although China achieved great progress when it comes to its power generation capacity based on renewable energy sources, many of these renewable energy facilities are poorly integrated in the national grid. How to better address curtailment and enhance the flexibility of the energy market and energy grid constitute key topics on which the EU and China can work in the future as they have also formally pledged to jointly work on the “optimisation of grid system and measures to expand the application of renewable energy.”36 The next section will draw a few conclusions regarding the EU-China cooperation prospects, as well as make recommendations on how to enhance the joint work on climate and energy.
Conclusions and policy recommendations
This study argues that despite the planned withdrawal of the United States from the Paris Agreement, the EU and China remain committed to tackling climate change and have showed willingness to enhance their cooperation on issues related to climate and in supporting the global energy transition. The two might be driven by a slightly different configuration of reasons to act on climate, but they both remain engaged. The study showed that high level officials from the EU and China, as well as policy officers and experts based in the EU and China, have in the last year enhanced their cooperation on carbon markets, energy markets and the successful deployment of renewables. Additional work can be done to further enhance this cooperation:
- The two can focus on cooperation and exchanges in areas in which there is great interest from both parties. The EU-ETS is a good example in this regard. The EU believes it is in a good position to transfer knowledge and China is interested to learn from the EU-ETS’ success and failures in developing a Chinese nationwide ETS.
- Despite the fact that the EU has a history of climate regime engagement, emission reduction policies and a few of its countries (such as Denmark) constitute great examples of variable renewable energy integration, the EU is not free of challenges on the path to decarbonisation and in transforming its energy system. The EU and China should work together and build genuine partnerships to find solutions to challenges they might face in the process of energy transition. Areas with great potential for joint work include the redesigning of electricity markets and increasing the flexibility of the energy system (through storage, building interconnectors, digitalisation, etc.).
- China is a leader in solar PV production and deployment and the EU remains an important player in the field and an important market for Chinese solar PV modules. The two can work together to develop rules applicable to renewable energy technology, as well as balanced trade arrangements that would encourage the growth of the manufacturing and deployment sectors in the EU and China, as well as globally.
Cooperation between the EU and China towards the implementation of the Paris Agreement faces several challenges and they need to be addressed. The EU-Chinese climate and energy partnership is jeopardised by several divergent political and economic interests:
- The EU should try to decouple as much as possible climate and energy topics from politically sensitive issues. Engaging China on climate and energy transition can in the long term lead to better cooperation on sensitive issues, such as human rights.
- The EU has recently started to reconsider trade policies applicable to solar panels imported from China. The EU might want to make changes to trade policies that, while protecting EU manufacturers, might negatively impact the rate of renewable energy deployment in the EU.
- Initiatives such as 16+1 have been perceived by the European Commission as an attempt of China to circumvent the EU in the process of investing in the EU Member States’ energy sector. Both the EU and China need to develop mechanisms and practices that help them build trust in each other and encourage transparency. The EU and China can further work together on fostering public and private investment in green products and renewable energy research and deployment.
- Material resources can be important in sustaining the EU’s engagement with China through good practice exchanges and workshops. They support the EU in exercising its climate directional leadership,37 help with the implementation of the Paris Agreement and with energy transition. As a bloc representing the developed world that has historically contributed massively to greenhouse gas emissions, the EU should be prepared to financially support cooperation and exchange initiatives on climate and energy transition.
Alexandra M Bocse is an academic and policy specialist based at LSE. She completed a PhD on European energy governance at University of Cambridge, UK and an MPhil in International Relations at the same institution. In 2015-2016 Alexandra was a Fulbright-Schuman Fellow at Harvard University. Alexandra also worked in the past for the EU and the UN in analysis and advisory roles.Her research and analysis interests are related to European Affairs, energy policy and international governance. She taught at both undergraduate and graduate levels European Politics, Global Energy and Environmental Politics and International Affairs at University of Cambridge, LSE and King’s College London.
Photo: Green energy and sustainable development of solar energy with Shanghai bund panorama Skyline | Shutterstock
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Interview with Chinese expert (2017) the interview took place in Beijing in a public place.
Interview with Chinese expert (2017) the interview took place in Beijing in a public place.
Interview with EC official, DG Clima 1 (2017) the interview took place in Brussels, in a Commission building.
Interview with EC official, DG Clima 2 (2017) the interview took place in Brussels, in a Commission building.
Interview with EC official, DG Energy 1 (2017) the interview took place in Brussels, in a Commission building.
Interview with EC official, DG Energy 2 (2017) the interview took place in Brussels, in a Commission building.
Interview with EP official (2017) the interview took place in Brussels, in an European Parliament building.
Interview with EP, ITRE official (2017) the interview took place in Brussels.
Interview with governmental official 1 (2017) the interview took place in Beijing in an embassy.
Interview with governmental official 2 (2017) the interview took place in Beijing in a public place.
Interview with MEP (2017) the interview took place in Brussels, in an European Parliament building.
Interview with MEP policy adviser (2017) the interview took place in Brussels.
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Published on June 5, 2018.