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Making choices over China: EU-China co-operation on

energy and climateBy Nick Mabey

Introduction

The EU has a vital interest in ensuring that Chinamoves rapidly towards a low carbon economy. Evenwith strong leadership at the highest level in China,this will not be easy, given the country’s scale,diversity and development needs. The building of aneffective UN climate change agreement is animportant component of this process and Europemust work hard to ensure that the Copenhagensummit in December 2009 is a success. But it is alsocrucial that the EU has a close bilateral relationshipwith China, which helps to accelerate the country’stransition to a low-carbon economy by leveragingEurope’s technology, expertise, investment and trade relationships.

European companies already inject over S1.5 billion ayear into Chinese projects to lower emissions ofgreenhouse gases through the Clean DevelopmentMechanism (CDM), while theEU spends S60 million annuallyon official bilateral co-operationon climate change issues.1 Thesesums will grow rapidly in thecoming years especially if theCopenhagen summit producesan ambitious global agreement.Unfortunately, the absence of acommon strategic approach toChina means that Europe has not reaped all thebenefits it could from its investment in China’stransition to a low carbon economy. Moreover,

★ Europe has invested significantly in the creation of a sustainable global climate change controlregime. The EU needs the Copenhagen summit to be enough of a success to maintain political andeconomic momentum towards a global low carbon economy. A perception of failure at Copenhagenwould undermine Europe’s global influence and threaten its climate security.

★ Effective EU-China co-operation is critical to delivering a good deal at Copenhagen and to ensuringongoing progress towards global decarbonisation. Europe and China are economically and politicallyinterdependent, and have strikingly similar energy and climate change policies. As its largest investor,trade partner and provider of technology, Europe has a strong stake in China’s success.

★ The aim of the Copenhagen agreement and EU-China bilateral co-operation must be to help Chinamove to a position where its leaders believe they can deliver a peak in domestic carbon emissionsbetween 2020 and 2030, while maintaining fast enough economic development to ensure socialstability. With the US and Japan strengthening their co-operation with China, Europe must actdecisively to maintain its comparative advantage as the country’s leading economic and technologypartner on low carbon economic development.

★ The EU and China should increase the status of energy and climate change in their bilateralrelationship. This will require the progressive alignment of the EU’s and the individual member-statesclimate policies towards China, behind a common European strategy. The 2009 EU-China summitmust deliver agreement on some key flagship co-operation projects in order to build China’s trust inthe EU as an effective partner.

1 The Clean Development Mechanism (CDM) allowsindustrialised countries to earnemissions credits by investing in emissions-reducing projects in developing countries. These credits are used to meet industrialised countries’ emissions targets under theKyoto protocol.

Europe’s ability to forge a privileged bilateralpartnership with China is now under increasingpressure from the US and Japan, as they increase theirofficial co-operation with the Chinese and aim tomake inroads in China’s growing market for low-carbon technology.

Climate change as a global imperative forEurope

The Copenhagen climate change conference inDecember 2009 will shape global energy investmentfor the next decade. The right decisions will put theworld on a secure trajectory towards decarbonisationby the middle of the century, deliver real global energysecurity and reduce geopolitical tensions over accessto the remaining reserves of oil and gas. The wrongdecisions will make it impossible to limit the rise inglobal temperatures to 2°C, condemning the world toa high risk of catastrophic climate change. Therelative importance of the EU as a global player willprimarily be expressed through the success – or failure– of the global climate change negotiations.

Europe has been a global leader in the fight to keepclimate change below dangerous levels, displayingnone of the weaknesses it suffers in other foreignpolicy areas. The EU has demonstrated leadershipthrough a unified voice in international negotiations,through ambitious domestic actions such as theAgenda 2020 climate energy package agreed in

December 2008, and throughstrong co-operation with othercountries.2 European countriesaccount for 80 per cent of theestimated S20 billion globalmarket in emission reductioncredits under the CleanDevelopment Mechanism in the2008-12 period; leveragingmany times this amount of lowcarbon investment intodeveloping countries.3 Europecurrently leads the world insetting strict standards forvehicle emissions; China’s

decision to adopt European standards means that it isalready 10 years ahead of the newest US regulationsproposed by the Obama administration.

Europe’s investment in early action means that it hasthe assets and authority to consolidate its leadershipof the global environmental agenda. This will not beleadership in the political sense; no one country – notleast the EU – can be a climate change hegemon. Butthe EU will have demonstrated its ability to act as apathfinder toward a low carbon economy, and haveinvested in the building of the global institutions andagreements needed to bring about internationally-co-ordinated action. As the world becomes steadily moreinterdependent and multipolar this style of leadershipwill become increasingly important.

With all major countries seeing the movement to a lowcarbon economy as inevitable, if not alwaysimmediate, this also positions Europe at the forefrontof some of the fastest growing sectors in the globaleconomy (the clean energy sector is already larger thanthe aerospace and defence industries combined). TheEU’s role on climate change is in many ways analogousto its engagement on international trade. The EU hascontributed to the success of the multilateral tradingsystem through multilateral rule-making, the size ofthe EU market, the influence of EU regulatorystandards, and effective bilateral diplomacy andagreements. However, action on climate change shouldalways be driven primarily by the need to achieveglobal – and thus European – climate security ratherthan narrow national economic advantage.

Europe has invested significantly in the creation of asuccessful, sustainable global climate change controlregime. Europe needs Copenhagen to be enough of asuccess to maintain political and economicmomentum towards a global low carbon economy. Aperception of failure at Copenhagen would be bad forthe EU’s economic, security and political future, andEurope must be prepared to act decisively to preventit. The EU’s leadership on the low carbon economymeans it stands to benefit most from a strongCopenhagen agreement. Europe’s vulnerability toclimate change-driven instability on its borders meansit has the most to fear of all developed countries fromuncontrolled climate change. Since Copenhagen is theprime example of rules-based international co-operation today, a failure would undermine Europe’spolitical position in the world, and contribute to thedecline of the multilateral system. There is no lowcost, high carbon future for Europe.

The role of the EU-China relationship

Effective EU-China co-operation is critical to deliveringa good deal at Copenhagen and to ensuring ongoingprogress towards global decarbonisation. Europe andChina are economically and politically interdependent,and have strikingly similar energy and climate changepolicies. As its largest investor, trade partner andprovider of technology, Europe has a strong stake inChina’s success. Only if Chinese emissions peakbetween 2020 and 2030 can the Europeans hope forclimate security. Europe also needs China to pursue amulti-lateral approach to achieving energy security. Asa project based on international law, the EU would farebadly in a ‘great power’ competition for dwindlingglobal oil and gas resources.

China understands that it is highly vulnerable to theimpact of climate change, but fears thatdecarbonisation may be incompatible with the rapideconomic growth needed to maintain social stability.Chinese leaders have committed to the aim ofachieving a low carbon economy, but have yet to putadequate political impetus behind a set of policies tofully achieve this. China is looking for new low

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2 The 2020 climate and energypackage commits the EU to dothree things by 2020: reduceemissions of greenhouse gasesby 20 per cent; increase energy efficiency by 20 per cent; and to increase the proportion of total EU energyconsumption met from renew-able sources by 20 per cent.

3 http://cdm.unfccc.int/Statistics/Registration/RegisteredProjAnnex1PartiesPieChart.html.

carbon technologies to bridge this gap, and to formthe basis of its next stage of economic growth.

The aim of the Copenhagen agreement and EU-Chinabilateral co-operation must be to help China move toa position where its leaders believe they can deliver apeak in domestic carbon emissions between 2020 and2030 (and to rapid emission reductions thereafter)while maintaining fast economic development andsocial stability. This is as much about helping showsuch a path is economically and technologicallyfeasible as it is about traditional diplomaticengagement, persuasion and assistance.

Europe’s economic links with China are acritical asset

Europe’s economic relationship with China is mainlybased on trade in medium and high technologymanufactured products which are not particularlycarbon or energy-intensive to produce. Europe’s tradein energy intensive goods with China is relativelyinsignificant: in 2008 high energy merchandise goodsmade up 8 per cent of Chinese exports to the EU.Chinese steel exports to the EU have surged since2004, and now account for 18 per cent of total EUimports of steel. This has raised fears in Europe overthe competitiveness of the European steel industryand led to calls for anti-dumping actions againstChinese producers. However, booming Chinesedemand for steel, combined with rising wages and thecosts of shipping the material from China to westernmarkets, means that the Chinese are unlikely tocapture a rising share of the global steel market.

Europeans often think of China mainly in terms of themore developed and export orientated eastern coastalregions. However, in climate change terms there isanother China. In the less developed central andwestern regions of the country heavy industry mainlyserves the domestic economy, and will continue to doso as rapid urbanisation drives demand for cementand steel. Europe’s strategic interest is in reducing theclimate impact of these carbon-intensive domestically-focused sectors. By way of example, China produces50 per cent of global cement, but exports just 1 percent of its production – and will construct theequivalent of the entire building stock of the EU-15between now and 2020. China has some of theworld’s most efficient cement plants (including onesowned by the French company, Lafarge), but also along tail of smaller, older inefficient units which areripe for closure or modernisation.

Europe supplies over 50 per centof the high technology used in

China and is particularly active in the power, energyand transport sectors.4 European supply chains couldprovide a major avenue for accelerating thedecarbonisation of China’s economy. This processwill depend on increased flows of trade, investment,technology and joint research and development with

EU economies. Europe will also reduce the cost ofmeeting its own emissions targets if the cost of lowcarbon technologies is lowered by their massdeployment in China.

Europe’s economic relationship with China willincreasingly rest on the exchange of high-techmanufactured goods and services. Chinese firms willnot compete internationally on the basis of cheapenergy and low carbon prices. Indeed, China sees theshift to a low carbon economy as an opportunity tomove up the value chain and increase its productivity.This will create opportunities and risks for Europeanbusinesses, but active engagement with China canpotentially maximise the positive results of therelationship. The Copenhagen agreement could result inan additional S20 billion a year of additional lowcarbon finance flowing into China from 2012 onwards– perhaps rising to S50 billion a year by 2020. Thiswould attract at least as much in additional domestic and international private sector investment.5 Europe’sengagement with China mustaim to produce the largestemissions reductions andeconomic gains possible fromthese flows.

Europe must work to keep its lead in China

Despite the recent improvements in the tone of US-China relations, and the increased focus on co-operation on energy and climate change, the EU stillhas a lead in substantive engagement with China inthis area. The EU has far stronger and more maturepractical collaboration with China, even thoughthis has not translated into equivalent levels ofpolitical engagement.

Europe must build on its existing relationship withChina. There can be no global climate treaty withouta strong consensus between the EU, China and the USat its core. The nature of climate change makes USleadership or US-China bilateralism insufficient. TheEU’s stronger economic ties with China and moreadvanced low carbon economy – being over 50 percent more carbon efficient than the US – provide apowerful and attractive basis for effectiveengagement. This is recognised by Chinese policy-makers in principle, even if they find concrete co-operation with Europe as a whole often hard torealise in practice. Geopolitically, China would preferto have balanced relations with both the US and asuccessful EU inside a strong multilateral framework.This view was reflected in China’s negative responseto the idea of a G2 leadership group comprising theUS and China.

In terms of investment in low carbon technologies andbilateral diplomacy with China, Europe has much to

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5 The European Commissionestimates that an effectiveCopenhagen agreement requiresadditional finance to developingcountries of S97 billion by2020. Assuming the majorityflows through sectoral carbonmarket mechanisms, then atleast 50 per cent is likely toflow to China.

4 See Chatham House,Changing Climates, 2007.

learn from Japan. The more activist climate changepolicy of the new Japanese government is likely toconsolidate Japan’s position as a key strategic partnerto China. Though Europe has advantages in terms ofdiversity and economic scale, Japan is often a morestrategic, practical and reliable partner for China.

With general diplomatic and economic relations backon an even keel since mid-2009, the EU-China summitin November 2009 presents a real opportunity to reachsubstantive agreement on a new level of co-operation.But stronger co-operation on climate change andenergy cannot be divorced from broader Europe-Chinarelations. Many of the critical decisions Europe mustmake in order to accelerate the shift to a low-carboneconomy will have implications for businesscompetitiveness and energy security. For the EU to takebold moves to strengthen economic co-operation witha country that many Europeans see as a threat to theirliving standards will not be easy, even if it is necessary.

Realising the full potential of the EU-Chinarelationship

Whatever the outcome of Copenhagen, Europe willneed to forge a close bilateral relationship with Chinaif it is to meet its climate objectives. At the momentEuropean co-operation with China is not sufficientlyfocussed, or of the necessary scale to drive significantchange. Too often the Chinese see Europeans asprioritising trade and investment objectives – whetherat national or EU-wide level – over climate and energysecurity outcomes. Europe will only be an effectivepartner if it makes some critical strategic choices overwhat it needs from the relationship and how it intendsto prioritise co-operation in the coming years.

EU member-states and the European Commissionneed to make the following choices if Europe is tofulfil the potential of the EU-China relationship:

I. Place energy and climate security at thecentre of EU-China relations

Energy and climate change are still seen as asupplemental or a minor component in EU-Chinarelations, essentially subordinated to trade and marketaccess. This will have to change. Low carboninvestment is a rapidly growing commercial sector – 80per cent of the annual S1.3 trillion low carboninvestment the International Energy Agency estimates isneeded by 2030 will be made in developing countries.

The need to boost investment in low carbontechnologies must be accorded greater importancethan other economic objectives, because it is crucial inorder to meet other public policy objectives, such as astable climate and energy security. Europe’s long-termobjective to accelerate China’s decarbonisation isarguably more vital to its citizens than the short-termcommercial needs of European companies.

Given the likelihood of mounting tensions between theEU and China over the size of the EU’s trade deficitwith China and the latter’s reluctance to rapidlyrevalue its currency, energy and climate change willprovide the best opportunity for deepening EU-Chinaco-operation over the next few years. This must bereflected in climate and energy issues being accorded ahigher diplomatic priority in regular bilateralmeetings, and in more senior representatives fromboth sides being involved in the discussions.

II: Agree a clear role for EU-China bilateralrelations in Europe’s climate change diplomacy

Over the past few years Europe has rightly put themain emphasis of its climate change diplomacy onmultilateral negotiations. This will change in thefuture, whatever the outcome of the Copenhagensummit. If the Copenhagen conclusions are weakerthan hoped for, there will be an urgent need to sustainmomentum through enhanced co-operation withcountries which have signalled their intent to move onclimate change. China is the most important actor inthis potential ‘coalition of the ambitious’.

If Copenhagen is largely successful in laying thefoundations of an effective international climatesecurity regime, and defining significant commitmentsfrom all major countries, the focus will shift totranslating goals into action. This means rapidimplementation of ambitious, economy-wide lowcarbon development strategies by all major emitters,underpinned by effective international mechanisms toboost clean investment in developing countries and toaccelerate the development and diffusion of lowcarbon technologies. China can play a unique role notonly in showing other developing countries that lowcarbon growth is possible, but also in bringing downthe cost of low carbon technologies worldwide and insharing its expertise with less advanced countries.China’s size and geographical diversity means it canoffer a variety of low carbon growth models tocountries at differing stages of development.

III: Co-ordinate the low carbon co-operationstrategies of the EU and the individualmember-states towards China

Companies based in the EU are purchasing carboncredits produced in China worth S1.5 billion a yearunder the Clean Development Mechanism of the KyotoProtocol. This lowers the cost of complying with theEU’s emissions targets – because reducing emissions inChina is cheaper than in the EU – and helps driveChina’s transition to a low carbon economy. The EUand member-state governments are also collectivelyinvesting around S60 million per year in official climateand energy co-operationprojects.6 The EuropeanInvestment Bank has a S500million framework loan facility

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6 Freeman and Holsag, ‘Climatefor co-operation: The EU,China and climate change’,September 2009.

with China for investment in projects to lower carbonemissions, and member-state development banks haveadditional facilities. Moreover, there are large privateinvestment flows from Europe into low carbon sectorsin China. Europe is a very significant investor in greentechnologies in China. But the impact of this investmenton China’s development strategy, its overall stancetowards climate questions and on the country’s overallrelationship with the EU has been modest at best.

The reason why the EU punches below its collectiveeconomic weight in China is not hard to identify.Commercial rivalry between member-states leadsthem to prioritise their national economic interestsover wider European policy goals. The Chinesegovernment often finds dealing with the EU as awhole complex, slow and confusing. As a result, itoften responds by picking and choosing between itsEuropean partners, and focusing on bi-lateral co-operation with individual member-states on specificprojects. It must be recognised that these competitiveforces will not disappear and that even a morestrategic, united Europe would only ever have arelatively limited influence on China’s development.

However, there is still clear scope for Europe toincrease return on its growing investment. Chinesepolicy-makers value the EU’s expertise andexperience in pioneering decarbonisation models,and wish to learn from and adapt Europeanexperience. The priority for the EU must be to helpChina quickly develop practical decarbonisationpaths which fit with its different developmental andeconomic imperatives.

For example, the EU should focus its effort on helpingto create large-scale models of low carbon economicgrowth in different regions of China. To this end, theCommission and the national governments could agreeto pool a growing share of their bilateral assistanceprogrammes in ‘low carbon zones’ where the Chinesegovernment has agreed a strategy for accelerateddecarbonisation. Similar strategic priorities could beagreed in the areas of technology development and co-operation, urban planning, capacity building andregulatory assistance and reform.

If the Europeans made an effort to align theirresources behind a common strategic approach, theywould increase the impact and sustainability of theirassistance, reduce administrative demands on Chinese

partners, and preserve theuseful diversity and differingexpertise of different EUparties. A realistic target couldbe to align 50 per cent of EUand member-state funds aroundagreed strategic priorities andprogrammes by 2013.7

VI: Take the lead in convening tripartitediscussions between the EU, China and the US

Constructing an effective and sustainable globalclimate regime will require action in many differentinternational formations. The United NationsFramework Convention on Climate Change(UNFCCC) negotiations are already supplemented byinformal talks at the Major Economies Forum, the G20, the Greenland Dialogue, and multipleregional and interest basedgroupings.8 However, in someareas there will be value intrilateral discussions between the EU, China and the US toresolve critical issues. Theseinclude the trade inenvironmental technology andthe disagreements surroundingtrade and climate change policy.In some areas this should be extended to four-waydiscussions including Japan.

Trade and climate change

Chinese policy-makers are concerned at a general levelabout Chinese goods being excluded from westernmarkets if they fail to engage responsibly in globalefforts to combat climate change. However, along withall the other major emerging economies, China hassignalled that it would take retaliatory trade measures ifit faced unilateral trade measures in high energy usingsectors. The EU should firmly move away fromthreatening to use unilateral trade measures againstChina, such as the imposition of so-called carbon tariffson imports of Chinese-made goods. Exports of carbon-intensive goods account for only 5 per cent of China’scombined merchandise trade with the US and Europe (8per cent for the EU; 3 per cent for the US) and thisproportion is falling. As a result, trade tariffs based onthe carbon content of goods would represent a smallstick with which to threaten China. Punitive sanctionsgoing beyond proportionate measures – as proposed bysome groups in the US – would rightly provoke a strongChinese reaction and could potentially derail the climatenegotiations and the prospect of further tradeliberalisation. Given the interconnectedness of theEuropean and Chinese economies, this would be highlydamaging for both sides.

Energy-intensive, trade-exposed industries in Europeand the US have been successful in lobbying forexemptions from climate legislation, for example byprolonging their access to free emissions allowancesunder emissions trading schemes. Introducing ‘bordertaxes’ as well – as proposed by some in both the USand Europe – would not only infuriate China but alsofurther reduce the economic incentive for firms inEurope and the US to adopt transformative, lowcarbon technologies. A level playing field withcomparable carbon constraints in all major economieswill not be achieved until 2020-30 at the earliest. Inthe meantime, the EU should work actively with theUS and China to agree on a pragmatic approach to

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7 This would not involveremoving national budgetaryand administrative responsibility for member-statefunds, but rather directing themto commonly agreed priorities. This reflects standard practiceused to co-ordinate Europeandevelopment aid in developingcountries.

8 The Major Economies Forumon Energy and Climate comprises the EU, Australia,Brazil, Canada, China, India,Indonesia, Japan, South Korea,Mexico, Russia, South Africaand the United States; theGreenland Dialogue is a seriesof informal discussions on climate change between keyministers involved in international climatenegotiations.

defusing this issue, and managing any resultingpolitical pressures in a cooperative manner.

Europe could start by discussing the potential for a‘peace clause’ within the Copenhagen agreement,subjecting any unilateral trade measures to impartial,multilateral review in the UNFCCC. Europe couldaugment this with a renewed focus on liberalisingtrade and investment in low carbon goods andservices and on forging closer co-operation on thedevelopment of new technology. This approachwould allow sanctions against verified ‘roguecountries’ reneging on climate change commitments,but avoid their abuse for protectionist reasons. Anagreement at Copenhagen to increase taxes on marinetanker fuel could also help reduce competitivepressures in bulk, energy intensive sectors by raisingtransport costs, while also providing a new flow offunds to support decarbonisation in China and otheremerging economies.

Technology co-operation

Technology co-operation is an area where trilateraltalks – with potentially the addition of Japan – coulddefuse a highly contentious issue. Achieving the EU’starget of keeping the rise in global temperatures tobelow 2°C will require the rapid development and

diffusion of new technologiesafter 2020.9 The rate oftechnology diffusion todeveloping countries will needto be at least double thehistoric rate, which implies afar more active approach totechnology co-operation on thepart of the multinationalcompanies based in developedeconomies who own the vastmajority of low carbontechnologies.10

Negotiations on this issue at the UNFCCC are mired inideological disputes which date back to the debates onaccess to medicines in the 1990s, and in many ways tothe economic disputes of the 1970s. There has been ahardening of fronts recently, with some developingcountries demanding that all patents on low carbontechnology be put in the public domain, and manydeveloped countries steadfastedly resisting pressure forany enhanced sharing of intellectual property. However,these disagreements should not be exaggerated. Afterall, China recently asked the OECD to review itsdomestic innovation system, implying that China is nowgetting serous about protecting intellectual property.And China has also repeatedly asserted the importanceof intellectual property rights protection for its domesticenterprises – not least against aggressive competitionfrom other Asian nations.

The EU should work with the US, China and Japan tofind ways of accelerating the development and

diffusion of low carbon technologies. Preliminaryagreement on a set of measures could then be reachedat the Major Economies Forum in advance of theCopenhagen summit, and could form the basis ofagreement in the UNFCCC.

V. Agree fast-track progress on priority EU-China co-operation projects at the EU-Chinasummit in November 2009

This year’s EU-China summit will take place just afterPresident Obama’s first visit to China, and just over aweek before the Copenhagen conference opens.During Obama’s visit the US and China plan toannounce a set of new co-operation initiatives whichshould cover CCS, solar power, low carbon cities andcapacity building. These projects are at an early stageof development and currently have no significant USgovernment resources behind them. However, giventhe political importance of the Obama visit, it is likelythat the projects will receive a large amount ofpublicity and be presented as concrete examples ofUS-China global leadership on climate change.

This presents risks to the EU. It is in the EU’s interestto see active co-operation between the US and Chinaon climate change, but Europe does not want to see aUS-China bilateral deal outside the Copenhagenprocess. The EU-China summit in November 2009 isalso not the right place to pre-negotiate Copenhagenoutcomes. However, if the EU-China summit lacksany substantive new outcomes on climate change,Europe’s claims to low carbon leadership will lookincreasingly fragile.

The way out of this dilemma is to focus on deliveringsummit outcomes which will send the right signals onmaintaining momentum towards a low carboneconomy and which do not seem to pre-judge theoutcome of Copenhagen. There is not enough time orpolitical momentum at this stage to agree a detailedset of policy objectives, but there is the opportunity toelevate the overall level of EU-China co-operation inthis area and to accelerate progress on somepolitically visible flagship projects.

At a process level this could be achieved through theestablishment of a senior EU-China low carboneconomy taskforce, with an agreed workplan andmandate to produce joint initiatives over the comingyear. In terms of flagship projects, one critical areawhere progress is required is on the EU-China CCSdemonstration plant that was agreed at the 2005 EU-China summit. The targeted completion date of 2020for this project has been overtaken by events, with theEU itself planning to complete eight to ten CCSprojects by 2015 and at least eight other major CCSdemonstration plants underway in the US, Australia,Norway and Canada. The summit could build on theextensive work carried out on this project to date byagreeing to complete the CCS plant by 2015, make ita full part of the knowledge sharing process under the

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9 See IEA, ‘Energy technology perspectives’, 2008;E3G and Chatham House,‘Innovation and technology transfer:framework for a global climatedeal’, 2009; Office of TonyBlair, ‘Technology for a low carbon future’, 2009.

10 See Chatham House, ‘Who owns the low carboneconomy?’, 2009.

EU’s CCS demonstration programme, and agree tojointly identify a workable financing mechanism byMay 2010. A credible aim would be to havecompleted the selection of a demonstration site and acommercial consortium in advance of the next EU-China summit.

Low carbon technology and investmentdevelopment zones

Another major area could be a joint initiative toestablish China’s first ‘low carbon technology andinvestment development zone’ (LCTIDZ), potentiallyin the city of Nanjing, which will host the EU-Chinasummit. Feasibility studies of different types of lowcarbon zones have been developed through a range ofcollaborative EU-China pilot research in differentregions of China. The creation of these zones aims toprovide a platform for a more intensive EU-Chinaclimate change partnership, with a clear and strongfocus on economic restructuring, technology co-operation and the engagement of the businesscommunity. The strategic goals are:

★ To facilitate the upgrading of technology and thejoint development of new technologies by Chinaand the EU, thereby helping to achieve long-termreductions in CO2 emissions.

★ To allow the EU and China to work with thebusiness community to build a new intellectualproperty regime to facilitate rapid and large-scalediffusion of low carbon technology and to helpprevent protectionist measures.

★ To identify ways to help both Chinese andEuropean enterprises, in particular small andmedium sized ones, to overcome barriers toinnovation and market entry through joint EU-China public and private partnerships.

A feasibility study exploring the potential forLCTIDZs in three Chinese provinces (Gansu,Shandong and Jiangsu) was recently completed byE3G in co-operation with the InvestmentPromotion Agency of the Ministry of Commerce of

China. The final report waslaunched in September inXiamen.11 The feasibilitystudy commends theestablishment of two newzones: one in Pingliang City,

Gansu province, to foster co-operation on lowcarbon coal power generation and low carbonagriculture; and another in Nanjing Yangtzi riverindustrial development zone in Jiangsu province, tofoster co-operation on low carbon chemical andsteel production.

Chinese partners at both local and national level haveindicated a willingness to provide co-financing forLCTIDZ initiatives of this kind. In the long term, itwill be possible to scale-up co-operation to theregional level in some areas of China.

The EU-China summit in November 2009 couldrecognise the importance of taking forward theseinitiatives. An EU-China multi-stakeholder forum ofgovernments and businesses should be established toidentify critical areas for action and to monitorprogress and co-operation in these zones at futuresummits, with a view to strengthening and scaling upsuccessful models of co-operation.

Conclusion

The ratification of the Lisbon treaty could open theway for a more coherent and strategic foreign policy.No bilateral relationship will be more important thanthe one with China. The European interest lies inaccelerating the decarbonisation of the Chineseeconomy along a low carbon path. With thatobjective in mind, the EU should concentrate oncooperating with China to demonstrate a successfulmodel of low-carbon growth in China.

The EU should accord climate change and energy thesame status as economic and commercial issues withinthe EU-China bilateral relationship. The urgency ofthe challenge posed by global warming combinedwith the potential rewards of strong co-operationwith China should make the EU willing to experimentwith new models of co-operation and partnership.

Europe cannot do this on its own. A similarcommitment will be needed from the Chinese side.E3G’s experience of working in China gives usencouragement that this is the case. There is agrowing conviction among many Chinese economicpolicy-makers that the move to a low carboneconomy will drive the next stage of Chineseeconomic development. Europe has a real opportunityto support this process through the EU-China summitand associated partnership programmes.

Such a partnership with China would put real substancebehind European aspirations to shape the internationalsystem in its own image. It would build on Europe’s rolein multilateral negotiations and consolidate its positionat the forefront of the drive to put the global economyon a low carbon path. Europe has all the assets it needsto make this happen, but it needs to decide to makethem work in the European interest.

Nick Mabey is the chief executive of E3G. November 2009

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11 E3G, ‘Feasibility study on EU-China low carbon technology and investmentdemonstration zones’,September 2009.

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