- China and the European Union (EU) are the world’s largest importers of natural resources. They will rely on imports for 80 per cent of their oil supply by 2030, mainly from the Middle East and Russia. Chinese growth over the past decade has transformed global resource markets, driving up prices and raising fear about the impacts of resource scarcity and the environmental sustainability of production. Competition for resources such as Russian gas also makes EU sanctions against Russia less effective. The EU and China are also vulnerable to climate change, and both have experienced a rise in extreme weather events in recent years.
- The EU and China have recognized at the highest level that their future security and prosperity require effective responses to the linked challenges of resource security, environmental degradation and climate change. It was on this basis of common interests and growing economic interdependence that the 2007 report Changing Climates – jointly published by Chatham House and E3G – suggested that cooperation between China and the EU should be deepened in a range of areas, including strategic and long-term clean energy research, development and demonstration; joint standard-setting; green trade; and investment liberalization. The aim was to make the EU–China economic relationship the de facto engine of global clean energy transformation.
- Progress has been slower than expected on some policy and cooperation recommendations made in Changing Climates, but clean energy market integration has accelerated. China’s domestic reforms on clean energy have exceeded all expectations, driven by concerns about security, pollution and climate change. As recommended in Changing Climates, low-carbon zones have been established at several levels in China, covering 350 million people. Carbon-emission trading pilot projects have been established and supported by European technical assistance.
- Demand created by European renewable energy policies kick-started Chinese renewable energy industries and exports; and this has brought major reductions in global costs, especially for photovoltaics and light-emitting diodes. China has rapidly increased its domestic renewable energy targets and is now the world’s largest national investor. Policy cooperation has grown by way of a suite of cooperative agreements in areas such as urbanization and energy security, as agreed at the 2012 EU–China Summit with the then vice-premier Li Keqiang.
- However, this progress on green economic reform and integration has not been reflected in the practical politics of EU–Chinese relations, which have ebbed and flowed considerably since 2007. The mutual benefits from the clean energy trade have been overshadowed by EU complaints about artificially low prices for Chinese exports of efficient light bulbs and rare-earth minerals and about solar power subsidies. China’s position at the Copenhagen Climate Summit in 2009, and its aggressive opposition to the inclusion of aviation in the EU Emissions Trading System, has raised serious doubts among European policy-makers about its commitment to climate action. This rising distrust is one reason behind the enthusiasm of many of those policy-makers for the Transatlantic Trade and Investment Partnership agreement. They see a reinvigorated transatlantic partnership as a way to set de facto global norms and standards for Chinese exports and investors.
- At the same time, broader shifts in geopolitics after the 2008–09 financial crisis, and also changes in Chinese diplomatic priorities, have reduced the EU’s importance to China. President Xi Jinping has given higher priority to China–US ‘great power’ relations and China’s neighbourhood. He has downgraded the focus on multipolar multilateralism that made the EU a strategic priority in Beijing. The EU remains a vital economic partner for China, but its political relationships now focus on bilateral ties with Berlin and London and on stronger economic integration with eastern and southern Europe.
- A distrustful and less confident EU and a distracted China are a weak basis for rebuilding a productive EU–China relationship on climate change and resource scarcity. But the authors of this paper believe that the core analysis of mutual interest laid out in Changing Climates still holds and that China and the EU need to work together better in order to achieve their national objectives.
- China faces a daunting challenge in national economic reform and mass urbanization. Its current cities are wasteful, unsustainable and in many parts unliveable. The country faces huge costs in adapting to climate change, water scarcity and land degradation. If China carries on building the same type of infrastructure for the next 200–300 million urban inhabitants, it will lock itself into the middle-income trap. Europe, at its best, has technology and development models that China needs. And as it deepens its own domestic low-carbon and resource-efficient reforms, it remains the best partner for China to co-develop effective solutions in areas such as energy market regulation, electric mobility, clean finance markets and climate resilience.
- Europe and China still look to the US for global diplomatic leadership and security. But as US domestic energy production increases, Washington is less interested in supporting stability and security in resource-producing areas such as Africa, Central Asia and the Middle East. Europe and China need to work together better in order to protect their vital interests in these regions.
- Europe is already seeing weather extremes linked to climate change cause serious instability in its neighbourhood. To preserve European climate security, the EU needs China to commit itself to greater domestic decarbonization before 2030. Given China’s high climate vulnerability, the necessary cuts are objectively in its domestic interest. However, it has traditionally been reluctant to move faster than the US on climate action, as shown by the 2014 joint US–China climate change pledge. If China maintains this implicit political linkage, the world is likely to exceed the agreed 2°C threshold because the US is far from having a domestic consensus on keeping climate risks below this level.
- Just as Europe reassesses its internal relations on key issues, such as the development of the Energy Union, Europe and China need to forge a new understanding of their relationship if they are to preserve their core interests. Relations with the EU cannot be treated as just an economic interest by China, and China’s strategic relationship with the EU is even more important as it embarks on a peaceful transition to a middle-income economy. Its effort to build a coherent and cooperative international framework, including its ability to operate in global markets, depends in part on European views of its actions as well as its intention on issues such as climate change. The EU cannot form an exclusive partnership with the US to attain its interests because its members’ priorities are too divergent on energy security, clean technology, climate change and resource scarcity.
- A rebooted EU–China relationship must reflect post-financial crisis political realities and move beyond the multiplication of announcements that has characterized past summits. The European Commission has said that domestic EU policy should be ‘bigger on big things and smaller on small things’. This principle should be applied to external relations too. China should help this adjustment of priorities by being clearer on those areas in which partnership with the EU can help to bolster and accelerate its domestic economic and market reforms. The EU and China must have a frank discussion about their expectations and objectives for the outcome of the UN Framework Convention on Climate Change (UNFCCC) negotiations in Paris in December 2015 and for the continued evolution of the broader international climate regime.
- A positive agenda for the EU–China Summit in 2015 would:
Focus the EU–China relationship with an agreement to concentrate collaboration on key existing partnerships: the Partnership on Urbanization; the Energy Security Dialogue; resource scarcity; energy market reform; and clean technology cooperation (Horizon 2020 etc.). Specifically, closer collaboration on energy security can elevate the relationship to a more strategic level.
Deepen EU–China economic integration and reform through green growth by sharing experience. A joint working group could create a domestic investment environment conducive to green growth. Agreement on a list of bilateral initiatives could accelerate the creation of green growth areas in both the EU and China.
Work towards a strong climate change regime by way of an agreement on core elements for the climate change negotiations in Paris in 2015, and the establishment of an EU–China working group on climate change governance. Such a group could look at the role of the UNFCCC, international development institutions (including the New Development Bank), the G20, disaster responses etc.