China-EU partnership on climate change is a watershed

Climate multilateralism was put to the test in Baku, Azerbaijan, as the COP29 took place against an increasingly complex geopolitical and economic backdrop. However, the new challenges only reinforced the importance of China-European Union cooperation on climate change.

All eyes were on the New Collective Quantified Goal, which defines how much financial support developing countries can expect from rich countries. Negotiations lasted until the last minute, and in the end, a new target of $300 billion was agreed upon, with rather loose requirements on the quality of financing.

The outcome may have been unsatisfactory for many, but it shouldn't be taken lightly either. COP29 made an important statement about the resilience of this multilateral process. China and the EU played a key role in securing agreement on the NCQG by being flexible, communicating constructively with each other, and acting as a bridge between the developing and developed nations.

At COP29, China announced that it has voluntarily provided 177 billion yuan ($24.25 billion) in project funding since 2016 to support developing countries in tackling climate change. By being transparent about its voluntary efforts, China demonstrated an openness that brought countries closer to common ground on the new finance goal.

China has been key in reassuring the world that climate action will continue. Its domestic climate action, supercharged by the cleantech industry, is unstoppable. Its continued commitment to South-South climate cooperation also provides confidence that increased funding and resources from China can be expected to support other developing countries.

The signals from COP29 were clear: China is a key player in defending climate multilateralism and reassuring the world that climate action will continue. But efforts to defend climate multilateralism can only succeed by joint forces among all key players.

China-EU engagement

Amid the current geopolitical uncertainties, China and the EU have the opportunity to jointly step up their leadership role in championing the global climate agenda. As the United States is likely to take a back seat in tackling global climate change over the next four years, commitment by China and the EU will be crucial to keep the momentum going.

The world remains dangerously off track from achieving the climate targets of the Paris Agreement. Under the current trajectory, global temperatures would increase by 2.6 C to 3.1 C over this century, according to the Emissions Gap Report 2024 released by the United Nations Environment Programme. The implications for humans, wildlife and economies are unthinkable.

However, geopolitical tensions and economic uncertainties risk standing in the way of more meaningful emission reductions and effective multilateral cooperation to advance the climate agenda. This could lead to a dangerous spiral where increasingly harsh climate impacts exacerbate crises and drain already empty pockets of countries trying to revive their economies.

But countries still have an opportunity to get back on track by cutting global emissions by 57 percent by 2035, as they put forward their Nationally Determined Contributions in 2025. China and the EU stand at the heart of driving these necessary emission reductions as two of the three largest historical emitters. Both have signaled that they are up to the task.

With the new European Commission in place, the Green Deal remains a priority for the EU. The European Commission has proposed a 90 percent emissions reduction target for 2040 that will likely form the basis for the upcoming NDC. The forthcoming Clean Industrial Deal is intended to speed up the implementation of the EU's climate pledges by directing investment toward industrial decarbonization and building lead markets for clean technologies.

China has also made rapid progress that should enable the implementation of its climate targets while accelerating the global transition. Experts are becoming more confident that China will peak emissions by 2025, five years ahead of schedule. The UNEP Emissions Gap Report 2024 suggests that China might be able to reduce CO2 emissions by at least 10 percent in 2030 and 28 to 37 percent in 2035, based on national modeling studies of mitigation pathways aligned with China's long-term decarbonization goals and with interpretations of the Paris Agreement.

China's rapid renewables expansion is not only bringing down emissions but its clean-energy sector has also become the top driver for economic growth, accounting for a significant part of GDP expansion.

By working more closely together, China and the EU can benefit from each other. China can benefit from having the EU as a reliable partner to share best practices and exchanges on key questions in implementing the green transition from power market reform and industrial decarbonization, to just transition and climate adaptation. Similarly, the EU can learn a lot from China's achievements in producing renewables and advancing breakthrough technologies.

The synergy between China's manufacturing prowess in cleantech and the EU's policy-driven decarbonization efforts could create the conditions for a global green industrial revolution, propelling both regions to the forefront of a low-carbon economy.

Their cooperation could help bridge the gap between developed and developing countries.

The way forward

China and the EU stand at a fork in the road: either they can grow apart and threaten our shared climate safety, or accept that the relationship needs to take new shape to fit the changing economic and geopolitical context.

This means that China and the EU should continue to seek coordination on traditional climate issues and broaden discussions to include emerging areas of divergence.

On the climate diplomacy calendar, if 2024 was a year about finance, then 2025 should be a year about NDCs. With the incoming US administration, there remains a lot of uncertainty around how strictly the US will implement its newly announced NDC of cutting greenhouse gas emissions by 61 percent to 66 percent by 2035 compared to 2005. Between now and COP30 in Belem, Brazil, China and the EU can reinvigorate the multilateral process by presenting a strong NDC and outlining plans to transition away from fossil fuels.

China and the EU need to step up their engagement in the upcoming NDCs. Technical dialogues should continue to strengthen science-based decision-making, but high-level political engagement is also needed to coordinate the timing of submissions and the content of NDC targets.

China and the EU have yet to find a good modus operandi to effectively discuss trade tensions that are inevitably arising as both decarbonize their economies. The implementation of the EU's Carbon Border Adjustment Mechanism and China's edge in green technology have sparked tensions, underscoring the need for clearer communication and cooperative frameworks.

The proposed China-EU high-level dialogue on CBAM could become a venue for both sides to discuss these topics in more detail. Advisers in China and the EU have also signaled openness to explore new ways of enabling Chinese investments in Europe to strengthen the EU's cleantech sector through joint ventures and tech transfer.

To enable a forward-looking China-EU climate cooperation, both sides should create new or revive existing bilateral and multilateral spaces. The two should establish a regular high-level exchange format to discuss priorities while championing decarbonization supported by new industries. China and the EU can also champion multilateral forums that can lay the groundwork for tackling broader challenges.

China and the EU have an unprecedented opportunity to lead the world by setting ambitious emissions reduction targets and creating the frameworks for global cooperation. By strengthening cooperation, focusing on shared priorities and finding ways to address trade issues head-on, China and the EU can catalyze global action.

The climate clock is ticking, and only by working together can China and the EU chart a course for a sustainable future.

The author is a China analyst at the Centre for Research on Energy and Clean Air, a Helsinki-based think tank.