China-EU ties fashion green future

Cooperation between the two is seen as essential for success at the Paris climate summit

China and Europe need to form more strategic alliances to combat global climate change through policy cooperation and deepening of green policy integration, experts say.

Such ties are seen by the low carbon industry as a crucial step toward further government-level discussions at December's United Nations climate summit in Paris.

Crucial to any alliance is recognition from both sides of similar climate change challenges and opportunities faced by Europe and China, according to a roundtable discussion held in September at London's Chatham House think tank.

Antony Froggatt, a senior research fellow at Chatham House, says there are many opportunities for climate change collaboration, and one area is China's urbanization, because urban infrastructure has significant implications on resource consumption and energy efficiency.

This is an important area where Europe can offer some expertise to China, given that Europe has also gone through the urbanization process and has technological knowledge and expertise in the area, Froggatt says.

China's urban dwellers increased from 40.4 percent of the total population in 2005 to 52.3 percent in 2012. They are expected to reach 70 percent by 2030. According to forecasts, China may have 200-300 million inhabitants moving from rural to urban areas in the next few years.

This debate is important because the way urban infrastructure is developed can mean the use of fossil fuels is locked in once construction is complete. Residential living, including the consumption of goods, food, heating and electricity, account for nearly four-fifths of urban energy consumption.

It is also important to help China find a way to reduce dependency on certain resources such as coal and oil, by increasing the range of materials it uses for energy production, Froggatt says.

China should also consider how to maintain growth while transforming energy consumption by embedding renewable energy into the economic structure in an efficient way, he says.

Nick Mabey, chief executive and a founder director of E3G, a not-for-profit company, says that the relationship between the European Union and China is becoming closer from a political perspective and there is a pressing need for both sides to better understand each other.

Such an understanding would help avoid problems such as the dispute over the EU's setting of tariffs for China's low-cost solar panel exports to Europe, he says. Mabey says the panels benefit the EU by providing consumers with an inexpensive, environmentally friendly way to generate energy.

Mabey says it is important to align the objectives of the EU's reform plans and China's 13th Five-Year Plan (2016 - 2020), turning the strategic alliance into "opportunities rather than sources of tension."

In June, E3G published a research paper in cooperation with Chatham House on enhancing engagement between China and the EU on resource governance and low carbon development. The basis for the paper is the growing economic interdependence of China and Europe, because they are both vulnerable to climate change and both have experienced a rise in the number of extreme weather events in recent years.

Given that China and the EU are the world's largest importers of natural resources, and forecast to rely on imports for an estimated 80 percent of their oil supply by 2030, fluctuations in resource prices will greatly affect both.

Suggestions for cooperation given in the report include an increasing focus on existing China-EU partnerships such as energy security, in which the two sides can form a consumer alliance with more cooperation on renewable energy.

It is also suggested the two sides deepen their economic integration and reform through green growth, which could involve continued market integration, policy coordination and consultation, and stronger practical cooperation and regulation.

Furthermore, the two governments are encouraged to work toward a stronger climate change regime, and the establishment of an EU-China working group on climate change governance.

In 2007 Chatham House and E3G published a joint report called Changing Climates, which suggested that cooperation between China and the EU should be deepened to include strategic and long-term clean energy research, development and demonstration, joint standard setting, green trade and investment liberalization.

Since then, there has been an acceleration in the clean energy market. As recommended in Changing Climates, low carbon zones have been established at several levels in China, affecting 350 million people. Jilin city is the first to be established, and since then there have been others. Eight low carbon pilot cities and five pilot provinces are located across the country, and plans focus on reducing carbon in industry, transportation and other areas. Low-emission trading pilot projects have also been established and supported by European technical assistance.

Meanwhile, demand created by European renewable energy policies has created a big push for China's renewable energy industries and exports, and this has brought major reductions in global costs, especially for photovoltaics and light-emitting diodes.

However, such cooperation has met challenges, especially since 2007, such as EU complaints about low prices for Chinese exports such as efficient light bulbs and solar power subsidies.

Mabey says such trade protectionist measures show the concerns of the situation when what makes sense economically does not transform into politics, because it is the EU market that has driven the growth of China's renewable industry to its scale.

Globally, solar photovoltaic module prices have fallen by 80 percent since 2008, by 20 percent since the beginning of 2012 and by 12 percent in 2014 alone. This is made possible by both the EU's commitment to renewable targets and China's manufacturing prowess, and the fall in prices has also brought benefits to both the Chinese and EU economies.

In relation to these trade tensions, the paper suggests that in the future, the EU and China maintain and consider lowering current levels of Chinese and EU applied tariffs on a mutually agreed list of low carbon and environmental goods and services, and to work toward further trade liberalization.

It also suggests that both sides work proactively to avoid unnecessary trade disputes, especially in low carbon and environmental sectors, by enhancing the mutual transparency of subsidies and support mechanisms.

There may more issues that need to be worked out regarding China-EU cooperation on low carbon development, such as infrastructure investment, which China is leading through initiatives such as the Asian Infrastructure Investment Bank and the country's Belt and Road Initiative, Mabey says.

A total of 14 European countries have invested in the AIIB, although not as a bloc. Cooperation with China on the bank will lead to discussion on which investments are suitable for the AIIB. From Europe's perspective, the sustainability of investments will also come into the discussions.

Another key area that Mabey's team sees as a key driver for low carbon cooperation is in the area of green finance, which will be a powerful force to channel funds into environmentally friendly projects.

Because it was heavily involved in helping to set up the UK Green Investment Bank, Mabey's team has also been invited to give advice to the Chinese government, helping it to come up with plans for equivalent financial market structures that can channel funds into environmental projects.

Founded in 2012, the UK Green Investment Bank's purpose is to accelerate the UK's transition to a greener, stronger economy. It has been given capital of 3.8 billion pounds ($5.8 billion; 5.3 billion euros) to invest by the UK government. Most of its investments help fund the creation of new, modern, green infrastructure across the UK and with that, new jobs in construction and operational projects.

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