Article > An EU-China pact is key to a global climate deal

SUSTAINABLE EUROPE

An EU-China pact is key to a global climate deal

Autumn 2008

by Bernice Lee / Nick Mabey

Europe and China have much more in common on both energy security and the climate change issue than is generally realised, say Bernice Lee and Nick Mabey. They set out the elements of a close new partnership

Commentary:

by Tao Wang, Jim Watson

The EU’s progress toward a low-carbon economy is being closely watched in the US, China and India. And a genuine commitment to decarbonisation in these three key countries will only materialise if Europe delivers first. Put another way, the future cannot afford to see Europe – environmental responsibility's only credible standard-bearer – fail to meet its own objectives because it is clearly vital that Europe should stay in the driving seat on climate change policy. This will be a risky, expensive and time-consuming task, but that is the price of real global leadership.

As negotiations on a ”global deal” move slowly forward, a parallel process of building trust, confidence and expectations between the major parties must start to accelerate. Formal negotiations can only be one part of the climate policy process, which in the end requires a belief that countries can decarbonise without threatening domestic well-being or stability, and that all countries are playing their fair part in addressing this shared dilemma.

MATTERS OF OPINION

Japan tops polluters’ “green awareness” league

The five countries responsible for emitting over half of the world’s carbon dioxide - produced from the burning of fossil fuels - are the US (21%), China (19%), Russia (6%), Japan and India (both 4%).

In a survey of green attitudes in these top five carbon dioxide emitting countries, the awareness of climate change and individual efforts to protect the environment was broadest in the US and Japan. More than eight in 10 Americans and Japanese said they voluntarily recycled newspapers and glass in the past year, compared to fewer than one in 10 Russians or Indians. Over three times as many Chinese as Russians participated in recycling: 29% vs. 9%.

Only Japan and China showed a strong correlation between knowing about global warming and participation in environmental activities to protect the environment: from recycling or purchasing “green” products to community activism. Elsewhere, although the best-informed were more likely to adopt “green” habits, the difference in behaviour between those who were well-informed and those who knew little was less marked.

Majorities in all of the countries except Russia said they had tried to save water. The Japanese were the most careful to turn off the tap (82%), followed by Chinese (75%) and American (74%) respondents.

India was the only country of the five where fewer than half of people surveyed (37%) had heard of global warming.

http://www.gallupworldpoll.com/

Global climate security demands global agreement if mankind is to minimise the probability of a 2°C rise over pre-industrial levels. Going beyond this level presents unacceptable risks of passing “climatic tipping points” beyond which catastrophic damage is irreversible, and our ability to control the extent of further temperature rises will be lost. To give a 50:50 chance of staying within the 2°C limit, global CO2 emissions will need to peak in the next two decades and fall by over 50% by 2050. For the European Union and other developed countries this implies moving to an essentially zero-carbon economy by around 2050, with major developing countries following suit well before the end of the century. All major emitting countries will need to begin radical decarbonisation in the next 20 years, whatever their level of economic development.

Delivering these ambitious goals will demand far more realistic and focused efforts to secure an effective global climate change agreement in Copenhagen at the end of next year. The measure of this agreement will not be just whether it gains acceptance by all major polluting countries, but whether it generates a transformational shift in international energy finance flows – moving over $50 trillion of forecasted energy investment by 2050 from high-carbon to low-carbon technologies.

The global political conditions to deliver such an agreement do not yet exist. Clear and powerful leadership is needed to build the politics for a meaningful global climate change consensus. While the US presidential hopefuls have been jostling for position, Europe has been well aware that it must maintain the global momentum for change by revitalising its own climate leadership.

Europe is the first major emitter to commit to an early shift to decarbonisation. European commitments have been crucial in forming expectations in global business that action on climate change will happen and will create real markets. EU Commission President José Manuel Barroso has spoken of Europe leading the world into a “post-industrial revolution”.

No task will be more important in this effort than strengthening Europe’s relationship with China on energy and climate security. The combined economic might of the EU as the world’s largest marketplace and China as its fastest-growing economy can yield unprecedented opportunities to generate benefits of scale and to drive innovation. This will help lower the costs of climate-friendly goods and services, not just for China and Europe but globally. The two can become the de facto engine of global low-carbon transformation, and they can benefit economically from this leadership.

China and the EU are already economically entwined. The EU has been the largest source of foreign direct investment into China, and China has become the EU’s largest trading partner. The EU is also the largest supplier of technologies and services to China. The two face common challenges in energy and climate security, and the International Energy Agency (IEA) estimates that both will be importing 80% of their oil needs by 2030. Ensuring security of supply – and political stability in the world’s resource-rich regions – is thus of paramount importance to both.

China and the EU have remarkably similar, and ambitious, energy policies to improve security of supply through much greater energy efficiency and the increased use of renewable energy. Both need to manage the impacts of climate change, including water stress, shifting agricultural zones and extreme weather.

Much is made of China’s opening of two major coal power stations every week. But the closure of ageing European power stations, coupled with inevitable increases in demand, will mean that the EU also has to invest in a similar level of new generating capacity by 2030. Both Europe and China therefore need to make decisions today if they are to avoid locking in carbon-intensive investments in the coming decades.

The new housing that will be built in China between now and 2020 is equal to all the existing housing stock in the EU-15; and in the EU the housing and building sectors together are already the largest CO2 emitter. Acting together now to improve efficiency standards would help avoid locking in inefficient housing with high CO2 emissions for the next half-century.

China and Europe will dramatically improve their chances of achieving energy and climate security by finding concrete ways to work more closely together. Their cooperation must be concerted and transformational if it is to affect global economic and political conditions, going beyond the confused plethora of small, nationally driven projects that currently dominate EU-China energy cooperation.

Building “low-carbon economic zones” (LCEZs) in China was one of the initiatives proposed in the Changing Climates report of November last year by Chatham House (Royal Institute of International Affairs) and E3G (Third Generation Environmentalism). These LCEZs would be formed at prefecture level (30-40m people) and would provide testing grounds for new technologies. LCEZs would be magnets for attracting investment in research and high-end manufacturing, which is consistent with the Chinese leadership’s desire to move into higher added-value industries. The LCEZs could be to China’s next industrial revolution what Shenzhen was to the current one – and they would be a powerful demonstration of the viability of a low-carbon economy. The EU could focus its energy and climate cooperation around these zones so as to demonstrate to other countries the reality of large-scale transformations.

China uses coal to generate around 80% of its energy needs, and although it’s a uniquely high percentage, coal use is likely to increase in China and in the EU too as both seek to reduce fuel imports. Europe and China should therefore radically upgrade their existing cooperative programme to reduce coal-related emissions though the development of carbon capture and storage technology, and should have a full-scale demonstration plant in operation by 2012 with a further programme of technology development beyond that.

Because China now manufactures such a vast array of goods for Europe and so much of the world, adopting world-class standards for energy-efficient goods would bring clear benefits to all. Under its Eco-Design Directive, the EU will be setting increasingly tight energy efficiency standards, and China and the EU could drive progress in both their markets by setting up a consultative committee to define challenging standards for energy-efficient, low-carbon goods. This could be coupled with the introduction of an EU–China ultra-efficiency building research platform to drive new technical and development opportunities in this fast-growing sector. Other opportunities for EU–China cooperation include developing a low-carbon free trade and investment agreement.

Fulfilling this vision of a truly transformational approach to EU–China collaboration clearly implies moving away from today’s endless jostling over trade issues, and an end to the kind of political rhetoric that feeds exaggerated fear in Europe of Chinese business competition. To win political support for removing barriers to trade and investment in climate-friendly goods, services and technologies, we need to focus much more on the potential benefits rather than on the costs of low-carbon transition.

As economies integrate, the competing needs of producers are commonly set in the public mind against those of importers and consumers. A good example of this dilemma is the way concerns over carbon leakage and loss of competitiveness (when high emitting industries are re-located to developing countries) have spurred discussion in the EU and the US on imposing tariffs on carbon-intensive imports.

Many of the claims over company relocations are overstated. Research suggests that pricing carbon is a major factor in only a small number of industries, accounting for a few percentage points of European GDP. These projections also fail to recognise the reality of global supply chains, or the potential for new technology to change the economics of energy-using sectors. As EU Trade Commissioner Peter Mandelson has asked, how do we define what is a European company in a world of global supply chains and multinational assembly lines?

Whatever the true economics, the politics of carbon leakage are nevertheless important. Unilateral action to impose border tax adjustments outside any global climate agreement would be likely to prompt retaliatory action, posing further threats to the already fragile multilateral trading system. It would also dampen trust and weaken present efforts to conclude a global climate deal in Copenhagen. Yet politicians in Europe and the US are now discussing legislation that would impose unilateral border sanctions, even if a global climate deal has been put in place. This undermines the very idea of the global climate negotiations, for if the “deal” turns out not to be a deal, then how are developing countries meant to accept that the industrialised nations are negotiating in good faith? The relocation of some energy intensive industries may be the price Europe has to pay to secure a global climate deal, and we cannot renege on the agreement if that is part of the outcome.

Two divergent paths lie ahead. One is the road of old-styled mercantilism and the obsessive cultivation of national champions. The other would take advantage of globalisation’s opportunities for win-win solutions that bring not only economic benefits but also energy and climate security.

Ensuring that China and other developing countries gain a sizeable economic share of the low carbon future is critical to the viability of the second path. Early movers are better able to maintain their competitive edge in a world of volatile energy prices. These potential gains may also persuade China to play a larger role in climate negotiations.

But winning public support for closer cooperation between the EU and China will not be easy. Europe’s political and business leaders must therefore begin shaping this debate on future foreign policy choices. If they fail, efforts to construct a low-carbon and secure energy future will be frustrated by the narrow concerns of special interest groups. And if we fail to secure climate security for Europe, or China, the result will be far higher economic costs than any marginal gains by energy-intensive sectors.

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