Stars and Dragons: The EU and China - European Union Committee Contents


195.  China is the world's largest emitter of greenhouse gases. In 2007, China was building the equivalent of one 500 megawatt coal-fired power plant every two-and-a-half days[86]. Its participation in any global agreement to combat climate change is therefore essential. China continues to see itself as a developing country and is unwilling to compromise on economic growth to tackle a problem it sees as having been caused by the western industrialised countries. However, China has taken important steps to address climate change in recent years with a predominant emphasis on energy efficiency.

196.  China and the EU cooperate widely on climate change (DECC pp 249-50). The EU-China Partnership on Climate Change was agreed at the 8th EU-China Summit in September 2005 under the UK Presidency. It provides a high-level political framework to strengthen cooperation by setting out new actions to tackle climate change. The partnership complements the UN Framework Convention on Climate Change and the Kyoto Protocol. It strengthens cooperation and dialogue on climate change including clean energy, and will promote sustainable development. It includes cooperation on the development, deployment and transfer of low carbon technology, including advanced near-zero-emissions coal technology through carbon capture and storage.

China's role and approach

197.  Despite its economic achievements, China continues to see itself as a developing country which should not have to sacrifice its economic growth to combat climate change. China holds the developed world responsible for causing anthropogenic climate change, and therefore believes that the developed world, including the EU, should lead efforts to tackle it.

198.  China is investing capital and building infrastructure faster than any society ever has. Its estimate of the investment needed in its energy infrastructure over the next 12 years is in the order of US$2 trillion. Therefore it needs to make a bigger and faster shift in its economic direction than any other economy in order to achieve a successful global response to climate change (John Ashton[87], Q 228).

199.  Nevertheless, China is taking action on climate change. In November 2009, Premier Wen Jiabao stated China's intention to reduce energy intensity (carbon dioxide emitted per unit of economic output) by 40-45% by 2020 compared to 2005 levels. In 2007 the Chinese government established a National Leading Group on Climate Change, led by Premier Wen Jiabao and comprising 14 Ministries. China's National Climate Change Programme sets out a number of substantial mitigation actions on energy efficiency, renewables and reforestation. These include a programme to improve energy efficiency in China's 1,000 largest enterprises, which account for 37% of China's primary energy and 50% of industrial energy consumption; retiring inefficient power and industrial plants; energy efficiency standards for buildings; and vehicle fuel consumption standards (DECC pp 250-1).

200.  The Programme provides for the implementation of a wide range of energy and industrial policies that, while focused on energy security, contribute to emissions reductions. The Chinese government estimates that these policies will result in the mitigation of 1.85 billion tonnes of carbon dioxide over 2006-2010, which is equivalent to around 36% of total EU emissions in 2006 (DECC p 250).

201.  One impetus for action is that China is itself vulnerable to climate change. According to the Intergovernmental Panel on Climate Change (IPCC), currently observable effects include increases in flooding in the north east and eastern regions of China; an increase in the frequency of glacial lake outbursts due to the retreat of glaciers in the Tibetan Plateau; and water shortages. The IPCC has indicated that future temperature increases in China are likely to be greater than the global average increases. If emissions continued unabated, temperatures in China could rise to about 2°C above pre-industrial levels by 2050, or 4°C by 2100. An estimated one billion additional people would be at risk from water stress by the end of the century (DECC p 250). Much of the Chinese population lives on the eastern coast of China and would be very vulnerable to an increase in sea level.

202.  Ambassador Wu[88] underlined the importance of climate change in EU-China relations. He thought that developed countries should find a formula to help developing countries, including through the transfer of advanced technologies which the Chinese could not afford. In contrast, the EU Chamber of Commerce commented that China held US$ 2.4 trillion in foreign exchange reserves which could be used to purchase such technologies[89].

203.  Jiang Kejun[90] thought that China should set high targets for the reduction of carbon emissions but this could not be achieved through targets alone. There were many possibilities for international collaboration.

204.  China is the world's largest emitter of greenhouse gases. Nevertheless, its overriding concern is delivering economic growth. The Chinese Communist Party sees continued economic development across China as the basis of its legitimacy. All other policy considerations, including climate change, take second place.

205.  China has set a target for reduction in energy intensity of 40-45 per cent by 2020 compared to 2005 levels. This is welcome. However, China's refusal to set targets for emission reductions means there is no realistic prospect of its transition to a low carbon economy, without which limiting global average temperature increases to 2°C will become impossible.

The EU and China: partners in addressing climate change?

206.  John Ashton (the Foreign Secretary's Special Representative on Climate Change) told us in April 2009 that the EU, the world's largest single market, and China, the world's fastest growing large economy, were "absolutely critical" to achieving a low carbon global economy (Q 216). Nancy Kontou, then head of cabinet to the Environment Commissioner, agreed that the EU's relationship with China was one of the most important in the context of the international climate change negotiations (Q 441).

207.  John Ashton thought that it was difficult for the Chinese to see how they could contribute to the global response without adding to the existing risks to their own stability and prosperity. The security and prosperity of the EU depended on building a more transformational engagement with China. The Obama administration had declared its interest in building a transformational strategic relationship with China on energy and climate. The EU should seek to do the same. However, the EU's record in engaging China on climate change was drowned out by Member States competing against each other for short-term, partly illusory, commercial advantage (QQ 218-21)(see also Chapter 3).

208.  We are concerned that competition for short-term commercial advantage between the Member States is undermining EU engagement with China on climate change. We recommend that the Member States put collective EU interests before short-term commercial advantage in the area of climate change.

209.  Michael Pulch[91] explained that the EU had invested a great deal in green technologies and China was a growing market for EU goods. However, the EU should be cautious about transferring technology to China because of the limited usage of licensing in the Chinese system. At the EU-China summit on 30 November 2009 the two sides had agreed to upgrade the current EU-China Partnership on Climate Change[92].

210.  The European Chamber of Commerce in China[93] told us that the Chinese system did not support green thinking on climate change and the environment. A key issue was that China was keeping electricity prices down through state subsidies. This reduced price incentives to reduce energy usage.

211.  The EU should raise the issue of state subsidies for electricity with the Chinese government and highlight that this practice creates a disincentive for energy efficiency.

Cooperation on energy and low carbon technologies

212.  The EU-China Partnership on Climate Change includes activities to reduce the cost of energy technologies and promote their deployment and dissemination. In November 2007, the European Investment Bank signed a Climate Change Framework Loan of €500m to fund projects in China that contribute to combating climate change. The China-EU Action Plan on Energy Efficiency and Renewable Energies aims to enhance dialogue and promote industrial cooperation, including through cooperation on energy markets; security of supply; and protecting the global environment. The Plan provides policy advice and capacity building to national and local authorities, and promotes the deployment of technology. The biennial EU-China energy conference brings together high-level representatives from European and Chinese industries and governments.

213.  The EU-China Clean Development Mechanism (CDM) Facilitation Project[94] which ended in January 2010 provided assistance to China in strengthening its policy and regulatory regime for CDM development. This has facilitated China's participation in the carbon market and its transition to a low carbon economy. However, project-based offsetting mechanisms are limited in terms of their scale. DECC wrote: "Advanced developing countries such as China need to build on their success in attracting CDM investment by moving towards sectoral crediting and trading mechanisms that will make a net contribution to emission reductions and achieve financial flows and emission reductions ..." The Government supported the Council of Ministers Conclusions of 2 March 2009, which included a proposal to "build, as soon as practicable and preferably by no later than 2015, a robust OECD-wide carbon market through the linking of cap-and-trade systems, to be extended to economically more advanced developing countries by 2020" (DECC pp 253-4).

214.  One important area for practical cooperation between the EU and China is clean coal technology. The UK-led EU-China Near-Zero Emissions Coal (NZEC) initiative aims to build demonstration plants in China to test the feasibility of Carbon Capture and Storage (CCS) technology at the industrial scale. CCS is the only set of technologies with the potential to reduce emissions from coal-based power generation (DECC pp 252-3). Jiang Kejun[95] thought that China should move to CCS by 2020 but there was strong resistance from special interests in the Chinese industrial hierarchy who feared that this would choke economic growth.

215.  Nevertheless, Lord Hunt of Kings Heath, Minister of State at the Department of Energy and Climate Change, wrote that the initiative was making progress[96]. This cooperation was taking place under the EU-China Partnership. Several UK-China and EU-China clean coal projects concluded in particular that:

  • there was potential for CCS in China;
  • once CCS was established, the cost of deployment in China could be relatively cheap (approximately £25 per tonne of carbon dioxide); and
  • there may be significant storage in saline aquifers though further assessment was needed.

According to Lord Hunt, these projects had built a "significant amount of institutional capacity, expertise, and business interest in CCS in China".

EU China CCS initiative: phases II & III

Phase II of the initiative (2010-2012) will examine the site-specific requirements for and define in detail a demonstration plant and accompanying measures. Phase III for the construction and operation of a commercial-scale demonstration plant in China should commence after 2012.

Lord Hunt recognised that no funding had been found for Phase III, apart from the Commission's contribution of €50 million. The Government's immediate objective was to find funding for Phase II. They had pledged £6 million and the Commission €7 million, on the condition that other European countries contributed.

216.  Although we strongly support the concept of the EU-China Near-Zero Emissions Coal (NZEC) initiative, based on Carbon Capture and Storage (CCS) technology, we are sceptical that the current pace of development, and the lack of committed funding, will lead to a successful and timely outcome. There needs to be a much stronger determination by the UK, the EU and China for this initiative to work.[97]

The Copenhagen conference

217.  The December 2009 Copenhagen conference was "disappointing in a number of respects", according to the Government[98]. The EU did not achieve its objectives. However, in the margins of the conference, 49 developed and developing countries, including China, adopted a "Copenhagen Accord", which:

  • Endorses the limit of 2°C of warming as the benchmark for global progress on climate change; developed and leading developing countries agreed to make specific commitments to tackle emissions, to be lodged in the agreement by 31 January 2010;
  • Contains commitments by developed countries to provide finance for developing countries, such as $10bn of fast-start finance a year by 2012 and specific support to tackle deforestation;
  • Refers to the measurement, reporting and verification of progress.

In February 2010, China confirmed its voluntary commitments under the Copenhagen Accord. These are to: endeavour to lower its carbon dioxide emissions per unit of GDP by 40-45% by 2020 compared to the 2005 level; increase the share of non-fossil fuels in primary energy consumption to around 15% by 2020; and increase forest coverage by 40 million hectares and forest stock volume by 1.3 billion cubic metres by 2020 from 2005 levels.

218.  Based on the internationally-agreed principle that countries have common but differentiated responsibilities to fight climate change, the EU had not been seeking a commitment by China to cut its emissions in absolute terms. The EU did, however, want China to commit to capping the growth of its emissions to between 15 and 30 per cent below "business as usual"—i.e. the current rate of increase—by 2020. This figure was based on the objective of keeping the rise of global average temperatures to 2°C above pre-industrial levels (Nancy Kontou, Q 441).

219.  The Government (in their 5 January statement) recognised how far major developing countries such as China had come, but noted the need to allay their concerns that they would be constrained from growth and development by the demands of a legally-binding treaty. In an attempt to present the outcome of the conference positively, the Government stated that "every major economy of the world now has domestic policy goals and commitments to limit their greenhouse gas emissions: the US, China, Japan, Russia, Brazil, India, Indonesia, South Korea, Mexico, South Africa, and of course the EU. Throughout the world, policy is now set to improve energy efficiency, to increase investment in low-carbon power, to develop hybrid and electric vehicles and smart grids and to reduce deforestation".

220.  We are deeply concerned about the failure of the Copenhagen conference on climate change in December 2009. The EU made a concerted effort to achieve agreement on a legally-binding treaty on climate change in the negotiations leading up to the conference. However, China and other developing countries were successful in opposing this.

221.  The adoption by some participants of a Copenhagen Accord outside the UN framework is a positive first step but falls short of the EU's objectives.

222.  Copenhagen illustrated a marginalisation of the EU, even when united; the Chinese leadership of the developing world; and its direct challenge to the United States as an equal.

223.  The EU should be prepared to set an example on carbon emission cuts which is in the interests of the Member States and the world. It must reassess its negotiating strategy prior to the UN meetings in Bonn and Mexico City in order to re-enter the negotiations as a player rather than as a spectator. The Government should consider whether a new approach by the EU towards China and other major developing countries is needed. All options should be included in this review. In particular a major effort should be made by the EU to convince China of the need for a fully effective international system of verification and monitoring of commitments entered into.

224.  Despite Copenhagen, bilateral climate change cooperation between the EU and China is achieving practical results. The UK played a leading role in this respect, including by achieving agreement on the EU-China Partnership on Climate Change during its presidency of the EU in 2005.

225.  The EU-China high-level dialogue should include the issues that arise from industrial pollution and its effect on the Chinese and wider environment.

86   Communication from the Commission to the European Parliament and the Council-Demonstrating Carbon Capture and Geological Storage (CCS) in emerging developing countries: financing the EU-China Near-Zero Emissions Coal Plant project. Ref. 11488/09, COM(2009) 284 final, Brussels 26 June 2009. Back

87   The Foreign Secretary's Special Representative on Climate Change. Back

88   Meeting with Ambassador Wu, Beijing, Appendix 4. Back

89   Appendix 4. Back

90   Meeting with Jiang Kejun, Roundtable on EU/China climate change cooperation, Beijing, Appendix 4. Back

91   Meeting with Michael Pulch, of the then Commission delegation to China, Beijing, Appendix 4, p.2. Back

92   Joint statement of the EU-China summit: Back

93   Meeting with the European Chamber of Commerce in China, Beijing, Appendix 4. Back

94   The Clean Development Mechanism (CDM) is a market-based mechanism established by the Kyoto Protocol to the UN Framework Convention on Climate Change (UNFCCC) to enhance cooperation between developed and developing countries on carbon emission reductions. The EU-China CDM facilitation project, which started in February 2007, aims to strengthen the role of the CDM to help China's path to sustainable development. It is being implemented by Chinese and European partners, supported by grants from the European Commission. Through a series of activities including policy research, capacity building and training programmes, the project focuses on China's policy and regulatory regime for CDM development and will provide policy recommendations to CDM policy-makers in Europe and China. It brings together a range of public and private sector stakeholders involved in CDM projects. Back

95   Meeting with Jiang Kejun, Roundtable on EU/China climate change cooperation, Beijing, Appendix 4. Back

96   Appendix 5, letter from Lord Hunt to Lord Roper dated 2 December 2009. Back

97   We have already commented publicly on this point ("Lords EU Committee criticise Government and European Commission's slow progress on Carbon Capture and Storage Project", press statement dated 20 October 2009). Back

98   HL Statement 5 January 2010, col 49-50.  Back

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