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


Memorandum by the Department of Energy & Climate Change

1.  What are the main elements of the EU's policy on cooperation with China on climate change? To what extent is this cooperation successful, and what are the obstacles to greater cooperation? Does the EU (EU institutions and Member States) have a common and coherent approach to cooperation with China on climate change.

  An EU-China partnership is critical to moving to a global low-carbon economy: an alliance between the world's fastest growing economy and the world's biggest single market would potentially drive down the costs of low carbon choices by accelerating market growth.

  The commitment of the EU and China to cooperation on environment and energy issues, including climate change, was underlined and given an institutional structure at the 8th EU-China Summit in September 2005. At this Summit and under the UK's Presidency of the EU, a Joint Declaration on Climate Change was agreed, launching the EU-China Partnership on Climate Change. This partnership provides a high-level political framework to further strengthen the cooperation between EU and China by setting out concrete new actions to tackle climate change. These actions are set out in the Rolling Work Plan:

  This partnership fully complements the UN Framework Convention on Climate Change and the Kyoto Protocol. It strengthens cooperation and dialogue on climate change, including clean energy, and promotes sustainable development. It includes cooperation on the development, demonstration, deployment and transfer of low carbon technology, including advanced near-zero-emissions coal technology through carbon capture and storage. The EU's policy on energy co-operation with China is to intensify collaboration on energy security with a view to creating a stable, secure, efficient and clean energy environment and to promoting open and competitive energy markets.

  The EU—at both institutional and member state level—has regular high level dialogue with China on climate change. Twice yearly the Bilateral Consultation Mechanism discusses multilateral issues, presents new domestic climate change initiatives and reviews the Rolling Work Plan.

2.  To what extent is China vulnerable to the adverse impacts of climate change, both in the short and long term? What are the main elements of China's strategy for the mitigation and adaptation to climate change?

  Like all countries China is vulnerable to the adverse impacts of climate change. The Intergovernmental Panel on Climate Change (IPCC) reports pronounced warming across the whole country during the past 50 years, leading to a number of observed adverse impacts. These include increases in flooding in both the North East and Eastern regions of China in addition glaciers in the Tibetan Plateau have been retreating more quickly in recent years than before, leading to an increase in the frequency of glacial lake outbursts, with associated mudflows and avalanches.

  In parts of the country, the increase in temperature and decreases in rainfall, along with increasing water use, have caused water shortages that have led to drying up of lakes and rivers. Severe droughts and unregulated groundwater withdrawal have also resulted in sea-water intrusion in coastal plains.

  The IPCC Fourth Assessment Report (AR4) (2007) supported by other research, indicates that future temperature increases in China are likely to be greater than the global average increases. If emissions continue unabated, temperatures in China could rise to about 2°C above pre-industrial levels by 2050, and 4°C or more above pre-industrial levels by the end of the century. As a result it is estimated that an additional 1 Billion people would be at risk from water stress by the end of the century, partly owing to salt-intrusion in coastal regions caused by over-extraction, sea level rise and increases in drought frequency. Such temperature changes could have a significant impact on human health and well-being, especially in Chinese cities, through increased risks of vector—and water-borne diseases, cardio-vascular and respiratory diseases; and heat stress..

CHINA'S STRATEGY FOR THE MITIGATION AND ADAPTATION TO CLIMATE CHANGE

  In 2007 the Chinese Government published a National Climate Change Programme and established a National Leading Group on Climate Change, led by Premier Wen Jiabao and comprising 14 Ministries. The National Development and Reform Commission (NDRC) plays the lead role, alongside the ministries of Foreign Affairs, Science and Technology, Finance, and Industry and Information Technologies, and the Chinese Meteorological Administration.

  The 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. The Programme also sets out targeted adaptive actions for agriculture; forests and other natural ecosystems; water resources; and coastal zones.

  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 CO2 over the 2006-2010 period. (Around 36% of total EU emissions in 2006.)

  The EU is supporting ongoing Chinese government work on a stronger cross-cutting policy framework for dealing with adaptation at national and provincial level.

3.  What are the prospects for China committing to ambitious and binding targets for reductions in its greenhouse gas emissions at the UN climate change conference in Copenhagen in December 2009? Does the EU have a strategy to persuade China to support an ambitious deal?

  The Chinese government have made a number of statements expressing the importance they place on tackling climate change and is participating fully in the formal negotiating processes under the UNFCCC. At the World Economic Forum in January Premier Wen Jiabao said to "We take the issue of climate change very seriously," and set out his country's stepped-up regulations regarding emissions.

  The EU Position is that averting dangerous anthropogenic climate change requires the increase in global mean surface temperature to be kept below 2°C compared with pre-industrial levels. As a consequence the EU believes that developed countries as a group should reduce their emissions to 30% below 1990 levels in 2020. The EU has set the example by committing to a 20% reduction in its emissions compared to 1990 levels by 2020, irrespective of whether or not an international agreement is concluded.

  The EU is willing to go further and sign up to a 30% reduction target in the context of a sufficiently ambitious and comprehensive international agreement that provides for comparable reductions by other developed countries, and appropriate actions by developing countries. Developing countries as a group should limit the growth of their emissions to 15 to 30% below business as usual.

  The EU's policy on climate change co-operation with China is to intensify collaboration with a view to, securing an ambitious outcome at Copenhagen, based on the principle of common but differentiated responsibilities. The EU—at both institutional and member state level—is pursuing a range of bilateral discussions with the objective of securing effective Chinese participation in an agreement at Copenhagen.

4.  What is the EU doing to help China increase its energy efficiency at the national, provincial and local levels?

  The promotion of energy efficiency is an important component of the EU-China Partnership on Climate Change. The Partnership supports EU and Chinese efforts to reduce the energy intensity of their economies, and incorporates the China-EU Action Plan on Energy Efficiency and Renewable Energies. The Plan's objectives are to establish closer contacts between the EU and China and promote industrial co-operation aimed at increasing the use of energy efficiency and renewable energies. Progress is regularly reviewed by EU-China Summits.

  A key delivery mechanism for the Plan is the EU-China Energy and Environment Programme (EEP) which aims to foster cooperation between Chinese and EU industries in China's energy markets; strengthen the security of energy supply in both China and Europe; protect the global environment; and to ensure sustainable development. Energy efficiency objectives under the programme focus on the five areas of, energy policy development; standards; energy-saving potential in energy-intensive industries; energy efficiency in small and medium size boilers; and incentive mechanisms to promote energy savings in China.

  These objectives are delivered through policy advice to national and local authorities studies and seminars, awareness-raising and capacity building through information exchange and training, and promotion of technology deployment through funding of feasibility studies and demonstration projects.

  In addition, the EU-China Energy Conference gathers together high-level representatives from European and Chinese from industries and governments every two years.

  On 30th January 2009, the EU and China signed nine cooperation agreements aimed at developing global solutions to various aspects of the global financial crisis and climate change. Among these was the Europe-China Clean Energy Centre (EC2, previously agreed at the 2007 EU-China summit), a project which will create a permanent Centre in Beijing to promote the use of cleaner energy technologies and to support energy conservation and efficiency, thus assisting China in its transition to a low-carbon economy. The EU and China also agreed to set-up a regular dialogue on energy efficiency standards in construction.

  In addition the EU has been instrumental in the creation of the International Partnership for Energy Efficiency Co-operation, a new high-level forum to co-ordinate international efforts to promote energy efficiency and to build capacity for the implementation of successful energy efficiency policies and programmes. The Partnership will be formally launched later this year and China will be a founding member.

5.  At the 8th EU-China Summit in September 2005, a Joint Declaration on Climate Change was agreed, launching the EU-China Partnership on Climate Change. This partnership provides a high level political framework to further strengthen the cooperation between the EU and China by setting out concrete new actions to tackle climate change. What is the Government's assessment of the progress made so far under the Partnership? What are the main challenges that it faces?

  This partnership provides a high-level political framework to further strengthen the cooperation between EU and China by setting out concrete new actions to tackle climate change. These actions are set out in the Rolling Work Plan, as agreed in Beijing on 19 October 2006.

  This partnership fully complements the UN Framework Convention on Climate Change and the Kyoto Protocol. It strengthens cooperation and dialogue on climate change, including clean energy, and promotes sustainable development. It includes cooperation on the development, demonstration, deployment and transfer of low carbon technology, including advanced near-zero-emissions coal technology through carbon capture and storage. In broad terms, the EU's policy on energy co-operation with China is to intensify collaboration on energy security with a view to creating a stable, secure, efficient and clean energy environment and to promoting open and competitive energy markets.

  The EU—at both institutional and member state level—has regular high level dialogue with China on climate change. Twice yearly the Bilateral Consultation Mechanism discusses multilateral issues, presents new domestic climate change initiatives and reviews the Rolling Work Programme.

  The Partnership was created to strengthen cooperation and dialogue on climate change and energy between the EU and China. This work includes a strong focus the development and deployment of clean energy technology.

  The UK Government believes that the Partnership is making good progress in achieving these objectives.

6.  How important is the Near Zero Emission Coal (NZEC) technology for addressing the challenge of China's rising greenhouse gas emissions in the future? What progress is being made in the EU-China "Near-Zero Emissions Coal Initiative"? How great are the scientific and technological hurdles that must be overcome before this technology can be incorporated into industrial installations on a large scale in the EU and China?

  Global energy demand is projected to increase by 45% between 2006 and 2030; 40% of this increase will come from China alone. Coal fired power generation and heat related CO2 emissions in China will increase by 2.4 times between 2004 and 2030 (IEA, 2006).

  Carbon Capture and Storage (CCS) is the only set of technologies with the potential to address emissions from coal power generation.

  The EU-China Near Zero Emissions Coal (NZEC) initiative was announced as part of the EU-China Partnership on Climate Change at the EU-China Summit in September 2005. It was agreed that both partners would aim "to develop and demonstrate in China and the EU advanced, near-zero emissions coal technology through carbon capture and storage" by 2020. More recently, at the UK-China Summit 2009, political support was announced to demonstrate CCS through the EU-China NZEC agreement by 2015.

  Memoranda of Understanding were signed between the UK and Chinese Ministry of Science and Technology (MOST) in December 2005, and between MOST and the European Commission in February 2006, leading to the UK-China NZEC and COACH (Co-operation Action within CCS China-EU) projects respectively. Both projects are looking at options for CCS in China (although COACH focuses specifically on polygeneration), and will be completed in Autumn 2009.

  The UK-China NZEC Initiative includes a range of Chinese and European partners working around the themes of knowledge sharing and capacity building; future technology perspectives; case studies for carbon dioxide capture; carbon dioxide storage potential; and policy assessment.

  The UK-China initiative was launched by Vice-Minister Liu Yanhua and the British Deputy Ambassador to China, Barbara Woodward, in November 2007. Considerable progress has been made since the project's start, both in terms of building important evidence on more technical issues, and in strengthening relationships between Chinese and European CCS experts. This has included capacity building activities such as a workshop for Chinese storage experts hosted in the UK by the British Geological Survey; a CCS study tour in the UK and Europe in March 2009 for Chinese policy makers to learn about CCS in a European context, including through visiting a pilot plant and talking to key experts in industry and government; and arranging for Chinese students to study in UK academic institutions with particular expertise in CCS.

  Final results from the UK-China Initiative will be launched in Autumn 2009. They will include a final report exploring options to help shape and drive the activities necessary for establishing CCS in China, with an emphasis on moving towards an NZEC demonstration. More details of this launch event will be made available at www.NZEC.info, which also provides further details of the UK NZEC initiative. More information on the COACH project can be found at www.co2-coach.com.

  The Support to Regulatory Activities for Carbon Capture and Storage (STRACO2) is a further element of the EU-China Partnership on Climate Change. By incorporating the Administrative Centre for China's Agenda 21 (ACCA21), who are also involved in the NZEC Initiative and COACH project, their work aims to ensure that the development of a regulatory framework for CCS in the European Union is at least in part relevant to rapidly developing economies such as China. The programme started in January 2008 and will run for 18 months. For further information see: http://www.euchina-ccs.org/index.php

  Building on these capacity building activities, Phase II (design of plant) of the EU-China NZEC initiative, which is being led by the European Commission, should begin in early 2010. In preparation, China and the European Commission need to agree an approach to the costs of demonstration, finance, intellectual property rights (IPR) and regulation. The project and site for the demonstration will also need to be selected.

  The European Commission is planning to publish a Communication on financing CCS in developing countries in mid 2009, which will set out a financial model for NZEC.

  The technologies and processes of capture, transport and storage have been shown to work independently at pilot scale. The challenge now lies in demonstrating the combined technologies and processes at commercial scale and in different countries/contexts (eg Indian coal is not the same as Chinese coal, and storage potential is different throughout the world), and in improving the efficiency of the technologies and bringing down the costs.

7.  Another goal of the EU-China Partnership on climate change is to reduce the cost of key energy technologies and promote their deployment and dissemination. What mechanisms and funding are foreseen in order to achieve this goal? What progress has been made so far and what are the main obstacles encountered?

  Responses to questions 6 and 9 set out some specific EU-China activities which aim to significantly reduce the cost of key energy technologies and promote their deployment and dissemination. A full list of activities is set out in the Rolling Work Plan which can be found at http://ec.europa.eu/environment/climat/pdf/china/rwp_180808.pdf ).

  At the EU-China Summit in November 2007, the European Investment Bank signed a Climate Change Framework Loan of €500 million to finance projects in China that contribute to combating climate change.

  The UK, EU and China are working with other parties in the UNFCCC framework to agree the most viable means to finance the dissemination of key technologies.

  Over time, the global development and deployment of lower cost, clean energy technologies, requires a global solution. The UK's preferred approach is that a transformation in the carbon market and in particular greater use of sector based emissions trading and crediting mechanisms will play a key role in future finance, but there are many other options on the negotiating table. A further assessment of the future development of the carbon market is set out below in response to question 8.

8.  What is the objective of the EU-China Clean Development Mechanism (CDM) facilitation project? How well is the project progressing, and what obstacles does it face? What Mechanisms are in place to ensure that the funding for the CDM is well spent and actually reduces emissions by the target amount?

  The EU-China CDM Facilitation Project 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. The project started in February 2007 and will end in January 2010. 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 wide range of stakeholders at public and private sector levels involved in CDM projects.

  The project is progressing well, broadly in line with the work plan. The training programme component in Germany has been particularly successful, resulting in two Chinese organisations receiving accreditation qualifying them to audit CDM projects as Designated Organisational Entities. A major obstacle to delivery has been reaching consensus on how to improve the level of technology transfer. The forthcoming report on technology transfer—to be published later this year—will present both Chinese and European perspectives. More information will also be available on other aspects of the Project through a new website and publication of a further report on the Pre-2012 CDM Market in China.

  Funding for emission reductions under CDM is provided by a wide range of private sector organisations, by developed country (Annex 1)[20] governments, and international organisations, including the World Bank. Investors in individual projects receive credits—Certified Emission Reductions (CERs)—for emission reductions that can be sold through the carbon market or used directly for compliance. CERs can be used by governments to meet Kyoto emission reduction commitments; by companies complying with emission caps at installation level (eg under the EU ETS); or by individuals or organisations voluntarily offsetting emissions.

  CDM Projects undergo a rigorous auditing and verification process, overseen by the UN's CDM's Executive Board, to ensure that the CERs issued represent genuine emission reductions. Nevertheless, the Government wishes to see the CDM reformed both to give greater confidence in the additionality of emission reductions and to improve the efficiency and effectiveness of the mechanism. We are therefore working with EU partners to seek international agreement for such changes through the UN.

  CDM has played an important role in building capacity in developing countries, in allowing them to participate in the carbon market as well as supporting their long term transition to low carbon economies. However, though project based mechanisms have provided an essential platform for market based approaches to financing mitigation activity, the UK Government recognises that project based offsetting mechanisms are limited in terms of the scale of emission reductions that they can achieve. Advanced developing countries, such as China, need to build on their experience and 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 at scale. Such approaches will provide the basis for a longer term transition to a fully capped global carbon market. The UK supports the EU Council Conclusions, issued on 2 March, 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, including through the adoption by these countries of no-lose or binding targets which could be linked to participation in sectoral crediting and trading mechanisms."

9.  To what extent are China and the EU cooperating in the area of scientific research on energy efficiency and technologies to mitigate climate change? What is the content of the China-EU Action plan on Energy efficiency and Renewable Energies, which was agreed by the two sides in March 2005?

  The EU-China dialogue on Science and Technology started in the early 1990s and was one of the first areas of cooperation between the European Commission and China. The first EU-China S&T agreement entered into force in late 1999 and it was renewed in December 2004. Cooperation has increased substantially since the first S&T agreement was signed. Its aim was to promote mutually beneficial research activities in a variety of areas, such as food and environmental safety, the management of natural resources, the control of infectious diseases etc. Today, this cooperation shows growing dynamism as is demonstrated, for instance, by the participation of Chinese partners in more than 100 research projects funded by the Commission's Framework Programme for research. China is rapidly becoming one of the most active actors on the international research scene and in several areas it is a world leader—examples of the latter are nano materials and energy components. A principal area for EU-China scientific co-operation on energy and climate change mitigation is on clean coal technology (see Q6).

  Research on energy saving technologies is an important part of the wider EU-China dialogue on energy efficiency. However, given the significant savings that can be achieved using existing technologies the focus of EU-China co-operation on energy efficiency has largely been on building capacity for the deployment of current technologies.

  The China-EU Action Plan on Industrial Co-operation on Energy Efficiency and Renewables agreed by the two sides in March 2005 was intended to expand co-operation on the compilation of energy audits to identify energy savings potential, improvement of motor and air compressor efficiency, replacement of inefficient industrial boilers, identifying potential for Combined Heat and Power deployment, improving the efficiency of lighting, co-operating on development of biofuels and solar energy and identifying potential for offshore wind.

10.  What will be the role of the EU China Institute for Clean and Renewable Energy, and when will it be established? Are China and the EU still planning to launch an Environmental Governance Programme, as announced at the summit meeting between the Commission President Barroso and Premier Wen on 25 April 2008?

  On 30th March 2009, the EU and China signed the financing agreement for the ICARE project (Institute for Clean and Renewable Energy). The aim of the Institute is to increase capacity for achieving China's energy policies, particularly those focusing on renewable energy and energy efficiency and to create durable links between European and Chinese clean and renewable energy professionals, researchers and academics. The Institute is expected to be based in Beijing.

  The EU-China Environmental Governance programme was launched in April 2008 and has three main objectives are to support the Chinese government's pollution control and environmental conservation efforts, by increasing public participation in environmental decision making and planning; to enhance the role of the Chinese general public in protecting the environment by promoting public awareness about environmental issues, improving access to environmental information, increasing public participation in environmental decision-making, and boosting public rights of appeal and redress; and to provide stronger incentives for enterprises in China to take a proactive approach to environmental issues.

11.  In what ways are the EU and China cooperating to reduce illegal logging?

  The UK recognises the important role of China in global timber markets, both as a producer and a transit country for timber. UK objectives on illegal logging and the timber trade are thus taken forward through a range of bilateral activities, but also through EU efforts.

  The EU and China have both been important actors in regional Forest Law Enforcement and Governance (FLEG) Ministerial meetings in East Asia, Africa and Europe and North Asia. Both sides have also made a commitment at recent EU-China summits to address this issue.

  An EU-China conference on illegal logging was held in Beijing in September 2007 which brought together over 200 participants from China and developed and developing countries and led to the signature in January 2009 of the Terms of Reference of a Bilateral Coordination Mechanism on forest law enforcement and governance. A work plan for this mechanism is currently under development and the two sides have already established channels for exchanging information on relevant developments, such as relevant EU legislative proposals and the outcomes of dialogue and activities conducted by the EU and by China related to illegal logging and third countries.

  The European Commission has funded two projects aimed at building links between Chinese timber processors, tropical timber suppliers and EU importers, in which UK organisations are important actors (WWF-UK and the UK Timber Trade Federation). It is also starting up an Asia-wide regional programme to support forest law enforcement and governance in Asia, in which actions concerning China are expected to be an important component.

  Forest Law Enforcement Governance and Trade (FLEGT) was identified as a potential area of trilateral cooperation in the October 2008 EC Communication on "The EU, Africa and China: Towards Trilateral Dialogue and Cooperation" and this will be further developed during 2009 with the full participation of African countries.

  In April 2008 DFID and Defra funded a six-day European Timber Trade Federation Road Show to Shanghai and Pizhou. This was designed to give Chinese producers a better understanding of the requirements of European markets. At the same time the visit allowed European and Chinese trade associations to discuss how better cooperation and knowledge transfer could help their respective members benefit from opportunities in the environmentally discriminating European market. For details see:

12.  To what extent are China and the EU cooperating in the area of Carbon Trading and innovative finance for investment in renewable energy and low carbon technologies? Can experiences gained from the operation of the European Emissions Trading Scheme (ETS) be usefully shared with the Chinese? Is the recent fall in the price of Carbon a problem in this respect?

  There are a variety of initiatives by EU institutions and member states to build capacity for carbon markets , in particular developing expertise in monitoring and reporting emissions. The Government believes that there are many lessons from the development and operation of the European Emissions Trading System that can be shared and in particular the importance of monitoring and reporting emissions in order to reduce energy demand.

  The recent fall in carbon prices reflects reduced demand for allowances as a result of lower economic output. The environmental impact of the trading system—the cap—remains unchanged but the price drop means that it is easier for business to comply with the system during the recession. The Government's view is that this demonstrates the market's responsiveness to changed economic conditions providing further lessons for both the EU and China in developing and designing future policy in this area.

  In terms of broader cooperation, the UK is providing £800 million to the international Climate Investment Funds to help countries shift onto low carbon, climate resilient development pathways. These funds are being administered by the World Bank, and the governance structure ensures equal representation of developed and developing countries. The largest of these funds, the Clean Technology Fund (CTF), is designed to support rapidly industrialising countries in scaling up the deployment of low carbon and renewable energy technologies. China is one of the eight developing countries on the Trust Fund Committee of the CTF, and the UK would welcome a bid from China to access this new and additional source of funding.

13.  What is the EU doing to help build institutional capacity in China to mitigate green house gas emissions at the national and provincial levels, as well as to enhance climate change modelling and research?

  The EU is providing substantial support to China on both mitigation and adaptation. This includes capacity building in a number of sectors including, monitoring reporting and verification of emissions, renewable energy, low-carbon buildings, sectoral crediting, emission trading schemes and development of provincial climate change programmes. There are also examples of technology cooperation including through the 7th Research Framework Programme, Near Zero Emissions Coal Initiative (NZEC) and in renewable energy and energy efficiency.

14.  With the change of administration in the United States, are there any opportunities for trilateral EU-China-USA cooperation on climate change?

  In March 2009 President Obama established the Major Economies Forum (MEF). The MEF brings together all of the major economies including China, US and EU for a series of discussions in preparation for the Copenhagen summit in December 2009. The Government welcomes the MEF as an important forum for further discussions amongst all major economies, including China, in preparation for the negotiations at Copenhagen.

  The first preparatory meeting for the MEF took place on 27 April. Our Secretary of State Ed Miliband attended. This was a very successful meeting which discussed, in particular, low carbon technologies and mitigation. The discussion around the table was open and extremely helpful.

7 May 2009




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