E3G

Towards a low carbon future, together

By Bernice Lee and Nick Mabey

Europe must work with China to produce the next industrial revolution – the creation of a low-carbon economy. But that will take real vision and political courage.

So write Bernice Lee & Nick Mabey in an article published in Chatham House’s magazine The World Today. The article is also featured on the new ‘Changing Climates’ forum hosted by chinadialogue.

As the world wakes up to the imperative for a low-carbon future, the ripple effects can be felt across the global economy. Governments and companies alike are beginning to calibrate decisions on trade, financing and production planning. At this critical time, new strategic decisions are needed to avoid the pitfalls of protectionist instincts. More than ever, there is a need to tap into the benefits offered by globalisation and enhanced cooperation.

Only weeks ago, European Union (EU) trade officials voted informally to remove anti-dumping duties on energy-efficient compact fluorescent lamps from China. A month later, the European Commission proposed to delay the removal by a further year.

These duties add up to 66% of extra tariffs on Chinese imports. Cutting them appears logical since the EU will decide on phasing out less efficient lighting in 2009. China today produces four fifths of the world’s energy-saving light bulbs, with exports worth US$1.5 billion last year. According to the World Wildlife Fund, lifting the duties could help save 23 million tonnes of carbon dioxide in the EU each year.

Quibbling over anti-dumping duties has been the mainstay of recent EU-China trade relations. But the lighting case illuminates how climate change is changing the terms of such debates. The pros and cons have been argued by European, rather than Chinese, actors. Osram, an arm of Siemens, a German company, advocated extending the duties, citing risks to hundreds of jobs in the EU. Philips, a Dutch manufacturer, together with two other lighting companies welcomed the lifting of duties as supporting an aggressive expansion in the European market for high efficiency lighting. Most of Philips’ energy-efficient bulbs are produced outside of the EU, including in China.

As economies integrate, it is commonplace to set the competing needs of producers against those of importers and consumers. Economies like China and the EU are forced to confront difficult trade-offs. Over 50 million sweaters, T-shirts and bras from China were stuck in ports during the so-called ‘bra wars’ in August 2005 because of protests of French and Italian producers. But in reality, public policy choices will need to be made against a backdrop of globally integrated supply chains and an increasingly complex political economy landscape. Balancing energy security, climate change, employment, and export competitiveness will become a central part of political conversations between governments and their citizens.

The discussion over light bulbs also highlights opportunities for mutual gains for China and the EU in the years ahead. Today, the need to deal with global climate change is driving a new kind of industrial revolution. Tightening global supply of oil and natural gas is also encouraging the development of new technologies and higher efficiency. Even the US National Petroleum Council believes it unlikely that the projected growth in demand in the next 25 years will be met.

In short, high prices, supply volatility, import dependency as well as climate change are steering new thinking towards a low carbon future. Central to that vision is the need for enlightened thinking around the potential economic and political benefits – rather than just the costs – of this transition.