E3G

Europe’s World: An EU-China pact is key to a global climate deal

By Nick Mabey

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 jostle for position, Europe must maintain the global momentum for change by revitalising its climate leadership in this critical year.

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 market place 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 powers 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 stability in 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 one major coal power station every week, and the $3.7 trillion of energy investment it will make by 2030. The closure of ageing European power stations coupled with fairly modest increases in demand will mean that the EU also has to invest in a similar level of new generating capacity. Both Europe and China therefore need to make decisions today if they are to avoid locking in carbon-intensive investments in the coming decades.