Hopes for EU-China climate deal centre on a green recovery - China Dialogue
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Hopes for EU-China climate deal centre on a green recovery

The 2020 climate agenda was supposed to be all about the European Union and China. Then came the coronavirus. Now what?
Jean-Claude Juncker, former president of the European Commission, Angela Merkel and Emmanuel Macron meet Xi Jinping at the Paris Peace Forum, 26 March 2019 (Image: Alamy)
Jean-Claude Juncker, former president of the European Commission, Angela Merkel and Emmanuel Macron meet Xi Jinping at the Paris Peace Forum, 26 March 2019 (Image: Alamy)

When exhausted delegates finally trailed out of the massive convention centre in Madrid last December after the longest UN climate talks in history, it was clear the international climate process was in trouble. Facing a critical 2020 deadline to ramp up global climate action, the world’s major emitters were stalling – or, in the case of the US, exiting the process entirely. But advocates pointed to one ray of hope: a potential agreement between the EU and China. If two of the world’s largest emitters could strike a deal to jointly raise their climate targets, then other countries might do the same, driving a new wave of climate action.

About this article

This is the first in a series of articles co-published by Clean Energy Wire and China Dialogue that explores the prospects for EU–China cooperation on climate, investment and the low-carbon transition

“Bringing together the largest emitter with the continent that has taken on the responsibility of being the icebreaker on this path to climate neutrality could be incredibly powerful,” said Jennifer Tollmann, a policy advisor with the environmental think-tank E3G in Berlin. “You don’t really see any major power alliances in the world that could set that global agenda in the same way.”

Fast forward six months and the coronavirus pandemic has upended those plans, sending governments scrambling to manage the health crises and economic damage as geopolitical tensions spiked. One by one, crucial events have been rescheduled or postponed. Among the casualties: the COP26 UN climate summit in Glasgow and the September summit in Leipzig between the EU and China, where diplomats had hoped the two might strike a deal.

Yet some climate advocates see an opportunity.

“Maybe something even bigger is possible,” said Lutz Weischer, with the environmental NGO Germanwatch.

Weischer and others say there’s an opening for the EU and China to craft a “green partnership” focused less on specific emissions targets and more on using the coronavirus recovery to accelerate the transition to a greener global economy. “The question for future European–Chinese cooperation, regardless of when the summit happens, is going to be, what is the vision for rebuilding the economy? How do you build back better?” Weischer said.

The decisions made now could affect the trajectory of greenhouse gas emissions for years to come.

Both the EU and China have announced major economic rescue packages as countries around the world prepare to spend unprecedented amounts to rebuild their economies after the crisis. The decisions made now could affect the trajectory of greenhouse gas emissions and policy debates for years to come.

The EU and China are also major funders of development overseas. If they can agree to direct funding toward low-carbon investments, both at home and abroad, that could have a bigger impact than any deal on simply cutting emissions, advocates say.

Such a partnership would send a global message that both the EU and China believe “the green transition is the economy of the future,” Weischer said.

Others are less optimistic. Noah Barkin, a fellow with the German Marshall Fund in Berlin, pointed out that the EU and China already face difficult negotiations over trade and investment. Political tensions are making those conversations more complicated, while the pandemic itself has limited the ability of diplomats to meet. He thinks a major climate agreement is unlikely any time soon.

“My sense is it was always going to be very difficult, and the Covid-19 pandemic has made it close to impossible,” Barkin said.

A critical relationship for climate action

Experts say the EU–China relationship is a crucial one for the international climate process at a time of profound uncertainty and high tensions between the US and China.

“It’s really a situation where few countries are left, and where two big players would really make a difference,” said Dr Susanne Dröge, a senior fellow at the German Institute for International and Security Affairs (SWP).

The US decision to exit the Paris Agreement has left a leadership void at a key moment. Under the agreement, countries committed to submit more ambitious climate targets this year. But as of June, only ten countries had done so and they represent less than 3% of global emissions. Advocates say new leadership is sorely needed.

European leaders signalled their hope to strike a bilateral deal similar to the 2014 US–China deal that paved the way for the Paris Agreement

It’s a role the EU seems interested in filling. In December 2019, EU leaders officially embraced a 2050 carbon-neutral target. The European Commission, the EU’s executive arm, rolled out its plan for a “European Green Deal” to remake the bloc’s economy, along with a proposal to increase 2030 climate targets. Meanwhile, European leaders signalled their hope to use these bids to convince China to join them, striking a bilateral deal similar to the 2014 US–China deal that had paved the way for the Paris Agreement.

China’s interest in a deal with the EU has been less clear. “It’s understandable for major countries to feature China prominently in their climate-engagement strategy,” said Li Shuo, a senior policy advisor at Greenpeace East Asia, pointing to China’s status as the world’s largest emitter and second-largest economy. “But I think from the Chinese perspective, the US looms always very large in any strategic decision-making.”

There was some diplomatic momentum. In January, Germany’s chancellor, Angela Merkel, announced that climate change would be a major agenda item at a key EU–China summit scheduled for September, during Germany’s presidency of the EU Council. The summit would bring together all 27 EU leaders with China’s president, Xi Jinping, for the first time. That meeting, in turn, would take place just before two marquee events: the UN biodiversity talks hosted by China in October, followed by UN climate talks hosted by the UK in November.

“There was really hope for a substantial agreement, one that would give a sign to the rest of the world,” said Wendel Trio, director of the environmental NGO Climate Action Network (CAN) Europe.

In late May, Ursula von der Leyen, European Commission president, proposed a €750 billion coronavirus stimulus package for the EU, a quarter of which would be spent climate action (Image: Alamy)

The coronavirus crisis has derailed those hopes, at least for now. The EU–China summit and biodiversity talks have been postponed to as yet undetermined dates, and the climate talks moved to November next year.

The reshuffled diplomatic schedule means the political landscape has shifted but advocates say it stills holds possibilities. The original hope was to hash out an agreement on increasing climate targets, while also setting the stage for further economic cooperation down the road. Now, Weischer said, economic cooperation might be the focus.

“If they agree on the principle that the recovery has to be aligned with what the sustainable development goals say and what the Paris Agreement says, I think that sends a powerful message to the rest of the world,” said Weischer.

Some officials have echoed that language. EU foreign policy chief Josep Borrell called climate action “even more important in the post-Covid-19 world” during a press conference in June, after speaking with Chinese foreign minister Wang Yi. “We will have to ‘build back better’ – all of us,” Borrell said. “We all need to seize this opportunity to transform our economies and societies in a green and sustainable way.”

Cooperation on a green recovery?

Observers see a range of areas where the EU and China could cooperate – or ramp up existing cooperation. These include sustainable finance standards, greening supply chains, revamping biodiversity frameworks and overseas investment.

The EU and China could work together on developing international standards for sustainable finance, E3G’s Tollmann said, perhaps through the International Platform on Sustainable Finance (IPSF). China has expressed interest in the EU’s effort to develop a sustainable finance taxonomy – essentially, a set of standards to determine which economic investments can be considered “green” and which can’t. As countries around the world prepare to spend previously unthinkable sums to rebuild their economies, those guidelines have taken on a new urgency.

There might be a potential to develop joint commitments on debt or greener investments in developing nations.

“You can’t talk about how to recover better without talking about what is a good investment and what is a bad investment,” Tollmann said.

Then there’s investment in third countries. In her January speech, Merkel highlighted potential EU–China cooperation on international development, especially in Africa. There might be a potential to develop joint commitments on debt or greener investments in developing nations, Tollmann said. It’s an area of particular focus for climate advocates and EU officials, who see as a major issue China’s funding for energy projects – including coal plants – as part of its Belt and Road Initiative.

Observers say there’s still too much uncertainty surrounding the EU–China relationship to confidently say what’s possible. “Honestly, it’s really unpredictable,” Tollmann said. Just a few weeks ago, she had hoped for a major agreement; with the September summit postponed, she thinks a single bilateral deal is less likely. But there’s still the opportunity to work together – and perhaps with other countries – on an issue-by-issue basis.

Ultimately, the coronavirus has upended assumptions for policymakers around the globe, potentially opening up possibilities that didn’t exist just a few months ago. “It is just huge sums of money that could really fundamentally reset our economy for the next 10 years,” Tollmann said, and countries have the chance to make sure that reset is green: “If we don’t view it that way, we’re locking ourselves into a reality where there just won’t be money for the world that we need.”

A solar power station in Aswan, Egypt, built by Chinese company TBEA SunOasis (Image: Alamy)

Both EU and German officials stressed that climate change remains on the agenda in the bloc’s discussions with China.  

“Rest assured that tackling climate change, meeting our climate commitments, and engaging on sustainable development, are one of our very top priorities, both in our bilateral relationship and also working in multilateral fora and with third countries,” Virginie Battu-Henriksson, EU spokesperson for foreign affairs, told Clean Energy Wire.

Germany’s foreign office assumes that under the Paris Agreement countries are expected to submit new climate targets (also called nationally determined contributions, or NDCs) in 2020, regardless of when the COP26 climate summit takes place – and said China is one of the “focus countries” for German and EU climate outreach.

“Together we are promoting a more ambitious NDC from China, which would be a very important signal for international climate policy,” a government source told Clean Energy Wire.

A complicated relationship gets more difficult

Some experts caution that any climate agreement will be an uphill battle, for reasons that predate the coronavirus crisis.

“I think a key point here is never to underestimate the challenging bilateral relationship between Brussels and Beijing,” said Li Shuo, of Greenpeace East Asia. He pointed out that an earlier attempt to broker a joint statement on climate change, in 2017, collapsed over disagreements on trade.

For China, the primary geopolitical concern is not the EU, but the US, said Susanne Dröge from SWP. Escalating tensions between the US and China have led to headlines warning of a “new Cold War.” Any climate deal with the EU will be seen through that lens, Dröge said. “The only [way] the Chinese would see that as relevant would be if this whole thing would help them to make a case against US policy,” she said.

Assuming the EU–China summit eventually goes ahead, climate change wouldn’t even be the top priority, Dröge added. Instead, it will be competing with the response to the coronavirus and efforts to complete years-long negotiations on a major investment agreement. And all of that comes on top of long-time disagreements on issues like trade, human rights and the status of Hong Kong.

Meanwhile, Reinhard Bütikofer, a Green Party member of the European Parliament from Germany and chair of the body’s panel on relations with China, said China’s approach in the aftermath of the pandemic – touting its own success in handling the crisis and disparaging Western democracies – has alienated many in the EU.

“China’s prevailing crisis opportunism has made them shoot themselves in the foot repeatedly,” Bütikofer said, adding that events this spring have convinced many in Europe that as China gets more powerful, it is less interested in compromise. “This is not a leadership that looks for shared multilateral approaches, this is a leadership that looks for reshaping global governance in the image of a China-centric hub-and-spokes approach. Well, why should anybody be thrilled by that?” Bütikofer said.

But Nis Grünberg, of the Mercator Institute for China Studies (MERICS), said climate change mitigation should be a rare bright spot in an otherwise contentious relationship.

“Climate change is actually one of the very few topics remaining where the European Union and China have an alignment of interests,” Grünberg said. “It’s a pity that it’s been pushed down the agenda by the crisis, but that doesn’t mean it’s gone away. It could be used to kickstart a more productive dialogue.”

Internal debates within the EU

Experts say any agreement also depends on how internal dynamics unfold within the EU and China over the coming months in response to the pandemic.

One major question is whether the EU will agree to increase its 2030 climate targets by the end of the year, as required by the Paris Agreement. So far, that still looks likely, said Trio, of CAN Europe. The European Commission has said it will stick to the deadline.The bloc’s current target aims to cut emissions 40% below 1990 levels; the commission’s proposal would raise that to between 50 and 55%. The proposal, which requires approval by EU member states, got a boost in April when Angela Merkel publicly declared her support for the higher target during the Petersberg Climate Dialogue.

The EU is sending the message that climate change remains as, or is even more, important than before

Merkel’s endorsement was key, Germanwatch’s Weischer said, because once Germany takes over the presidency of the EU Council in July, it will be responsible for shepherding the bloc to consensus on new targets. The higher targets face resistance from some member states, especially Poland, which is highly dependent on coal. Merkel has also faced scepticism at home from lawmakers within her own conservative coalition who think the new targets go too far. “The Germans need to play an active role in this,” Weischer said. “They’re in a better position to do that now than they were a few weeks ago, but they’re still not in the ideal position.”

Another question is how the EU will handle its economic stimulus. In late May, the European Commission president, Ursula von der Leyen, proposed a €750 billion fund to revive the bloc’s economy, with 25% earmarked for climate action. The proposal followed a joint statement from Merkel and French president, Emmanuel Macron, who called for the EU to base its coronavirus recovery measures on the European Green Deal, a sweeping set of proposals to make the continent carbon-neutral by 2050.

Trio, of CAN Europe, said the EU must go further to align its targets and spending with the goal of limiting warming to 1.5C. But, he said, overall, these are hopeful signs. “We’re not there yet, but at least in this time of crisis, the EU is sending the message that climate change remains as, or is even more, important than before,” Trio said.

Key decisions yet to be made in China

Clear, ambitious new climate targets from the EU could affect China’s calculus, said Li Shuo.

Climate change was a difficult subject in China even before the coronavirus pandemic, Li said, as slowing economic growth made Chinese leaders more cautious about imposing new environmental targets. Now, the pandemic and its economic fallout have pushed climate policy even further down the priority list.

But, Li said, a serious commitment from the EU could pressure China to reciprocate. “European engagement will be critical in bringing the climate issue back to the agenda of the highest political level on the Chinese side,” Li said.

At a moment when China is facing hostility from the US and international anger over its response to the coronavirus outbreak, climate change offers an opportunity to be seen as a constructive player on the world stage, and a supporter of the multilateral system, Li said. “Climate action has been a rare area where China has been perceived relatively positively by the global community over the last few years,” he said. “If that momentum is not sustained, China risks reversing its global image.”

Wind turbine blades in China’s Jiangsu province, destined for North and South America (Image: Alamy)

So far, China’s leaders have offered just a few clues to their plans for economic recovery and new climate targets. In May, the government announcement that it would not set a GDP target this year was greeted by environmentalists concerned that an effort to rapidly boost growth would lead to major investments in fossil fuel projects. The government also outlined a plan to shore up the economy, though there’s still little detail on how the money will be spent.

As for climate targets, there are several policies on the table, but it’s uncertain which might be adopted by China’s leadership – if any. China could shift forward the date it will peak its greenhouse gas emissions, currently set for 2030, introduce emissions limits for greenhouse gases like methane, which aren’t covered under current targets, or strengthen its carbon-intensity target (a limit on carbon emissions per unit of GDP). It could even introduce an absolute cap on emissions, though that’s seen as less likely, or set a goal of reaching carbon neutrality.

One key issue is coal. China is still building coal-fired power plants, and is one of the biggest funders of coal projects abroad. Any new climate targets should reduce coal use, Li said, but it won’t be easy. Indeed, the entire question of new climate targets is a hard one, he said.

China will be navigating a very narrow political space

“I think those conversations will be very, very difficult and China will be navigating a very narrow political space,” Li said.

Hu Min, executive director of the Innovative Green Development Program (iGDP) in Beijing, said it’s misleading to focus solely on China’s international commitments. Domestic sectoral policies are a better indicator of where the country is heading, she said. One key indicator will be China’s 14th Five Year Plan, which is now in development. Hu expects it to be a much greener document than its predecessor, which could put China on a path to significantly overperforming its current NDC.

Hu also sees potential for EU–China cooperation on a green recovery. She pointed to a March appearance by Xi, which he used to highlight his concept of “ecological civilization”. “It’s a very strong political signal that green development is still the core even though we need to tackle economic recovery,” Hu said. She added that China’s leaders seem to have learned the lessons of 2008, when the country responded to the economic crisis with a stimulus programme that ended up locking in significant fossil fuel emissions.“It’s clear that policymakers are trying to make it a smarter, greener more sustainable recovery through the concept of new infrastructure and new urbanisation,” Hu said.

Ultimately, though China’s leadership does take climate change seriously, responding to the pandemic and its economic fallout will come first, said MERICS’ Grünberg. “Climate change is still a top priority, but there’s always a priority among priorities, and that is stability.”

US election remains a wild card

For policymakers in both the EU and China there is, of course, another wild card: the US presidential election. If Donald Trump is re-elected in November, the US is set to exit the Paris Agreement. Meanwhile, his Democratic challenger, Joe Biden, has promised to re-join the Paris Agreement and make climate change a priority. China, especially, might decide to hold off on announcing any new targets until the results of the US election are known, Li said.

Joe Biden has promised to re-join the Paris Agreement and make climate change a priority if elected this November (Image: Alamy)

Li compared global climate policy to a tricycle, with the EU, China and the US as the three wheels. “The EU is the front wheel. You can’t really move forward without the front wheel, [and] the good news is there are strong domestic political conditions within the EU to propel it to move forward,” Li said. “The two wheels at the back are sort of dragging each other. There’s still a possibility for China to move forward, but the gravity of the US is still quite strong.”

For now, the outlook remains uncertain. But Tollmann, of E3G, says it may be time for the EU to look beyond China, to countries like South Korea, the UK and Japan.

“I do still think the EU and China [relationship] is really important for the climate… because at the end of the day, China is still the world’s largest emitter,” Tollmann said. But this spring has laid bare the pitfalls of counting on one key partnership to jump-start global climate action. “You do probably need numerous coalitions,” Tollmann said. “Rather than a silver bullet relationship that will save all.”