On the 26th of May, Teneo hosted a discussion on the China-EU climate relationship ahead of COP26. The discussion was hosted by Lauren Chung, COO Asia-Pacific and Senior Managing Director at Teneo’s Hong Kong office, and was joined by Dr. Christine Loh, Chief Development Strategist & visiting professor at the Division of Environment and Sustainability of the Hong Kong University of Science & Technology & former Environment Secretary of Hong Kong, and Monica Frassoni, Senior Advisor at Teneo and former Co-President of the European Green Party.
Key Takeaways
- On the topic of climate change, a lot of attention has gone to the EU’s European Green Deal and the carbon neutrality pledge on one hand, and Xi Jinping’s climate ambition and China’s own carbon neutrality pledge. While these pledges have become commonplace, it is worthwhile to consider the scope of the challenge that carbon neutrality still presents. The green transition represents an economic, technological and social revolution that will challenge governments in pursuing a just transition. Especially because it is no longer a simple environmental question – the decision to become carbon neutral is a complex strategic choice for countries and companies alike, which will need to reinvent how their economies and business practices work, and how fast the change can be made.
- For China, the decision to showcase this level of climate ambition is a huge step. China has made a lot of advances, but a lot of its systems are still emerging and developing, in stark contrast with the EU member states that are, on the whole, well developed and advanced. In general, the country has several changes it will need to make: ramping down on fossil fuel, catching up on energy efficiency, concentrating on circular economy as the biggest manufacturing country in the world, making agriculture more efficient and strengthening ecosystems to add to carbon retention and recycling. This will permit the country to further reinforce their position on the climate diplomacy playing field, although they will still need to communicate more domestically given that they are a state-led system. In the coming months, the Chinese government will roll out plans, projects and policies as part of their roadmap to reach their climate targets. This creates business opportunities in China but also abroad. As China is reducing the GHG emissions, the footprint of companies & products will be reduced as well – creating opportunities to meet increased multinationals demands on ‘green’ supply chains and consumers demand for products with a lower carbon footprint.
- The EU-China relationship, meanwhile, has become increasingly complex. On the one hand, the European Union considers China to be a systemic rival which they will continue to criticise vis-a-vis their political system and the human rights situation. On the other hand, EU leadership realizes the need for climate diplomacy and close ties in the area of climate action. The Belt & Road Initiative specifically causes worries on geopolitical implications for the EU, even though infrastructure has a key role to play in decarbonization. Moreover, doubts remain over China’s implementation strategy – the pledges made by Xi Jinping are a huge step in the right direction, but action will have to be taken to deliver on these promises. On the other hand, all eyes are also on the much-discussed green taxonomy, and the implementation of a carbon adjustment mechanism given the far-reaching repercussions these policies could have on investment and trade with and within China and the EU.
The views and opinions in these articles are solely of the authors and do not necessarily reflect those of Teneo. They are offered to stimulate thought and discussion and not as legal, financial, accounting, tax or other professional advice or counsel.