Understanding the scope of the EU-China Environmental Partnership

EPA-EFE/NG HAN GUAN

European Council President Donald Tusk (2-R) and European Commission President Jean-Claude Juncker (3-R) meet with Chinese Premier Li Keqiang (not pictured) at the Great Hall of the People in Beijing, July 16, 2018.

Understanding the scope of the EU-China Environmental Partnership


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Arvea Marieni is a Strategy and Innovation consultant who belongs to a small pool of Europeans that have lived, worked, and studied in China.

As a consultant, the Italian-born Marieni specialises in “green tech” and had worked on projects ranging from energy renewables to waste management. Her insights into China’s evolving relationship with the West is founded on 20 years of experience that began after she started working in China in the mid-1990s.

She immersed herself in Chinese culture and can easily converse on literature, culture, and governance and corporate culture.

New Europe sat down to have her expert’s insight into Europe’a relationship with Beijing at a moment of crisis in multilateral environmental governance after US President Donald J. Trump‘s withdrawal from the Paris Climate Agreement.

In both trade and the environment, the question often arises if China is willing to take over the leadership role in light of Trump’s decision to turn the United States away from being the global leader. If China is willing to do so, what can Europe expect from Beijing?

One enduring truism about China that Marieni stresses in order to answer that question is that the Chinese have always managed transformation themselves on their own terms. In her words, what drives transformation is “confidence” in the Chinese worldview. China emulates models that are relevant to its own context. They proved this by adopting Singapore’s experience with “market autocracy”, which was formative in China’s shift from a purely centralised Communist society and into a market economy.

One should not project European expectations on China, Marieni insists, noting that China never aspired to become a liberal democracy.  China’s leadership style is confident and assertive, but not combative, she adds. After experiencing 8-10% growth a year for over a generation, China’s confidence is well earned.

In 1997, China stepped in to stabilise Asia, preventing a massive regional fallout similar to the Lehman Brothers crisis a decade later. The same year Hong Kong’ return to China reinforced the belief that China was becoming an economic superpower.

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 Left to Right:  Zhiqiang, Deputy Secretary General GEIDCO, Prof. Jeffrey Sachs  at Columbia University, director of the Earth Institute, and special adviser to the secretary-general of the United Nations, Sonia Ehrlich Sachs, MD, MPH  a paediatrician,  Avrea Marieni,  The Global Energy Interconnection Conference” in Beijing  on 28 March 2018.

NE: Washington’s withdrawal from the Paris Agreement and the threats of withdrawing from the World Trade Organisation is creating a multilateral leadership vacuum. Is China ready to step in?

AM: Domestically, Xi Jinping has moved China towards a process of re-centralisation, addressing the challenges of regional corruption and social disparities.

That political trajectory reflects the Confucian view that the government serves the people and knows better what is in the interest of the people. In Western terms, this is a “paternalistic” vision of government, with strong elements of faith in technocratic governance. When President Xi talks about the dream of a “moderately prosperous society,” he echoes traditional Confucian values that are similar to our notion of “sustainability.”

That particular brand of Chinese leadership entails long-term vision that goes beyond electoral cycles. Strategic planning in corporate terms means that you prioritise some interests and objectives over others. In Chinese technocracy that means reclaiming centralised decision competence.

Centralisation requires connectivity in energy supply and consumption. And China has a practical approach to the challenge at hand. In 2015, China launched the Global Energy Interconnection initiative aimed specifically at the decarbonisation of the economy. There are already measurable effects.

Adaptation is a complex challenge. It requires emerging and developed economies to review the way they manage land and water resources. To this end, there is ample room for EU-China cooperation, not least in finance.

In 2017, China launched the worlds’ largest carbon market, expected to cover 1700 companies and 30% of China total’s greenhouse gas (GHG).

Washington’s withdrawal from the Paris Agreement is weakening the trend towards the “decarbonisation” of the global economy, and it’s providing opportunities for the recovery of carbon-intensive obsolete technologies. China is moving in the opposite direction, and the effects of this choice are palatable.

NE. Does Europe have leverage in China? Given a tradition of bottom-line driven trade relations without political subtext, can Chinese policy be “influenced” the same way multiparty democracies in the West are influenced? How do you campaign for the environment in China?

AM: I don’t “campaign” for the environment in China.

I try to create industrial and commercial partnerships in order to promote effectively carbon-neutral technological solutions. I make the environmental and financial case for the specific solutions and products.  The best-case scenario is when the government objectives and corporate objectives “harmonise”.

For instance, I often point out that advanced environmental legislation often leads to leaps in technology. Ship-building is a good example.

If it were treated as a country, the shipping industry would be the sixth largest polluter in the world, just above Germany. The third International Maritime Organisation (IMO) Report (2015) estimates that ship CO2 emissions will increase 50%–250% from 2012 to 2050. Without further action, the international shipping sector could account for 17% of global CO2 emissions by 2050.

But, environmental concerns in Europe are driving innovation.

China accounts for 11% of global emissions from ships. Let’s focus on cruise ships. Domestic demand for cruise trips in China increases by 30% a year. China’s State Shipbuilding Corporation (CSSC) projects 10 million cruise trips annually by 2026. Therefore, it is investing in €1,8bn in two joint ventures with the Italian Fincantieri group and Carnival.

Fincantieri tries to hold on to its strategic technology and remain in the game for the advancement of other technologies. For instance, Chinese firms are experimenting with new propulsion technologies fuelled by LNG, electricity and hydrogen.

There is a thin balance here. Europe drives innovation because of its regulatory environment but does not have the integrated industrial policy required to retain its innovation advantage.

NE: If Europe is driving innovation due to its regulatory framework, what can we learn from Chinese industrial policy?

When China targets development in a particular sector they “scout” for BAT (Best Available Technologies or management methods).

They study and benchmark and then they move to implement their plans. In shipbuilding, they plan to invest €620 million in a cruise ship industrial park housing foreign firms in Shanghai. This will create the conditions for the emergence of a global production cluster and know-how transfer.

In such cases, you move in to make a difference, making a case for firms with the technology and innovation with market potential. I participate in that process, making a case for EU firms.

It is true that Chinese firms aim at maximising their own return/advantages, which is true of every party in any negotiation. However, the Chinese leadership understands that we are in a very interdependent world. Chinese negotiators avoid open conflict and tend to express dissenting opinions via silence or simply by reiterating a point. That is a notoriously exhausting process for us (Westerners). What I like about it is the mental challenge: always trying to imagine/guess the hidden motives of otherwise inexplicable behaviour.

NE: Environmental degradation in China is considerable and ranges from poor air quality to water resource exhaustion. Is China’s reputation for long-term strategic planning well earned?

AM. Environmental issues have been acknowledged as possibly the greatest threat to China’s social and economic development and stability. During Xi’s extensive speech at the 19th National Congress of the Communist Party, the Chinese word for environment/ecology (生态) or its synonyms recurred 89 times. In comparison, the Chinese word for the economy was pronounced a mere 70 times.

In turn, Chinese industrial policies are gradually assimilating environmental principles. We are increasingly witnessing consistent and integrated regulation and monitoring, controlling and punishing.

Moreover, amendments to the 2014 New Environmental Protection Law increased tenfold the cost of non-compliance with CO2 emission thresholds. Prior to these amendments, polluting companies were happy to pay fines rather than undertake long-term anti-pollution measures. Now, companies face a penalty for each day they fail to comply.

Shortly before the end of 2017, the National People’s Congress (the national legislature of the People’s Republic of China) approved the country’s first environmental tax. That was a historic decision with immediate and significant impact on all companies operating in China.

Furthermore, China’s ban on plastic waste exports is meant to support and foster start-ups in the national recycling industry, starting with urban waste management. New collection and separation companies will be founded and tasked with creating a circular economy system.

China has more and tougher long-term plans in the pipeline.

According to World Bank estimates, China produces 525,000 tons of rubbish per day, and the figure is expected to reach 1.4 million by 2025. That means there is plenty of work to go around. In order to prepare for the challenge, Beijing is set to hire seventy thousand environmental educators tasked with going from door to door to explain how to perform a separate collection of waste at home.

In sum, China’s green turn is a long-term commitment. The transformation appears to be holistic: political, cultural and economic. And it is long term.

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