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Satisfying growing energy demands and simultaneously implementing climate change mitigation strategies is a global challenge. As part of the global energy transition, the International Energy Agency (IEA) predicts that by 2040, around 40% of all power generated will be produced by renewables, led mainly by a clean energy revolution in China.^[1] China is at the center of the global energy transition, pushed by technological innovation and lower costs of renewable energy. As renewables have become both cheaper and more efficient, clean energy development has become a real prospect for many countries.^[2] According to a report from SolarPower Europe, electricity generation from large solar plants currently costs half as much as energy generated from new coal and nuclear plants.^[3]

The world’s largest energy consumer has become the world’s largest producer in wind and solar energy, investing more than the United States and the European Union combined.^[4] China’s new economic growth strategy as set in its Thirteenth Five-Year Plan, stipulates that it will invest a total of ¥2.5 trillion ($361 billion) in domestic renewable energy generation capacity by 2020.^[5] China is also taking the lead in global renewable energy value-chains, as it has become the largest outbound investor in renewable energy.^[6] Most importantly, China is shifting away from being just a manufacturer towards becoming a source of technological research and innovation, signifying promise for EU engagement in joint research and development (R&D) activities.

The EU has set itself an ambitious goal of a 20% share for renewable energy of total energy production by 2020, and a 27% share by 2030, compared to a 13% share in 2015.^[7] Meanwhile, the U.S. administration has dropped out of its international climate commitments and is turning back to fossil fuels. It has recently passed a tax reform that will significantly cut renewable energy R&D funding.^[8] Current international energy diplomacy has become an instrument of international power struggles, defined by longstanding tensions between different energy exporters and importers.^[9] Yet, a low-carbon energy transition and national energy security cannot take place without international cooperation. In order to attain global climate goals, the EU needs to engage in renewable energy cooperation and energy diplomacy with China through the creation of joint R&D activities. It is instrumental for climate change action that both Chinese and EU policymakers understand the value of improving joint EU-China renewable energy R&D activities.

China is rapidly becoming a global leader in R&D and technological innovation. As the renewable energy sector in China is maturing, the government has renewed its focus on R&D activities and developed its R&D collaboration model.^[10] In 2016, China’s government spent $2.8 billion on renewable energy R&D, equal to the EU.^[11] This innovation has put China ahead of other major powers such as the U.S.^[12] The Chinese-based solar manufacturer Trina Solar has achieved the world record in efficiency of the multicrystalline-silicon cell, the solar cell that currently dominates the market.^[13] The industry is maturing and receiving more funding, but the supply chain still lacks the capacity to produce more technologically advanced goods, indicating that China still need additional expertise and knowledge.^[14] EU engagement would result in knowledge transfer for both parties through the participation of major renewable energy economies such as Germany.

But knowledge and expertise is not the only thing lacking in China. Theft and insecurity concerning Intellectual property rights (IPR) have restricted bilateral renewable energy R&D collaboration. Previous bilateral R&D collaboration with China, such as the U.S.-China Clean Energy Research Center, established in 2009, remained shallow due to fear of intellectual property theft and insufficient implementation of IPR within Chinese courts.^[15] This created tensions between the U.S. and China, leading to mutual solar tariffs and doubts over IPR protection for foreign investors.^[16] In recent years, however, China’s emphasis on R&D collaboration has resulted in vast improvements. As found by the American Chamber of Commerce in 2016, China’s IPR protection is improving.^[17] New calculations on data from the Supreme People’s Court in China show that the success rate for foreign plaintiffs in intellectual property cases is now as high as 74%. Damages awarded are steadily increasing and courts are ruling against state-owned enterprises, creating a more favorable R&D environment.^[18]

The most important aspect of assisting China’s renewable energy transition is the global impact of its actions on climate change. China will be responsible for a quarter of the projected rise in global gas demand and will overtake the U.S. as the largest consumer of oil by 2030.^[19] China’s clean energy transition will not only be a key driver in achieving peak carbon dioxide emissions by 2030. It will also ignite a faster global transition when given the technical and financial incentives to peak earlier. China provides funding for clean energy production on a larger scale than the EU currently does, and spent 4 times more than the EU in clean energy per unit of GDP in 2015 already.^[20] China’s R&D spending is likely to increase at a much higher rate than R&D spending within the EU.^[21] The IEA emphasizes that current R&D spending is still insufficient to reach global targets and promotes international joint innovation projects.^[22] The EU needs to partake in such projects in order to maintain relevance, contribute to global climate commitments and reach EU targets, which will require the opportunities for innovation that joint R&D activities provide.

Engaging with China will support the clean energy transition in both the EU and China, providing mutual benefits with global significance. China’s improved IPR protection and willingness to lead this transition places the EU in a strategic position to benefit from engaging with the country. China’s strong industrial base, large market and increasing R&D efforts in renewable energy should persuade the EU to engage with China in researching and developing renewable energy technology. Failure to do so could delay the EU’s energy transition, jeopardize the fulfilment of the global climate change goals and, ultimately, damage the EU’s global reputation and influence.

References

Picture: Asian Development Bank

^[1] International Energy Agency, “World Energy Outlook 2017 Executive Summary,” International Energy Agency (2017): 2.

^[2] Ibid.

^[3] Michael Schmela, “Global Market Outlook for Solar Power 2017-2021,” Solar Power Europe (2017): 5.

^[4] International Energy Agency, “Key World Energy Statistics 2017,” International Energy Agency (2017): 22-24

^[5] Josephine Mason, “China to plow $361 billion into Renewable Energy Fuel by 2020,” Reuters, January 5, 2017, https://www.reuters.com/article/us-china-energy-renewables/china-to-plow-361-billion-into-renewable-fuel-by-2020-idUSKBN14P06P.

^[6] Frankfurt School-UNEP Collaboration Centre for Climate & Sustainable Energy Finance, “Global Trends in Renewable Energy Investment,” FS-UNEP Centre (2016): 11.

^[7] Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC, 2009 O.J. L 140.

^[8] Emma Foehringer Merchant, “Senate Tax Bill Passes with BEAT Provision,” Green Tech Media, December 1, 2017, https://www.greentechmedia.com/articles/read/beat-provision-tax-bill-vote#gs.EzxUzyw.

^[9] Xu Qinghua, “China’s Energy Diplomacy and its Implications for Global Energy Security,” Friedrich Erbert Stiftung (2007): 6.

^[10] Shinwei Ng, Nick Mabey and Jonathan Gaventa, “Pulling Ahead on Clean Technology: China’s 13th Five Year Plan Challenges Europe’s Low Carbon Competitiveness,” E3G (2016): 2.

^[11] Frankfurt School-UNEP Collaboration Centre for Climate & Sustainable Energy Finance, 73.

^[12] Jeffrey Ball, Dan Reicher, Xiaojing Sun et al. “The New Solar System: China’s Evolving Solar Industry and its Implications for Competitive Solar Power in the United States and the World,” Stanford Steyer-Taylor Center for Energy Politics and Finance (2017): 18.

^[13] Mark Osborne, “Trina Solar Achieves 24.13% Conversion Efficiency for IBC Solar Cell,” PVTech, May 5, 2017, https://www.pv-tech.org/news/trina-solar-achieves-24.13-conversion-efficiency-for-ibc-solar-cell.

^[14] Jeffrey Ball, Dan Reicher, Xiaojing Sun et al. 18.

^[15] Joanna I. Lewis, ”A Better Approach to Intellectual Property?: Lessons from the U.S.-China Clean Energy Research Center,” Paulson Institute (2015): 4.

^[16] Jeffrey Ball, Dan Reicher, Xiaojing Sun et al. 18.

^[17] Jane Song, “AmCham China Releases 2016 Business Climate Survey,” AmCham China, January 20, 2016, https://www.amchamchina.org/about/press-center/amcham-statement/amcham-china-releases-2016-business-climate-survey.

^[18] The Economist, “For Some Plaintiffs, Courts in China are Getting Better,” The Economist, September 30, 2017, https://www.economist.com/news/china/21729753-cases-do-not-threaten-communist-party-are-receiving-fairer-hearing-some-plaintiffs.

^[19] International Energy Agency, “World Energy Outlook 2017 Executive Summary,” 2.

^[20] Bloomberg New Energy Finance, “Clean Energy Investment End of the Year 2016,” Bloomberg (2016): 10.

^[21] Frankfurt School-UNEP Collaboration Centre for Climate & Sustainable Energy Finance, 73.

^[22] International Energy Agency, “Energy Technology Perspectives 2017 Summary,” International Energy Agency, June 6, 2017, http://www.iea.org/etp2017/summary/.