Roundtable: Europe’s summer of change and EU-China climate cooperation

How might events in Europe, including elections and tariffs on Chinese electric vehicles, affect climate diplomacy with China?
<p>Chinese electric car maker BYD unveils a new model at the Paris Motor Show in 2022 (Image: Michel Euler / Alamy)</p>

Chinese electric car maker BYD unveils a new model at the Paris Motor Show in 2022 (Image: Michel Euler / Alamy)

Europe is experiencing a summer of change and uncertainty. The recent EU elections, while returning familiar faces to the top jobs, registered a rise in support for the right. This trend was playing out in France’s snap parliamentary elections too, though the country avoided a majority victory for the far-right National Rally, which in the end finished third.

Meanwhile, as of 5 July, electric vehicles (EVs) made in China and imported into the EU will be hit by tariffs of up to 37.6%, a dramatic move in a key trade relationship. Just days before, Hungary had taken over the rotating presidency of the EU for the rest of the year. The central European country hosts major Chinese EV- and battery-manufacturing facilities and breaks ranks with other EU countries in its overt friendship with China.

With the mood of uncertainty amplified by the upcoming US presidential election, what do these shifts to the status quo imply for China and the EU’s cooperation on climate? Dialogue Earth asked three experts from Germany, China and Hungary for their thoughts.

Lutz Weischer

Head of policy for Germanwatch

We do not expect the EU elections to have a disruptive effect on Europe’s relations with China. The democratic parties of the political centre retain a clear majority in the European Parliament. And the people that have now been nominated for top jobs – Ursula von der Leyen, António Costa, Kaja Kallas and Roberta Metsola – stand for continuity, also regarding the European Green Deal.

Lutz Weischer
Image courtesy of Lutz Weischer

However a broader paradigm shift, in the making for several years in European politics, is also reflected in the election results. There is now a stronger emphasis on issues around security, strategic independence and economic prosperity for the EU in a more unstable world. This was already a topic in Ursula von der Leyen’s first mandate – which in 2019 she famously labelled a “geopolitical Commission” – and has been reinforced since Covid disrupted global supply chains and the Russian war on Ukraine catapulted energy security to the top of European political agendas. The European Green Deal remains the best strategy to secure energy independence, affordable energy and future competitiveness – and we expect a stronger focus on these aspects.

For the EU-China relationship as a whole, we expect that the EU will continue to try to strike a balance between China as a systemic rival, a competitor and a partner for cooperation. All three dimensions are present in the climate and energy relationship between the two regions. Though we expect the competition angle will become more important, as is foreshadowed already, for instance, in the recently introduced tariffs on Chinese EVs.

Nonetheless, engagement and cooperation with China will remain indispensable to achieving global climate goals. China’s domestic climate action as the world’s largest emitter will be crucial over the next five years to keep 1.5C within reach. What’s more, very few, if any, countries will be able to reduce their emissions at the pace necessary for the 1.5C limit without tapping into China’s capacity to produce affordable renewable energy, batteries, and EVs.

The election that might have a bigger impact on the Sino-European climate relationship is the US one in November. The stability and credibility of the international climate regime could hinge on China and the EU in the coming months. If Trump wins, and his second administration retreats entirely from international climate diplomacy, the EU will have to step up like never before. In the lead up to that crucial moment, the German government and the EU Commission should take care to increase their capacities to work more closely with China and hold it accountable to its climate commitments.

Yao Zhe

Global policy advisor, Greenpeace East Asia

Climate engagement between China and the EU faces a bumpy road ahead. In the EU, there is growing concern about China’s dominance in the cleantech industry, both for security and market competitiveness. In the bigger picture, a shift to the right in political power, as evidenced by the June results of the EU parliamentary elections, will be a test for the EU’s own climate agenda.

Image courtesy of Yao Zhe

Responding to public sentiment, pro-climate policymakers in the EU are also adopting a framing that emphasises industrial competitiveness. With such a shift in political rhetoric, concerns about China’s dominance only become more pronounced.

Here is where it gets complicated: EU policymakers’ approach to advancing their own net-zero transition can also block globalisation and multilateralism, which have been core tenets of climate cooperation as we know it.

At the same time, pressure inside China, exacerbated by economic concerns, challenges the climate’s status as a political priority. This makes EU-China engagement on substantive issues such as fossil-fuel phaseout or finance increasingly difficult. Equally worrying, this relationship may be distorted by fear or mistrust among conflicts of interest.

Technical exchanges will be key to maintaining mutual understanding. For example,  exchanges on the EU’s Carbon Border Adjustment Mechanism have helped Chinese stakeholders better understand the levy’s rationale and implications, thus avoiding panic and fear. Going forward, China-EU climate relations will benefit from more nuanced exchanges on how China’s cleantech industry has grown to its current stage.

EU member states have their own diplomatic priorities and do not always take the same position as the EU. That differentiation makes them important interlocutors. Germany, France, Denmark and the Netherlands all remain important climate partners for China. China holds high-level dialogues with Germany on energy transition, and energy experts on both sides recognise that there is much to share on grid management. France has been engaging China in discussions on global financial reform. During Xi’s recent state visit to France, both sides also agreed to deepen cooperation on biodiversity and ocean protection. The potential for cooperation between China and member states remains high, complementing and strengthening the overall China-EU engagement.

Tamas Matura

Senior fellow at the Center for European Policy Analysis

Central and eastern European EU member states have split into two blocks. Those in the first either vehemently criticise China or at least have quietly scaled down their close cooperation. The other block is Hungary.

The Hungarian government not only disregards western attempts to de-risk EU-China relations, but has been more active than ever in creating deeper economic and political relations with Beijing. While most states in the region have seen a stagnation in Chinese investment, China’s investment stock in Hungary may increase to EUR 15 billion, positioning it as the country’s second or third largest foreign investor. Chinese investment, which includes battery producers like CATL and auto manufacturers like BYD, primarily focuses on the EV industry. Political relations are also strengthening. As President Xi Jinping said during his recent visit to Budapest: “China supports Hungary in playing a bigger role in the EU and promoting greater progress in China-EU relations.”

Meanwhile, many other central and eastern European countries have reevaluated their relationship to Beijing. This is first because of the underwhelming performance of the 16+1 cooperation [initiative, to promote business with China], and second because of China’s support for Russia’s aggression in Ukraine, which poses a direct security threat to the region.

Although the recently announced anti-subsidy measures on EVs are unlikely to affect the Chinese production facilities in Hungary, escalating trade tensions between the two sides could negatively affect Chinese economic activities in the country. The EU’s Foreign Subsidies Regulation offers a legal framework to investigate market distortions caused by subsidies granted by non-EU governments to companies operating in the the bloc. This could be used to target Chinese companies in Hungary’s EV sector. The Hungarian government, as the incoming president of the European Council, may seek ways and means to avoid such a scenario.