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EU-China Relationship Could Hold Key to Global Climate Deal

The 19th United Nations annual Climate Change Conference begins in Poland on November 11. This will be an important step, although only a step, along the path toward securing by the end of 2015 a comprehensive global treaty that must set the world on a path to a low carbon future.

The 19th United Nations annual Climate Change Conference begins in Poland on November 11. This will be an important step, although only a step, along the path toward securing by the end of 2015 a comprehensive global treaty that must set the world on a path to a low carbon future.

However, to achieve this goal there will need to be much closer bilateral and regional cooperation between two key economic powers -- China and Europe. This cooperation alone could hold the key to creating the conditions for an international agreement. But the key question is if European leaders are reading China's signals properly, and have the vision to develop and grasp the opportunity.

Fundamentally, both China and the EU share a vision of a prosperous, energy secure future in a stable climate. And great advances have been made in the relationship in recent years.

The China-EU Summits, initiated in 1998, are now an established annual event with the next to be held later this month. The EU is China's biggest trading partner, and China is the EU's fastest developing export market.

However, Europe risks squandering the opportunity to deepen this engagement if China is viewed more as a threat than a partner.

China's 12th Five Year Plan is the clearest signal yet to Europe. It sets the strategic direction for China's economy through to 2016, shows that Beijing decision makers are determined to change their development model from low-grade labour-intensive manufacturing towards a greater emphasis on services and innovation.

They want to design the next iPad, not just manufacture it. And, as resources become scarcer, the incorporation of the principles of sustainable development, green procurement, clean air and resource efficiency are increasingly moving up the priority list.

The EU has strengths in areas that China needs and, as China emerges as the world's largest economy in coming decades, there are substantial economic opportunities for the EU. As the largest emitter of greenhouse gases, in no area is cooperation with China more important than on clean air, energy and climate change.

The Five Year Plan includes policies and measures designed to help China achieve a 40-45% reduction in the carbon intensity of GDP from 2005 levels by 2020. This is a significant commitment that will shortly be strengthened by China's first national climate change law.

The fact China is using the experience of its sub-national pilot emissions trading schemes to inform the development of a national scheme, probably by 2016, is another signal to Europe. It clearly shows that China is open and willing to learn from Europe's experiences and reinterpret these for their own domestic circumstances.

China has no obligation to pass a climate law and develop carbon markets. But it is pursuing these policies because there is a recognition at the heart of government that climate change is as likely to affect China's population and growth, if not more so, than anywhere else.

Importantly, an enhanced China-EU relationship will not just be one-way traffic; it is increasingly clear that technology transfer will be two-way. China is already the world's largest manufacturer, and user, of solar panels and the largest investor in renewable energy. The planet's fastest high-speed rail services are in China. Both sides thus have much to gain from a stronger, closer, broader and deeper partnership.

It is therefore frustrating when disputes, such as the recent spats over solar panels and aviation, escalate to a level that sets both sides back from the closer economic and political partnership that is ultimately in their respective interest.

As in all relationships there will be times that each side will do something that frustrates the other. But there must be a higher level objective of mutually beneficial cooperation underpinned by practical political mechanisms to address concerns as they arise. In effect a dispute clearing house.

Disputes should not be allowed to escalate to the detriment of the higher level objective of closer cooperation. To achieve this though requires commitment on both sides to develop such mechanisms.

As those that have invested time in the relationship with China over many years understand, megaphone diplomacy rarely works. There is a window of opportunity over the next decade to step up engagement of China.

But this window will not remain open indefinitely and Europe needs to read the signals being sent. So many of the policies China are testing and implementing are refinements of European policies and laws. They are applied differently but the path is one much closer to that of Europe than other major economic powers.

To be sure, there is still a way to go before China has a fully-fledged carbon market, or both parties develop new low carbon standards in key industrial sectors. But the potential is clear.

Co-operation could build low carbon industries in a range of sectors as well as align the EU to the world's future largest economy. This could only serve to improve political ties and strengthen respective economies.

And importantly as a dividend of such engagement Chinese and European cooperation would accelerate the transition to a global low carbon economy, lead others and magnify the benefits that, together, will help to create the political conditions that will enable a comprehensive, global agreement to be reached within the UN.

It is essential that we recognise that agreements within the UN process reflect national political conditions; they rarely define them. China and Europe hold the key, and European leaders need to better read Chinese signals.