The EU-China energy relations


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Since the Russian invasion of Ukraine, the EU is divided regarding its relations with China. In the meantime, China and Russia have strengthened their strategic relationship in recent years given that Putin need to diversify its energy exports away from the EU, especially since he started the war in Ukraine. 

In these weeks, the worries of EU to face the winter 2023 with gas shortages are growing. 

“Many of the circumstances that allowed EU countries to fill their storage sites ahead of this winter may well not be repeated in 2023,” the head of the International Energy Agency (IEA), Fatih Birol said in a press release launching his report “How the European Union can avoid natural gas shortages in 2023. According to Birol, having an economic revival as China could make difficult for EU to buy the needed liquefied natural gas.

“Measures already taken by EU governments on energy efficiency, renewables and heat pumps should help reduce the size of the potential gas supply-demand gap in 2023. A recovery in nuclear and hydropower output from their decade-low levels in 2022 should also help narrow the gap. Despite all of this, the EU’s potential gas supply-demand gap could reach 27 billion cubic metres in 2023 in a scenario in which gas deliveries from Russia drop to zero and China’s LNG imports rebound to 2021 levels, according to the report”, Birol added.

In a document, the EU External Action Service (EEAS) affirms that over the past year,  EU-China bilateral relations have deteriorated, notably related to a “growing number of irritants”: China’s counter-measures to EU sanctions on human rights, economic coercion and trade measures against the single market, and China’s position on the war in Ukraine.  “The balance of challenges and opportunities presented by China has shifted over time. At the same time, the EU has remained committed to engagement and cooperation given China’s crucial role in addressing global and regional challenges”. For this reason, the EEAS underlines that “the EU’s current approach towards China set out in the “Strategic Outlook” Joint Communication of 12 March 2019 remains valid. The EU continues to deal with China simultaneously as a partner for cooperation and negotiation, an economic competitor and a systemic rival”.

After the Russian invasion of Ukraine, the 2022 energy dialogue between EU and China addressed topics of common interest, such as energy security, green energy transition and electricity market reforms. In particular, EU and China focused on LNG, natural gas and oil markets during their discussions on energy security. But also, the policies and practices to accelerate the green energy transition were key elements in their talks. Furthermore, three joint reports on power market reforms, innovative energy solutions and energy efficiency were presented at the meeting on the 22 March 2022.

However, China has different levels of economic engagement with certain strategic sectors of EU member states, as reported in a research of Raquel Vaz Pinto of EPC. The report underlines that “Beijing already plays an important role in Portugal’s electricity and energy sectors, or in the Port of Piraeus in Greece, while it is still far from being relevant in Spain”.

But for its new energy plans and Green deal objectives, China seems to be crucial for the EU. For the new energy vehicles (NEVs), “China is already the world’s largest automotive market and aims for new energy NEVs to account for 20% of all vehicle sales by 2025”. And NEV sales rose by +137% year-on-year in 2020 in the EU. “As NEVs gradually penetrate the European auto market, the EU remains a major market for Chinese NEV exporters. Regarding green hydrogen, the EU just launched a €2-billion industrial partnership to upgrade its strategy on clean hydrogen. Both commercial and technological cooperation should be embraced with China, the largest hydrogen producer, responsible for one-third of the global total”, the report says.

Written by: Irene Giuntella

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