UK must work with China on low carbon projects if climate change is to be successfully tackled, MPs say

A report (136-page / 1.4MB PDF) by the House of Commons Energy and Climate Change Committee (ECCC) said that opportunities for investment in China in areas of UK low carbon expertise, such as carbon capture and storage (CCS) technology, could be worth as much as £430 billion.

It warned, however, that the UK's current involvement in China was made up of too many small projects focused on too many different areas to have much "strategic" impact. Instead, the Government should focus on a "smaller number of strategic interventions" tailored to appeal to Chinese priorities and build on UK strengths.

As the fastest growing economy in the world, China could account for half of the world's CO2 emissions by 2030, according to the ECCC. However China has recently set out ambitious plans to reduce the carbon intensity of its economy, boost green energy, draft a new climate law and introduce a carbon trading system. As a result of these developments, this is the "ideal time" for the UK to work with China, the MPs said, particularly as any future international agreement on climate change would not be possible without Chinese engagement.

"China must succeed in building a low-carbon economy if the world is to avoid dangerous and disruptive temperature rises in the coming decades," said Tim Yeo, chair of the ECCC. "We applaud the steps China is now taking to do this and the emphasis placed in [the country's] 12th Five Year Plan on promoting low carbon technology and infrastructure. By demonstrating low-carbon leadership at home, the UK could punch well above its weight in encouraging major emitters like China towards low-carbon development, but only if ministers can come up with a more focussed strategy."

However John Yeap of Pinsent Masons, the law firm behind Out-Law.com, said that the real challenge for the Government would be turning industry awareness of possible investment opportunities in China into concrete investment.

"Thanks to the efforts of the UK and Scottish governments, there is significant awareness of UK investment opportunities in renewables for Chinese organisations," he said. "However, turning that awareness into concrete investment is a challenging next step. There are other markets, such as Africa, where trade relations are better established, scale of opportunity is significant and the need for investment is compelling."

The ECCC said that the Government needed to do more to help UK firms gain access to opportunities in China by identifying the potential markets and technologies in which the UK could have a comparative advantage, such as CCS technologies and wind, wave and tidal power opportunities. The Government should, it said, undertake a "systematic assessment" of the sectors where the UK could have advantages and then develop a strategy for promoting its expertise to China.

From a policy perspective, the report said, the UK had experience to offer China as it began to develop a system of carbon pricing and accounting and draft its new climate law. The UK was "well-placed", Yeo said, to help China "develop the legal infrastructure" for a carbon trading scheme and to establish effective ways of accounting for emissions by heavy polluters.

The development of CCS, a technology used to prevent CO2 from being released into the atmosphere when fossil fuels are burned to generate power, was an "environmental imperative" for China - as well as a potential commercial opportunity for UK businesses, the report said. Coal remains "abundant and cheap" in China, according to the Committee's research, and coal-burning power stations account for 70% of the country's electricity.

The UK is yet to deliver a full-chain, 'source to sink' CCS demonstration project, or one which stores the CO2 produced by a power plant in such a way that it does not enter the atmosphere. The report said that the Government must set a "more challenging" objective and deliver its first operational project in the UK to begin by 2016 or earlier; so creating opportunities for the UK to export its expertise abroad.

Yeo said that the UK was in danger of "becoming tarnished by a reputation of being more talk than action" when it comes to climate change; as countries including France and Germany became more effective at showing China what they had to offer in terms of low carbon development and expertise. Slowing the pace of decarbonisation at home could undermine the credibility of the UK's low carbon businesses as well as the UK's international leadership on climate change.

"If we want to convince the Chinese that they should be doing business with us in this area, then we will need to strengthen our brand," Yeo said. "The Government must not allow the UK to fall behind in the high-tech low carbon race by faltering on its commitments to create a low-carbon economy here at home. By demonstrating that we can deliver real carbon reductions as well as we deliver climate change rhetoric, we could put UK plc out in front in the low-carbon industrial revolution set to sweep the world and therefore enjoy economic as well as environmental advantages."