16 Oct 2020

China’s carbon neutrality goal spells competition for the EU in the market for low-carbon technology

Daniel Gros / Milan Elkerbout

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China’s announcement that it intends to achieve carbon neutrality by 2060 is a game changer for international climate policy. It has considerable implications for the EU’s climate and industrial policy.
China still needs to translate this political promise into concrete goals with verifiable intermediate targets. But its goal of carbon neutrality by 2060 is in some ways a more ambitious long-term climate goal than the EU’s, despite the 10-year difference in target years (and the different greenhouse gases covered).

When considering the different growth trajectories, China’s target is undoubtedly more ambitious than that of the EU. China will need to reduce emissions at a far faster pace than the EU has managed so far, both in absolute and relative terms, but given its high savings rate, it can afford the vast investments needed to green its economy. On the road to carbon neutrality, China will become the biggest market for low-carbon technology.

Will this be in competition or cooperation with Europe? For the EU, proposals such as the “carbon border adjustment mechanism” may suddenly be an uneasy fit. There may be stiff competition for the development of climate-neutral technology, especially for energy-intensive industries, which are fundamental to the debate about industrial competitiveness and the risk of carbon leakage.