Energy Security in China-EU Relations:Framing Further Efforts of Collaboration

I.Introduction

Energy was not a significant concern for either contemporary China or Western European countries to formally re-connect with each other after 1971, the year of tectonic change in China’s pursuit of economic and political relations with the rest of the world.Yet, it did not take long for energy to feature as a substantive issue area for Sino-European diplomatic interactions.The China-EEC trade and economic cooperation agreement, signed in 1985, covered industry, agriculture, science, energy, transportation, environmental protection and development aid.It needs to be noted, though, that it was not until 1988 for China and the EEC to exchange permanent diplomatic missions, a necessary instrument for enforcing cooperation agreements.Furthermore, re-normalization of a comprehensive relationship did not happen until 1995, when the European Union(EU) announced its first strategy paper on relations with China.

In viewing China-Europe relations through the energy prism,one basic feature to take note of is that trade in energy commodities between China and the EU is small in scale.For example, in terms of crude oil, Chinese statistics lists Norway as the only European(albeit non-EU) country source of supply in the year 2010, but the total amount stood at 78,000 tones, a 50% drop from the previous year and a negligible fraction of the 240 million tones of crude oil which China imported in that year.1Tian Chunrong, “China’s 2010 oil imports and exports”, International Petroleum Economics,March 2011, p.20.[in Chinese]Neither China nor a European economy treats each other as a source of supply in coal and/or natural gas.There is no record of oil exports from China to Europe.Geographical distance makes two-way trade in electricity too ambitious to contemplate.

The absence of mutual dependence in energy trade provides an important material background for the fact that European commentary on China and energy security typically entail a reflection of concerns about Chinese foreign policy, rather than how that policy leads to material gain or loss to Europe itself.2For example, Pradeep Taneja, “China’s Search for Energy Security and EU-China Relations”,European Studies 27, 2009, pp.259-273.This is natural but, as shall be said in later parts of the paper, insufficient for the sake of managing the effectiveness of further dialogues.

A second basic feature to note is that energy development, i.e.,European participation in the downstream sector of the energy economy in China, has been the primary feature of European interactions with China over energy.Such participation can be summarized in three primary paradigms: technology development for energy use (technical assistance from Europe and joint research and development programs), trade and investment by European companies in equipment for energy extraction and utilization, and European support for research in energy policy development.Chinese sources on European involvement in China’s energy development indicate such projects date to the mid-1980s.For example, in 1988,the European Community offered a grant to China to put together an alternative (wind power) energy experiment in an island in Zhejiang Province.3Chang Jinming, et al, “Sino-European DES project in Dacheng Island”, Energy Engineering,March 1989, pp.20-23.[in Chinese]By 2000, China and Europe established cooperation projects on energy development and environmental protection, again in China.4Anonymous, “China and Europe Initiate Energy and Environment Cooperation Program”,Power Demand Side Management, March 2000, p.47.[in Chinese]Chinese involvement in the European energy sector has yet to gain traction, in spite of the appearance of news reports about Chinese ambitions to acquire energy-related technology companies in Europe.5Maja Zuvela, “Chinese firms invest in emerging markets energy for EU toehold”, Reuters newswire, June 11, 2013.

Nonetheless, recent years have witnessed an emerging interest on the part of both the EU and China to move from energy development to also encompassing energy security in policy interactions with each other.In May 2012, China and the EU held their first “high level meeting on energy”, which resulted in the signing of a joint declaration on energy security.6Gunther Oettinger, “First EU-China High Level Meeting on Energy”, http://ec.europa.eu/commission_2010-2014/oettinger/headlines/news/2012/05/20120503_en.htm.Meanwhile, while energy has received greater levels of diplomatic attention, the EU has yet to formally establish a China-specific energy strategy.In addition, EU member states differ widely in their interactions with China in the field of energy:for some the relationship involves primarily market questions; for others, energy matters are more of a foreign policy concern.

In this research note, our aim is to help frame and define the features of a China-EU dialogue on energy security.This report will proceed in four parts: (1) a review and analysis of European and Chinese energy security concepts; (2) an explanation of the rationale for EU-China energy security cooperation and policy coordination;(3) an overview of the past and current undertakings in the energy field between China and the EU; and (4) a set of policy proposals for the two sides to consider as they work to frame a China-EU dialogue on energy security.

II.EU and Chinese Energy Security Concepts

1.EU Energy Security Concept

The concept of energy security that underpins and informs the EU approach to energy policy have been transformed in recent years as Europe’s challenges in this area have broadened.Energy security ideas are particularly dynamic in the European context as there are numerous stakeholders (EU institutions, member states, energy companies and experts).The main drivers behind the evolution of the EU concept of energy security have been the high volatility of global energy markets, rising concerns about security of supply(notably from external suppliers), the challenge of responding to climate change, a decline in hydrocarbon reserves within Europe and a dynamic shift in the EU energy mix, etc.In response to the considerable uncertainty of the future energy environment, the EU has developed an increasingly comprehensive approach to energy security and launched a set of initiatives designed to enhance the European energy market, to strengthen the EU’s external energy policy, to integrate energy policy with the emergent role of the EU as a foreign and security policy actor and to enhance global dialogue over energy policy and the strengthening of international rules in this sector.7Susanna Horn and Angelina Korsunova, “Trends in EU Energy Policy 1995-2007”, in Marja J?rvel? and Sirkku Juhola, eds., Energy, Policy, and the Environment: Modeling Sustainable Development for the North, Springer, 2011, pp.45-63.

Energy belongs to the realm of shared competences between the Union and member states.Although the EU has legislated in the area of energy policy for many years, the concept of introducing a mandatory and comprehensive European energy policy was only approved at the meeting of the European Council on 27 October 2005.A conspicuous change in European primary law came with the entering into force of the Treaty on the Functioning of the European Union (‘Lisbon Treaty’) on 1 December 2009, which included a chapter on energy.

More specifically, Article 194(1) of the Lisbon Treaty sets out the four main aims of the EU’s energy policy: to ensure the functioning of the energy market; to ensure the security of supply in the Union;to promote energy efficiency and energy saving, and develop new and renewable forms of energy; and to promote the interconnection of energy networks.The energy provisions of the Lisbon Treaty are to be executed in a spirit of solidarity.8Johann-Christian Pielow and Britta Janina Lewendel, “The EU Energy Policy after the Lisbon Treaty,” in André Dorsman, Wim Westerman, Mehmet Baha Karan, and ?zgür Arslan, eds.,Financial Aspects in Energy: a European perspective, Springer, 2011, pp.147-165.

With the creation by the Treaty of the post of the High Representative of the Union for Foreign Affairs and Security Policy (currently Baroness Ashton) and of the European External Action Service, the external dimension of EU energy security has been enhanced.EU energy security is thus pursued today as a horizontal policy issue that brings together inter alia energy, foreign,environment/climate change, and competition policies.

2.The EU’s Energy Security Challenge

The EU is facing a threefold challenge to its energy security:

Decrease in EU primary energy production.Primary energy production has been falling in the EU.This development reflects the depletion of indigenous non-renewable resources (oil and gas) and an environmental policy (backed by energy efficiency measures and the promotion of renewable resources) that has restricted the use of certain fuels (notably coal) linked to climate change.The decision of some member states to phase out or review nuclear power will further reduce Europe’s internal energy options.

Dynamic changes in the energy mix and uncertain demand.Due to the volatile nature of global economic and energy market conditions,predictions of the future demand for energy in Europe vary considerably.Most forecasts see a continuation of the overall decline of demand for energy in the EU (with coal and oil experiencing significant falls to 2030), even while certain energy (notably gas, although the rate of increase in demand is predicted to slow)experience increasing demand.

Growing import dependency.External supplies meet an increasing part of the EU’s demand for energy.The EU is a major importer of energy resources and its energy dependency has been growing recently (with oil reaching over 90%, natural gas above 60% and coal at about 40%).Imports are concentrated from a few key countries raising concerns about over dependence.For oil, the EU is reliant on OPEC and the Middle East countries with Russia the single largest oil supplier.Russia is also the largest supplier of natural gas - followed by Norway and Algeria - and coal and the second largest supplier of uranium.

Overall, these developments mean that in the future the EU’s relative importance as an energy consumer and producer will be falling, at the same time as it is seeking to institute far-reaching shifts in the energy mix, its demand for external energy resources is rising and global competition for access to energy resources is intensifying.

3.The EU’s Emerging Approach to Energy Security

Energy security in the EU has traditionally been based on the idea that EU member states are interdependent in the area of energy and expressed in three main concepts - competitiveness, security of energy supply, and sustainable development.These concepts underpin an EU energy policy that has “evolved around the common objective to ensure the uninterrupted physical availability of energy products and services on the market, at a price which is affordable for all consumers (private and industrial), while contributing to the EU’s wider social and climate goals”.9The Communication “Energy 2020 - A strategy for competitive, sustainable and secure energy”adopted by the European Commission on November 10, 2010, p.2.

In responding to energy challenges - current and forecast to affect the EU market - the Union has steadily broadened and deepened its approach to energy security.In recent years the EU institutions as a whole have become stronger actors in European energy policy alongside the EU-27.

The main elements of the EU approach to energy security can be summarized as follows:

(1) Building an integrated and liberalised EU energy market

The liberalization and integration of the internal market is one of the key aspects of increasing the EU’s energy security and self-sufficiency, and is designed in large part to promote the free movement of energy in the Union.The EU has sought to achieve this aim through the introduction of new legislation, the enforcement of competition law, and the launch of new infrastructure projects,promoting enhanced solidarity among member states, and a strengthening of the role of the EU in Europe’s energy market.

In 2009, the EU adopted the “third energy package” which includes measures for “unbundling” - separating the operation of gas pipelines and electricity networks from the business of providing gas or generating power.On 28 September 2011 these provisions provided the basis for anti-monopoly bodies of the European Commission to search the offices of 20 European companies (most with close connections to Russian energy concern Gazprom) in connection with possible violations of free competition rules in the area of gas supplies for the EU members in Central and Eastern Europe.

In responding to energy challenges - current and forecast to affect the EU market - the Union has steadily broadened and deepened its approach to energy security.

The new legislation also seeks to promote “regional solidarity”.It requires member states to cooperate in the event of “severe disruptions” of gas supply, by coordinating national emergency measures or developing and upgrading electricity and gas interconnections.Member states have also been directed to take measures to prevent and mitigate potential interruptions of supply, including through building up stocks.

In 2009-10, the EU identified a series of priority energy projects and supported their construction through the European Energy Recovery Fund - which also included an external dimension in terms of connections with Caspian gas imports and interconnections with North Africa.10The European Energy Programme for Recovery (EEPR) (regulation 663/2009), endowed with a €3,980 million financial envelope of which € 1,565 million was allocated to projects relating to offshore wind electricity and carbon capture and storage; and the Strategic Energy Technology(SET) Plan (14230/09) which contains detailed Technology Roadmaps for 2010-2020, including the “European Industrial Initiatives” projects 1.The European Commission is currently seeking an enhanced role in “common” European energy infrastructure projects.Under the proposals, such infrastructure would effectively operate within an EU-wide legal regime such that these projects would receive special treatment from national regulatory and executive authorities.This latter initiative has been interpreted as a shift from a reliance on “bottom up”, market based approach (as epitomized in the third energy package) to recognizing the need for a stronger role for government and regulation in promoting an integrated EU energy market.

(2) External energy policy

In the context of rising export dependency and a desire to break from over-reliance on particularly producers (notably the Russian Federation) the external dimension of EU energy security thinking has considerably advanced.Energy relations with third countries have received an impulse in recent years, notably following the natural gas supply interruptions as a result of the Ukrainian-Russian disputes of 2006 and 2009 and in response to the political turmoil in North Africa and the Middle East in 2011.The main thrust of external policy has been to diversify energy sources and routes of supply,notably in regard to gas.

A particular aspect of the EU’s external energy security policy is its relationship with the European “neighbourhood” countries.The basic mode of operation of the EU in its neighbourhood is the export of the acquis communautaire that concern energy issues.The Energy Community is one of the most important frameworks to achieve this aim (membership: Western Balkans, Ukraine, Moldova).The revised European Neighbourhood Policy of 25 May 2011 calls for increased energy dialogue to achieve market integration, improved energy security based on converging regulatory frameworks, new partnerships on energy efficiency and environmental standards.

Strengthening the EU’s main external supply “corridors”,including notably the southern energy corridor to the Caspian Sea has been a priority.11On November 17, 2010, the European Commission has adopted the Communication “Energy infrastructure priorities for 2020 and beyond - A Blueprint for an integrated European energy network”.This aim has seen important innovation in the EU approaches to energy including most recently the decision by the European Council to mandate the European Commission to negotiate on behalf of the Union with Azerbaijan and Turkmenistan to build a Trans Caspian Pipeline System.

The EU supports a number of global initiatives aimed at increasing energy efficiency, climate protection, and the reduction of emissions,and nuclear security.Another important part of EU energy security is the establishment of international rules for the functioning of energy markets - the Energy Charter (investment, trade and transit)has been a primary vehicle to this end.The EU also supports various multilateral energy frameworks - for example the Baku Initiative and the Caspian Development Corporation.At a global level the EU is engaged in the Kyoto Protocol, the International Energy Forum, the G8 and G20, with EU member states participating in International Energy Agency.

The EU also seeks to promote legally binding nuclear-safety,security and non-proliferation standards worldwide.The Commission is developing initiatives to encourage European partner States to make international nuclear safety, security and non-proliferation standards and procedures legally binding and effectively implemented around the globe, in particular through reinforced cooperation with the International Atomic Energy Agency and the conclusion of Euratom agreements with key nuclear suppliers and user countries.

The external dimension of Europe’s energy policy has increasingly been integrated with foreign and even development policy - although DG ENER remains the primary actor.In Central Asia, for example,the European Union Special Representative has energy issues as part of his mandate.The recent Commission Communication “The EU Energy Policy: Engaging with Partners beyond Our Borders” of September 2011 noted that improving access to sustainable energy for developing countries, including addressing energy poverty, is a priority as part of EU development policy.12Communication on security of energy supply and international cooperation - “The EU Energy Policy: Engaging with Partners beyond Our Borders” adopted by the European Commission on September 7, 2011, pp.14-15.

The increased dynamism in the area of EU energy security has seen the Union taking on an enhanced role vis-à-vis member states in order to strengthen coordination, build a common approach and reinforce strategic focus.For example, member states have been required to inform the European Commission on the nature of some bilateral energy agreements in order to ensure these are in compliance with European legislation.13Commission Regulation n°833/2010 of 21 September 2010 implementing Council Regulation n°617/2010 concerning the notification to the Commission of investment projects in energy infrastructure within the European Union.

4.China’s Energy Security Concept

Official Chinese definitions about energy security are rare.A white paper on energy published in 2007 perhaps comes closest to an elaboration of China’s energy security approach in a single document.It is significant that the body that published the white paper is the State Council Information Office, which is not a government body that is directly tasked to coordinate the government’s energy policy.As a matter of fact, China’s energy policymaking authority was for many years fragmented.This situation continues today.14For an earlier assessment, see Vaclav Smil, “Energy Development in China: the need for a coherent policy”, Energy Policy 9(2), June 1981, pp.113-26.A more current assessment is Guy C.K.Leung, “China’s Energy Security: perception and reality”, Energy Policy 39(3), March 2011,pp.1330-7.

The White Paper, which is conceivably reflective of consultations among energy policymaking bureaucracies, comes close to providing a definition of energy security in stating:

Guided by the Scientific Outlook on Development,the Chinese government is accelerating its development of a modern energy industry, taking resource conservation and environmental protection as two basic state policies,giving prominence to building a resource-conserving and environment-friendly society in the course of its industrialization and modernization, striving to enhance its capability for sustainable development and making China an innovative country, so as to make greater contributions to the world’s economy and prosperity.

...

The basic themes of China’s energy strategy are giving priority to thrift, relying on domestic resources, encouraging diverse patterns of development, relying on science and technology, protecting the environment, and increasing international cooperation for mutual benefit.15The State Council Information Office, China’s Energy Conditions and Policies, 2007, http://www.china.org.cn/english/environment/236955.htm.

Partly due to the absence of an official identification of energy security concepts, there have emerged numerous studies around the globe trying to make sense of what those considerations can possibly be in relation to the country’s foreign policy.Considerations of geopolitics play a large role, although the extent to which such assessments can be verified is highly questionable.Part of the cause for such a state of affairs is that few of the partner states with which China has entered into large energy cooperation projects offer any greater transparency.16Zha Daojiong, “Observing China’s Energy Policies: how strategic are they?”, in Wang Jisi,ed., Review of China’s International Strategies 2013, Center for International and Strategic Studies,Peking University (forthcoming).

Despite the lack of a definitive public statement on energy security,the last decade has, nevertheless, seen rising interest in the challenge of energy security in China with a growing number of comments by government officials, military officers, think-thank experts, and academics on the fast changing energy challenges facing the country.The backdrop to the discussion of energy security has been China’s remarkably rapid economic growth.In China energy security is thus generally viewed primarily as part of domestic economic development rather than as a part of foreign policy.

In China today it is not even possible to speak of one definitive “Chinese perspective” on energy security.

In China today it is not even possible to speak of one definitive“Chinese perspective” on energy security.There is much debate on the issue, and pervasive concern surrounds the challenges of meeting the country’s consumption needs,while voices of reining in the pace of growth in consumption have found a greater level of persuasion.When it comes to identifying strategies for dealing with the evolution of the country’s energy portfolios, stakeholders’ perspectives vary.Industrialists put low cost on par with security of supply; entrepreneurs see rationalization of investment flows as the key; technophiles argue engineering is the path to pursue.Individual consumers resist lowering of quality of life due to fluctuations of en-ergy price; environmentalists try to find a voice in affecting extraction and consumption.International relations scholars, meanwhile, weigh the costs and benefits associated with the country’s dependence on foreign sources of supply, oil in particular.Politicians trying to satisfy as many interests as possible in enunciating and implementing national energy policies thus have no shortage of viewpoints to consider.

Popularity of “energy security” study in China is heavily conditioned by watershed events that cast nation-wide concern of failures in delivery of a key energy commodity.

As an issue for everyday governance, energy does not rank in the first tier for the Chinese government in terms of urgency.The government has retained a separate ministerial agency for food, land,and water management.In order to ensure food supply, the central government issues a “Number One” policy directive, at the start of each calendar year, to exclusively focus on agriculture.Energy has received no similar treatment.In 1993, China turned from a net exporter of crude oil to a net importer.Yet in the same year, the Ministry of Energy was abolished.Debate over the necessity for having a ministerial-level bureaucracy to govern the various components of the country’s energy industry has been ongoing and inconclusive,although safety in coal mining is retained as a central government bureaucracy’s mandate.In January 2010, China did establish a national energy commission, with the premier as its director and more than a dozen ministers as members.

But thus far, the commission has functioned on a crisis-driven basis.And China’s national legislature has not yet held a single hearing on energy as an urgent task to address, which is another indicator of the topic’s salience in political circles.In short, observers need to balance research rhetoric about China’s energy security against the actual policy attention energy receives in everyday governance.17Zha Daojiong, “China’s Perspective: The Search for Energy Security”, in Ashley J.Tellis and Sean Mirski, eds., Crux of Asia: China, India, and the Emerging Global Order, Washington, DC:Carnegie Endowment for International Peace, 2013, pp.209-220.

Popularity of “energy security” study in China is heavily conditioned by watershed events that cast nation-wide concern of failures in delivery of a key energy commodity.Success in mega projects like the Daqing oil fields, which made the country selfsufficient in oil in 1964, contributed to a sense of normalcy.Along the way, fatal disasters in coal mining, hydropower projects, and electricity transition were numerous.For example, in August 1975,the break of dams in the Shimatan reservoir system of Henan province,led to immediate death of 26,000 people and another 145,000 suffering from fatal injuries during subsequent epidemics.But events like these are treated as mistakes to be avoided through improved engineering and management.18Wu Xu, Shimantan Shuiku de “75.8” Shijian [The August 1975 Incident of Shimantan Reservoirs], Zhongguo Fangxu Kanghan [China Flood and Drought Management], September 2005, pp.27-37.[In Chinese]China’s nuclear power stations have been relatively safe, at least so far spared from suffering from massive failures.Events like the Fukushima nuclear reactor accident in 2011 have motivated Chinese researchers to argue for strengthening their own country’s nuclear industry regulatory systems.19Wang Qiang and Chen Xi, “Regulatory Transparency: how China can learn from Japan’s nuclear regulatory failures?,” Renewable and Sustainable Energy Reviews 16(6), August 2012, pp.3574-3578.In any case, in government policy, meeting the immediate needs of energy supply takes decisive priority over mobilizing economic and policy resources to pursue power and/or fuel switch.

To bring together observations of these and related features in China’s trajectory of energy governance, it is important to take note of the confluence in Chinese language expressions of “energy security” (nengyuan anquan).In Chinese,anquandenotes both safety and security.Performance in safety is a necessary antecedent to that of the overall, if less tangible, security concerns.This is especially true of China, a country whose satisfaction of total energy demand relies heavily on coal, water and other sources domestically available.

In short, difficult as it is to present a comprehensive mapping of Chinese perspectives on the country’s energy security and/or vulnerability, it is worthwhile to attempt to address issue areas that traverse market and strategic issues arising from the overall question of China and world energy order.As will be discussed in the concluding part of this paper, bearing this point in mind is useful for thinking through EU-China dialogues on energy security.

5.China’s Structural Energy Challenges

Because Chinese articulations about the country’s energy security and vulnerabilities have to be tested against the material challenges facing the county in a structural manner, it is useful to remind ourselves of some salient features in China’s energy situation.The following list is not meant to be exhaustive but can be helpful to indicate the broader and historical contexts of Chinese energy policies, domestic and international.

First, like most other countries, China seeks to ensure a secure supply of energy for its economic development at financial costs commensurate with change in aggregate national and per capita income, while simultaneously addressing environmental and other concerns associated with energy consumption.Energy was first incorporated as a separate issue area in the 6th Five Year Plan (1981-1985), the country’s overall economic policy instrument.Before and since then, as a component of overall economic management, China’s energy policy attempts to address several long-running challenges:structural and industrial adjustment, conservation, and energy development.Weight given to each of these pillars varies in time,but it is significant to note that an emphasis was placed on energy investment programs and efficiency enhancement, dating back to the early 1980s.20Mark D.Levine, Feng Liu, and Jonathan E.Sinton “China’s Energy System: historical evolution, current issues, and prospects”, Annual Review of Energy and the Environment 17, 1992,pp.405-435.

Second, China’s energy resource endowment presents a profound material challenge to the pursuit of the twin goals of meeting overall demand and adjusting the country’s energy mix in the direction of a low-carbon economy.China is rich in coal resources but poor in hydrocarbons (oil and natural gas).According to BP, in 2011, as the world’s second largest energy consuming economy, China’s proven coal reserves stood at 13.3% of world total.But the same numbers for oil and natural gas was 0.9% and 1.5%, respectively.21BP Statistical Review of World Energy June 2012.The country’s geographical distribution of coal reserves - centered in northern and western parts of the country and thousands of kilometers away from population and industrial centers of the eastern provinces -makes coal extraction and transportation a constant constraint on energy development.China’s coal mines are primarily underground ones, making safety maintenance an additional premium.So much so that the central government consistently retained a separate bureau for handling coal mining safety, even when separating project management from industry regulation has been the norm since the 1990s.22Xueqiu He and Li Song, “Status and future tasks of coal mining safety in China,” Safety Science 50(4), April 2012, pp.894-898.Xunpeng Shi, “Have government regulations improved workplace safety?: A test of the asynchronous regulatory effects in China's coal industry, 1995-2006”, Journal of Safety Research 40(3), 2009, pp.207-213.[both in Chinese]Coal still accounts for 70% of China’s total primary energy consumption.

Reduction of coal use is conditioned by hydropower already having reached its peak period (accounting for 23.1% of the gross installed power capacity in 2010), although some Chinese assessments claim that 65% of the country’s hydropower resource remains theoretically available.23Xiaolin Chang, Xinghong Liu and Wei Zhou, “Hydropower in China at Present and Its Further Development,” Energy 35, 2010, pp.4400-4406.Development of China’s renewable forms of energy such as solar and wind has received extensive commentary but its commercialization.As such, dependence on coal - regardless the associated human, environmental and ecological costs - will have to be the overriding predomination of China’s total energy mix.

Third, interaction with the rest of the world in the energy sector has since the 1950s been a key if pragmatic component of Chinese pursuit of development of its own energy as well as overall economic development.In the 1950s and 1960s, China sought Soviet assistance in developing its oil industry.China also actively sought to export coal and other raw materials to Japan in exchange for steel, industrial facilities and technology, for three decades before normalization of diplomatic ties between Beijing and Tokyo in 1972.24Yoshihide Soeya, Japan’s Economic Diplomacy with China, 1945-1978, Oxford: Clarendon Press, 1998.In the early 1970s, China pursued export of crude oil and oil products to its capitalist Asian neighbor countries.25A.Doak Barnett, China’s Economy in Global Perspective, The Brookings Institution, 1981, in particular, Chapter IV “China and the World Economy System”.Until the early 1990s, oil assumed an indispensible role in China’s total export structure.26Larry C.H.Chow, “The Changing Role of Oil in Chinese Exports Since 1974”, The China Quarterly 131, 1992, pp.750-765.After the visit by United States Secretary of Energy James R.Schlesinger to Beijing in 1978, China began to systematically pursue involvement by the United States and European countries in participation of its offshore oil development.27This is discussed, in part, in Zha Daojiong and Hu Weixing, “Promoting energy partnership in Beijing and Washington”, Washington Quarterly 30(4), 2007, pp.105-115.

In relating to the outside world, China has not experienced disruption to supply on a scale comparable to the oil crises of the 1970s caused by turbulence in the Middle East.After the outbreak of the Korean War and until the start of the Kissinger-Nixon détente,Western embargo on trade of oil and other commodities deemed to be “strategic” with China did affect the Chinese economy and society.Nevertheless, the prevailing mode of governance was not on developing a consumer economy during those years, and China was still able to reach out to Japan and Western European countries for trade, including that of equipments for expanding domestic energy production.28Chad Mitcham, China’s Economic Relations with the West and Japan, 1949-1979: grain, trade and diplomacy, Routledge, 2005.

Along with trade, China entered into numerous programs and projects in energy technological cooperation and collaboration with the industrialized West.In China, international development agencies like the World Bank and Asian Development Bank funded hundreds of projects that “helped accelerate development of large-scale efficient coal power plants, hydropower, state-of-the-art technologies for controlling power-plant emissions, and international-best practice environmental assessments of energy projects”.29Eric Martinot, “World bank energy projects in China: influences on environmental protection,”Energy Policy 29(8), June 2001, pp.581-594.The pattern of such interactions is that China sought foreign inputs to increase its energy production, treated energy as an ordinary commodity of export, and along the way worked to improve the technological and managerial knowhow of its own energy companies.

In short, international efforts aimed at socializing Chinese policy toward sustainable energy use must relate to these on-hand challenges in the Chinese society.

III.EU-China Dialogues on Energy Security

Energy dialogues and other energy-related discussions are among the most long-lived aspects of bilateral dialogues between China and member states of the European Economic Community since the early 1980s.Formal EU-China energy dialogue commenced in 1994.The Energy Dialogue was one of the first official sectoral dialogues to be established between the two sides.Six areas have been prioritized for EU-China cooperation in this field: renewable energy, smart grids,energy efficiency in the building sector, clean coal, nuclear energy,and energy law.

High-level dialogue between the two sides takes place principally through two regularized and designated channels.The first channel,the EC-China Biannual Energy Conference, has been held every other year since 1994, and takes place between the EC Directorate General for Energy (DG ENER) and the Chinese Ministry of Science and Technology (MOST).Through energy and other sectoral dialogues,the EU demonstrates its willingness to share European experience with China.And China has shown an interest in using the best practices of the “EU model” in these policy areas.30“An Overview of the Sectoral Dialogues between China and the EU”, http://www.eeas.europa.eu/china/sectoraldialogue_en.htm.

A second channel is the EC-China Dialogue on Energy and Transport Strategies, based on a Memorandum of Understanding between DG TREN (currently divided into two DGs - DG ENER and DG MOVE) and the Chinese National Development and Reform Commission (NRDC) signed in 2005.With its establishment in 2008, the Chinese National Energy Administration has been the EU counterpart for this dialogue.The fourth EC-China Energy Dialogue was held in July 2010 in Shanghai, and, for the first time,was at the Minister level, with Commissioner Oettinger leading the EC delegation.According to the MOU, the dialogue “aims at strengthening mutual understanding on energy and transport development of each party”.

In addition to these dedicated channels, energy-related topics are a firm fixture of discussions between EU and Chinese leaders during their annual summit meetings.At the most recent EU-China summit in Brussels in October 2010, the Joint Press Communiqué included the following language on energy issues:

Leaders agreed that appropriate climate change and energy policies are needed to support joint efforts toward energy savings, increasing energy efficiency and fostering green and low-carbon development.The two sides will further enhance policy dialogue and practical cooperation under the framework of the EU-China Climate Change Partnership and the Energy Dialogue.Cooperation should, inter alia,focus on renewable energies, energy efficiency, smart grids and clean coal technologies including carbon capture and storage.They encouraged research actors, in particular SMEs, to carry out research and development cooperation in energy, aiming to promote energy conservation and emission reduction.Leaders also underlined that they remain committed to the climate negotiations under the guidance of the “Bali Action Plan” and to promoting a positive, comprehensive and balanced outcome at the Cancun conference.31Council of the European Union, “13th EU-China Summit Joint Press Communique”, Brussels,October 6, 2010, 14577/10, Presse [267].

On the basis of these high-level dialogues and exchanges, the EU and China have carried out a range of cooperative activities in the energy field.For example, under the EU-China Energy Dialogue, the Europe-China Clean Energy Centre initiative was launched in 2009 with the goal of assisting China’s efforts to develop a low-carbon and more energy-efficient economy, including with an emphasis on renewable energy sources and sustainable biofuels.The EU-China Energy Dialogue also fostered exchanges and workshops between EU and Chinese officials, industry representatives, and academic experts around such issues as clean coal, renewable energy and grid integration, and smart grids.

A number of other important initiatives are in place between the EU and China on energy-related questions.The two sides in November 2009 signed a bilateral Cooperation Framework on Energy Performance and Quality in the Construction Sector between the EC the Chinese Ministry of Housing and Urban-Rural Development.This framework aims to help China introduce more energy efficient practices in its buildings and building construction processes.Other areas of close cooperation in energy issues include working with the Chinese State Council in the crafting of China’s new comprehensive energy law and a 2008 research and development cooperation agreement between China and Euratom on the peaceful uses of nuclear energy and nuclear safety.

Energy questions have also been among the key areas of focus under the four-year program (2007-2011) of the EU-China Policy Dialogues Support Facility (PDSF) which aims to facilitate and support the range of policy dialogues which take place at an official level between the EU and China.Since late 2007, the PDSF has facilitated conferences, workshops, and expert exchanges on such energy-related topics as energy law, coal mine safety, environmental governance, ecological compensation, renewable energy, and,most recently, energy security strategies.The PDSF program was terminated at the end of 2012, although this does not necessarily imply that both sides are losing interest in further exploring common interested topics.32The author was invited to lead the Chinese team of the PDSF project on energy security in 2012.These activities provide support to official bilateral discussions and cooperation on energy by generating policy reviews and analyses, exchanging best practices and lessons learned, and increasing awareness and understanding between the EU and China on matters of mutual concern.

It ought to be noted, meanwhile, that such official dialogues have helped to foster a broad network of professionals in both Europe and China.It is nonetheless a challenge to try to document the scope and/or assess impact of how these networks have served the interests of both sides.Part of the reason stems from the fact that a good number of such networks are initiated and funded by corporate interests, which do not always find it necessary to publicize to the general audiences.

A broad conclusion that can be drawn is that between China and Europe there exist two streams of interactions: one government-togovernment and the other industry-led.Together, they have helped promotion of efficiency in energy use and improvement in Chinese energy policy making.

1.Rationale for Establishing EU-China Energy Security Dialogue

The European Union and China are two of the world’s largest energy consumers.They also face similar strategic and practical challenges.Forecasts suggest that in the future both the EU and China will increase substantially their reliance on imported sources of energy.As a result, relations with producer and transit countries are becoming increasingly important and involve foreign and security issues as well as traditional energy policy.The rising level of energy imports will occur at the same time as both economies seek to introduce radical shifts in the energy mix to combat climate change and environmental challenges, notably through an increased reliance on low carbon imports (natural gas) and the domestic production of renewable resources.To achieve this shift China and the EU will have to invest heavily in green energy sources (including in technological innovation, as well as new generation and transmission capacity) and enhance energy efficiency.

In terms of energy supply reliability, China and the EU face a comparable macro environment: opportunities and challenges to diversify sources of supply and transit options and limit dependency from the Middle East, a similar priority in implementing energy efficiency measures, comparable risks faced by energy companies and their employees in unstable countries.Energy security policies aim at stable supply and risk reduction.

In the context of an increasingly fluid and unpredictable set of global energy markets, the EU and China share a strategic interest in working together to promote an international energy order responsive to their changing needs and a practical interest in exploring cooperation around issues of immediate concern.Despite the shared interests around energy issues, there is currently an underdeveloped level of cooperation in this sector.This reflects the fact that the countries of the EU and China do not have a significant energy trade between them and indeed are sometimes seen to be in competition for key energy resources around the globe.

As a relative newcomer to the global energy order, China has been cautious about reliance on markets and engaging with the multilateral energy governance institutions, such as the IEA, established before China’s dramatic economic rise.The opportunities for China to build substantial dialogue with other energy consumer countries have thus been limited.This suggests that there could be a mutual interest in exploring bilateral and multilateral cooperation around the range of contemporary and emerging challenges facing energy consumer economies.

The EU and China have already agreed on a number of common undertakings in the energy area, including a dialogue on energy issues (see above).Cooperation has been established involving technology transfer and discussion of issues such as energy efficiency and promoting greener energy economies.With high-level political support there is a strong case today for building on these existing positive relations to establish a substantial relationship around energy security.

As noted above, the concepts of energy security in China and the EU are evolving.This can lead to a number of areas of potential convergence.These include inter alia how best to promote positive investment regimes in energy producer countries (including investment protection), how best to manage issues of supply involving cross border energy infrastructure (transit and dispute resolution),the role of domestic and international markets in achieving energy security, the broadening of the energy security idea to address issues of development (including energy poverty) in supplier countries, and strengthening industry-to-industry contacts.In light of the recent instability in energy markets caused by unrest in North Africa and the Middle East, an exchange of views on regional challenges to energy security for the EU and China would enhance confidence and build shared understandings and, thereby, contribute to market stability.

Beyond immediate practical challenges, there is also a common consumerist interest in fostering better governance of global energy markets to ensure stability, predictability, and the ready availability of competitively priced energy supplies.The focus of such a dialogue would be upon establishing binding minimum common standards for the energy trade that could ensure fair competition, encourage investment and promote the establishment of a level playing field for EU and Chinese energy companies and firms.Such a discussion would involve an exploration of the opportunities for cooperation within existing institutional formats and the need for reform of these institutions or the establishment of new bodies.

Enhanced cooperation between the EU and China offers the prospect of building relations that can strengthen mutual energy security in the face of unprecedented volatility and unpredictability in global energy markets and help to rebalance the relationship between consumer and producer.The agreement of a “roadmap”for EU-China energy cooperation would offer a framework to begin to explore common issues in more detail.

Finally, there is a need to avoid misunderstandings and mis-perceptions and a case to make in favor of a dialogue fulfilling a mutual need for confidence building in the field of energy security.In Europe, suspicions towards Chinese long-term strategic intentions shape European perspectives regarding Chinese energy deals abroad.In China, suspicions concern the EU’s normative approach of linking energy deals to the promotion of democracy and human rights, especially in Central Asia, Africa and other parts of the world.In addition, there is the risk of heightened competition between the EU and China to access energy resources in third countries, with a negative impact on energy prices.If unaddressed, misunderstandings and misperceptions can spiral out negatively to other areas of the EU-China relationship.

In Europe, there is an instinctive trend to persuade China to take a normative/multilateral approach in its pursuit of energy security.

2.Recommendations for Framing an EU-China Energy Security Dialogue

It is important to note from the outset that framing EU-China dialogues under “energy security” carries a higher level of concern and significance as compared to the previous focus on “energy development.” Without first demonstrating and gaining mutual benefits from ongoing energy development projects, forums on Sino-European energy security will have difficulty in gaining traction.In promoting new dialogues on energy security, proponents must also bear in mind the low level of mutual dependence in energy supply between the Europe and China.Dialogues must be related to the creation of new business and job opportunities on the ground, in both societies, to be sustainable.

With this background in mind, and taking into account the previous discussion on Chinese and EU energy security concepts,current EU-China undertakings on energy-related issues, and the rationale for EU-China cooperation on issues of energy security, the paper proposes the following recommendations to frame an EUChina energy security dialogue.

Promote bilateral relations alongside multilateral relations.In Europe, there is an instinctive trend to persuade China to take a normative/multilateral approach in its pursuit of energy security.Concrete examples include China joining the International Energy Agency and the Energy Charter Treaty (ECT).But the vision of an EU-China partnership promoting global governance of energy markets through multilateral organizations is unlikely to deliver any concrete achievements in the short-to-medium term.Framing the EU-China energy security dialogue as a platform to shape China’s strategic approach regarding multilateral energy organizations can risk derailing the whole process.Instead, the EU should focus on concrete projects to be negotiated at the bilateral level with the Chinese side and on examining key concepts of international cooperation in energy policy, especially between consumers.In general, the EU should avoid dialogue topics decided unilaterally because they may lead to Chinese defensive positions on broad foreign/energy policy.Finally, the EU can learn from the Sino-Japanese experience of separating energy development dialogues from shifts in the mood of political diplomacy between the two sides.33As a reference, see Zhenyu Zhao et al, “International Cooperation on Renewable Energy Development in China: a critical analysis,” Renewable Energy 36(3), March 2011, pp.1105-1110.

This is not to imply that multilateral arrangements like the ECT do not feature in Chinese debates at all.As a matter of fact, Chinese academics continue to debate the wisdom in China’s past decision not to join.34Zhang Sheng, “The Energy Charter Treaty and China: Member or Bystander?” The Journal of World Investment and Trade 13(4), 2012, pp.597-617.As sovereign representation by way of membership in an international organization ranks much lower in Chinese foreign policy making, it is just that greater efforts need to be made to help shape domestic Chinese debates toward eventual formal participation in the ECT.

Build on the 2005 EU-China dialogue on Energy and Transport Strategies and revisit the DG Energy/NDRC/NEA dialogue mechanism.It is important for the EU to build on existing documents and policy initiatives and take stock of past successes in energy development between China and Europe.35One example of such stocktaking is Eric Martinot, footnote 29.Under the 2005 EU-China dialogue on Energy and Transport Strategies Memorandum of Understanding, an Energy Working group has been set up between the DG Energy and the NDRC.An assessment of the successes and the failures of this dialogue mechanism should be conducted prior to any new dialogue proposition.In addition, the role of the DG Energy/NDRC/NEA channel should be revisited, with the aim to ensure coordination with the other dialogue mechanisms.Bilateral consultations between the DG Energy/NDRC/NEA should avoid functioning as an independent channel of communication, in order to avoid irrelevance or redundancy.

Favor concrete policy initiatives.The EU and China should make creation of pilot projects, not policy visions, the deliverable of each dialogue.Strategic plans, policy visions and wishful thinking risk resulting in empty-shell agreements.Speaking more realistic language of common interests and starting with small and concrete initiatives have been emphasized by Chinese experts in discussions conducted in Beijing as an important condition to increase the chance that the Chinese relevant authorities see an interest in conducting an additional policy dialogue with the EU.

Take transparency and the need for mutual reassurance seriously.The EU and China should acknowledge their divergences in terms of energy policy approaches.While the EU tends to link energy deals to an ambitious agenda of value promotion, China tends to integrate energy deals into comprehensive investment packages that promote Chinese overall strategic interests in third countries.However, setting aside mutual suspicion is not a realistic solution.The two sides should overcome a certain lack of political trust regarding their respective energy ambitions and policy.In particular, they could emphasize two similarities in their strategic thinking: the need for international strategic stability to ensure energy supply, and the link that they see between political stability, socio-economic development and major energy projects in third countries.

Consider involvement of third parties in dialogues and link energy security to socio-economic development.Should an EU-China energy security dialogue develop into a regular forum and include discussion of specific regions, the EU should refrain from seeking bilateral understandings with China.Beijing will not jeopardize its policy interests and reputation in third countries or regions for the sake of the EU-China strategic partnership, and it will always favor bilateral channels with third countries to bilateral deals regarding third countries.However, trilateral dialogue linking energy policy and socio-economic development would fit into both the EU and China’s foreign policy approaches.

Continue engagement at the 1.5 track level.There is a strong Chinese skepticism regarding the need for an additional dialogue with the EU.Given the perception gap towards both energy cooperation and the need for dialogues, the EU should continue its effort at the 1.5 track level and engage with Chinese experts, retired officials and officials in their private capacities.It can directly commission European and Chinese think-tanks or academic institutions to conduct this effort.

IV.Conclusion

The bottle of energy collaboration between the EU - as a multilateral institution, member states, industries - and China is more than half full.Now that energy security has been designated as a dialogue between the two, the challenge for the EU is that how the Union as an actor can positively impact project action behavior on the ground.For the assortments of both Chinese and European actors, design of dialogue topics and selection of dialogue participants are, arguably,more than half of the success in each endeavor.Failure to do so can easily and quickly lead to dialogue fatigue or even increased level of dialogue fatigue, which already is so much of standard feature in European and Chinese media portrayals of each other, and thus affects negatively their respective senses of mutual vulnerability.A general rule of the thumb is to begin by approaching the business sector in their own societies with the question: in what ways can the government-to-government dialogue channel contribute to your desire for creating new opportunities?