Sino-German green economic cooperation

The two countries should leverage their partnership in global governance to foster multilateral climate financing and expand cooperation in the green industry chain

Upon his arrival in Chongqing on April 14, German Chancellor Olaf Scholz initiated his journey of visiting China, with a particular focus on cooperation in new energy and green supply chain. Scholz highlighted the city's significance as an industrial hub, particularly for automotive industry, fostering crucial economic ties with Germany. As a pioneer of the green economy, Germany has dedicated itself to establishing institutional leadership in this domain. It indirectly guides other countries by shaping international systems, rules, norms and standards related to the green economy. Germany spearheaded the creation of the 21st Century Renewable Energy Policy Network to foster a multi-stakeholder participatory model, aiming for innovation thought leadership. It also established the International Renewable Energy Agency, the first international body explicitly committed to promoting renewable energy, and formed the Renewable Energy Club to encourage a green recovery and achieve directional leadership.

Furthermore, Germany has solidified its central leadership position in global renewable energy governance through the founding of the International Clean Energy Conference and the Global Energy Transition Conference, continuously enhancing its institutional leadership.

Despite recent volatility in the international economy and financial markets, compounded by the impacts of the Russia-Ukraine crisis and the COVID-19 pandemic, Germany has persistently promoted the development of clean energy, primarily through the European Emissions Trading System.

First, under the Scholz administration, Germany has introduced ambitious green economy and energy transition policies, accelerating domestic renewable energy development and enhancing bilateral and multilateral economic cooperation on the global stage. This includes launching climate clubs and advancing the Just Energy Transition Partnership.

Second, green economy objectives are driven by the Renewable Energy Act and the Federal Climate Change Act, aiming to achieve an 80 percent renewable energy supply by 2030 and striving for 100 percent by 2035.

Last, Germany has hastened the innovation in green hydrogen technology and bolstered energy security through global hydrogen diplomacy, establishing agreements with Canada, Japan and other nations on hydrogen imports and the construction of stable supply chains. Germany also engages in strategic cooperation on hydrogen energy with Central Asian countries such as Kazakhstan.

In the realm of renewable energy systems and equipment, Germany produces a range of products including photovoltaics, wind energy systems, batteries, network components, electrolyzers, large heat pumps and carbon capture utilization/storage facilities, aligning with the Net-Zero Industry Act proposed by the European Commission. In 2021, the German Federal Government advanced the circular economy strategy, differentiating it from other interpretations such as the ProgRess strategy, yet aligning it with broader circular economy principles.

China and the European Union, recognizing a shared destiny in the energy transition, have formalized their cooperation through the EU-China Joint Statement on Energy Security, the Joint Statement on Climate Change, and the Leaders' Joint Statement on Climate Change and Clean Energy. These were achieved through the China-EU Leaders' Summit and similar mechanisms. The German Ministry for Economic Affairs and Climate Action introduced the Sino-German Dialogue and Cooperation Mechanism on Climate Change and Green Transition during the seventh round of Sino-German government consultations co-chaired by Premier Li Qiang and Chancellor Scholz. This mechanism highlights Germany's commitment to eight areas, including industrial decarbonization, energy transition, energy efficiency, circular economy, climate partnerships, greenhouse gas emissions trading, green transportation and sustainable finance.

In June 2023, both countries signed a memorandum of understanding to establish the Dialogue and Cooperation Mechanism on Climate Change and Green Transition as part of their ongoing government consultations on climate objectives. This memorandum underscores a five-year plan involving high-level dialogues, expert exchanges, business representative activities, and demonstration projects.

Investment-wise, German companies have increased their stakes in the Chinese market, particularly in green transportation, where Sino-German cooperation in the automotive industry serves as a model for bilateral relations. This is bolstered by China's burgeoning new energy vehicle market. In terms of resource efficiency, on Feb 11, 2022, BASF and Heraeus jointly invested 66 million euros ($70.32 million) in Pinghu city, Zhejiang province, to establish BASF Heraeus (China) Metal Resources Co Ltd, focusing on the recovery of precious metals from waste catalysts to improve resource utilization.

Germany's long-standing cooperation with other countries and international organizations in climate and energy continues, with a focus on advancing technical, financial and investment goals as set at COP28 through multilateral cooperation. Additionally, Germany emphasizes partnerships on climate transition, having implemented financial packages for individual countries with G7 donor support. Multilateral cooperation with financial institutions should be reinforced as needed.

The expansion of Sino-German cooperation could be based on Germany's mature climate club model, which is constructed on three pillars: promoting robust and transparent climate mitigation policies; jointly transforming industries to accelerate decarbonization; and fostering international ambition through partnerships, thus enhancing climate action and promoting justice in energy transition. China remains committed to advancing Sino-German cooperation, emphasizing its significance in areas such as decarbonization, green finance and sustainable financing.

Faced with a substantial global climate finance gap, China and Germany should leverage their partnership in global governance to foster multilateral climate financing and expand cooperation with various international actors in the green industry chain, aiming to enhance Sino-German green cooperation.

Yu Hongyuan is a professor and director of the Institute for Public Policy and Innovation at the Shanghai Institutes for International Studies. Chen Hongyang is a research assistant at the Shanghai Institutes for International Studies. The authors contributed this article to China Watch, a think tank powered by China Daily. 

The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.