Q+A-Rivalry or friendship as EU, China hold energy talks?

BRUSSELS Wed May 2, 2012 7:08am EDT

BRUSSELS May 2 (Reuters) - Energy security, power markets and sustainable urban development top the agenda at talks on Thursday between European Commission bosses and visiting Chinese officials, led by Vice Premier Li Keqiang, as both sides scramble for supplies and market share.

Beijing and the European Union, China's leading trade partner, launched regular dialogue on energy in 2005 on the margins of one of a series of EU-China summits.

"It is important to position the EU from the very start as a 'must-go' partner for all energy security-related issues," a Commission note said.

"China has become a key player in the global energy markets and is making impressive infrastructure investments outside its border."

Six priority areas for dialogue have been identified - renewable energy, smart grids, energy efficiency in the building sector, clean coal, nuclear energy and energy law.

The next EU-China summit is set for the end of the year, and the Commission is keen for progress on the energy debate by then.

As well as high-level energy talks, Thursday's discussions are to launch an initiative on "cooperation on urbanisation", as China's rapid development provides an opportunity to build sustainably, with intelligent infrastructure.

The EU, by contrast, has been struggling to agree on energy saving law that would enforce renovation of existing buildings.

Joint declarations will on Thursday be signed on energy security, cooperation on electricity markets and sustainable urbanisation, the Commission said.

The following looks at some of the overlapping energy issues in sharpest focus.

VYING OVER CENTRAL ASIA?

The EU is seeking access to gas from Central Asia, to curb its dependence on dominant supplier Russia.

Shipping gas from Turkmenistan would require a pipeline across the Caspian, which has been a dream for decades, but first demands a solution to an intractable sovereignty dispute.

A next round of negotiations on the Trans-Caspian pipeline is scheduled to take place between the Commission and representatives of Azerbaijan and Turkmenistan on Friday.

Russia has no desire for a trans-Caspian link that could dilute its energy power or limit its ability to play one market off against another, analysts say.

Prior to the Brussels talks, Vice Premier Li, who is on track to succeed Premier Wen Jiabao, visited Moscow at the weekend, when Chinese officials signalled they were keen to pursue a major gas deal with Russia.

Frustrated by a protracted failure to agree on pricing with Russia, China has been buying extra gas from the former Soviet state of Turkmenistan.

RIVALS ON RENEWABLE ENERGY/SOLAR?

The EU has been a leader in renewable energy, partly to limit its carbon emissions and partly to ensure security of supply.

Its companies are interested in doing business with China, but China is winning the green race and snatching market share.

Solar panels have become a hot topic as some European firms have urged action to fight off competition from cheaper Chinese products, perhaps through trade action and defensive duties.

Others have said a better way to save European jobs could be for EU firms to learn from China, whose strength is scale.

Claude Turmes, a member of the European Parliament and energy spokesman for the Greens, said the Commission, the EU's executive, should use funding to create large plants in Europe.

He suggested a tender for one or two solar cell manufacturing units of more than 2,500 megawatts, which in contrast to Europe's "overly dispersed and outdated manufacturing facilities" could compete successfully with China.

He also cited China's meticulous planning for developing the solar industry, which Europe has yet to match.

"Increasingly, there is a move to give an industrial policy dimension to renewable energy policies," he said, referring to China and impressing on Europe the need to do the same.

Externally, Europe also needs to develop its strategy and the Commission needs "to vastly increase the attention it gives to renewable energy under external policies", Turmes said.

CLASH OVER CLIMATE?

China is the world's biggest emitter of greenhouse gases.

In Durban in December, it agreed in principle to enter the Kyoto process for limiting global warming.

Analysts say it is far more committed to winning a green technology race than any international system, in which the EU has played a prominent role.

China has clashed with the Commission over EU law to make all airlines entering EU airports offset carbon under the EU Emissions Trading Scheme (ETS).

Its objections are based on what it sees as an encroachment on its sovereignty and the establishment of the principle all polluters are treated equally, as opposed to the idea emerging markets should not bear the same burden as the developed world.

It is, however, working on its own ETS and has said it will use revenue from a passenger tax on international flights to cut carbon emissions.

Climate Commissioner Connie Hedegaard is not taking part in Thursday's talks, so the ETS argument is not expected to be prominent. (editing by Jane Baird)

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