Net-zero Chemical Industry by Policy Design: Policy Packages in China and the EU, with a Focus on Germany
Following last weeks comparative analysis of the steel industry, a new EU CHINA BRIDGE report "Net-zero Chemical Industry by Policy Design," explores the same dynamics within the chemical sector. The report provides a detailed comparison between the policy landscapes of the EU and Germany on the one hand and China on the other. The findings suggest that we need to look even more closely at how China is structuring its path toward industrial transformation.
A few key insights from the report stand out:
First, China has implemented a highly developed and integrated policy mix to drive the sector's decarbonisation. In several areas, the Chinese framework appears to be more targeted and developed than its German or EU counterparts. This is particularly evident in the realm of financial instruments; while Europe relies heavily on carbon pricing and broad project-based innovation funding, China utilizes a sophisticated array of specialized green bonds, low-interest direct lending, and state-backed equity funds specifically earmarked for chemical industry upgrades. Better understanding the Chinese approach to financing industry transformation and extracting lessons for Europe is certainly on my list for future research activities.
Second, many European and especially German policy makers are worshipping "technology neutrality" as the holy grail of industrial policy. Meanwhile, China is taking determined and takes strategic choices. By "white-listing" specific technologies it deems strategic, the Chinese government provides a clear signal that removes administrative barriers and encourages financing: if the state believes in a technology, why should banks and investors doubt it?
Third, perhaps the most interesting development to watch is China’s focus on net-zero industrial zones. The recently published 5-year plan makes the decarbonisation of entire industrial clusters a clear policy priority, offering a cluster-based approach that could overcome many of the infrastructure and integration challenges that have slowed the wide-scale adoption of disruptive technologies in Europe. In my view, the shared challenge of converting existing industrial clusters into net-zero versions of themselves represents a unique opportunity for mutual learning. And perhaps it is also a good opportunity for EU-CN cooperation in an increasingly rivalrous geopolitical context. As industrial zones are not in direct competition with one another in the same way as individual companies or specific products, this shared challenge creates a less contested space constructive exchange.
