Climate pragmatism? A new chapter in UK–China cooperation

Mengwei Sha explores the opportunities for pragmatic, policy-focused climate cooperation between the UK and China, following Prime Minister Keir Starmer’s recent visit to Beijing.

In January 2026, Keir Starmer became the first UK Prime Minister in eight years to visit China. The trip, which involved a series of bilateral announcements, has led to an intense debate about whether relations between the sides will continue to improve. While this remains unclear, there is a pressing need for a new chapter in climate cooperation between the countries, which have signalled a renewed willingness to work together to address global challenges.

A climate-led thaw in relations

In 2025, the UK and China engaged in two high-level bilateral meetings focused on climate and energy that appeared to begin a thaw in their relationship. The UK–China Economic and Financial Dialogue, co-led by HM Treasury and China’s State Council, resumed in January 2025 after a hiatus of nearly six years. Key outcomes included commitments to deepen climate and energy cooperation and to continue collaboration on sustainable finance. The Dialogue also led to a landmark development in April, when China’s Ministry of Finance issued its first green sovereign bonds on the London Stock Exchange – reinforcing the UK’s role as a global climate finance hub and boosting UK financial services more broadly.

The UK’s Department for Energy Security and Net Zero and China’s Ministry of Ecology and the Environment held the inaugural UK–China Ministerial Climate Dialogue in March. The most significant aspect of the talks, the first of their kind in almost eight years, was the signing of a UK–China Clean Energy Partnership Memorandum of Understanding. The document identifies each country’s distinct areas of strength from which the other could benefit, including power market reform; offshore wind; energy storage; carbon capture, utilisation and storage; and clean hydrogen.

Together, these exchanges laid the groundwork for climate-related announcements during the Prime Minister’s visit, including an agreement to establish a UK–China Climate and Nature Partnership and initial plans for China to issue a sovereign biodiversity bond in London in 2026.

There is a business case for climate pragmatism: first, it would reinforce the UK’s strengths in financial services, standards, regulatory frameworks, scientific research and climate cooperation, likely creating jobs and producing other economic gains. Second, as the UK Climate Change Committee stated in 2024, the UK “has to act fast” to fulfil its legally binding climate commitments, an effort that will require international cooperation. Lastly, this form of climate leadership would create global public goods. China has consistently played a role in international discussions on sustainable finance, including by serving for several years as co-chair of the G20 Sustainable Finance Working Group. With the UK set to host the G20 in 2027 and the US retreating from its global climate commitments, there is a strategic imperative for the UK and China to demonstrate that the global climate agenda can continue to advance – and that constructive international cooperation remains possible.

An outline of pragmatic cooperation

Pragmatic policymaking should produce tangible outcomes based on overlapping interests, sufficient institutional capacity and opportunities for progress that avoid entanglement with broader geopolitical disputes. There are four main areas in which the UK and China can achieve such outcomes through climate cooperation that is mutually beneficial and builds on their complementary strengths.

1. Sustainable finance

Even amid the prolonged “ice age” in the bilateral relationship, as Starmer called it, green and sustainable finance has remained one of the few areas in which the UK and China have maintained continuous policy and business engagement since 2017, when they established the UK–China Green Finance Taskforce. New shared priorities are emerging in areas such as transition finance, transition planning, and nature and biodiversity finance, requiring wider and deeper technical exchanges. The UK can continue to use its position as a global financial hub to provide financial services and a market that support both climate objectives and domestic economic growth.

Transition finance, which is critical to hard-to-abate sectors, is an area of pragmatic cooperation in which the UK and China have adopted distinct yet potentially complementary approaches. China has adopted a policy-led approach, developing sector-based transition finance taxonomies supported by sub-national pilots that test implementation across diverse socio-economic contexts and decarbonisation challenges. By contrast, the UK has placed greater emphasis on regulatory frameworks, particularly the development of a credible transition plan, and on market-shaping.

As next steps, the UK and China could deepen cooperation through structured technical exchanges linking China’s transition taxonomies with the UK’s financing and transition planning guidance (such as Sector Transition Plans: The Finance Playbook). They could also promote greater harmonisation of reporting requirements and disclosure standards, and could pilot innovative financing models in select hard-to-abate industries.

2. Nature

Nature is an increasingly important area of bilateral cooperation, as signalled by the agreement to establish the UK–China Climate and Nature Partnership. As an emerging area, nature-related financial cooperation between the two countries has primarily centred on knowledge exchange and capacity building in assessing and integrating nature-related financial risks, in line with the disclosure framework and recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD). Policymakers should continue this work while adopting a more systemic approach to addressing the deep interconnections between climate and nature crises (the “climate–nature nexus”). A siloed approach would risk overlooking critical opportunities to strengthen economic, social and ecological resilience, and to gain mutual benefits that support climate objectives.

While the official announcement of the proposed partnership included few details, cooperation under it could work on several levels. First, the UK and China should strengthen scientific research on ecosystem tipping points and nature-based solutions for climate adaptation and resilience. The UK–China Biosphere Evolution, Transitions & Resilience programme is a good example of such an effort – and, accordingly, deserves greater policy and financial support.

Second, the UK and China should deepen their understanding of the macroeconomic and financial impact of nature-related risks and the climate–nature nexus, while integrating nature considerations into economic, financial and fiscal policymaking. The planned sovereign biodiversity-labelled bond issuance, the first of its kind globally, provides an opportunity for the UK and China to lead by example in bond structuring and performance metric design, as well as robust monitoring, reporting and evaluation frameworks.

Third, the two countries should join forces to strengthen multilateral partnerships to halt and reverse nature degradation, support the implementation of the Kunming-Montreal Global Biodiversity Framework and promote constructive dialogue and action at biodiversity COPs and other nature-related initiatives, such as the TNFD.

3. Carbon pricing and budgeting

In 2025, China expanded the ETS – which initially covered the power sector alone – to the steel, cement and aluminium industries. As a result, the scheme now covers 60% of national carbon emissions. Despite plans to gradually introduce paid allocation of carbon allowances, China currently allocates most carbon credits free of charge, contributing to relatively low carbon prices and limited market competition. Technical exchanges that draw on the UK’s experience in emissions-trading design and market mechanisms, and in the interaction between carbon markets and long-term carbon budgeting, could help China’s ETS increase carbon prices, expand sectoral coverage and strengthen measurement, reporting and verification standards. Given that China’s ETS covers more emissions than any other such initiative, this would be a significant contribution to global emissions reduction.

Technical exchanges would also be valuable in carbon budgeting. China plans to replace its current energy intensity approach with a phased dual-control system. In the next five years, carbon intensity will be the primary binding metric, complemented by emissions caps as a supporting constraint. After China’s carbon emissions peak, its policy will shift to place greater emphasis on binding absolute emissions caps. The country aims to incorporate carbon emissions indicators into national economic and social development planning.

This transition mirrors the UK’s experience in embedding carbon budgets into national policymaking, including through its Carbon Budget framework and Growth Delivery Plan. The two countries could further reduce global emissions by sustaining and formalising bilateral cooperation on these issues through technical workshops, joint research activities and regular policy dialogues.

4. Clean energy

In its recent progress report, the UK Climate Change Committee stressed the need to “effectively deliver rapid expansion of the low-carbon electricity system”, which encompasses renewable supply, energy storage, grid expansion and distribution upgrades. Pragmatic cooperation with China could support progress in these areas and contribute to the delivery of the UK’s Clean Power 2030 Action Plan.

The Prime Minister’s visit highlighted the potential for mutually beneficial energy partnerships between UK and Chinese companies. For example, the UK’s Octopus Energy and China’s PCG Power launched a collaboration to develop digital electricity trading platforms, which are designed to boost the UK economy through the export of software and engineering expertise. According to Octopus Energy, the venture will generate around £50 million in profit annually by 2030, ⁠with half of this flowing to the UK. Additionally, Chinese energy storage manufacturer Hithium announced a £200 million investment in the UK that will strengthen the country’s domestic energy storage capability and enhance the reliability of its grid. The project is expected to create around 300 new jobs. With robust design and oversight, such partnerships could provide the mutual benefits of broad economic gains and greater energy security by facilitating the exchange of best practice in grid and market operations, achieving cost efficiencies and improving technical standards.

Pragmatic implementation

In an era of geopolitical uncertainty, pragmatic cooperation should be the new norm. The UK is not alone in recognising this: France, Germany, Canada and the EU have all begun to seek deeper climate policy and economic ties with China. The scope for UK–China cooperation on climate and energy should become clearer and more actionable in the next month, when Beijing is expected to unveil its 15th Five-Year Plan (2026–2030). The plan will set the direction of China’s social and economic development as it works to ensure that carbon emissions peak by 2030.

The current momentum in UK–China relations should extend beyond headlines and diplomatic symbolism to structured, implementable and pragmatic cooperation that is grounded in clearly defined objectives. Regardless of whether a new “golden era” in UK-China relations has begun, this should not stand in the way of pragmatic climate cooperation that aligns closely with the policy goals of both nations.

The author would like to thank Daisy Jameson, Sini Matikainen, Simon Dikau, Elena Almeida and Rob Patalano for reviewing an earlier draft of this commentary.