In September, as she delivered her annual State of the EU speech to the European Parliament, European Commission President Ursula von der Leyen took aim at China’s aggressive trade practices in the area of cleantech. “Global markets are now flooded with cheaper Chinese electric cars,” she noted as an example, “and their price is kept artificially low by huge state subsidies.”

She announced the launch of an anti-subsidy investigation into electric vehicles (EVs) from China, saying: "Europe is open to competition but not to a race to the bottom. We must defend ourselves against unfair practices." Such an intervention has been intensely lobbied for by France, which wants to see the EU adopt a more interventionist approach to compete with the aggressive trade practices of China and the US.

The investigation into Chinese EV manufacturers was officially launched on 4 October. Under the Commission’s procedures, it will be concluded within 13 months, at which point the EU executive will have nine months to decide whether to impose anti-subsidy duties on imports of Chinese EVs and their components.

EU cleantech China trade: wind war

The competition in the EVs space is only the latest front in a long-brewing trade conflict with China, which has also involved components for wind and solar installations. "We have not forgotten how China’s unfair trade practices affected our solar industry,” von der Leyen told MEPs in her September speech. “Many young businesses were pushed out by heavily subsidised Chinese competitors. Pioneering companies had to file for bankruptcy.”

The concern is that if ambitious EU climate legislation is not accompanied by strong trade protections, it will end up benefitting cleantech in China rather than Europe. "We want a European Green Deal, not a Chinese one,” said Manfred Weber, the leader of von der Leyen’s centre-right European Peoples Party, the Parliament's largest political group, after her speech. “We don't want to see Chinese electric vehicles benefitting from our ambitious climate approach.”

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In recent weeks, the Commission has been making moves to extend these trade protections to the wind sector, going further than the 7.2–19.2% anti-dumping duties placed by the Commission on imports of Chinese steel wind turbine towers in 2021. In October, the Commission put forward a wind power package of non-binding measures aimed at helping Europe’s struggling wind turbine makers under pressure from global competition. For example, countries are getting guidance to designate areas with good potential for wind installations and low environmental impact where permitting procedures can be easier and faster. The Commission has also relaxed state aid rules for the wind sector. Last month, Siemens Energy, the EU’s largest wind turbine manufacturer, received a €7.5bn ($8.09bn) bail-out from Germany after it experienced significant losses from its wind turbine manufacturing unit.

Ditte Juul Jørgensen, who heads the Commission’s energy department, told a recent event in Brussels that the EU could also come out with cleantech trade actions against China in the wind sector. She emphasised the need to “build an international level playing field”.

“So far, the wind installations deployed in the EU have been provided mainly by European manufacturers accounting for about 85% of the wind energy market [in total] and about 94%, so almost the entirety, of the offshore sector,” she explained. “We actually would like it to stay that way, and that is part of the reason for the wind power action plan. … We have seen that wind manufacturing in Europe has faced difficulties.”

The Commission wants member states to redesign wind project auction procedures to safeguard against unfair international competition. “[Up to now] there has been a focus on price to get the most for taxpayers’ money,” she explained, “but the focus on price really risks driving either project promoters away, or favouring those manufacturers that do not have the highest possible quality or are not best placed at developing the type of technology that we need in Europe, or manufacturers or project developers that do not necessarily reflect our security interests.”

Current contracts for wind project developers are entirely awarded on price, with the cheapest offer winning the contract. However, going forward, auctions should have a set of “pre-qualification criteria”, making it “clear that you have to respect the security, sustainability and quality requirements”, of Europe, Jørgensen said. “An auction based exclusively on price will not favour European manufacturers or Europeans, it will favour manufacturers from other parts of the world at a risk for our security.”

Solar peace?

While the EU’s cleantech trade disputes with China over electric cars and wind turbines are relatively new, its disputes over solar panels go back many years. Those experiences will likely be used to inform the current EV conflict, and the possible use of trade instruments in the wind sector. In June 2013, the Commission slapped Beijing with a 47.6% anti-dumping duty on solar panels following an investigation. In response, China immediately imposed an anti-dumping duty on European wine. By the following month, Beijing and Brussels reached a compromise to settle the dispute and avoid a full-on trade war. The Commission agreed to instead set a minimum price for Chinese solar imports near spot market prices and allow China to meet up to half of Europe’s solar panel demand without tariffs. So the EU backed off from the punitive measures, but the minimum price was still about a third more than what China had been selling its solar panels for, offering some protection for European industry.

At the time, many saw this as a retreat by the Commission, and internally there was much grumbling that it had been undermined by national governments that opposed the tariffs, notably leading exporter Germany. While France, Spain and Italy (who traditionally favour more protectionist EU policy) strongly backed the solar duties, 15 EU governments voiced opposition to them. By contrast, there was far more support for the 2021 anti-dumping duties on Chinese wind turbines towers, notably from Germany, which has flipped from its 2013 position.

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By 2018, the European solar sector was saying that the minimum import price that had been left in place was hurting rather than helping the sector. The Commission decided to end those remaining measures, a move welcomed by the industry association SolarPower Europe, which represents the whole value chain, as “a watershed” that would “unleash a new solar age in Europe”. This was because it would mean cheaper components, freeing up more capital for investment in solar installations and hires. “The trade measures have made solar much more expensive than necessary in Europe," said James Watson, CEO of SolarPower Europe, at the time. “By removing them, solar will now be the cheapest form of electricity in many EU countries.”

Solar has indeed become the cheapest form of electricity to generate in Europe since then – but 90% of PV (photovoltaic) wafers and other components in the EU now come from China. The issue of whether protection or support is the best remedy to Chinese competition is a fierce debate within the sector. The European solar panel market has been inundated by low-priced Chinese panels, causing prices to plummet by more than 25% in recent months. The European Solar Manufacturing Council, which specifically represents PV manufacturers, has been pushing for the Commission to extend non-price criteria for domestically produced solar hardware into public procurements and auctions, as part of the EU Net Zero Industry Act. These could include quality and other factors. However, SolarPower Europe opposes any new EU tariffs on imported Chinese components, coordinating a letter to this effect sent last month from more than 400 companies in the sector, including 18 manufacturers and 28 national associations and research institutes.

“Launching an anti-dumping and/or anti-subsidy investigation and imposing duties on imports of solar PV products will be detrimental to the entire European solar value chain,” the letter said. “How do we know that this will be the case? Only 5 years ago, anti-dumping and countervailing duties in place on solar panels imported from China, Taiwan, and Malaysia were abolished. These duties had negative consequences, which taught us a painful lesson. Solar jobs, project investment, and solar deployment severely declined during the period of application of these trade defence measures and led to an increase in costs to our customers and consumers.” They predict that if the EU adopts these trade measures, the predicted 890,000 jobs in the sector will drop to 655,000 in 2024, and down to less than 600,000 in 2025. 

EU internal market commissioner Thierry Breton convened a meeting of solar industry chiefs and national ministers on 1 December to discuss the issue. According to SolarPower Europe, he has seemed to be leaning towards an investigation into import and export restrictions. They want to instead see support measures, such as the Made in Europe solar industry alliance to promote investments in large-scale PV factories, which Breton launched last year. That strategy aims for an annual output of 30GW for each key solar component domestically in Europe by 2025. That would be more than six-times the current capacity.

Climate campaigners are getting increasingly worried that this Commission push toward renewable protectionism will actually hurt the energy transition. They point out that this year a record 40GW of solar PV is expected to be installed in the EU, and this wouldn’t have been possible without massive imports of PV components from China. A sudden end to those imports as part of a trade war could send the sector reeling.

“We are aghast at the rumours that a trade defence investigation could be launched into solar,” said Walburga Hemetsberger, CEO of SolarPower Europe, in a press release at the end of November. “This is an affront to the clear messages that the solar sector has repeatedly set out. We have better, faster and more effective solutions for the crisis that European manufacturers face.”