EU Moves to Counter China’s Green Tech Dominance: New Restrictions Set to Impact Public Contracts and Subsidies 

EU Moves to Counter China’s Green Tech Dominance: New Restrictions Set to Impact Public Contracts and Subsidies 

Table of Content

In this article, we’ll look at the reasons behind the European Union’s decision to introduce restrictions on Chinese green technology imports and how these measures might impact the future of green tech adoption in the region.

Key Takeaways:

  • EU plans to restrict Chinese green tech imports to tackle China’s growing dominance in the sector
  • Net Zero Industry Act draft proposes downgrading procurement bids with over 65% EU market share, mainly affecting China
  • Concerns arise over potential violations of international law and the need to balance environmental goals with economic interests
  • EU aims to diversify supply and promote environmental sustainability in procurement bids
  • Brussels’ plans include boosting EU green tech production, carbon capture initiatives, and facilitating domestic mining of critical raw materials
  • The legislative process may take up to two years before new measures become law, with China requesting WTO involvement
  • EU-China trade dynamics are being reevaluated as the EU seeks to reduce dependency on Chinese green tech and Russian gas
  • Balancing the green transition’s costs and fostering cooperation among EU member states will be crucial in the coming years

New Measures to Tackle Chinese Dominance in Green Technologies

Brussels is set to announce limitations on the import of Chinese green technologies, making it more challenging for Chinese companies to win public contracts and for buyers to obtain subsidies. 

This move comes as part of the European Commission’s efforts to address China’s growing influence in supplying green products such as solar panels and heat pumps.

Net Zero Industry Act to Affect Public Procurement Bids

According to a draft of the Net Zero Industry Act seen by the Financial Times, public procurement bids involving products from a country with over 65% EU market share would be downgraded. 

This rule would also apply to government programs subsidizing consumer purchases, with China being a prime example.

European Commission President Ursula von der Leyen has called for the EU to “de-risk” its exposure to China, as Brussels seeks to reduce dependency on Chinese manufactured goods and aligns itself more closely with the United States’ stance on the Chinese government.

Concerns Over Potential Violations of International Law

However, the European Commission’s trade directorate has expressed concerns that the proposed changes to the public procurement rule book may breach international laws. 

Compliance with World Trade Organization (WTO) obligations and government procurement agreement obligations is essential to prevent these measures from being considered green protectionism.

Draft Act Aims for Diversified Supply and Increased Sustainability

The draft proposal emphasizes the importance of a diversified supply, stating that a single third country supplying over 65% of demand for specific net-zero technology within the union would be deemed insufficiently diversified. 

Tenders’ environmental sustainability would also be assessed, potentially counting against Chinese imports.

Boosting EU Green Tech Production and Carbon Capture

Brussels plans to increase EU production of green technologies to 40% by 2030 by intervening in the market. 

The European Commission also intends to support the development of carbon capture technology by requiring large oil and gas extractors to commit to storing up to 50 million tonnes of CO₂ annually by 2030, with individual targets assigned to each company.

Proposal to Facilitate Domestic Mining of Critical Raw Materials

A separate proposal is aimed at promoting domestic mining of lithium and other minerals essential for green technology. 

Brussels plans to introduce stricter environmental measures to limit imports, according to a draft version of the text that is yet to be finalized.

Lengthy Process Before New Measures Become Law

Once the European Commission publishes its proposals, the European Parliament and member states must agree before they become law, a process that can take up to two years. 

China has already requested that European countries implementing significant environmental trade measures submit a written report to the WTO to discuss their legal basis, impact on trade, consistency with international rules, and potential effects on developing countries.

Reevaluating EU-China Trade Dynamics

The EU’s decision to curb imports of Chinese green technology comes amid a broader reevaluation of the trade dynamics between the two economic powerhouses. 

The European Union is seeking new ways to monitor European companies’ investments in overseas production facilities, limiting China’s ability to acquire advanced technologies from the West.

China’s Growing Dominance in Green Tech

China’s increasing dominance in green technology has raised concerns among European policymakers. 

China is responsible for over 90% of some solar panel components and is expanding its influence in other supply chains, including wind turbine production and electric vehicles. 

This growing dependence on Chinese clean technology has led EU officials to recognize the need for reducing reliance on Russian gas and Chinese green tech.

Promoting EU Green Tech Industry

The proposed measures aim to promote the EU green tech industry, focusing on sectors where it remains competitive, such as wind turbines and heat pumps. 

The draft of the Net Zero Industry Act warns that the EU’s trade balance in these sectors is deteriorating due to rising energy and input costs for European manufacturers. 

By implementing these new policies, Brussels hopes to reverse this trend and support the growth of the European green tech industry.

Balancing Environmental Goals and Economic Interests

While the EU seeks to limit Chinese green tech imports, it must also balance its environmental goals with economic interests. 

Ensuring that the new measures do not inadvertently make the green transition more expensive for private companies and taxpayers is crucial. 

Striking this balance will require close cooperation among EU member states and adherence to international trade rules and obligations.

Looking Ahead

As the European Commission prepares to unveil its proposals, the future of Chinese green tech imports remains uncertain. 

The potential impact on the green technology market, trade relations between the EU and China, and the broader implications for the global fight against climate change will depend on the final version of the proposed legislation and the outcome of negotiations between EU member states and the European Parliament.

It is evident that as the world moves towards a greener future, competition for market share in the green technology sector will intensify. 

Whether the EU’s efforts to limit Chinese imports will ultimately benefit European green tech companies and foster domestic innovation remains to be seen.

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Written by

Alexander Sterling

Alexander Sterling

Alexander Sterling is a renowned financial writer with over 10 years in the finance sector. With a strong economics background, he simplifies complex financial topics for a wide audience. Alexander contributes to top financial platforms and is working on his first book to promote financial independence.

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Judith

Judith

Judith Harvey is a seasoned finance editor with over two decades of experience in the financial journalism industry. Her analytical skills and keen insight into market trends quickly made her a sought-after expert in financial reporting.