In a rational world, Europe’s climate-conscious representatives would oppose surcharges that make clean tech, like electric vehicles (EVs) regardless of their origin, more costly. But that’s not the case: environmentalists warn that relying on Chinese imports will undermine a key promise of the European Green Deal, namely economic momentum and high-wage jobs within the bloc. Paul Hockenos reports.

In fact, it is in the name of the Green Deal, the EU’s cutting-edge climate package, that Europe’s environmentalists are defending the EU’s recently imposed tariffs on imported EVs. Unnerved by the astounding rise of state-subsidised Chinese EVs, on 4 July 2024 the European Commission, the EU’s executive, slapped duties between 17 and 38 percent on Chinese battery electrics (as well as Chinese-built Teslas, BMWs, and Dacias.) This comes on top of its standard 10 percent tariff for car imports that Chinese vehicles already pay.

’In this particular case, we had no option but to act in the face of soaring imports of heavily subsidized BEVs [battery electric vehicles] produced in China and their rising share of this market in the EU,’ said Valdis Dombrovskis, the Commission’s vice-president.

In Europe today, in the aftermath of EU elections that saw the far-right surge and Green parties suffer, the bloc’s ahead-of-the-curve climate policies are stalled – for the meantime. Environmentalists are now acutely aware that evidence of global warming alone is not enough to justify green policies in the eyes of the larger public. Thus, the clean energy transition, they underscore, is also an investment in energy security, pollution-free air, and economic modernisation. The latter can be summed up as: green jobs and green growth.

The German government argues that the tariffs can reinvigorate Germany’s clean-tech industry. Robert Habeck, Germany’s economy and climate minister, said these companies ‘need support now. This is about industry locations, many jobs, and economic power.’

The EU’s ambition is to almost triple the number (currently 4.5 million) of zero-emission cars on European roads by 2030 – and the chief obstacle to EV expansion for years has been their prohibitive cost.

Observers fear that this sleek and thrifty Chinese clean tech could overtake a European market that is already on the back foot in competition with its number one Asian rival. Last year, almost a fifth of electrics sold in Europe were China-made and this year sales could climb to a quarter. The Chinese automaker BYD flogs its chic little Seagull for about USD 12,000, while Europe’s lowest-cost EV is the Dacia Spring with a price tag of USD 18,500. Last year, BYD overtook Tesla as the world champion in EV sales, including battery electric and plug-in hybrid vehicles.

’The premise of the Green Deal,’ Julia Poliscanova of Transportation & Environment, a Brussels NGO that advocates for clean transport and energy, told Foreign Policy, ’is that the European economy will lead the transition to carbon neutrality. If it’s completely imported, it will lose support and we’ll see a further swing to the far right, which can mean dismantling the progress we’ve already managed. We’re not against Chinese competition, on the contrary it’s necessary, but all of the green jobs can’t land in China.’

’We have to invest in and keep [green business] in Europe — ‘whatever it takes,’’ Sascha Müller-Kraenner of Deutsche Umwelthilfe (Environmental Action Germany), a Berlin NGO, told Foreign Policy Magazine. ’We will need a combination of both tariffs on imported EVs and solar panels, and domestic and EU support of European EV makers and solar panel companies.’

’The way the US shored up its solar industry should be Europe’s blueprint,’ Müller-Kraenner told Foreign Policy magazine. The US imposed a series of tariffs on Chinese solar panels, EVs, and lithium-ion batteries, including in May a 100 percent tariff on Chinese EVs. Moreover, the Biden administration has invested heavily in solar research & development, as well as implemented demand-side incentives for local solar manufacturing, dedicated tax incentives, and public financing initiatives.

In contrast to the blatantly protectionist US levy – in violation of World Trade Organization rules – Europeans such as Habeck feel that the European tariffs are fair.

The measure followed a nine-month EU investigation that found that Chinese EV production benefits from ‘unfair subsidization, which is causing a threat of economic injury to EU BEV producers.’ The probe revealed such perks as preferential lending, tax reductions, direct grants, and cheap land, as well as a cut-rate supply of lithium and batteries. The subsidies also favoured Western-owned EV plants like Tesla and BMW in the same measure as Chinese firms, such as BYD, Geely, and SAIC. Tariff rates would vary depending on the EU study’s estimate of state support per individual automaker. This would, for example, hike the price of a BYD Seagull to USD 14,088.

The measures have China flailing wildly to amend it, despite the fact that their electrics would still be cheaper than European models; and other products, like electric city buses – another Chinese ringer – will suffer no levy at all.

Nevertheless, China is thundering retaliation in what sounds like a trade war. First off, the Chinese say, Europe subsidises its own carmakers aplenty, pointing to generous subsidies, R&D support, and tax incentives. (Although this is true, experts agree that the EU probe shows Chinese automakers benefitting much more than their European counterparts.)

China is offering carrots in terms of lowering existing tariffs on Europe’s large-engine cars in return for dropping the new charges, as well as waving the stick: jacked up tariffs on those very same imported gasoline-powered cars.

The worst possible outcome is that it fuels a mud fight that is injurious to climate protection, the clean tech industries, and EV buyers – and damages geopolitical relations, too.

The fiasco begs the possibility of a win-win-win compromise.

Subsidies can be beneficial for advancing an effective decarbonisation strategy, argues Shang-Jin Wei of Columbia Business School of Columbia University. The world, however, ‘would have been much better off,’ he opined, ’if major powers had found a way to negotiate a common pro-climate subsidy scheme for EVs, and a common tax on carbon emissions.’ Instead, he worries, ’we may get a self-destructive race to the bottom’ that has only losers.

The views and opinions in this article do not necessarily reflect those of the Heinrich-Böll-Stiftung European Union.