BRUSSELS — On paper, the EU sees China as a partner in the fight against climate change.

But the trade reality tells a different story.

As Beijing responds to weak domestic demand with heavy state subsidies, it’s a perfect recipe for overcapacity — from electric vehicles to solar panels — just as the European Union puts the green transition at the top of its policy agenda.

On Tuesday, EU competition chief Margrethe Vestager will launch a new anti-subsidy investigation into China’s fast-growing and increasingly dominant wind turbine sector, as exclusively reported by POLITICO’s China Watcher.

Europe was once a leader in the renewable energy source, but China’s rapid development since 2018 has inflicted billions in losses on its leading wind power players, including Denmark’s Vestas and German-owned Siemens Gamesa, forcing them into drastic cost cuts.

The EU is keen to avoid a mistake it made over the past decade, when China’s solar panel-makers all but killed their European competitors. Today’s playbook on wind turbines is indeed “all too familiar” to European policymakers, said one EU diplomat, who was granted anonymity to discuss the imminent policy announcement.

Years of inaction on EU domestic industrial policy — coupled with an open-door policy for green tech — has led to an influx of Chinese solar panels into the EU market, despite concerns over materials sourced from the western province of Xinjiang, where the United Nations has uncovered human rights abuses against the Uyghur community.

Then comes the next big thing: electric vehicles. Unfazed by the European Commission’s ongoing investigation into state subsidies behind these made-in-China EVs, Chinese Trade Minister Wang Wentao reassured Chinese EV executives on a visit to Paris on Monday that their market gains were merited.

“The rapid development of Chinese EV companies depends not on competitive advantage thanks to subsidies, but on sustained technological innovation, comprehensive industrial and supply chains, and full market competition,” Wang said at a meeting with the EV bosses.

Economic security

A bigger worry for the EU is Beijing’s bid to shore up its economic partnership with Russia, as Moscow’s war of aggression against Ukraine deepens its isolation from the West.

Chinese Foreign Minister Wang Yi, speaking on Tuesday alongside his visiting Russian counterpart Sergey Lavrov, said both countries “will more actively seek points of convergence for the interests of our two countries” and “join hands in securing stability for the global industrial and supply chains.”

That doesn’t chime well with the EU's geopolitical long game.

In a speech in Princeton, previewed by Brussels Playbook, Vestager is expected to float the idea of making broader use of so-called trustworthiness assessments.

Those criteria, the EU competition chief is expected to outline, should include cybersecurity, data security, labor rights and environmental footprint.

For now, China has taken more than half of the global market for wind turbines.

By one estimate, in the space of four years, China’s market share in terms of worldwide installations rose from 37 percent to more than 55 percent in 2022.

The direction of travel is opposite for European companies, whose share fell from 55 percent to 42 percent over the same period.

There is “a very real risk that the expansion of wind energy will be made in China, not in Europe,” Brussels-based trade body WindEurope said in a statement to POLITICO.

That’s thanks to Chinese state subsidies, experts say.

“The Chinese wind complex is a beneficiary of direct and indirect subsidies across the entirety of the value chain,” said Joseph Webster, senior fellow at the Atlantic Council’s Global Energy Center, a think tank.

Beijing, provincial and local governments, “lavish subsidies to Chinese industrial players, including directly in the wind industry but also in complementary sectors, such as steel and shipbuilding” essential to the installation of wind turbines, Webster added.