Amid ongoing trade spats with China, representatives from both the EU and the US have raised concerns about their domestic industries being undercut by cheap imports amid the green transition.
As the EU enters the next phase of its Carbon Border Adjustment Mechanism (CBAM), European industrial groups have warned that cheap imports of hydrogen manufacturing equipment will put them at a disadvantage.
European complaints come as the US’ climate envoy also tells the FT that he was planning a trade policy review in light of some nations “dumping of high carbon production costs into open markets”.
EU concerns
A group of 20 manufacturers wrote an open letter to European Commission (EC) president Ursula von der Leyen warning of the “acute threat” posed by Chinese imports.
Firms including Siemens Energy and Thyssenkrupp Nucera highlighted hydrogen as an industry in which China’s subsidised manufacturing industry puts bloc members at a “significant disadvantage”.
Europe is second to China in producing equipment used to create hydrogen, with China producing an estimated 37% of the world’s supply.
European authorities have already opened subsidy investigations into other Chinese green manufacturing, such as wind turbines and solar panels, as well as into electric vehicles (EVs). Additionally, new tariffs of up to 38% were placed on EVs last month.
China dominates green manufacturing, producing as much as 80% of the world’s key solar components.
CBAM
The move towards energy-efficient production of hydrogen is pressing in other areas of the EU’s green agenda, with the fuel listed as one of seven other goods subject to its new CBAM.
A landmark piece of legislation which functions as a tax on high-carbon imports, CBAM entered into effect 1 October 2023 with the first reporting deadline the end of January, requiring EU firms to report emissions generated by their imports in earlier stages of their supply chains.
It aims to offer a level playing field for domestic producers, which are already subject to an EU tax, and incentivise greener manufacturing globally.
Although fees won’t be levied until CBAM’s ‘definitive phase’, commencing 2026, supplier firms – including from the UK – will be required provide emissions data to support the reporting this year.
The Institute of Export & International Trade's resident ESG expert, trade and customs specialist Sandra Cooper, said that in order to be effective the policy needs "clear guidelines, technological investment and international collaboration".
"One can only hope for global harmonisation of carbon pricing systems. Efforts also need to be aligned to achieve measurable environmental impacts without hindering economic growth."
US rethinks carbon pricing
Taking a stronger stance on the issue of carbon intensive imports, climate envoy John Podesta told the FT that more action was needed and the US would not “give up our industrial base to people who are dumping carbon and freeriding on a system that doesn’t account for, and in fact, kind of subsidises the dumping of high carbon production cost into open markets.”
Having launched a task force into high-carbon imports in April, Podesta said data collected would support a review of existing trade policy, in an effort to decide “what we’re going to do about this question on carbon in the tradable goods sector, particularly steel and aluminium, cement, glass, fertiliser, etc”.
Notably, these are several of the sectors already addressed by the EU’s CBAM, suggesting the US could be instituting a similar measure in the future.
The US has been the leading critic of China’s use of “non-market practices” to bolster its manufacturing sector, which saw the country’s exports increase in both Q1 and Q2.
For its part, the US has rolled out a US$369bn package of subsidies, tax breaks and other economic incentives to onshore green manufacturing through the Inflation Reduction Act. The funds are designed to boost key industries surrounding the production of electric batteries and EVs.
