Green cold war threatens survival against climate change

China and EU are inching towards a trade war after two sides locked their horns in a battle over tariffs on Chinese electrical vehicles (EVs). Having failed to find a diplomatic solution, EC, which oversees bloc's trade policy, on October 29, announced imposing duties on imports of unfairly subsidised battery electric vehicles from China for five years.

EC Executive Vice-President Valdis Dombrovskis championed EU "open, fair and rules-based trade", insisting that "by adopting these proportionate and targeted measures after a rigorous investigation, we're standing up for fair market practices and for the European industrial base."

But by barricading China's green technology entrance into EU through high tariffs, Brussels is threatening to obstruct its own economy, weaken its own fight against climate change and harm its own people.

That's because while these tariffs would shut out foreign competition in EU, they will saddle consumers with additional costs and undermine bloc's goal of becoming carbon neutral by 2050. Furthermore, they will provoke retaliation from Beijing that could deal a blow to EU exporters to China, potentially complicating bloc's economic challenges.

China has already opened anti-subsidy investigations into imports of EU dairy and other products. In response, Brussels challenged the probe at WTO. This was for first time that EU had launched a consultation request at the initiation stage, indicating how quickly a trade war between Beijing and Brussels is simmering.

German Association of Automotive Industry's President Hildegard Müller has already given a warning to bloc, dubbing these tariffs "a step backwards for free global trade". "The industry is not naive in dealing with China but challenges must be resolved in dialogue," she said, adding that "countervailing tariffs increase the risk of a far-reaching trade conflict."

Uneven duty rates such as 17%, 18.8%, 35.3% and 7.8% EVs from BYD, Geely, SAIC and Tesla respectively on top of EU standard 10% import duty are considered "measured". Such analysis ignores impacts of these measures on battle against climate change and that they violate very basic principles of free trade, speaking volumes of EU's targeted treatment.

Duties on Chinese EVs have divided European capitals. For instance, German Chancellor Olaf Scholz wanted to continue negotiations with China as five EU member states including bloc's largest economy reportedly voted against the measure with 12 abstentions, unveiling inside rifts.

The 20.7% tariffs on German auto giants BMW and Volkswagen, manufacturing EVs in China, would infuriate Berlin for it considers Beijing "most important" and "a key business partner for Germany and all of Europe". It's pertinent to note that despite geopolitical tensions, economic headwinds, pressure from US to pare back investments in China and calls of de-risking from their leaders, German carmakers and other companies have been reluctant to de-risk from China and are investing heavily there.

EC cited unfair state subsidies, which helped Chinese EV manufacturers to undercut rivals on price, as a reason for imposing heavy taxes on Chinese EVs. True, they have played an important role in China's EV development, but other factors such as fierce domestic competition and technological innovations over the years have also helped accelerate Chinese EV evolution. What's more, battery production in China is more integrated than the US and Europe, courtesy of its leading role in upstream stages of supply chain.

Tesla's Elon Musk observation earlier this year "Chinese car companies are most competitive car companies in world" highlights why EV manufacturers in China today are much more competitive than their competitors elsewhere. China has also set an ambitious target of having 45% new energy vehicles of all new auto sales by 2027. This also helped promote competition between domestic and foreign EV manufacturers in China and contributed to global environmental goals.

Seeing Beijing's climate contributions through geopolitical lens just cannot snatch away credit from China of indigenously developing a robust EV industry and giving the world a hope to foster clean energy transition through wide EV adoption.

If geopolitics is to be accounted for, EC ex-officio anti-subsidy investigation - initiated by Commission itself rather than in response to industry complaints - too is a geopolitical move to buy time to improve Europe's future competitiveness and assert its "green industrial leadership" even this agenda slows the pace of EU green transition.

Data has shown that duties are unlikely to make a significant impact on market share gains of Chinese EV makers in Europe. But what EU tariffs could do is that they would stoke divisions within bloc and handcuff its climate ambitions. The US and Canada's sweeping tariffs on China's electric cars too indeed would delay global sustainable transition.

Climate change is a global challenge. It must not fall victim to anyone's geopolitical ambitions. This cold war for green industrial leadership should be stopped immediately and focus should be given to dialogue and on exchanging experiences in developing green technologies if world is to be secured from unfathomable consequences of global warming, environmental degradation and greenhouse gas emissions.