The EU 'new trio' industrial subsidy policy in the name of green transition

III. THE EU HAS ISSUED A NUMBER OF INDUSTRIAL POLICIES INVOLVING THE "NEW TRIO” AND IMPLEMENTED ALL-ROUND SUBSIDIES

In recent years, the EU has been increasing financial support to the green industries including the "new trio”, in particular focusing on the transition of green energy and the R&D of net-zero technology, and with enhancing the global industrial competitiveness as one of its important objectives. There are two main ways for the EU to provide subsidies: (1) EU uses the funds from the budget of itself to provide subsidies to the new energy industry through establishing various funds and programs; (2) the EU member states use their public funds to provide state aids to the new energy industry.

A. INCREASING SUPPORT FOR THE "NEW TRIO” INDUSTRIES THROUGH THE EUROPEAN GREEN DEAL, EUROPEAN NEW INDUSTRIAL STRATEGY AND OTHER MEASURES

1. Highlight the Development of the "New Trio” and Other New Energy Industries as A Key Priority of the EU's Energy Policy

In 2014, the European Commission issued A Policy Framework for Climate and Energy in the Period from 2020 to 2030, requiring the Member States to increase investments in R&D, innovation and large-scale deployment in the renewable energy industry.

In 2015, the European Commission issued the European Energy Union Strategy, establishing the "European Energy Union”, and listing the development of the "new trio” and other new energy industries as a core priority. It requires the EU to remain its global leadership in technology R&D.

In 2018, the European Parliament and the European Council amended the Renewable Energy Directive, requiring that by 2030, the proportion of renewable energy in the energy mix should reach at least 32%, and that financial support should be focused on reducing the cost of renewable energy projects.

2. Promulgate the European Green Deal and European New Industrial Strategy to Promote the "New Trio” Industrial Policies

In 2019, the European Commission issued the European Green Deal, proposing specific emission reduction goals and emphasizing the key role of green energy transition. It focuses on the development of the "new trio” and other new energy industries, and requires the Member States to promote the EU's energy standards and technologies at the global level in order to ensure the global leadership and competitiveness of the EU's new energy industries.

The European Commission published A New Industrial Strategy for Europe in March 2020 (updated in May 2021), which identifies three strategic and policy objectives, with a particular emphasis on the creation of globally competitive and world-leading industries in the EU. The European Commission requires member states to rationalize the use of public funds to provide investment and financing support for green transition and proposes amendments to EU state aid provisions in order to support development in priority sectors, including through better use of funds from the Important Project of Common European Interest (IPCEI) to promote investment in the relevant sectors.

3. Subsidize Photovoltaic Products and Lithium-ion Batteries as Strategic Net-Zero Technologies

In 2023, in order to further implement the European Green Deal, the European Commission issued A Green Deal Industrial Plan for the Net-Zero Age, enabling the EU and its main member states to achieve and maintain the global leadership in the new energy industries such as "new trio”. In 2024, the EU's Net-Zero Industrial Act and Critical Raw Materials Act, as an important part of A Green Deal Industrial Plan for the Net-Zero Age, entered into force.

Net-Zero Industrial Act aims to promote clean technology manufacturing. It provides a list of "strategic” net-zero technologies, including photovoltaic products and lithium-ion batteries. It also provides a policy toolkit that could be used to support the Act's implementation, including accelerating licensing and related administrative procedures, as well as harmonizing procedures of private investment, subsidies, and public procurement.

Critical Raw Materials Act aims to ensure EU's access to secure and sustainable supplies of critical raw materials. It updates the EU's list of critical raw materials by listing strategic raw materials, including lithium - battery grade, and permanent magnet for the production of electric vehicles. It also establishes a coordination mechanism for financial support to facilitate adequate supplies of critical raw materials in areas such as the "new trio”.

B. ESTABLISHMENT OF "BATTERY INDUSTRY ALLIANCE” AND ISSUANCE OF A STRATEGIC ACTION PLAN ON BATTERIES TO SUPPORT THE DEVELOPMENT OF LITHIUM-ION BATTERIES AND ELECTRIC VEHICLES

1. Provide Subsidies to Support Electro-mobility

In 2018, the European Commission published a communication - Sustainable Mobility for Europe: Safe, Connected, and Clean, suggesting that member states could increase taxes on some energy products to support "electro-mobility”. The EU also finances the development of trans-European transport networks through the Connecting Europe Facility (CEF), in order to create a clean, safe, digital, and connected European transport system.

2. Establish "European Battery Alliance” and Formulate the Battery Strategy

In 2017, "European Battery Alliance”, a platform for cooperation on the development of the battery industry, was established by the European Commission together with stakeholders, some member states, and the European Investment Bank. "European Battery Alliance” draws on the EU's strengths and supports value-chain participants to collaborate to create competitiveness and economies of scale.

In 2018, the European Commission published Strategic Action Plan on Batteries to support the establishment of the complete value chain of the battery industry, including raw materials acquisition and recycling, design and production of cell components, cells and packs, and manufacturing of electric vehicles, with the aim of enhancing the EU's global competitiveness in battery industry and reinforcing the EU's global industrial leadership.

In short, in order to accelerate the development of the battery and electric vehicles industries, the EU promoted the development of the European battery and electric vehicles industries and supported the manufacturing, deployment and R&D activities in the battery and electric vehicles industries by establishing the cooperation platform and the Recovery and Resilience Facility, the Cohesion Fund, the InvestEU Fund, the Innovation Fund, Horizon Europe, and other quite numerous funds.

C. IMPLEMENTATION OF SOLAR ENERGY STRATEGY AND INITIATION OF THE CONSTRUCTION OF "EUROPEAN SOLAR PV INDUSTRY ALLIANCEC”

1. Develop Solar Energy Strategy

In 2022, the European Commission issued the EU Solar Energy Strategy, considering solar energy as a cornerstone to promote the EU's transition to clean energy and net-zero emission and an important way to enhance the EU's leadership of industries, calling for simplifying the licensing procedures in state aid and other aspects, accelerating photovoltaic deployment through the "European Solar Rooftops Initiative”, and establishing "European Solar PV Industry Alliance”.

2. Promote Photovoltaic Manufacturing, Deployment, R&D through European Solar PV Industry Alliance

"European Solar PV Industry Alliance” was formed by all public and private entities having activities in the field of solar photovoltaic. The Alliance aims to facilitate financing, promote the commercial development of solar photovoltaic manufacturing and other areas, provide a cooperation mechanism for R&D and implementation, and support solar photovoltaic R&D&I.

To sum up, in order to accelerate the development of photovoltaic industry, the EU has subsidized the industry and supported R&D&I in PV technology by establishing cooperation platforms and various funds, such as the Recovery and Resilience Fund, Cohesion Fund, the InvestEU fund, the Innovation Fund, and Horizon Europe.

IV. CONCLUSION: THE EU IS EMPLOYING DOUBLE STANDARDS BY OFFERING LARGE-SCALE SUBSIDIES TO DOMESTIC INDUSTRIES WHILE IMPLEMENTING DISCRIMINATORY ANTI-SUBSIDY MEASURES AGAINST FOREIGN COUNTRIES

A. VARIOUS "NEW TRIO” INDUSTRIAL SUBSIDIES WITHIN EU

As early as 2006, the EU's first overall energy strategy stressed the importance of developing new energy such as the "new trio”. In recent years, the European Green Deal, European Industrial Strategy, and Green Deal Industrial Plan have made promoting industrial green transition one of the seven strategy implementations of the EU, focusing on the development of new energy, promoting the EU's industrial policies involving "new trio” to become key measures to enhance its global competitiveness and maintain the global leadership, and implementing subsidies in all aspects through various funds and other incentives.

For instance, the Recovery and Resilience Fund (RRF) is the centerpiece of the NextGenerationEU. It covers six policy pillars including green transition, and mainly finances relevant measures implemented by EU Member States applied from February 2020 to December 31, 2026. The total budget is EUR 723 billion, of which EUR 338 billion is provided to Member States in grants and EUR 385 billion in loans. Member States must formulate national recovery and resilience plans and allocate at least 37% of the funds to green measures. As of April 2024, about EUR 87.9 billion is used to support sustainable mobility projects such as zero-emission or low-emission vehicles, accounting for 25.7% of the green transition expenditure of the Recovery and Resilience Fund.

The Connecting Europe Facility (CEF) is a key funding instrument established by the European Union to achieve the goals and strategies of the European Green Deal. It supports the development of high performing, sustainable and efficiently interconnected trans-European networks in the fields of transport, energy and digital services. This fund mainly provides subsidies in the form of grants, procurement and financial instruments. In the energy sector, it is mainly used to finance the transition towards clean energy and complete the Energy Union, with a focus on supporting energy infrastructure construction, cross-border renewable energy projects, interoperability of networks and better integration of the internal energy market. For the 2021-2027 period, the energy budget for this fund is EUR 5.84 billion.

The Horizon Europe focuses on research and innovation, financing mainly three pillars: "Excellent Science”, "Global Challenges and European Industrial Competitiveness”, and "Innovative Europe”. Excellent Science aims to strengthen the EU's global competitiveness in science and technology, Global Challenges and European Industrial Competitiveness aims to provide financial support for research and innovation activities in areas such as climate, energy and mobility, and Innovative Europe aims to secure that innovation in the European market keeps a leading position. The main form of support for the Horizon Europe program is direct grants. According to the Subsidy Notification to the WTO in 2023, the EU provided approximately EUR 22.735 million for such subsidies in 2021-2022.

B. DISCRIMINATORY ANTI-SUBSIDY MEASURES AGAINST FOREIGN COUNTRIES

While vigorously developing and subsidizing its own "new trio” industries, the EU takes discriminatory restrictive measures against "new trio” industrial products originated from other countries. The true intention of the EU is thought-provoking.

In the EU's anti-subsidy investigation against Chinese BEV, China raised objections to the justification of purpose of the European Commission's ex-officio investigation, holding that such measure was out of political purposes and was protectionist. In recent years, the EU itself has provided billions of euros in subsidies to build its own BEV supply chain, and will continue to subsidize the local BEV industry in all aspects in the future.

After the European Commission disclosed the draft decision on its anti-subsidy investigation against Chinese BEV on August 20, the MOFCOM spokesperson once again pointed out that the EU's anti-subsidy investigation on Chinese BEV had a default conclusion, and every step of the investigation violated the EU's commitment to the principles of "objectivity, fairness, non-discrimination, and transparency”, which was also inconsistent with the WTO rules. Such practice is actually "unfair competition” under the pretext of "fair competition”. The disclosed draft decision did not take China's opinions into full consideration, yet insisted on wrong practice of imposing high duty rates, and using the sample process to treat different types of Chinese companies discriminately, distorting the results of the investigation. The draft decision was based on the so-called "facts” unilaterally identified by the EU, instead of facts recognized by both sides.

The German Association of the Automotive Industry (VDA) argued that in order to achieve the EU CO2-free mobility target by 2035, there must be sufficient supply of electric vehicles on the Union market. The rise of prices of BEVs from China could make it more difficult to achieve this target. The European Commission should consider the relevance that China has for the transition of the whole European industry and the automotive industry, in particular, towards carbon neutrality. Many European companies also claimed that countervailing duties would threaten the supply of BEVs affordable for low- and middle-income Union consumers on the Union market, ultimately jeopardizing the pursuit of the EU action to tackle the existential threat posed by climate change.

On August 9, 2024, China submitted a request for consultations with the European Union at the WTO Dispute Settlement Body (WT/DS626). China considers that the determination by the Commission to initiate the investigation at issue, the consultations for the investigation, the conduct of the investigation, the preliminary affirmative determination on the alleged subsidization, injury and threat of material injury and causation, and the imposition of provisional countervailing duty are inconsistent with Article VI of the GATT 1994, and Articles 1, 2, 10, 11, 12, 13, 14, 15, 16, 17, 19, 22, and 32 of the SCM Agreement, and the EU acted inconsistently with the WTO Agreements in both procedural and substantive aspects, which injured or deprived China's interest entitled under the above-mentioned agreements.

C. GENERAL CONCLUSION: THE EU HAS IMPLEMENTED PLENTY OF "NEW TRIO” INDUSTRIAL SUBSIDIES TO ACQUIRE GLOBAL LEADERSHIP

Industrial policy has always been a part of the European economic integration process, and energy is the starting point of its industrial coordination and policy. Although the EU restricts its Member States from implementing state aid by legislation, it still remains enough space for subsidies. Directed by documents such as the European Green Deal, the EU has established a systematic industrial policy and coordination strategy concerning the "new trio” industry, and improved the industrial competitiveness through various subsidies. The EU has emphasized in many documents repeatedly that it is extremely important to procure global leadership in related industries.

Although outwardly the EU supervises and restricts market-distorting state aid by means of legislation, it actually set up a variety of exceptions and continuously expanded the scope of such exceptions under the pretext of green development and transition, leaving sufficient room and flexibility for the EU and its Member States to subsidize the "new trio” industries.

For example, the Treaty Establishing the European Economic Community signed in 1957 already allowed Member States to provide state aid for the implementation of "Important Projects of Common European Interest” (IPCEI), which has become an important part of the state aid exceptions of the Treaty on the Functioning of the European Union. At present, the project is mainly committed to promoting the growth of European industry and economy, employment, green and digital transition, and enhancing industrial competitiveness, including the "new trio” industries.

According to data released by the European Commission, from 2018 to August 2024, under the IPCEI, the European Commission approved a total of EUR 36.2 billion in state aid (320 projects in total) for batteries, hydrogen, microelectronics and communication technologies, as well as next generation cloud infrastructure, of which 68 projects (about 21%) were in the battery industry, with a total subsidy amount of EUR 6.1 billion (about 17%). This fully demonstrates that in order to enhance its global competitiveness and acquire global leadership for emerging industries, the EU is sparing no effort to implement the "new trio” industry support policy.

Shi Xiaoli, Cui Yunfei, China University of Political Science and Law