How Europe could fight back against China’s next rare-earth stranglehold

Europe is coming under increasing pressure between China and the US: whether it involves rare-earth elements or liquefied natural gas, digital technologies, or the question of whether European companies can continue exporting products like electric cars abroad.

A new study commissioned by the EU Parliament's Committee on International Trade concludes that Europe must get its "trade bazooka" ready to fire – not necessarily to pull the trigger, but to build up sufficient deterrence and dissuade countries from exerting economic pressure. The Kelvin Report was able to view the study exclusively ahead of its presentation to the committee later today. How exactly Europe should proceed can be read in today's cover story.

And while on the topic of liquefied natural gas (LNG): The fossil gas industry's demand for a three-year suspension of EU climate protection rules on oil and gas imports has triggered mixed reactions. The European Commission had already accommodated the industry's proposals for differentiating between simple and complex supply chains for the required certification. "The industry is now essentially saying that these solutions – which it proposed itself – are not yet ready," methane expert Maria Olczak from the Oxford Institute for Energy Studies told The Kelvin Report. The researcher also doubts the gas industry's claim that the EU methane rules will lead to a diversion of LNG supplies away from Europe.

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Snapshot

  • EU Methane Regulation: Expert expects no threat to Europe's LNG market
  • Overshoot: Even carbon dioxide removal has its limits, researchers warn
  • Carbon sinks: Environmentalists call for ‘strong’ plans to restore nature
  • Coming up: What's next in energy, industry and climate

but first ...

How Europe could fight back against China’s next rare-earth stranglehold

By Sinan Reçber

China has a firm grip on the supply chain for rare-earth elements—holding sway over an indispensable raw material for manufacturing clean technologies such as electric vehicles, wind turbines, and battery systems, as well as nuclear power plants, fuel cells, and electrolysers. After Beijing restricted exports of these critical raw materials to the EU in 2025 amidst a trade dispute with the US, car factories in Europe were forced to temporarily halt production, sending shockwaves through the domestic economy.

A new study commissioned by the European Parliament's Committee on International Trade (INTA) has examined how the European Union should defend itself against this kind of economic pressure. The Kelvin Report was able to view the analysis exclusively ahead of its presentation at INTA today. According to the study's authors, the EU must, above all, get its "trade bazooka" ready to fire—built in 2023 and officially known as the Anti-Coercion Instrument (ACI).

As a reminder: using this trade bazooka, the EU could first launch an investigation into economic blackmail by China or another country, and theoretically strike back, leveraging its economic power as the world's largest single market. Under the ACI, the EU could, for example, impose new tariffs or raise existing ones, ban imports from the country in question, exclude companies from public tenders, and block foreign investment in Europe as well as access to European financial systems.

So far, the EU has never used its trade bazooka—and changing that is not necessarily the advice of the study's authors from the Polish Center for Social and Economic Research (CASE) and the Italian Institute for International Political Studies (ISPI).

"Our central recommendation is not to make the ACI easier to trigger, but to make it more usable, more predictable and better connected to the rest of the EU toolbox," the study states. "A credible ACI is one that third countries believe could be activated when the evidence, the political stakes and the Union interest justify it."

How effective a deterrent the trade bazooka proves to be—and thus how successfully it counters the use of economic coercion against the EU—will depend less on how often the EU uses the ACI. Instead, it hinges “on the EU’s ability to show that coercive pressure will be detected early, assessed seriously and, when necessary, met by a coordinated Union response.”

According to the analysis, a crucial vulnerability in the EU's economic deterrence is the unresolved question of when it is in the "Union interest" to use the ACI. If member states expect the EU to deploy the ACI only against smaller or hostile nations, its deterrent effect will be weakened. Furthermore, if third countries such as China or the US expect differing political preferences among member states to divide the EU, the instrument will likewise lose punch.

"This is why Union-interest criteria should be clarified before the first major ACI case, to minimise the risk that they are ‘improvised’, diluted, or become matters of political opportunism," the experts urge.

For the German Green MEP Anna Cavazzini, the study highlights what many European companies are experiencing: economic coercion, such as export restrictions or the threat of tariffs, has increased significantly since 2024. "The EU must defend itself against this with its trade defence instruments, but unfortunately, the German federal government repeatedly blocks this," Cavazzini criticised when asked by The Kelvin Report. "I call on Chancellor Friedrich Merz to put his foot down with his Economics Minister so that she ends her blockage in Brussels and German companies are finally better protected against economic coercion from China and other countries."

Among other measures, the study's authors recommend that the EU Parliament's trade committee holds a targeted hearing on "ACI implementation readiness" within the next six to twelve months—involving the Directorates-General responsible for energy, industry, and trade. In the medium term, there should also be a "playbook" in the event that third countries like China or the US exert economic pressure on an individual EU state—including the potential establishment of a fund to support affected companies and options for escalation. Two interviewees questioned by the authors stressed that individual regions or sectors must not be left to suffer under such pressure and should be compensated, thereby helping to offset "divide-and-rule" strategies adopted by coercive states.

Expert expects no threat to Europe's LNG market

The European fossil gas industry's demand for a three-year suspension of European climate protection rules on natural gas imports has triggered mixed reactions.

Methane expert Maria Olczak from the Oxford Institute for Energy Studies told The Kelvin Report that the European Commission has already accommodated the industry's proposals for differentiating between simple and complex supply chains for the required certification. Olczak specializes in the quantification, measurement, reporting, and verification of greenhouse gas emissions and is therefore familiar with the reporting requirements for methane emissions under the EU Methane Regulation.

"The industry is now essentially saying that these solutions – which it proposed itself – are not yet ready," the methane expert stated. The researcher also doubts the gas industry's claim that the EU methane rules will lead to a diversion of LNG supplies away from Europe.

"We need to remember that LNG trading is a highly competitive business and that Europe remains a major and one of the most attractive LNG markets," said the expert from the Oxford Institute for Energy Studies. "Ultimately, it comes down to money, and I don’t think that the potential risks identified in the industry letter are substantial enough to justify companies voluntarily giving up significant profits."

Kim Talus, Professor of European Energy Law at the University of Eastern Finland (UEF) Law School, shares the observation that most agreements for importing US LNG into the EU operate on a "Free on Board" (FOB) basis, meaning the buyer can also divert the LNG shipment away from the EU to another location.

"If the rules under the EU Methane Regulation risks having a negative effect on the importer, they can simply move the cargo to another location outside the EU," Talus explained when asked by The Kelvin Report. In his assessment, this could also lead to two distinct LNG markets: the premium market in the EU and other markets where corresponding rules do not exist. "This also highlights the danger of being too reliant on US LNG as it exposes the EU to vulnerabilities and the need to comply with pressure from the US," Talus warned.

The European climate NGO network Climate Action Network (CAN) Europe takes a different view. "The risk of LNG cargoes being diverted from Europe to Asia is driven by inter-basin price arbitrage and transport economics, not by EU Methane Regulation compliance anxiety," CAN Europe stated upon request. "And the evidence supports Europe’s position: gas and oil volumes already compliant with the highest level of methane reporting are projected to be triple the EU’s demand by 2027, meaning Europe can exclude the dirtiest suppliers without tightening markets."

Under the EU Methane Regulation, European importers will in future be required to report on methane emissions from the production and transport of imported oil and gas. Different deadlines apply to import contracts signed before and after August 2024, with the first reports due in August 2028.

From August 2030, imports of oil, natural gas and coal must not exceed certain methane emission limits. This is intended to help reduce global methane emissions and thus curb a greenhouse gas that is 80 times more potent than CO2. Climate campaigners accuse the natural gas industry of making demands for a three-year delay not out of genuine concerns over implementing climate protection rules, but to run "another attempt to reopen the methane rules."

In their statement on Monday (31 August), an industry alliance of various natural gas and energy associations, such as Eurogas and the International Association of Oil & Gas Producers, assured: "This is not a request to weaken the Regulation or to delay its objectives. It is a request to ensure that when obligations are enforced, the systems to fulfil them actually exist."

According to the gas industry, among other things, the delay would give the Commission and Member States the time to complete the accreditation, verification and certification frameworks at the scale required, both within the EU and in exporting countries. It was only in July that the European Commission accommodated the concerns of EU countries such as Germany and the Czech Republic, recommending that potential fines for violations of EU climate standards be suspended until the end of 2029.

The Commission justified the step with the global security of supply situation, but also with the fact that many EU countries have still not established a system of fines. At the same time, a Commission official conceded upon request in July that despite the Strait of Hormuz blockade, Europe could still purchase enough oil and natural gas on the world market that complies with the highest industrial reporting standards for methane emissions (Level 5 of the Oil & Gas Methane Partnership), thereby satisfying the requirements of the EU Methane Regulation. snr

Even carbon dioxide removal has its limits, researchers warn

Carbon dioxide removal can only help humanity limit the climate crisis to 1.5 degrees in the 21st century if global warming remains below 2 degrees Celsius, according to a new report by the United Nations Environment Programme (UNEP). "Beyond around 1.8°C, a decline to 1.5°C during the 21st century becomes increasingly challenging," states the analysis published on Wednesday, referring to a so-called overshoot scenario.

In their assessment, the researchers refer to both forms of CO₂ removal: natural carbon sinks in the form of afforestation and the restoration of peatlands and other ecosystems, as well as novel CO₂ removal methods such as bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and storage.

The experts point out that, in a hotter future, nature will increasingly lose its ability to remove CO₂ from the atmosphere and store it. "It would take over 100 years of afforestation and forest management at the current scale, and zero residual CO₂ emissions, to reduce warming by 0.1°C," the authors also note. Even novel CDR technologies are reaching their limits: simply limiting net-zero CO₂ emissions to their current level could exhaust the expected CO₂ storage capacities of sedimentary basins by 2200.

Overall, even a large-scale expansion of CDR would not deliver a temperature reduction of more than a few tenths of a degree this century. "This emphasises the importance of focusing on reducing greenhouse gas emissions now," states the UNEP report.

Oliver Geden, an expert on climate policy at the German Institute for Science and Politics (SWP), warned in a statement for the German Science Media Centre (SMC) on Wednesday, against misinterpreting the ‘overshoot’ concept in climate research. The concept does not mean that the international community can carry on as before, and that future generations will be able to reverse the temperature trend again – "that would be grossly negligent", said Geden. According to the researcher, even under the overshoot concept, humanity must achieve net-zero emissions in order to halt the rise in temperature. "And at the current global emissions level of 42 gigatonnes, we are incurring an additional 0.1 degrees of warming every five years." snr

Environmentalists call for ‘strong’ plans to restore carbon sinks

An alliance comprising the WWF, ClientEarth and other European environmental organisations is calling on EU member states to ensure their national plans for the targeted restoration of natural carbon sinks, such as peatlands and forests, are built on a "strong foundation". EU member states were required to submit their draft National Restoration Plans (NRPs) by yesterday, 1 September.

"Plans must be inclusive, science-based and politically empowered – setting out where restoration will take place, what measures will be taken, who is responsible, and how it will be financed," states the environmental alliance’s press release. According to the coalition, the European Commission also has a crucial role to play in ensuring that the plans are credible and coherent, and that they contribute to the objectives of the underlying Nature Restoration Law.

In line with the overarching objective, restoration measures in the EU are to cover at least 20 per cent of all land and water areas. Some European farmers’ organisations are outspoken opponents of the Nature Restoration Law: they fear that it will result in the loss of arable land and that financial compensation schemes are unclear or insufficiently thought through. snr

Coming up: What's next in energy, industry and climate

  • 02/09/2026, INTA committee, 9.00 – 12.30 and 17.30 – 18.30
    • State of play of EU trade policy: Exchange of views with Ditte Juul Jørgensen, Director-general of DG Trade, Commission. Stream it here.
    • Exchange of views with Yasushi Masaki, OECD Deputy Secretary-General, on the 2026 MAGIC Database on Industrial Subsidies, with a focus on China. Stream it here.
    • Presentation of a study on "Strengthening the EU's resilience against economic pressure and documenting coercive practices"
  • 02/09/2026, 14.30 – 17.30: INTA, ITRE and IMCO committees
  • 09/09/2026, Industry commissioner Stéphane Séjourné plans to propose a Public Procurement Act and a European Innovation Act

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