“We sleepwalked for years”: EU lawmakers react with shock and fury to figures on China's industrial subsidies
Europe has long accused China of unfairly using subsidies to push European industrial competitors out of its own markets and abroad – whether in electric cars, wind turbines and chemicals, or cement, solar panels, or semiconductors. On Wednesday, OECD Deputy Secretary-General Yasushi Masaki presented EU parliamentarians in the International Trade Committee with company-level data on this issue. The parliamentarians could hardly conceal their astonishment. Read more in today's cover story.
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Snapshot
- Industry: Europe lacks measures for green steel boom in auto industry, researchers say
- ETS 1: Bank forecasts doubling of cement and steel prices due to CO2 pricing
- Road transport: Alliance calls on Commission to launch a dialogue on the decarbonisation of trucks
- Capacity market: Mixed reactions to the green light for €35 billion German subsidy scheme for gas power plants
- Coming up: What's next in energy, industry and climate
but first …
“We sleepwalked for years”: EU lawmakers react with shock and fury to figures on China's industrial subsidies
By Sinan Reçber
For years, European governments and companies have complained about state-subsidised, low-cost competition from Chinese industry — whether in electric vehicles, aluminium, or solar panels; steel, cement, or chemicals; or wind turbines and fertilisers. China, for its part, consistently denies subsidising its industry on a massive scale to drive competitors out of global markets.
However, on Wednesday, a representative from the Organisation for Economic Co-operation and Development (OECD) presented an overview of the situation to MEPs on the International Trade Committee. The OECD data presented to the committee tracks the share of revenue derived from subsidies for Chinese and European companies across 15 industrial sectors over several years, including the eight sectors mentioned above.
Yasushi Masaki, OECD Deputy Secretary-General, described the analysis's findings as follows: “Overall, Chinese firms received subsidies that were on average about nine times higher than those received by EU firms in 2024.” The analysis distinguishes between government grants, tax breaks, and low-interest loans awarded to industrial companies.
A direct look at the dataset reveals that the share of revenue from subsidies in various heavy industry and clean-tech sectors was many times higher for Chinese companies in 2024: for instance, in wind turbines (5.3 percent versus 0.7 percent in OECD countries), cars (2.7 percent versus 0.3 percent in Europe), chemicals (1.9 percent versus 0.5 percent in Europe), steel (4.2 percent versus 0.7 percent in Europe), cement (3.5 percent versus 0.3 percent in OECD countries), and semiconductors (8 percent versus 3.8 percent in Europe).
According to Masaki, Chinese companies have achieved significant gains in global market share across many industrial sectors over the past two decades. “Nearly 60% of the increase in global market share achieved by Chinese firms between 2005 and 2023 can be statistically associated with the subsidies they received.”
In a wide range of industries — such as automobiles, solar panels, steel, fertilizers, and chemicals — China has shifted from being a net importer to a major net exporter, Masaki noted. “Taken together, these developments increasingly resemble a second China shock, this time affecting a broad range of advanced manufacturing industries that are strategically important for Europe,” continued Japan’s former ambassador to the EU.
Members of the Trade Committee could barely conceal their astonishment at the stark figures regarding Chinese industrial subsidies. “For a lot of years, we sleepwalked into this situation because it wasn’t clear that this is happening,” said German Green MEP Anna Cavazzini on Wednesday, following the presentation of the statistics to the committee. “But now I think it's even more black on white.”
For Czech Green MEP Markéta Gregorová, the conclusion on Wednesday was clear: “Our solar industry was not out-innovated. It was out-subsidised into the ground.” According to Gregorová, China “bought, not earned” its market share in strategic industries.
Social Democrat MEP Kathleen Van Brempt (Belgium) described the OECD figures as “quite shocking” but questioned whether they might still represent an underestimation of Chinese industrial subsidies.
“We say that this is a very conservative evaluation,” Masaki replied — though he noted that the OECD does not yet know exactly how much higher China’s industrial subsidies actually are.
Liberal MEP Pascal Canfin (Renew/France) described the OECD data as “absolutely key” for an upcoming delegation visit to China by MEPs and asked how Chinese authorities had reacted to the figures.
“China recently expressed its dissatisfaction with the OECD MAGIC database,” Masaki said. “But we firmly reject the proposition that the OECD methodology is not neutral.” Brussels had already responded to industrial subsidies in certain sectors: for instance, in late 2024, the European Commission imposed tariffs on Chinese electric vehicles—ranging from 7.8 to 35.3 percent for manufacturers such as BYD Group, Geely Group, and SAIC Group.
Researchers: Europe lacks measures for green steel boom in auto industry
Europe still lacks the economic conditions necessary for its domestic automotive industry to source steel produced via climate-friendly methods on a large scale, according to researchers at the Oxford Institute for Energy Studies (OIES).
“Europe’s automotive sector does not lack interest in low-emission steel,” states the study published on Wednesday. “It lacks a common framework capable of converting that interest into bankable, time-bound and scalable demand.”
According to the study, a common mistake in the debate surrounding low-emission steel is the focus on the vehicle's final price. Estimates suggesting that green steel accounts for less than one percent of the final vehicle price are misguided, write authors Lucian Aflaki and Hannes Nordberg of Lund University in Sweden, “because automotive procurement is organised around margins rather than vehicle price.”
“A material cost increase of around €200 per tonne represents a direct and measurable reduction in operating profit, in some cases exceeding €100 million annually,” Aflaki and Nordberg explain. The study suggests that fleet customers and corporate procurement offer a better approach for securing demand for low-emission steel, as purchasing decisions in these sectors are driven by institutional commitments — which often include climate protection goals.
The study’s authors outline several steps needed to put Europe’s green steel market on the right track. “The first is preserving the ETS phase-out of free allowances on its current timeline, since any rollback would undermine the investment logic for producers who have committed capital on the assumption that the carbon price signal will persist and strengthen.”
Secondly, the researchers recommend that the EU publish a definition of green steel — in time to inform current procurement decisions rather than after the fact — while “ensuring that the methodology does not allow coal-based production to qualify under the same label as decarbonised routes.”
Thirdly, OIES researchers see contradictions between the Automotive Package and the proposed Industrial Accelerator Act with its procurement requirements — “in particular the inconsistent treatment of made-in-EU criteria, which currently prevents OEM procurement teams from building a single coherent sourcing strategy.” snr
Bank forecasts doubling of cement and steel prices due to CO2 pricing
The Swedish bank SEB projects that market prices for cement and steel in Europe will double over the coming decade due to rising CO2 prices within the EU Emissions Trading System (ETS 1). This finding comes from the bank's “Sustainable Finance Outlook,” published on Wednesday.
According to the report, the CO2 price would rise from the current level of approximately 83 euros per tonne of carbon dioxide to between 180 and 270 euros per tonne by 2040, depending on which of three SEB scenarios — based on the European Commission's recent reform proposal for ETS 1 — materializes. “Project developers could lose up to 40 percent of their margins as a result,” stated Gregor Vulturius, Lead Scientist at SEB, referring to the construction industry.
In its calculations, SEB assumes that steel and cement producers will pass on 80 percent of their production cost increases to construction companies, which in turn will pass on a similar proportion of these cost increases to real estate developers. “Because steel and cement represent only part of total project costs, the impact on final building costs is smaller than the increase in material market prices,” the report notes.
Vulturius assessed the impact of rising CO2 prices on the construction sector as follows: “The EU Emissions Trading System is likely to boost demand for more energy-efficient buildings, low-carbon construction materials, and alternatives such as timber.” snr
Alliance calls on Commission to engage in dialogue on the decarbonisation of trucks
An alliance comprising representatives of the road transport sector and environmental campaigners has called on the European Commission to hold a strategic dialogue on the decarbonisation of heavy-duty vehicles in light of high diesel prices. The European section of the International Road Transport Union (IRU) and the environmental umbrella organisation Transport & Environment have sent a corresponding open letter to Commission President Ursula von der Leyen, as was announced on Thursday. The European Automobile Manufacturers’ Association (ACEA) is also a member of the IRU.
“A well-supported decarbonisation of road transport through the rapid scale-up of zero-emission heavy-duty vehicles is paramount for the resilience, competitiveness and strategic autonomy of European logistics and mobility,” the alliance argues at the outset of the letter. The alliance refers to the forthcoming revisions of the Alternative Fuels Infrastructure Regulation (AFIR) and CO2 standards for heavy-duty vehicles, which would set the conditions for the decarbonisation of road transport over the coming decade.
“Getting these frameworks right is essential, while grids, financing, electricity prices, toll and the support of transport service buyers will also be decisive factors,” the letter continues. “We believe the time has come for a dedicated strategic dialogue on the transition of heavy-duty road transport.” The alliance added that an initial exchange would already be valuable “in the coming weeks”. snr
Mixed reactions to the green light for €35 billion German subsidy scheme for gas power plants
The European Commission’s approval of Germany’s tender process for new gas power plants and other flexible power generation capacity — valued at up to €35 billion — has met with a mixed response.
Nicolas Leicht, an energy economist at the analytics firm Aurora Energy Research, described the move on Tuesday as “good news for ensuring security of supply into the 2030s, when many coal plants are expected to leave the system due to deteriorating economics.”
Leicht believes that combining short-term flexibility from batteries with intermittent generation from renewables could enable Germany to achieve an electricity mix “that is much more decarbonised already in the early 2030s.”
In contrast, the Berlin-based environmental network Beyond Fossil Fuels views the upcoming tenders as a breach of a fundamental principle of EU energy policy. “In designing these auctions, Germany has thrown away the rulebook when it comes to EU State Aid rules regarding technology neutrality,” Alexandru Mustață criticised in a statement on Wednesday. “By turning a blind eye to this rule-breaking, the Commission is failing to protect German households and businesses from the fossil gas industry,” he added, directing his criticism at the leadership in Brussels.
The capacity mechanism was initiated by the federal government under Chancellor Friedrich Merz (CDU); it is intended to complement wind and solar power in Germany and ensure a stable electricity supply during periods when the wind is not blowing and the sun is not shining. While the tenders are technically open to various technologies, climate activists and energy storage companies accuse the German government of structuring the tender conditions in such a way that, in practice, only fossil-gas power plants will succeed.
The state subsidy for flexible generation capacity is set to run for 15 years, with the first power plants scheduled to come online in 2031. By 2045, all subsidised power plants must operate climate-neutrally — the same year by which Germany is legally required to achieve climate neutrality. snr
Coming up: What's next in energy, industry and climate
- 09 September 2026: European Commission / Industry commissioner Stéphane Séjourné plans to propose a Public Procurement Act and a European Innovation Act
- 10 September 2026: 16.00 – 17.30: European Commission (DG Clima) is hosting EU CRCF Buyers Club Webinar
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