Solar PV Industry Caught Up In China Forced-Labour Controversy

Political momentum is swaying in favour of European solar panel manufacturers, as work progresses on a new EU law banning forced labour practices that would effectively block Chinese imports.

China’s share in each manufacturing stage of solar panels exceeds 80%. And these cheap panels are fuelling Europe’s solar boom. However, the tide may be turning. Germany’s chemical giant BASF announced its exit from joint ventures in Xinjiang on 9 February, a region in Western China in which systematic human rights abuses of the Uyghur Muslim minority have been documented. Similar moves have been made across other industries: carmaker Volkswagen is eyeing an out itself, as thousands of its cars are stuck in a US port for components linked to forced labour.

Forced Labour Regulation

EU institutions are currently set to start negotiations on a forced labour regulation, proposed in 2022 – a law that could translate the widespread practices in China into what may amount to a ban on Chinese solar modules. The US adopted a similar law in 2022 – which led to the Volkswagen cars stuck in port.

For the proposal to become law, the European Parliament and the Council of EU member states must agree on an identical text. Both have adopted their positions and are expected to begin negotiations soon to finalise the law. China’s peculiarities may make the rules, that could come into force by 2026, especially hard-hitting. Campaigners stress that the entire Chinese solar panel supply chain should be affected by this.

“Emergency Measures” Against Chinese Competitors

European Solar Manufacturers Council (ESMC) member companies, who represent solar panel production capacities of about 6 GW per year, are not in the best shape. In early February, the association called for “emergency measures”, against Chinese competitors who offer cheaper prices for solar panels of similar quality. To stem the bleeding, the group called for upwards of 200 million in short-term state support to buy unsold European solar panels gathering dust in warehouses.

But cash injections won’t solve the industry’s long-term problem: Europe is not a competitive location to produce solar panels. In its 2023 renewables report, the International Energy Agency (IEA), estimates that a solar panel fully produced in Europe from start to finish would be 140% more expensive than its Chinese counterpart by 2028.

Anti-Dumping Tariffs

European Commission officials, wary of jeopardising climate goals, have been reluctant to impose another round of anti-dumping tariffs. Green EU lawmaker Anna Cavazzini, who champions domestic solar manufacturers, said “the Commission seemed so inactive in this debate.”

According to the solar industry, the agreed law to reshore clean industries in Europe may not bite quickly enough. It remains up to the incoming European Commission to square this circle.

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