The European Commission and EU officials are warning that a significant portion of investments of up to 20 billion euros, provided for by the Global Green Bond Initiative, may benefit Chinese companies, risking the undermining of Brussels’ policy to diversify key supply chains from Beijing.
The Global Green Bond Initiative is one of the EU’s largest financial instruments, designed to finance sustainable infrastructure and climate projects in partner countries. The European Investment Bank (EIB) and other European development institutions will be the main investors and provide technical assistance for environmental projects in third countries, such as solar farms in Algeria, wastewater treatment in India, or light rail transport in the Dominican Republic. This initiative was conceived as part of the European Green Deal, but its governance framework was only finally approved in April this year, after significant geopolitical changes.
Concerns About Chinese Suppliers
According to a Commission representative who wished to remain anonymous, “The main problem is that, given the market for renewable energy technologies, most of the money will likely go to Chinese companies.” There are particular concerns about high-risk solar inverters—devices that convert the direct current of solar panels into alternating current for the grid—which the EU is trying to phase out due to the vulnerabilities they create for third countries connected to the European energy network.
Brussels is gradually shifting its trade policy towards Beijing to a defensive stance, developing an economic security doctrine to counter China’s dominance in key sectors through subsidized firms. However, the Global Green Bond Initiative was developed before this doctrine was fully formed and does not require partner countries to avoid Chinese suppliers, nor does it offer incentives to do so. The question of how to deal with Chinese suppliers in EU-funded projects abroad has long been a stumbling block for European development financing, as convincing third countries to buy from more expensive non-Chinese suppliers is difficult without covering the additional costs, which Brussels is still reluctant to do.
Cybersecurity and Energy Infrastructure Risks
The imperative to exclude Chinese suppliers is not limited to supply chain dependence, which can be used as a weapon, but increasingly concerns cybersecurity. Last month, the European Commission disseminated recommendations requiring all EU-funded renewable energy projects to gradually phase out high-risk inverters, implying Chinese ones. The recommendations cited cybersecurity risks to the EU’s energy network, noting that firms dominating the solar inverter market, including Huawei, could remotely manipulate the energy network, destabilize it, or, in the worst case, cause complete blackouts.
The Global Green Bond Initiative received the green light before the Commission issued these recommendations, which apply to projects outside the EU only from April 15, 2027. Now, there are concerns that the investment program may increase the vulnerability of third countries to risky Chinese technologies and create security risks for Europe’s own energy infrastructure. Energy networks do not operate in isolation, and phasing out Chinese inverters at home may make little sense if the same rules are not applied to Europe’s closest neighbors, especially North African countries, many of which are part of the Global Green Bond Initiative.
“The presence of EU-funded projects built by Chinese companies is exactly what we want to avoid,” said a second Commission representative, adding that the Mediterranean region is the area where China’s influence poses the highest risks. The Commission is pressing the EIB and other European investment institutions to apply the requirements for phasing out risky solar inverters everywhere, but these institutions are resisting and seeking exceptions. In the context of the Global Green Bond Initiative, there is no exclusion mechanism.
The problem may concern both management and procurement. The Commission is expected to pressure the initiative’s fund manager, Amundi, Europe’s largest asset manager, to review projects that appear to have been developed without considering these requirements. For investment banks, financial viability and the profitability of investments are the priority, and supply chain considerations cannot lead to commercially unjustified costs. However, as critical dependencies are increasingly used by China as a weapon, and the EU is serious about reducing its dependence on Beijing, geopolitical risk is becoming a decisive factor.
“The EIB wants exceptions for everything, the Commission is resisting on all fronts,” said a third EU representative, adding that “The situation is still unclear; this confrontation will continue for some time.”
Source: Euronews