Automakers and politicians plead with the EU to loosen vehicle emissions standards

Slowing EV sales and tariffs on Chinese imports may result in enormous fines for manufacturers

Car manufacturers, industry bodies and officials from EU member states are piling pressure onto Brussels to change the bloc’s vehicle emissions standards. Next year, legislation will require the average car sold by a company in Europe to emit no more than 93.6 grams of CO2 per kilometre. This requirement will drop to 0 grams from 2035, essentially banning ICE vehicles in ten years – a precipitous decline from the Europe-wide average of 108.1 grams per kilometre in 2022. Companies will face fines if their vehicles are not in alignment with the targets. ACEA, the European car industry body that includes the likes of Toyota, Renault and Nissan, has urged the EU to review its 2025 and 2035 targets immediately, arguing that the laws will result in multibillion euro fines. Italian Prime Minister Giorgia Meloni has called the 2035 EV mandate “self-destructive” and is pressing Brussels to expedite its review of the law from the scheduled 2026 date to early next year.

Opposition to the targets comes amid slowing EV sales in Europe. Last August, new EV registrations were 44 percent lower than in August 2023. On current trajectories (EVs account for around 15 percent of sales), auto manufacturers face fines of up to €13 billion (US$14.35 billion) next year. Automakers would need EV market share to rise to between 20 to 22 percent to be compliant with emissions standards. One of the major roadblocks to higher uptake has been faltering customer incentives for EV purchases. The EU has implemented the stick but not yet the carrot. However, debt limits among EU member states may be an obstacle to the provision of subsidies. Last year, Germany failed to extend green industry subsidies because of the country’s stringent debt brake. The EU’s tariffs on Chinese-made EVs will make matters worse. Companies such as Renault had planned to make cars in China at much lower prices.

Pakistan reconsiders Chinese security requests after string of militant attacks

Chinese security personnel could be stationed in Pakistan

After several successive attacks on Chinese nationals in Pakistan, the Pakistani government has suggested that it will reconsider its two year opposition to Chinese security personnel being stationed on Pakistani soil. Chinese-backed infrastructure projects in Pakistan have been the target of militant attacks for the better part of a decade, with five separate attacks in March taking the lives of five Chinese engineers. Targets included the Gwadar Port (the centrepiece of the US$62 billion China-Pakistan Economic Corridor) and the US$4.2 billion Dasu hydropower plant. Construction at both the Dasu and the adjacent Diamer-Bhasha dam projects have been halted, and thousands of workers were made redundant. The Balochistan Liberation Army and Pakistani Taliban are believed to be responsible. These groups have portrayed the Belt and Road Initiative as deeply exploitative, taking advantage of local grievances against Chinese projects.

China has made investments into Pakistan’s infrastructure, energy and transport sectors contingent on material improvements in Pakistan’s security. The Chinese Ministry of State Security initially requested Chinese security companies to be stationed in Pakistan in 2022. This request was denied by the Interior Minister due to political sensitivities which were particularly felt amongst Pakistan’s military establishment. However, Pakistan’s efforts since this time to improve security with increased surveillance and added checkpoints have failed to assuage Chinese concerns.

Pakistan, which is enduring a protracted economic crisis underpinned by high public debt, appears to have concluded that the imperative to attract Chinese investment outweighs sovereignty concerns. Specifically, China and Pakistan have agreed to start negotiations on the formation of a joint security company that will protect Chinese nationals. The arrangement would see Chinese personnel stationed directly outside Chinese businesses, with Pakistani personnel patrolling the outer cordon. Though these security arrangements appear necessary to ensure China’s continued investment in Pakistan, there is a risk that Chinese boots on the ground will aggravate militant groups opposed to Chinese presence.

Taiwan at risk of losing commitments to offshore wind projects

Taipei’s local content requirements are proving burdensome for developers

A number of offshore wind projects in Taiwan appear in danger of major delays and potential cancellations, jeopardising the country’s renewable energy targets. This is most clearly seen in the order pipelines of Denmark’s Vestas and German-owned Siemens Gamesa – the only suppliers of blades to Taiwan’s offshore wind projects. Vestas only has around one year’s worth of orders left to fulfill, as no developers have committed to projects proposed in the latest tenders. The only project Vestas has been asked to supply blades to, Copenhagen Infrastructure Partners’ 500MW Fengmiao Offshore Wind Farm, has failed to secure power purchase agreements (PPAs). The lack of recent commitments to new projects will likely see Taiwan fall far short of its target for 5.7GW of installed offshore wind capacity by 2025. By the end of last year, only 2.25GW was installed. Taiwan is looking to build up its offshore wind industry to compensate for its lack of onshore solar and wind potential, and ultimately reduce its overwhelming reliance on fossil fuel imports.

Taiwan’s lacklustre offshore wind outlook is largely a function of Taipei’s strict local content requirements. Under the Ministry of Economic Affairs’ regulations, companies bidding into the third phase of the government’s offshore wind tendering process (occurring in 2023 and 2024) must source 60 percent of components domestically. The rules are an attempt to establish a local offshore wind manufacturing industry. However, Taiwan is giving itself only ten years to accomplish what in Europe took 30. Thus, local companies have been unable to produce cost competitive components. Wind blades imported from Europe, for instance, are 20 percent cheaper than Taiwanese-made blades, even when factoring in shipping fees. Local content requirements are a major causal factor in Taiwan’s exorbitant offshore wind construction costs, which are 2.5 times higher than those in Europe. In turn, these costs have driven up bidding prices for PPAs to a level that is unviable for many potential customers. It is clear that Taiwan will have to dilute its local content requirements to meet its climate commitments.

The West plays catch-up with China in Africa

Sustained Chinese financial largesse over the last decade will make Beijing’s dominance difficult to dislodge

Hosted in Beijing in early September, the triennial Forum on China-Africa Cooperation (FOCAC) Summit saw China commit to Africa US$50 billion in loans, investment and aid over the next three years. Whilst this commitment is significant, it marks a reduction of China’s footprint in Africa. Since the first FOCAC in 2000, around 1200 Chinese loans with a cumulative value of US$170 billion were issued to Africa under the Belt and Road Initiative. Since then, Chinese financing in Africa has had a year-on-year reduction, recently decreasing by 55 percent from US$16.5 billion in 2021 to US$7.5 billion in 2022. China has attributed its decrease in funding to debt sustainment issues. Kenya, for example, was loaned US$5.3 billion by the Exim Bank of China to finance the Standard Guage Railway in 2022 and has since faced persistent difficulties with repayments.  

The drop in Chinese investment has provided the West with a potential opportunity to compete. For its part, the US has committed to mobilising US$600 billion under the aegis of the G7’s Partnership for Global Infrastructure and Investment (PGII). A flagship project of this initiative is the US$10 billion Lobito Corridor that will connect the Democratic Republic of Congo (DRC) and Zambia to Angola’s port of Lobito. Theoretically, because of Lobito’s position on the Atlantic Ocean, the corridor should cut the time it takes to transport critical minerals and copper from the DRC and Zambia to the US and EU by 75 percent. To date, the US has mobilised US$4 billion for Lobito, including US$500 million from the African Development Bank, US$552 million from the US Development Finance Cooperation and US$320 million from Italy. Feasibility studies on delivering 1000 tons of copper from DRC’s Ivanhoe Mines were conducted in September 2023, but completion of the project is not expected until 2029.

Whilst the Lobito Corridor project is a major move, it alone will be insufficient to compete with China in Africa. This is especially true of China’s dominance over African mining. China owns 72 percent of Congo’s cobalt and copper mines and has a significant stake in Namibia, Zimbabwe and Mali’s lithium production.