The EU's trade chief will recommend punitive import duties on solar panels from China to protect European producers.
Trade Commissioner Karel De Gucht is expected to tell his fellow EU commissioners on Wednesday that Brussels should levy the tariffs to guard against Chinese production that quadrupled between 2009 and 2011 to more than the entire global demand.
The move risks upsetting Beijing, but the case, the biggest the Commission has ever targeted, highlights the balancing act facing Brussels as Europe tries to protect against cheap imports while needing China, the EU's second largest trading partner, to help it emerge from recession.
"De Gucht is ready to go ahead," says one person close to the decision-making. "The Commission has a very solid case."
Following Wednesday's meeting in Brussels, De Gucht will then propose the measures at a meeting of trade specialists from all EU countries, who are expected to back them, diplomats say, allowing the provisional levies to come into force by June 6.
However, the decision to levy duties would still leave the door open for a negotiated solution with Beijing before December and avoid levies that could be imposed for up to five years.
The United States levied its own duties on Chinese solar energy products last year, arguing that China's rapid expansion into the industry has created a massive oversupply.
Germany, the United States and China are the world's biggest solar markets and companies are in a race to win contracts as countries seek to limit pollution and global warming.
The initial EU duties on Chinese solar panels are likely to be set at 30 per cent and above, which would make Chinese exports far less attractive in Europe, said one person involved.
The European Commission declined to comment.
China, which had barely any solar production capacity a decade ago, exported more than €21bn in panels to the European Union in 2011.
European solar panel manufacturers, led by Germany's Solar World, accuse Chinese counterparts of dumping panels and related components on the EU market and seeking to put European peers out of business to corner the market.
SolarWorld, once Germany's biggest solar group, partly blames Chinese overcapacity for its problems, including €900m in liabilities, while its smaller rival Q-Cells filed for insolvency last year.
"Germany has thrown all its weight behind this case," says another person close to the case. "Germany does not usually do so in trade defence measures, but this is an important industry under attack."
Germany is Europe's largest exporter to China, and Chancellor Angela Merkel has made numerous trips to Beijing, last year striking a conciliatory tone by saying Europe has no interest in starting a trade war over solar panels.
Europe's stance on solar energy is complicated by the fact that some in the EU solar sector, notably importers and installers, support cheap panel imports from China, saying EU tariffs would be damaging for efforts to develop clean energy, and who fear retaliation by Beijing.
In April, trade groups representing users of solar panels in six EU member states sent an open letter to De Gucht urging him not to seek duties, saying the prospect of duties on Chinese solar panels had already resulted in cancelled orders.
But EU producers from a range of sectors want protection against Chinese imports, and the European Commission, which handles trade issues for the EU's 27 members, is investigating 30 dumping and subsidy cases, 19 of them involving China.