The European Commission has proposed a tough 47pc “anti-dumping” tariff to penalise the imports, it emerged on Wednesday.
The move would benefit European manufacturers, who allege their Chinese rivals - whose panels are as much as 45pc cheaper - are unfairly subsidised by Beijing.
Chinese solar panel production quadrupled between 2009 and 2011, exceeding global demand, and EU manufacturers say China has now captured 80pc of the European market.
However, action against the Chinese imports is fiercely opposed by European solar panel installation companies which have thrived on the cheap supply and claim that hundreds of thousands of jobs could be at risk.
On Wednesday night Britain said it was “working hard to ensure the Commission’s response, and any measures imposed, are proportionate and take account of wider effects on the industry”.
The EC is expected to consult with member states before taking a formal decision on penalties in early June.
China’s ambassador to the World Trade Organisation, Yi Xiaozhun, told Reuters that the move would “send the wrong message to the world that protectionism is coming”.
The plans come at a time when Chinese relations are already tense for both Britain and the wider EU.
The EU, China’s largest export market, has already clashed with China over a series of trade issues. In September, the EC launched its anti-dumping probe into Chinese solar panels, prompted by complaints from primarily German and Italian companies who have struggled to compete against the cheap imports.
In November, the EC escalated its action with an anti-subsidy investigation. Both investigations will take nine months at the end of which it will report back to member states and decide whether to impose provisional duties.
China retaliated to the investigations with an inquiry into European exports of polysilicon, a key component for solar panel makers.
The Alliance for Affordable Solar Energy said reports of the EC’s provisional anti-dumping duties were “extremely worrying” and warned that levies over 15pc could destroy 85pc of the European market for solar panels.
It said that “punitive tariffs, no matter at what level, would cause irreversible damage” to the solar power industry in Europe.
Britain’s energy minister Greg Barker told a UK confererence on solar power late last month that the technology would be “at the heart of the UK’s energy mix” but admitted the Chinese issue was the “elephant in the room”.
He urged solar companies to continue lobbying against the proposals through their trade associations.