A paper prepared for EU leaders has raised concerns about the potential dependency of the European Union on China for lithium-ion batteries and fuel cells by 2030, similar to its past dependence on Russia for energy prior to the conflict in Ukraine. This issue will be a focal point of discussions on Europe’s economic security during the EU leaders’ meeting in Granada, Spain, on October 5th.
Given China’s increasing assertiveness and economic influence on the global stage, the leaders will evaluate the European Commission’s proposals to mitigate the risk of excessive reliance on China and explore diversification opportunities towards Africa and Latin America.
The paper emphasizes that due to the intermittent nature of renewable energy sources such as solar or wind, Europe must develop energy storage solutions to achieve its goal of net-zero carbon dioxide emissions by 2050. As a result, the demand for lithium-ion batteries, fuel cells, and electrolyzers is expected to surge between 10 and 30 times in the coming years, according to the paper prepared by the Spanish presidency of the EU.
While the EU holds a strong position in the intermediate and assembly stages of electrolyzer production, boasting over 50% of the global market share, it heavily relies on China for crucial components like fuel cells and lithium-ion batteries, particularly for electric vehicles.
Without implementing robust measures, the paper warns that by 2030, the European energy ecosystem could face a different but equally concerning dependence on China, akin to the dependency on Russia before the invasion of Ukraine.
Before the Russian invasion, the EU sourced over 40% of its total gas consumption, 27% of its oil imports, and 46% of its coal imports from Russia, according to the European Commission’s data. The abrupt cessation of energy purchases from Russia caused an energy price shock in the EU, leading to a surge in consumer inflation. This necessitated the European Central Bank to raise interest rates significantly, ultimately dampening economic growth.
However, the vulnerability of the EU extends beyond lithium-ion batteries and fuel cells. The paper highlights the potential for a similar scenario in the digital-tech sector, as the demand for digital devices such as sensors, drones, data servers, storage equipment, and data transmission networks is projected to rise sharply in the coming decade.
While the EU maintains a relatively strong position in certain aspects of the digital-tech sector, notable weaknesses exist in other areas, as stated in the document.
By 2030, this foreign dependency could severely hinder the productivity gains urgently required by the European industry and service sector. Furthermore, it could impede the modernization of agricultural systems necessary to address the challenges posed by climate change, the paper concludes.
