A confidential document prepared for EU leaders has raised concerns that the European Union (EU) could become as dependent on China for lithium-ion batteries and fuel cells by 2030 as it was on Russia for energy before the Ukraine crisis. The paper, obtained by Reuters, will serve as the foundation for discussions on Europe’s economic security during an upcoming meeting of EU leaders in Granada, Spain, scheduled for October 5.
EU leaders to discuss economic security and measures to reduce dependency on China during a meeting in Granada on Oct:
Amid growing apprehension over China’s increasing global assertiveness and economic influence, EU leaders are set to deliberate on the European Commission’s proposals aimed at mitigating the risk of excessive dependency on China and the necessity of diversifying toward Africa and Latin America.
The document highlights the need for energy storage solutions due to the intermittent nature of renewable energy sources like solar and wind. To achieve its ambitious goal of achieving net-zero carbon dioxide emissions by 2050, Europe is expected to witness a significant surge in demand for lithium-ion batteries, fuel cells, and electrolysers, with estimates indicating an increase of anywhere between 10 and 30 times in the coming years.
The paper, which was prepared by the Spanish presidency of the EU, underscores the EU’s strong position in the intermediate and assembly phases of electrolysers’ production, boasting a global market share exceeding 50%. However, it also underscores the EU’s heavy reliance on China for fuel cells and lithium-ion batteries, both of which are pivotal for electric vehicles.
Without the implementation of robust measures, the document warns of a potential dependency on China by 2030, akin to the EU’s reliance on Russian energy before the Ukraine crisis. Notably, in 2021, the year preceding the Russian invasion of Ukraine, the EU sourced over 40% of its total gas consumption, 27% of oil imports, and 46% of coal imports from Russia. Consequently, ending most energy purchases from Russia triggered an energy price shock within the EU, leading to a surge in consumer inflation and necessitating a sharp increase in interest rates by the European Central Bank, ultimately curbing economic growth.
While the paper chiefly emphasizes the vulnerability in the battery sector, it also raises concerns about potential dependency in the digital technology space. Forecasts indicate a substantial rise in demand for digital devices, including sensors, drones, data servers, storage equipment, and data transmission networks in the coming decade. While the EU possesses a relatively strong position in some of these areas, it exhibits significant weaknesses in others.
The paper concludes that by 2030, foreign dependency in these critical sectors could pose substantial obstacles to the productivity gains needed urgently in European industry and the service sector. Additionally, it could hinder efforts to modernize agricultural systems, a crucial aspect of addressing climate change.
As EU leaders convene to address these pressing concerns, discussions are expected to center on strategies to reduce dependency on China and enhance Europe’s economic resilience in a rapidly evolving global landscape.