Diversification strategies in green technology must be technology-specific rather than uniformly applied. Balancing openness with resilience will allow the EU to mitigate supply risks while leveraging China’s scale and innovation capacity.
This article is part of a series on “EU-China relations: Bound by Clean Tech or Divided by it?”. The articles reflect the opinions of their respective authors and should be read in the context of this series.
The clean energy transition is no longer a distant aspiration, and it is certainly not a “scam” - it is the defining economic transformation of the 21st century. Nowhere is this clearer than in China and Europe, two regions that have each staked their future prosperity on the green economy. As net importers of fossil fuels, both see the energy transition as a way to energy security.
Yet despite these shared foundations, the EU-China relationship on clean technology is increasingly framed in terms of rivalry and risk. Europe worries about its dependence on Chinese clean technologies and their components - echoing the painful lessons of its reliance on Russian fossil fuels. China, for its part, is determined to expand its industrial capacity and global markets for clean tech, even as fierce domestic competition and a waging price war put pressure on its industries.
The question now is whether Europe and China will allow this challenge to result in fragmented supply chains that slow down the global clean energy transition, or if they will recognise the potential for complementarity and find a pathway forward that enables everyone to have a piece of the pie.
Shared Foundations: Betting on the Green Transition
Both Europe and China have placed clean energy at the core of their economic futures.
In the EU, clean energy accounted for nearly one-third of GDP growth in 2023, the highest share of any region assessed. Investment in clean energy manufacturing has more than doubled between 2022 and 2023 in response to the EU’s strong climate and industrial policies, such as the Fit for 55 Package and the Net Zero Industry Act.
In China, clean energy industries contributed about a quarter of GDP growth last year and have the potential to double in value over the coming decade, adding 29 trillion yuan to the economy. The Chinese government has framed the energy transition as the major driver of high-quality growth. Through a mix of long-term planning, targeted policy support, integrated supply chains and intense competition between different producers, China has become the global leader in core clean technologies and has built the world’s largest renewable energy system.
At their core, both economies are betting on the same thing: that clean energy is becoming and will remain the foundation of future economic development.
China’s Aims: Driving the Global Transition
China’s motivations are strategic. Clean tech is a central industry in China’s shift from heavy industry to high-tech manufacturing, supporting its economic security in an increasingly volatile world.
Domestic demand for clean tech is a key driver for these industries to succeed, with the majority of China’s clean tech manufacturing consumed domestically. In 2024, China installed more than 350 GW of solar and wind power capacity, more than the rest of the world combined. 2025 is expected to bring yet another record year with around 400 GW of newly installed solar and wind capacity. In May alone, China installed on average 100 solar panels per second. Similarly, new energy vehicles now make up more than 45 percent of new sales, a steep increase from less than 5 percent just five years ago. However, the future of its clean tech development is more uncertain as current targets for 2035 would imply a dramatic slowdown unless they are significantly overachieved.
More than half of China’s solar, wind and EV exports now go to the Global South.
Yet, exports still provide essential market opportunities. More than half of China’s solar, wind and EV exports now go to the Global South, particularly Southeast Asia and the Middle East. These markets represent the strongest demand growth over the coming decade.
evertheless, Europe remains an important export destination, in particular, for batteries and EVs. China also invests increasingly in overseas clean tech manufacturing. Since 2022, China’s outbound investments in these sectors have exceeded $220 billion, more than the Marshall Plan over four years at a time of similar US dominance in manufacturing. These investments and exports have reduced emissions abroad by more than 1 percent in 2024 alone.
But this model is not without costs. China has made the largest investment into the clean energy sector globally. At the same time, private sector players face slim margins, a highly competitive domestic market, and environmental and labour challenges from rapid industrial build-out. Chinese companies and the government have accepted these costs as the price of global leadership in clean energy. However, this is now being tested by growing financial, environmental, and geopolitical headwinds.
Europe’s Dilemma: Dependency or Opportunity?
The EU’s challenge is to ensure resilient supply chains without becoming overly reliant on one single country for the technologies that will underpin its future energy security.
It is important not to equate the risks of reliance on fossil fuel imports with those of clean technologies. The shadow of Russia looms large with fears that today’s solar modules may be tomorrow’s gas pipelines. But this analogy is flawed. Where gas could be cut off overnight, solar panels cannot be removed from rooftops, and batteries already on the road will continue to power EVs.
Nevertheless, relying on a single country for the majority of technologies providing future energy security and a source of economic growth poses significant risks, not only from a geopolitical perspective but also from other external factors such as climate impacts.
Therefore, the EU’s determination to diversify its clean technology imports is crucial. Yet this requires a closer examination of the specific situation for each relevant technology rather than a blanket approach to de-risking from China. There may be technologies where importing from China in the short term is the most viable and cost-effective solution, such as in the solar industry. For others, Europe has an opportunity to stay competitive or even holds a leading global position, such as in the wind industry, where it still dominates global installations outside of China. And if Europe’s automotive sector finally decides to move more decisively towards electrification with the growth of new battery manufacturing facilities emerging across the EU, there may still be hope.
However, a key question to support European clean tech manufacturers is not only about supply but, critically about demand. While China has created demand expectations for the deployment of clean technologies through its climate and energy policies, the renewables buildout in Europe faces challenges through administrative hurdles, such as permitting, and uncertainty through policy revision, such as the recent Omnibusses and the revision of the target to end sales of internal combustion engines by 2035.
Europe’s competitive advantage may lie in leading the systems transformation that clean energy demands.
In addition, it’s important to keep in mind that the domestic value-add from clean energy technologies is around three times as large as the value of the imports. It lies not in manufacturing technologies but rather in their deployment, integration, grid services, and system innovation—areas where Europe has unique expertise. This highlights that Europe’s competitive advantage may lie less in replicating China’s manufacturing scale and more in leading the systems transformation that clean energy demands.
Why There Is Still Room for Collaboration
For all the rhetoric of rivalry, the logic of cooperation remains compelling in a world of global uncertainty. When it comes to tackling climate change and accelerating the green transition as a means of economic development, the EU and China can find much common agreement. Europe and China have both set their futures on the promise of the green transition. But neither can realise the full benefits of this wager alone.
Europe cannot achieve its climate targets without access to affordable Chinese technologies. China, in turn, cannot sustain its export-driven clean tech expansion without advanced markets, stable investment environments, and partners in setting global rules.
The EU’s ambition to diversify supply chains must therefore be carefully balanced with the practical imperatives of meeting its climate targets and maintaining economic competitiveness. China secured its lead through linking climate and energy policy with industrial policy and carving out its own niche in areas where it saw market potential and a competitive advantage. This should be a lesson learned for Europe - not to replicate China’s manufacturing capacity but to integrate climate and energy policy with European industrial policy and maximise areas where it has a competitive advantage.
There are four actions that Europe can take to achieve this:
- Engaging proactively with Chinese counterparts to manage trade tensions on clean technologies and building a global vision for green economies that benefit countries around the world through regular high-level dialogues at the EVP/Vice Premier level, accompanied by technical dialogues involving key private sector stakeholders to address key questions on transparency and fair competition.
- Reducing reliance for strategic technologies from any one country through the use of percentage-based import limits, in close alignment with WTO requirements.
- Developing diversified and resilient supply chains by partnering with other emerging clean tech manufacturers such as India and Indonesia.
- Attracting investments from leading Chinese companies into European manufacturing under clear guidelines.
The stakes extend far beyond bilateral relations. A fractured clean energy economy would slow the global transition, raise costs, and undermine climate diplomacy at a time when international cooperation is already under strain.
In clean tech, Europe and China are not destined to be divided. They can be bound by a shared vision of prosperity built on the foundations of the energy transition, jointly advancing competitiveness and climate security.
