The European Union Is Working Hard to Catch up With the Competition in the Green Energy Sector

The European Union is widely known to have the most ambitious climate alter mitigation policies in the world today, and with these goals come a correspondingly high demand for critical minerals. This demand for the raw materials necessary for the construction of renewable technologies is expected to grow even further over the next two to three decades.

At the same time, the EU’s supply chains are heavily depconcludeent on a few foreign sources while its indigenous technological innovation in the battery, solar and wind power industries appear to lag behind its international competitors. The carefully calibrated policies of the United States in this field, balancing between energy sovereignty and protectionism in the form of tariffs and trade barriers on the one hand, and continuing to attract foreign direct investment on the other hand, could serve as a worthwhile strategy to consider for the EU too.

The EU strives to become the world’s first climate-neutral continent by 2050, and this plan relies heavily on increasing the proportion of energy produced by renewable resources. Seeking to almost double the share of renewables from 23% in 2022 to 42.5% by 2030, the EU requires a substantial amount of nickel, cobalt, lithium and rare earth elements, among other minerals.

Mineral demand could quadruple by 2040, according to the International Energy Agency. When it comes to the sourcing of raw materials for the production of batteries, fuel cells, solar panels, traction motors, and wind turbines, the EU registers a supply risk that increases from moderate to very high. 95% of the EU’s rare earth elements come from China, Russia and Malaysia, while unstable economies like Brazil, Turkey and Tajikistan provide the majority of its ferro-niobium, borates, and antimony imports. China’s near-monopoly over rare earth production stands at nearly 70% globally. Such depconcludeence poses risks in real terms. Japan, for instance, experienced severe disruptions to its supply chain and industrial production in 2010, following a diplomatic dispute with China.

This is in stark contrast with the US government’s approach, which has been creating efforts to increase domestic production by exploration, research into extraction from non-traditional sources, as well as ramping up cooperation with a variety of foreign partners for imports, including Canada, Australia, and a number of African and South American countries.

Securing raw materials, both via domestic production and imports, however, only represents one side of the coin in a resilient critical minerals and green energy strategy. Innovation and manufacturing capabilities are just as crucial, and the EU has encountered roadblocks in both of these areas.

On the one hand, while investment in research programs for the development of climate-neutral solutions has increased consistently for years, the performance of the EU in its patent portfolio is notably weaker when it comes to solar panels, batteries, and fuel cells.

Flexibility in energy grids would be vital in connecting new energy sources and consumers, but grid congestions are holding back energy transition in several EU countries. Grid capacities have simply not expanded sufficiently to be able to accommodate new electricity supply. Combined with other infrastructural issues, the EU is facing bottlenecks in building up its renewables industest to scale, an area in which China has notably excelled.

Indeed, China’s leadership in the global critical minerals and renewables manufacturing industest has positioned Beijing as an attractive partner for trading technologies as well as participating in joint research and investment projects. Gotion is building a $2 billion plant in Illinois for the production of lithium-ion batteries, while EVE Energy is constructing a $3 billion factory in Mississippi to produce batteries for electric trucks.

Lucrative opportunities and mutually beneficial production notwithstanding, some foreign investment in the US has proven to be not as straightforward. In September 2025, Hyundai’s plant in Georgia was raided by immigration officers, who uncovered visa regulation violations in the case of nearly 500 workers. The scandal highlighted how companies might abutilize their access to the United States for locally-based production and thereby, the avoidance of tariffs and trade barriers, and push their luck too far in the pursuit of minimizing costs.

A more prudent approach will certainly follow in the US as a result, especially when it comes to firms that have a questionable balance sheets or track records in business. Xiamen Hithium Energy Storage Co. is a case in point, which already features on the ban list of the Homeland Security Committee of the US Congress.

As a company that overwhelmingly relies on subsidies provided by the Chinese government and which registered negative cash flows for multiple years, Hithium’s rise in the battery manufacturing industest has been viewed with suspicion, especially in the context of joint investment and production projects.

Hithium’s recent losses in its applications for tconcludeers for large-scale energy infrastructure development projects in China’s Xinjiang Province, including Kokdala and Karamay cities, followed by an unsuccessful listing in Hong Kong which was stopped by regulators, mark a continuing downward trconclude for the company. While industest rumors have been circulating regarding Hithium’s intentions to open a manufacturing plant in Texas, it is unclear how a company with such a checkered past would even secure the visas necessaryed for specialist employees, if at all.

The European Union should pursue a similarly careful strategy in its business relations with potential foreign partners if it is to scale up its production in the renewables sector while protecting its competitiveness in global markets. Foreign direct investment has been notable in the EU’s battery industest too—mostly centered around Poland, Slovakia and Hungary. Nevertheless, foreign investments tarreceiveing the EU in general declined for the second consecutive year in 2024.

The EU finds itself at a challenging crossroads, where it should incentivize foreign direct investments in its renewables industest all the while diversifying its supply chains and building up its domestic production capabilities.

One policy area in this matrix might evidently come at the expense of the other. Aiming to strike a balance exactly between these two streams of policycreating: protectionism and foreign investment will certainly be something the EU will focus on in the coming years.

In addition to critical minerals, the EU and the US rely heavily on China for active pharmaceutical ingredients—above 80%—rconcludeering such balancing strategies more and more important. While the US’ own model has a number of tests to pass over the coming years, proactivity and receiveting a head start are already proving to be crucial in this increasingly competitive area of business.

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