Geopolitical tensions and supply chain disruptions endanger Europe’s green transition. European leaders know that sourcing essential materials from rival powers out of pure economic convenience can come at a high price – and the greater the reliance on those rivals, the greater the vulnerability to coercion. ‘Friend-shoring’, through which governments turn to their allies and like-minded countries for the provision of critical imports, has emerged as a way to lessen these risky dependencies. But China still dominates some segments of green technology supply chains, making their redesign a delicate task.
The European Union’s new economic security strategy recognises these external vulnerabilities and, despite not explicitly arguing for friend-shoring, envisages more cooperation with close allies such as G7 and NATO members. It then extends this to include “the broadest possible range of partners”, opening up space for more partnerships with countries in the global south. Correctly, the strategy acknowledges the green transition as a privileged avenue of engagement with those states. Many of them may not be traditional allies, or even have backed Ukraine against Russia or align with the EU on human rights, but they do not constitute rivals in the same way as China and Russia.
Europeans should view their cooperation with the global south on the green transition as fundamental to the redesign of their supply chains, and thus their economic security. They need to ensure that they present a better offer than China, including technical support for climate mitigation and adaptation efforts, rather than one based only on engagement as a tool to reduce external vulnerabilities. The EU and its member states could then reap the triple benefit of fighting climate change, reducing dependencies on their rivals, and recovering the lost ground in their relationships with the global south.
Risk and reward
Europeans need to strike the right balance of risk and reward in their industrial and technological cooperation, limiting shoring in strategic domains to close friends but intensifying cooperation with non-rivals in less sensitive areas. Three essential and relatively risk-free areas that have shown promise so far are critical raw materials (CRMs), sustainable agriculture, and mature renewables technology.
Critical raw materials
Western states’ eagerness to divest from dependencies on China in green technology supply chains has granted countries in Asia, Latin America, and sub-Saharan Africa a new bargaining power, mainly due to their significant reserves of CRMs. Wind turbines, electric vehicle batteries, and other components of green technologies require considerable amounts of these materials: for example, Europeans will need around 390,000 tonnes a year of CRMs to fulfil their REPowerEU goals in wind power generation alone. And they are far from alone in courting resource-rich countries to secure access to CRMs. China, which already dominates global processing of the materials, is offering to develop local infrastructure and supply chains in countries such as Bolivia – where leaders are responding with some enthusiasm.
To compete, Europeans should focus on the development of local industries and the climate-proofing of local economies. They could, for example, support early-stage processing of CRMs in Namibia, which recently banned the export of unprocessed minerals. To encourage private investors to develop processing plants, the European Commission could render permanent the current tariff suspension on several raw and processed CRMs. The tariffs generally fall between a modest 3 per cent and 5.5 per cent, but firms could still perceive their scheduled return in 2025 as a limit to investment in processing abroad. In addition, development finance institutions could introduce preferential access to climate funding and technical assistance for countries entering CRM partnerships with Europe. This would help avoid the pitfall of treating resource-rich states as mere sources of CRMs, helping improve Europeans’ strained relations with some African countries and increasing the likelihood of them becoming more aligned in the future.
Agriculture is another area in which economic cooperation should not entail significant security or geo-economic risks for the EU, as well as bring significant benefits to all involved. Kazakhstan, for instance, has already deepened its relations with the EU on raw materials and energy, yet still maintains high tariffs on agricultural equipment. The EU could build on the existing partnership by fine-tuning the regulatory framework and investing in the country’s production of components in exchange for lower tariffs on machinery that contains Kazakh-made parts.
Moreover, the EU should increase its cooperation on agriculture with as many African countries as possible. This could be hugely beneficial in addressing food insecurity and help promote the transition in agricultural production from subsistence to cash crops. Europeans could expand joint research and innovation on food systems and agricultural sustainability from its currently limited form, providing African partners with better solutions to tackle high temperatures and drought while also granting them easier access to the European market. This would require a change in the currently protectionist attitude of EU governments and institutions on agriculture, a longstanding issue that, for example, still weighs on the EU’s pending trade deal with the Mercosur bloc in south America.
Mature renewables technology
Mature renewables technology such as heat pumps is another possibility for relatively risk-free cooperation in the global south, starting from the southern Mediterranean. China’s increasing capabilities in heat pump technology is challenging Europeans’ currently strong position. The EU’s Net-Zero Industry Act proposes a target of 40 per cent for domestic production of heat pumps and other clean tech by 2030. This will require more skilled workers, who could be trained in southern neighbourhood countries through EU programmes. In parallel, financial support to nearshore production could help expand European industry in a part of the world that faces rising temperatures and would benefit from heat pumps’ greater efficiency compared to air conditioning units.
On new and disruptive green technologies, the EU and its member states would have to carefully weigh the benefits of cooperation with countries outside the G7 and NATO families. Vulnerabilities would be more severe, and Europeans would need to protect any competitive edge from rival powers. But new supply chains for established technologies, ranging from raw materials processing to the production of components would increase Europeans’ standing in the global south and help propel the green transition there and in Europe – all while potentially opening new markets.
Partnerships for the planet
Research from the insurance giant Allianz suggests that other good candidates for EU partnerships in the global south are Vietnam, Indonesia, Malaysia, Mexico, and Brazil. All these states possess significant industrial capabilities as well as resources, making them ideal partners in the EU’s attempt to diversify its supplies. Indonesia has banned the export of nickel ore, spurring downstream investments in processing. The Brazilian search for investors in its lithium sector is a clear opportunity: if the EU steps in, sharing mining techniques and developing local manufacturing plants powered by renewables, it will diversify its suppliers while also helping the country green its economy. The EU is already establishing a similar partnership with Chile that also covers green hydrogen.
The global south is the most exposed to the disastrous effects of climate change. But countries there often lack the technology and resources to implement adaptation and mitigation measures. With debt costs rising as fast as temperatures, they face the hard choice between providing basic services now or starting expensive green projects that are unlikely to yield results in the short term. More cooperation with the EU and member states in non-strategic supply chains, if accompanied by the sharing of eco-friendly technology, could boost economic growth and help contain emissions.
It would remain a challenge for Europeans to finance these initiatives. They need to opt for cost-effective solutions and domains where EU industrial players possess the relevant capabilities. A recent debt-swap between Egypt and Germany could set an example: EU member states and development banks should provide debt relief on the condition that the forgiven amount would be funnelled into climate action in close coordination with European finance institutions. This kind of initiative requires political and economic commitment from the EU and its member states, but would amount to investments in their economic security and the future of the planet.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.