Europe’s China Dilemma: Balancing Decarbonization and Green Industry Growth

As Europe embarks on an ambitious journey towards sustainable energy, the question remains: how inward-looking can this transition be? In 2024, a remarkable 47% of the EU’s energy came from renewables. Surprisingly, despite this significant shift, most of the technologies fueling this green revolution come from outside Europe, particularly from China.

To put this into perspective, in 2024, China supplied a staggering 92% of the world’s solar panels and 82% of wind turbines. Notably, there are no European companies among the top ten solar panel manufacturers. While Vestas, a European firm, leads in wind turbine production, the rest of the top ten consists of companies based in other countries.

This brings us to a crucial question: Should Europe take this unique chance to develop its own renewable energy supply chain? This would create green jobs and sustainable wealth or rely on established Chinese suppliers who can deliver at lower costs and in larger quantities.

The Economic Reality

From an economic standpoint, Daniel Grosvenor, an energy consultant at Deloitte in London, suggests that Europe might need to lean on Chinese providers for now. He emphasizes, “What Europe really needs most of all is cheap, abundant, and reliable energy.” He believes that the broader economy will benefit more from affordable energy than from building its own supply chain for renewables.

Building local capacity is often more expensive and would slow down the rollout of renewable technologies. A stark example lies in the electric vehicle (EV) market, where Chinese brands like MG, BYD, and Polestar are gaining market share rapidly in Europe. Just last year, Chinese EVs constituted only 1% of the market; today, that figure has jumped to 9.5%. This growth is largely attributed to competitive pricing supported by Chinese state subsidies.

Take BYD, for instance. After entering the European market in 2021, they sold over 11,000 EVs in just September 2023, marking an increase of 880% from the previous year. Car rental company Sixt is also planning to expand its fleet with 100,000 BYD electric cars by 2028.

Jan-Henrik Rauhut from Siemens praises the quality of Asian manufacturers, stating, “They are spot on from a quality and technology point of view.” Although European manufacturers still have an edge in service networks, this might change as the market evolves.

The Security Factor

But economics isn’t the only issue Europe faces. The political landscape also plays a crucial role, especially regarding the security of energy supplies. The EU has spent considerable effort reducing its dependence on Russian gas, particularly after the tensions that arose in 2022. However, depending on a single country like China for renewable technology raises similar concerns about vulnerability.

Grosvenor asks, “If we rely on one country for much of our energy supply, should we be comfortable?” Many European nations are now considering the strategic implications of their supply chains.

Despite growing political will to buy locally made products, the level of Chinese subsidies creates significant barriers. A report from the OECD highlighted that between 2006 and 2023, Chinese wind turbine manufacturers benefited from significant government support, making it difficult for EU companies to compete effectively.

Emerging Opportunities

While the challenges are stark, there is a glimmer of hope for European manufacturers. Although Europe may struggle to compete on price, it could potentially excel in technological innovation. David Ward, CEO of Oxford PV, explains that while Chinese manufacturers face financial challenges, European firms could focus on creating efficient technologies.

Ward’s company has developed the most efficient solar panel in the world by adding a thin layer of a new material called perovskite over traditional silicon. This innovation allows their panels to convert nearly 27% of sunlight into electricity. Although the upfront cost may be higher, the long-term energy costs are expected to be lower than conventional options.

Conclusion

The European energy transition is certainly promising, but it is also complex. Europe faces the delicate challenge of balancing the need for cheaper energy against the urgency to build its sustainable industries. While relying on Chinese suppliers for the time being can secure economic stability, investing in local capabilities and technology could pave the way for a more sustainable future.

As Europe navigates this green landscape, the focus should not only be on immediate costs but also on creating a resilient, innovative, and secure energy economy for years to come.

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Original Text – https://fortune.com/2025/10/15/europe-china-dilemma-does-the-eu-need-to-pick-between-faster-decarbonization-and-green-industry/