As news emerges of escalation in the trade conflict between Europe and China, it may seem naive to point to the opportunity of them working more closely together. However, we should not be surprised if that is exactly what happens in the coming years. Europe and China share a fundamental goal in the transition to clean energy, and to complete it, they need each other.
The transition to clean energy is a shared goal for Europe and China, albeit for different reasons. In China, clean energy is central to the country's economic reform plan, in which the economy transitions away from investing in real estate and infrastructure and towards high-tech manufacturing, including clean energy technologies. In Europe, besides climate targets, successive global crises have made its energy system expensive and vulnerable to disruption, necessitating a transition towards clean, local energy sources.
What is sometimes underappreciated is that, because of this shared goal, clean energy has already become a key driver of economic growth for both (see chart). In China, clean energy industries account for 25% of GDP growth; in Europe, more than 30%. In the US, the figure is just over 5%.
Most importantly, to complete the transition to clean energy, Europe and China need each other. Europe cannot achieve energy security without affordable Chinese technologies, and China cannot sustain its export model without reaching agreement with advanced economies like Europe on the rules for market access.
The key question is how exactly Europe and China will be able to cooperate amid conflict – driven mainly by Europe's concerns about overreliance on Chinese products – especially at a time when tensions are still escalating. The answer lies in the current energy crisis. Europe will increasingly discover that the greatest value from clean energy lies not in manufacturing these technologies (solar panels, wind turbines, heat pumps) but in deploying and integrating them with the local energy system, as this is what unlocks the potential of the broader economy. The Netherlands is a case in point: its congested electricity grid is already preventing new business formation even outside industrial production.
The main bottleneck for cooperation between Europe and China is therefore not economic competition but strategic security: Europe does not want to become overly reliant on a single country for its energy needs again. This will drive European policy towards a logic of diversification – as seen this week in the area of chemicals – rather than punishment (like the US approach of import tariffs on Chinese goods). This European approach could, like the Western quota policies on Japanese imports in the 1980s, provide the basis for diplomatic agreement.
