CarrZee comment: This, below, from Shell’s Varro is barnstorming … the European Union is misguided if it thinks shielding Europe’s fossil fuel-vehicle-making workers is more important than overall competitiveness in international traded markets.
Europe’s post covid solar deployment rate “so often celebrated by European politicians would have been inconceivable without the Chinese scale up,” Varro says below.
Let’s collaborate against the climate crisis. Not divide each other.
Europe should compete with China, not shut China out (it shouldn’t use protectionism as a weapon like the US does … just because China 🇨🇳 is winning the EV-making competition).
China’s doing the world a favor.
Europe should protect its auto workers in a similar way to how it protected its coal workers — lots of careful policy, planning and hard work.
I’m not saying Europe should be naive about China … and all countries shouldn’t tolerate practices that are anti competitive.
Shell’s Laszlo Varro (formerly IEA):
There is a lively political debate on the role of subsidies in Chinese clean energy value chains and the appropriate trade policy response from Europe. Clearly, government incentives and policy oriented lending from state owned banks have played a major role in scaling up the clean energy supply chain. While the European wind industry is struggling, European solar deployment is running 4 times the pre-Covid speed, driving the growth of renewables, mitigating the energy crisis and bringing the EU emission reduction targets into the realm of reality.
There is no doubt that this achievement so often celebrated by European politicians would have been inconceivable without the Chinese scale up: Indeed Chinese taxpayers are subsidizing Europe’s energy security and clean energy progress.
Reasonable people can have legitimate concerns about the geopolitical issues. However, from an energy investment perspective I have little doubt that trying to decouple from China would have a price in both the cost and the timing of the transition. Awareness is insufficient to the heavy industry footprint of clean energy. There is a reason why these activities are much more likely to be in Western China than in Ile de France or Amsterdam: This year around 50 million tons of coal will be burned by the Chinese solar manufacturing industry for the high temperature heat needs of silicon refining, glass coating and also electricity for the machine tools and aluminum smelting. Protests across Europe against anything from lithium mine projects in Portugal to battery gigafactories in Hungary are examples of the adventures that the large upscaling of the clean energy manufacturing chain is likely to face in a European social context.
It should also be clear that the strong competitiveness of Chinese suppliers is not only a subsidy issue. The fact that solar and batteries are standardized, modular technologies deflects attention from the radical innovation in manufacturing systems. The Ford T model was not a spectacular car, the disruptive innovation was the assembly line. Similarly, in the past decade a continuous innovation by the Chinese industry massively reduced production costs, the energy intensity of the manufacturing process and also the reliance on expensive critical minerals. This manufacturing system innovation is as important as new designs.
How Europe and other regions will resolve the geopolitical, trade policy and macroeconomic dilemmas arising the Chinese super dominance in clean energy will be one of the key uncertainties shaping the transition pathway, watch this place.
Financial Times front page on Friday