Clean electricity production and storage are cornerstones in the energy transition. To meet the world’s growing energy needs, we must accelerate the development of green technologies.
China offers affordable production of components needed for the green transition and holds a strong market position globally across many relevant value chains, such as solar PVs, batteries, and wind turbines. In solar PV intermediates, such as polysilicon, wafers, and cells, this market share is above 80 per cent.
High market concentration increases the risk that current geopolitical tensions will increase the cost of decarbonisation through trade conflicts, such as export restrictions or the imposition of tariffs on global trade. As such, the EU faces the challenge of reconciling three often conflicting priorities: economic competitiveness, supply chain security, and open trade to ensure an affordable energy transition. This has raised questions amongst policymakers and businesses about how the EU can best design industrial and trade policy to achieve these vital goals.
Comprehensive impact assessments are necessary to evaluate the effects of protectionist measures. This includes understanding the retaliatory responses across the value chain on green technologies and their broader economic implications. The EU needs to design its industrial policy in a way that enhances productivity and reduces dependencies but without unnecessary adverse effects on transition costs.
In an ongoing project with our partner Kaya Partners, we are using our climate economic model INTERSECT to simulate the impact of protectionist measures on the cost of the green transition in Europe. The study is ongoing and will be published soon.
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