Europe risks losing ground to China in net-zero industrial race: Report

The European Union faces an increasing threat of losing its competitive edge in the global race for net-zero technologies, particularly against China’s rapid expansion in the clean tech sector, according to a report by Strategic Perspectives, a Brussels-based think tank.

Titled ‘The global net-zero industrial race is on. A wake-up call for a powerful Clean Industrial Deal,’ the report analyzes the EU’s position in the race with China and the US to become a leader in net-zero emissions industry.

The report reflects the performance of these three major economies in key indicators such as net zero emission investments, the number of jobs created in the energy transition process, and clean technology production.

Although Europe remains in the race, it risks falling behind as China advances its ambitions to lead the global cleantech sector, according to the report. Sufficient EU funding for research and development, coupled with policies that promote creativity and support domestic manufacturing, could help the EU compete effectively, the report added.

According to the report, net-zero emissions transformation will become one of the main engines of economic prosperity, as China, the US and the EU want to become net-zero production centers in this transformation.

The report indicates that the EU remains the second most attractive location for net-zero investors in 2023 after China but ahead of the US, reaching $334 billion, $76 billion more than in 2022. While the European Green Deal supports investment boosts, the planned transformation aims to attract investors by electrifying the vehicle fleet in the EU and creating new industrial opportunities.

The report highlights that China’s ambition to dominate the cleantech market poses a significant threat to the EU’s net-zero industries, as China alone accounted for 39% of global net-zero investments, totaling $654 billion in 2023. Beijing plans to increase its battery production by four times by 2030.

The US is positioning itself as a technological leader of the future by attracting more than a third of global investment in clean energy start-ups, well ahead of Europe, the report said.

-‘Competitive and innovative gap grows with US and China’

In Europe, certain nations are taking advantage of the net-zero competition. Poland is emerging as a key cleantech manufacturing center in Central Europe, while Spain and Denmark are at the forefront of wind energy, generating employment opportunities. However, there are increasing concerns about a two-speed Europe as Germany and France attract 45% of net-zero investments.

Neil Makaroff, a director at Strategic Perspectives, said Europe is lagging in a three-way race with ‘two giants’.

‘No single European country can compete with China’s powerhouse or the US’ tech dominance on their own,’ said Makaroff.

‘As the competitive and innovative gap grows with the US and China, the EU should respond with a stronger collective response to ensure Europeans put their industries at the forefront of the net-zero economy,’ he added.

‘Opening cleantech factories in Europe and decarbonizing existing industries are one of the most important missions of the Clean Industrial Deal. And this can only be delivered through massive strategic EU investments, innovation, and support for EU-made products,’ he explained.

Aymeric Kouam, an energy analyst at Strategic Perspectives, said that the EU’s $334 billion investment in net-zero emission technologies last year is the cornerstone of economic prosperity and job creation.

‘However, with energy prices significantly higher than in the US and China, driven by the high dependency on fossil fuel imports, the competitiveness gap with these regions is widening,’ Kouam added. ‘A great amount of zero-emission electricity should be a pillar of a Clean Industrial Deal to ensure the EU’s competitiveness and economic resilience.’

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