Can the EU and China navigate their dispute over critical raw materials and clean energy technologies?

In the ever-evolving landscape of global geopolitics, worsening climate change impacts and the need to accelerate the clean energy transition, the contest for critical raw materials and renewable energy technologies has emerged as a focal point of contention between the European Union (EU) and China. The upcoming EU-China summit in Beijing on 5 and 6 December offers an opportunity to address their disagreements.
Wind turbines are pictured near Heide, Germany, on 11 September 2023. (Daniel Roland/AFP)
Wind turbines are pictured near Heide, Germany, on 11 September 2023. (Daniel Roland/AFP)

Since the Russian invasion of Ukraine, the European Union (EU) has become cognisant of its vulnerability to external supply chain disruptions. The EU's policy response to this geopolitical turmoil involves not only diversifying its energy sources, but also safeguarding access to critical raw materials for net-zero technologies.

As of November 2023, the EU is set to adopt the Critical Raw Materials Act and the Net Zero Industry Act as part of a broader strategy to diversify its supply of essential resources and to boost the domestic manufacture of “strategic” net-zero technologies, including solar and battery technologies. 

Disagreements between the EU and China

These developments have given rise to various disagreements between the EU and China over critical raw materials and clean energy technologies, uncovering an intricate interplay between strategic economic interests, resource and climate security, and geopolitical considerations.

For Europe, the entrenched nature of China's dominance in critical material supply chains such as rare earth metals poses significant challenges. There is growing unease about Beijing’s recent export curbs on graphite, an electric vehicle battery material, as well as gallium and germanium. Also, China manufactures 80% of all the solar panels produced globally, and as Europe aims to triple the amount of energy generated by solar, it also aims to rebuild manufacturing capacity. 

... under the Net Zero Industry Act, Chinese solar products and wind turbines could be excluded from public tenders for large renewable energy projects.

For China, ensuring access to Europe’s market for its low-carbon technologies is a key concern, especially after the European Commission launched an investigation into subsidies for made-in-China electric vehicles in October. Also, under the Net Zero Industry Act, Chinese solar products and wind turbines could be excluded from public tenders for large renewable energy projects.

Employees work on solar photovoltaic modules at a factory in Haian, Jiangsu province, China, 21 November 2023. (AFP)
Employees work on solar photovoltaic modules at a factory in Haian, Jiangsu province, China, on 21 November 2023. (AFP)

Amid the disagreements and concerns over supply chain dominance and market access, there is also room for collaboration between the EU and China in the transition. 

Potential cooperation on circular economy

A pivotal component for ensuring resilient supply chains of critical raw materials lies in adopting a circular economy model. The EU's ambitious targets include achieving 10% domestic extraction of raw materials, processing 40%, and recycling at least 25% of the EU's annual consumption of raw materials. Embracing a circular economy specifically tailored for critical raw materials entails prioritising strategies like remanufacturing, repair and reuse of products containing critical raw materials, along with robust recycling practices. 

This approach not only significantly curtails the necessity for primary materials and reduces the pressure on additional extraction but also averts the environmental impacts associated with the disposal of toxic waste materials.

Moreover, the circular economy model has the potential to alleviate geopolitical tensions arising from the competition for securing mining sites, particularly as nations contend for access to indispensable resources vital for advancing clean energy technologies. The strategic significance of mining sites has heightened in this context, emphasising the imperative for circular practices.

... the EU and China agreed on the joint development of a cooperation roadmap on circular economy and to start its rollout in 2024.

The EU and China signed a Memorandum of Understanding on Circular Economy Cooperation already back in 2018. The memorandum was extended for another five years at the EU-China High-Level Policy Dialogue on Circular Economy, held in Beijing on 26 September. The dialogue identified opportunities for cooperation on batteries and remanufacturing as important topics of mutual interest.

Furthermore, the EU and China agreed on the joint development of a cooperation roadmap on circular economy and to start its rollout in 2024. This intention could be strengthened during the upcoming EU-China summit.

An employee working at the SUSTAINera Circular Economy Hub at Stellantis NV's Mirafiori complex in Turin, Italy, 23 November 2023. (Giuliano Berti/Bloomberg)
An employee working at the SUSTAINera Circular Economy Hub at Stellantis NV's Mirafiori complex in Turin, Italy, on 23 November 2023. (Giuliano Berti/Bloomberg)

Already, in the recent Sunnylands Statement issued on 14 November during the high-level Biden–Xi meeting at the APEC summit, both the US and China declared their commitment to collaborate on circular economy and resource efficiency. Relevant government agencies intend to conduct a policy dialogue on these topics and support enterprises, universities, and research institutions of both sides to engage in discussions and collaborative projects. 

Responsible mining for sustainable development in Africa

In the pursuit of securing critical raw materials, it is imperative for both the EU and China to recognise the significance of environmental, social and governance (ESG) standards in mining and extraction.

Cooperation on ESG is particularly crucial to mitigate the environmental and social impacts often associated with resource extraction in developing producer countries, notably in Africa. There are inherent trade-offs with biodiversity and potential ecological consequences that must be carefully considered in the quest for resource security.

By establishing and implementing common ESG standards, both the EU and China can contribute to responsible and sustainable practices, ensuring that the race to secure critical raw materials does not come at the expense of nature and local communities. As the International Energy Agency has pointed out, failure to consider ESG may also limit the supply of the minerals that are critical to energy transitions. 

Cooperation on internationally and mutually agreed mining certification standards can help policymakers and businesses in Europe and China create transparency and foster trust in the sourcing of mined products. For example, the Initiative for Responsible Mining Assurance (IRMA) is in the process of updating its original 2018 global standard to a Standard for Responsible Mining and Mineral Processing 2.0.

As both the EU and China engage in infrastructure and mining projects globally, integrating ESG standards into mining and extraction practices becomes a shared responsibility.

A haul truck is seen at the Mogalakwena platinum mine in Mokopane, Limpopo province, South Africa, 18 May 2016. (Siphiwe Sibeko/Reuters)
A haul truck is seen at the Mogalakwena platinum mine in Mokopane, Limpopo province, South Africa, on 18 May 2016. (Siphiwe Sibeko/Reuters)

A collaborative approach towards responsible mining is not only vital for the EU's Critical Raw Materials Act, but also needs to be considered in China's Belt and Road Initiative (BRI) and Europe's Global Gateway development cooperation. At the latest Global Gateway Forum in Brussels on 26 October, the EU signed agreements with the Democratic Republic of the Congo and Zambia to develop critical raw materials value chains and the development of the Lobito Corridor.

As both the EU and China engage in infrastructure and mining projects globally, integrating ESG standards into mining and extraction practices becomes a shared responsibility. Emphasising ethical and sustainable mining practices will not only strengthen the environmental and social fabric of producer countries but will also contribute to the credibility and sustainability of both the BRI and the Global Gateway initiatives. This cooperative stance underscores the importance of global partnerships in addressing the intertwined challenges of resource security, environmental protection and social impacts.

As the EU and China navigate this complex landscape, they must strike a balance between supply chain vulnerabilities, economic competitiveness and long-term sustainability. Collaborative efforts are needed to provide a pathway to shared solutions for global challenges such as climate change and resource security. 

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