Europe should ensure domestic production of critical transition technologies to lessen import dependence – report

Europe and Germany should ensure that certain elements of the supply chain of industries critical for the move to climate neutrality happen on their home turf to make the continent and country more resilient and less dependent on imports, said a report commissioned by the Climate Neutrality Foundation. "The issue of resilient supply chains is not just an economic issue or a challenge for the transformation, but a highly political issue of national security and national sovereignty," said Regine Günther, director of the foundation.

Researchers from consultancy Prognos, the Institute for Applied Ecology (Öko-Institut), and the Wuppertal Institute for Climate, Environment and Energy examined the supply chain of key transformation technologies such as wind power, solar PV, lithium-ion batteries, green steel production, and heat pumps. They looked at whether there was a strong dependence for raw materials, components, or strategic goods - or if one was likely to arise. They then laid out strategies and instruments to reduce these dependencies, which can leave countries exposed to geopolitical turbulence. "Targeted investments in domestic transformation industries and locating particularly critical parts of the supply chains in Germany or Europe enable the successful and resilient transformation to climate neutrality," said the report. Among these particularly critical parts were wafer production for the solar PV industry, making permanent magnets for wind turbines or e-mobility, or the entire value chain of lithium-ion batteries. The researchers recommended introducing "resilient content" rules, such as standards and quality criteria for state support programmes or for imports of goods. They caution that such rules would have to be in line with Word Trade Organisation (WTO) rules.

Clean resources and recycling are crucial to make the energy transition truly sustainable. The report names several raw materials as especially crucial to the energy transition: lithium, iridium, rare earths, cobalt, nickel, graphite, and manganese. These should be secured as a matter of priority with the help of "transformation partnerships" with supplying countries. The EU is currently negotiating proposals to boost net-zero industries and ensure the bloc has access to critical raw materials. Germany’s recently published national security strategy also addresses the issue.