Europe’s climate transition relies on critical mineral supply chains dominated by China. To ensure that Europe is autonomous and competitive, it must pair domestic action with targeted development investment in resource-rich partner countries, writes Apostolos Thomadakis, Senior Research Fellow and Head of the Financial Markets and Institutions Unit at CEPS; Head of Research at ECMI.
The EU is discovering, late, that the green transition is not just a climate project. It is a supply-chain project.
Wind turbines, batteries, electrolysers and grid infrastructure all depend on inputs that are mined, processed and traded in a world where geopolitical leverage is real. And the uncomfortable fact is that the EU’s decarbonization timetable runs through supply chains in which China remains dominant. The European Court of Auditors warned that the EU is struggling to diversify critical raw materials fast enough, putting the bloc’s climate and energy objectives at risk.
As EU leaders discuss how to make Europe more competitive, the numbers show why this makes us vulnerable. The International Energy Agency notes that supply concentration risks are greatest in processing and refining. In rare earths, needed to make electronics and for the EU’s transition to cleaner energy, China’s share is around 90% globally.
The EU can and should scale domestic extraction, processing and recycling of these materials. The Critical Raw Materials Act sets 2030 benchmarks to promote this, and sets a cap so that no single third country accounts for more than 65% of EU consumption of any strategic raw material. Even if these targets are met, new mines and refineries take years to permit, finance, build and connect to power.
Today’s scramble for critical minerals has an obvious trap. The EU tries to rely less on China by buying the same materials from different countries, while bottlenecks remain because these countries lack basic infrastructure – from refining capacity and grid connection, to functioning health and education systems and governance. That approach fails because it treats the problem as only an issue with the supply of minerals, but problems go well beyond that. In reality, the lack of basic infrastructure in third countries is what generates many of the challenges the EU faces in securing critical raw materials. This is especially true for projects that meet high environmental and labour standards, which are more expensive and require solid mechanisms to be implemented and regulated.
What should the EU do now if it wants strategic autonomy without sacrificing the green transition? The missing piece is not another communiqué on partnerships. It is a substantive, well-targeted investment in development aid, aimed specifically at countries rich in critical minerals which need support to develop local capacity, including health and education systems and infrastructure.
The goal is simple. Work with resource-rich partners to identify gaps in the value chain, strengthen institutions and infrastructure, and build reliable long-term partnerships. That is how the EU makes diversification real rather than rhetorical. That also means attracting private capital by pairing grants with other financial support – including through entities like the European Investment Bank. This approach creates local jobs and ensures alignment with environmental standards, sustainability, and anti-corruption measures. Development is the key to a win-win economic strategy – it’s good for them, and it’s good for us.
None of this replaces what Europe must do at home, but it does recognise the hard truth the auditors are highlighting. The EU cannot regulate its way out of a materials dependency. It must invest its way out, strategically.
The choice is not between climate ambition and competitiveness. The choice is between a transition that is hostage to concentrated supply chains and hostile foreign powers, versus a transition anchored in trusted partnerships. Without secure supply chains, there’s no strategic autonomy. If the EU wants to be truly independent, it should see development aid not as charity, but as an essential part of Europe’s green and competitive industrial future.
