Europe faced a perfect storm in 2022, with the invasion of Ukraine upsetting the post war security order, massive disruption in energy supplies especially coming from Russia undermining the backbone of Europe’s energy system and growing geopolitical rivalry, in particular between the US and China that crippled further the world trading system on which Europe relies for its economic growth. This is but the latest episode of Europe’s failure to insulate itself from the geopolitics of energy, a position of great vulnerability akin to a “Permanent Suez” crisis. The European response to double down on the energy transition and accelerate the decarbonization of its economies is sensible and necessary. It is also the only response that leads to a more secure and prosperous Europe.
Devoid of large fossil fuel and mineral resources, the continent is dependent on an arc of authoritarian energy powers, across central Asia, Africa and the Middle East. These toxic relationships, necessary to fuel the European economy, have repeatedly threatened European domestic politics, international security and wealth, culminating with the Russian war in Ukraine. In that light, Europe’s decarbonization policies can serve as more than climate policy, but also a security and foreign policy. Europe’s strategy in this energy transition will hinge on its ability to overcome five internal problems:
- The Fiscal problem: The European Union’s fiscal rules and limited budget limit the necessary financing Europe’s energy transition requires.
- The Hostage problem: Anti-transition interest groups continue to hold national politics hostage.
- The Collective Action problem: National veto players at the European level can hold the entire Bloc back.
- The Just Transition problem: The energy transition creates winners and losers, and the latter need to be compensated fairly, as exemplified by the “Gilets Jaunes” protests.
- The Industrial problem: Europe’s industrial base, green or otherwise, is increasingly challenged outside its borders.
- The Multilateral problem: Europe will need to support decarbonization outside its own borders, and in particular in less-developed countries.
Europe will need to completely overhaul its economic, trade and fiscal policies if it is to find a sustainable place in this new order. The race for critical minerals, of which Europe is once again bereft, will force European policymakers to redefine their relationships with mining states, while learning from the mistakes of the past. Further down the value chain, Europe risks massive deindustrialization if it fails to compete with Chinese and American firms. Finally, the Bretton Woods institutions that have governed global financial markets need to be reformed to unlock climate financing for less-developed States. This is a tall challenge that will require leaning on the US as much as possible.
Europe has entered the race to “net zero” from a position of weakness, and will need to reform internally and chart a path between the United States and China so as to avoid confrontation. Europeans should find an arm-length relationship that allows creating a Critical Minerals Club with the United States, reassure China about the scope of its economic de-risking and push hard for reforms international financial institutions, and push for a global “green” spending target as a percentage of GDP. This is an arduous path, but the only one which ensures Europeans a secure and prosperous place in the new world order.
About the authors
Ben Judah is director of the Transform Europe Initiative and a senior fellow at the Atlantic Council’s Europe Center. His current research focus is on the European consequences of Russia’s invasion of Ukraine, transnational kleptocracy, European energy and decarbonization politics, and Britain’s attempts to reset its diplomatic posture after Brexit.
Shahin Vallée is a senior research fellow in DGAP´s Center for Geopolitics, Geoeconomics, and Technology. Prior to that, he was a senior fellow in DGAP’s Alfred von Oppenheim Center for the Future of Europe.
Tim Sahay is a nonresident senior fellow at the Atlantic Council’s Europe Center and the senior policy manager at the Green New Deal Network, a coalition of labor, climate, and environmental justice organizations growing a movement to pass national and international green policies.
The Europe Center promotes leadership, strategies and analysis to ensure a strong, ambitious and forward-looking transatlantic relationship.
Report Oct 16, 2023
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