Several factors make outright denial of climate change increasingly difficult:

  • Direct experience of impacts—wildfires in the western US, hurricanes on the Gulf Coast, extreme heat, and flooding in Florida, Texas, and Louisiana. Mega-fires in France, Spain, and Portugal have forced massive evacuations and damaged vast tracts of land.

  • Economic and insurance pressure—rising insurance premiums and market withdrawals in high-risk areas (like Florida and California) put a dollar figure on climate risk that's hard to wave away, even for skeptics. Climate change-induced weather extremes cost the European Union over €200 billion in economic losses between 2021 and 2024 alone1, reflecting an accelerating trend across the bloc.

  • Business and agricultural interests—farmers, insurers, and even some energy companies now acknowledge that changing weather patterns affect their bottom lines and corporate America. Heatwaves, severe droughts, and shifting precipitation reduce crop yields (such as grains, maize, and fruits), driving up food inflation and causing billions in direct production losses, particularly in Southern and Central Europe.

  • Scientific consensus and elite discourse — the overwhelming consensus among climate scientists makes flat denial a harder position to defend in national and international settings, including for officials who have to engage with allies and global bodies. It is said that a wise leader can recognize mistakes and correct them.

As a result of the realities of climate change, international energy policy has moved away from the use of fossil fuels, which causes climate warming and deadly air pollution, resulting in a growing share of solar, wind, hydropower, and biofuels, with a slow decline of fossil fuels.

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The cost of solar panels declined dramatically in the last two decades. This was also made possible by large investments in production facilities by China.

image Source: Pew Research Center.

This led to a rapid increase in electricity production by solar panels, accompanied by wind turbines, which also decreased in cost, although less dramatically (see Renewables in green below).

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In the same period, battery production accelerated for electric vehicles and grid storage. "Battery storage is the fastest-growing power technology today. In 2025, 108 GW of new battery storage capacity was deployed worldwide, up 40% from 2024. Lithium iron phosphate (LFP) batteries now account for around 90% of deployments. While less energy dense than rival chemistries commonly used in EVs, LFP batteries are typically cheaper and better suited to more frequent cycling. China has invested substantially in battery production. Just five years ago, LFP batteries accounted for well below 50% of deployment market share1".

Global sales and deployment of batteries across electric vehicles (EVs) and stationary energy storage are experiencing a structural shift, characterized by moderating growth in passenger EVs and explosive, record-breaking acceleration in grid-scale and distributed battery energy storage systems (BESS). Naturally, the low battery costs permitted the boom in electric vehicles, which reached new highs in 2025, exceeding 20 million sales. The share of electric cars in the automobile market reached 25%2.

What has emerged is an energy strategy based on the key technologies of solar panels, wind turbines, batteries for EVs, EVs themselves, batteries for grid storage and distributed energy storage systems (BESS), plus heat pumps as an alternative to gas boiler space heating and as needed for air conditioning on a hotter planet, together with the various ways of increasing energy efficiency.

Clean technologies gain share based on economics alone. Most emissions reductions over the next decade will come from clean power and electrification, with renewables displacing coal generation and electric vehicles slowing growth in oil demand. A net zero scenario combines accelerated deployment of renewables, batteries, and EVs with large-scale use of hydrogen, carbon capture, and sustainable fuels to drive deeper emissions reductions across industry, transport, and buildings.

Electrification is the main climate strategy for transport, heating, and industry, but it only helps the climate if the added electricity is clean. At the same time, data centers (especially AI-related), EV charging, heat pump adoption, and broader digitalization are pushing electricity demand up faster than in past decades, reversing years of flat consumption in many advanced economies. Clean energy technologies are becoming central to climate strategy for the simple reason: electricity demand is rising even as the world needs to cut emissions, so the two goals have to be solved together rather than separately.

A major preoccupation for the US and EU is the Chinese domination of most clean energy technologies:

image Source: As of mid-2026, based on IEA, BloombergNEF, Wood Mackenzie, SNE Research, GWEC, OECD data.

The US and EU have left most of the development and production of these clean technologies to China. In the past, it was as if we put the oil and gas technologies in the hands of a foreign supplier.

How can the US and EU better compete in these key energy technologies? China’s advantage isn’t just subsidies — it’s scale, integrated supply chains, and a decade-plus head start. That means catching up requires more than tariffs.

  1. Don’t compete head-on where the gap is unclosable—compete on the next generation. The more viable path is leapfrogging: perovskite-silicon tandem cells, solid-state batteries, sodium-ion chemistry, next-gen offshore/floating wind, and heat pump refrigerants and controls where patents and performance—not commodity cost—decide the winner. Companies like First Solar (thin-film, non-Chinese supply chain); Northvolt successors; and QuantumScape are examples of firms trying to build a technology moat, rather than a cost moat. Governments can accelerate this via targeted R&D funding, demonstration-plant grants, and fast-track permitting for pilot lines.

  2. Fix the input-cost gap, not just the output-price gap. A large part of China’s cost advantage is upstream: cheap, state-directed capital; industrial electricity prices; and vertically integrated raw-material processing (China refines ~60–70% of world lithium and ~90% of rare earths, even where it doesn’t mine them). Western manufacturers pay more at every stage before the factory gate.

    Concrete levers are: cheap, patient capital: EU and US developers are increasingly citing financing cost as the single biggest disadvantage versus Chinese state banks. Vehicles like the EU’s proposed sovereignty/competitiveness funds, national promotional banks (KfW, CDP, BPI), and the US DOE Loan Programs Office can substitute for the “patient capital” that CATL, BYD, and Chinese solar majors get from state banks at below-market rates.

    Industrial electricity prices: EU industrial power costs are still roughly double China’s or the US’s — this is arguably a bigger drag on battery and PV manufacturing than any tariff can offset. Long-term PPAs, targeted electricity-price relief for strategic manufacturing, and faster grid/interconnection buildout matter more than most people realize.

    Critical minerals: The EU’s Critical Raw Materials Act3 and equivalent US mechanisms (stockpiling and allied “friend-shoring” deals with Australia, Chile, Indonesia, and the DRC) reduce exposure to Chinese midstream processing chokepoints, where China’s leverage is strongest—more than in mining itself.

  3. Use demand-side policy, not just supply-side subsidies: building factories is only half the problem — you need guaranteed buyers, because Chinese overcapacity can crash prices overnight and bankrupt a subsidized plant within two years (this already happened to several European solar manufacturers).

    Non-price procurement criteria: The EU’s Net-Zero Industry Act4 explicitly allows member states to weight public tenders and auctions (renewables auctions, public EV fleets) on resilience/local-content grounds, not price alone—a shift from the “always take the cheapest bid” logic that let Chinese products win by default.

    Local-content requirements tied to subsidies (the US IRA model): domestic-content bonuses for EVs, batteries, and clean electricity generation directly favor US-based supply chains, though the trade-off is complexity and higher near-term costs for buyers.

    Green public procurement at scale—government fleets, public buildings, and defense-adjacent infrastructure—can create a guaranteed floor of demand for non-Chinese producers even before they’re cost-competitive.

  4. Increase investments in heat pumps. To date, heat pump production has been located near its marketplace. However, heat pump compressors pose a potential supply chain risk: 90 percent of rotary compressors and 30 per cent of scroll compressors are produced in China. This concentration is strategically important as compressors account for up to one third of total cost. The future industrial strategy for heat pumps also focuses on scaling high-temperature applications, improving the electricity-to-gas price ratio, and integrating smart digital controls to overcome high initial capital costs.

  5. Double down on energy efficiency. It is an important energy source, hopefully contributing to a reduction of carbon emissions as much as, or more than, solar energy. Increasing energy efficiency is also the most complex source because energy can be saved at any point of use, and its application depends on social behaviors, such as following technical norms. However, there is little or no competition from China. The technology to increase energy efficiency may exist, but the needed investment may be lacking. Because of its complexity and long investment horizon of a decade or more, energy efficiency requires a policy of good governance. As Dario Di Santo of FIRE (Italian Federation for Rational Use of Energy) illustrates, this involves defining priorities, ensuring the stability of overall energy policy, measuring results, and building consensus around the priorities chosen. Strengthening good governance and increasing investment in energy efficiency should be a very high priority.

    The International Energy Agency's 2024 energy efficiency report estimates that, on average, Europe invested about EUR 200 billion in energy efficiency annually from 2021 to 2023. Therefore, comparing the investment needs, EUR 370 billion per year to deliver the 2030 energy efficiency targets, with the EUR 200 billion investments carried out in the EU during that period, the investment gap amounts to EUR 170 billion per year. The EU needs to double down on investment levels. Combined EU and national public funding amounts to only €53 billion per year. Comparable data for the US is not available. Future energy efficiency strategies focus on smart technology, deep building retrofits, large-scale industrial electrification, the use of artificial intelligence, and energy flexibility.

A clean energy economy ìs indispensable for the EU and US!

References

1 IEA (2026), Global Energy Review 2026, IEA, Paris, page 1, Licence: CC BY 4.0.
2 IEA (2026), Global EV Outlook 2026, IEA, Paris, Licence: CC BY 4.0.
3 European Commission (2024), Critical Raw Materials Act - Internal Marke, Industry, Entrepreneurship and SMEs.
4 European Commission (2024) Net-Zero Industry Act.