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Europe’s Energy Future Hinges on Global Powers

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Europe’s Energy Future Hinges on Global Powers

The European Union’s drive to replace Russian energy imports within two years, boost renewable energy rollout, and meet net-zero goals has put it in a position to become even more dependent on the two antagonistic global powers, the United States and China.

The EU trade deal with the U.S. and the EU’s reliance on China-made solar PV panels, wafers, and critical battery metals are likely to keep shaping the pace of energy transition in the European Union, which remains firmly committed to decarbonizing economies and becoming a carbon-neutral bloc by 2050.

The new geopolitical realities in an increasingly protectionist world make the EU’s energy transition more dependent on trade and tariff policies by the U.S. and China.

In the goal to ditch all Russian energy by 2027, the EU is now more dependent on the United States than ever, while the target to accelerate renewable energy installations hinges on Chinese export policies for solar panel components and critical and rare earth elements.

“Balancing energy security and political realities will determine the pace and success of the EU’s energy policies in the coming years,” Reuters energy columnist Ron Bousso points out.

The reality under U.S. President Donald Trump is that Europe pledged to buy a total of $750 billion of American energy in three years, or about $250 billion per year. This would be more than tripling the $76 billion worth of American energy imports into the EU in 2024.

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A large part of the planned increase is expected to come from additional purchases of LNG from the United States.

“Purchases of US energy products will diversify our sources of supply and contribute to Europe’s energy security,” the President of the European Commission, Ursula von der Leyen, said last week, commenting on the trade deal with the U.S., under which the American tariffs on most EU goods would be at 15%, half compared to the initially proposed 30%.

“We will replace Russian gas and oil with significant purchases of US LNG, oil and nuclear fuels.”

So far, so good.

But Europe is set to boost its reliance on U.S. LNG and pay higher prices for it, as soaring U.S. exports would drive U.S. benchmark prices higher, while competition for LNG supply with Asia will intensify.

Significantly higher EU purchases will need a significant increase in U.S. export capacity.

Even if all other planned or announced projects were approved today, they won’t make it on time for a significant rise in LNG exports to drastically boost EU imports within three years.

U.S. LNG exports are booming, but they won’t be anywhere close to helping the EU triple its imports of American energy, per the trade deal.

Europe, however, will become even more dependent on U.S. LNG.

The U.S. is already the EU’s top supplier of LNG, with 55% of LNG supply to the bloc from the U.S. so far in 2025, according to estimates by the European Commission.

The US is also the EU’s top oil supplier (17% of all EU imports in 2024), and a key supplier of nuclear fuel and fuel services.

The Commission insists that the EU-U.S. trade deal “does not undermine EU’s determination to decarbonise” as a jump in LNG imports over the next three years “is fully compatible with our medium- and long-term policy to diversify our energy sources and to implement the REPowerEU Roadmap so that we fully phase out Russian energy imports as soon as possible.”

The pillar of the REPowerEU plan and net-zero goals is the acceleration of solar and wind energy capacity installations.

And here comes the Chinese dominance in solar power panels and other equipment. In 2023, China was the EU’s largest supplier of solar panels, accounting for a whopping 98% of all imports, per the latest Eurostat data.

Cheap Chinese panels are helping with the solar capacity rollout, but they have put many European solar manufacturers out of business.

China’s stronghold in critical minerals and rare earths is also a serious concern for Europe’s automotive and renewable energy sectors. Stephane Sejourne, European Commissioner for Prosperity and Industrial Strategy, has even called for the creation of a strategic EU rare earths reserve.

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