On 23 February 2022, the European Commission presented the second in-depth analysis of Europe’s strategic dependencies. This analysis looks at five areas where Europe is increasingly dependent on third countries, and aims to foster better understanding of the risks and opportunities to address these dependencies.
Critical raw materials – such as rare earths and magnesium – are at the basis of a range of key products and technologies that will support the EU’s ability to reduce carbon emissions. Rare earth permanent magnets are crucial inputs for electric vehicles and wind turbines. Magnesium is an important alloying material for example in aluminium production, which plays an important role in reducing fuel consumption and mobility CO2 emissions.
Key issues
- The EU is strongly dependent on China for access to magnesium and rare earths. China accounts for 93% of global production of rare earth magnets and 89% of magnesium.
- EU demand for these raw materials is rising. By 2030, the EU's needs for rare earth permanent magnets may double to 40,000 tonnes per year, from 18,000 tonnes in 2019.
What can the EU do?
- The European Raw Materials Alliance has already identified 14 industrial projects to secure rare earth mining across Europe.
- The EU is also coordinating efforts to increase magnesium production in Europe, in the wake of the 2021 supply constraints.
- Further international partnerships on raw materials are being explored.
- Stronger focus on recycling and material substitution.
Safe and sustainable chemical products are crucial to products and technologies ranging from wind turbines to batteries, and from building insulation to medicines.
Key issues
- Europe has shown some dependencies on a limited number of third countries for access to several chemicals. Some are of particular strategic importance, such as iodine, fluorine, red phosphorus, lithium oxide and hydroxide, molybdenum dioxide and tungstate.
- Eurasian countries (e.g. Kazakhstan, Russia, China) are important exporters to the EU for these identified strategic chemicals.
- These chemicals have a wide range of end-uses, as part of supply and value chains for e.g. energy storage, food production, production of semi-conductors used in solar panels and production of electric vehicle batteries.
What can the EU do?
Possible measures to strengthen open strategic autonomy in the context of the Chemicals Strategy for Sustainability can include:
- Building new international partnerships
- Investing in production of sustainable alternatives in the EU
Solar photovoltaic (PV) technologies have become the world’s fastest-growing energy technology and play an important role in providing sufficient amounts of decarbonised electricity. Specific PV technologies are also critical for EU’s space and defence interests, for instance to guarantee satellite power supply.
Key issues
The European Green Deal requires a massive demand for solar energy generation: a tenfold increase needed by 2050.
EU companies are global leaders in several downstream segments of the solar PV value chain. However, the EU faces important strategic dependencies in the upstream manufacturing segments:
- China holds 96% of global solar wafer production.
- EU companies hold 1% of global solar wafer production, 0.4% for solar cells and 2-3% for modules.
Recent events worldwide have had a serious impact on the EU's import and deployment of solar PV panels: 20-25 % of EU solar projects have been postponed or cancelled in 2021.
The private-led European Solar Initiative targets scale-up of annual EU photovoltaic production to 20 GW by 2025.
What can the EU do?
Measures needed to upscale EU production, in particular on those segments where dependencies are strongest, could entail:
- Funding and support to assist that advanced and emerging technologies become market ready
- Limiting the dependence on certain critical raw materials
- Developing cooperation with international partners
Cybersecurity is crucial to ensure the safety of our digital technology, mobility, energy and health, as well as in defence and space. The increasing number of cyber-attacks requires the EU to strengthen cybersecurity and defend its interests.
Key issues
While the EU is a leader in global cybersecurity research, it lags behind in cybersecurity innovation and private investments.
- Only 14% of the world’s largest 500 cybersecurity companies are headquartered in the EU.
- Majority of hardware and software currently used in the EU for cyber defence is developed in the US and manufactured in China.
- Majority of EU cybersecurity companies are also micro- or small-sized and rely on third parties.
What can the EU do?
To strengthen EU cybersecurity capacities, the Commission has taken the following actions:
- EU Cybersecurity Strategy for the Digital Decade, including a European Cyber Resilience Act will bolster Europe’s resilience against cyber threats
- Developing a secure quantum communication infrastructure (EuroQCI)
- The European Cybersecurity Competence Centre to reinforce EU capacities in cybersecurity
- Dedicated cybersecurity funding from Digital Europe and Horizon Europe; cyber defence funding from the European Defence Fund
- EU legislative action for a number of specific technologies and products
Cloud and edge IT software is key to Europe’s digital transformation. It encompasses IT applications and services used by businesses on-demand and that follow a pay-per-use model, including those required for managing the underlying computing infrastructure.
Key issues
- The market for such technologies features a limited number of non-EU, global cloud providers. This could lead to potential risks for the EU stemming from possible foreign cloud service disruption, a lock-in effect for European users, or unlawful access to data in case of excessive implementation or modification of applicable third country legislations.
- The European cloud market is worth € 5.9 billion. Its value tripled between 2017 and 2020. However, market share of EU cloud providers decreased from 26% in 2017 to 16% in 2020.
What can the EU do?
Opportunities and actions for strengthening the capacities of the European cloud sector include:
- Funding from Digital Europe and Horizon Europe for artificial intelligence, data and cloud capacities
- European Alliance for Industrial Data, Edge and Cloud
- Connecting Europe Facility 2