Europe’s need to invest in breakthrough technology in the energy transition and circular economy

Europe’s need to invest in breakthrough technology in the energy transition and circular economy

For Europe, investing in breakthrough technologies across the energy transition and circular economy is not only a question of long-term climate action. It is also a matter of strategic independence and industrial competitiveness in a rapidly changing global landscape.

Energy dependency: A historical challenge

Europe has historically had limited access to raw materials, resulting in a dependence on external suppliers for both energy and critical raw materials such as lithium, copper, cobalt, rare earths, silver and gold. According to Eurostat, the EU’s energy import dependency stood at approximately 58% in 2023, meaning that nearly six out of ten units of energy consumed were sourced from outside the Union¹. This is further substantiated in the two graphs below.

Graph 1: EU energy dependency by fuel in selected years

Source: Eurostat data.

Graph 2: Evolution of total energy supply by source in Europe since 2000

Source: International Energy Agency.

It can be noted that the trend shows that energy dependency increased from approximately 50% in 1990 to around 58-60% in the early 2000s. It landed at 58,3% in 2023. In addition, the share of renewables in the energy mix is growing substantially. The chart shows that the share of renewables in the energy mix in the European Union grew from was 9.6% in 2004 to 24,6% in 2023.

The increasing share of renewables in the energy sector is promising and reflects substantial investments in the industry. However, it also gives rise to new challenges, particularly the issues of curtailment² and negative power prices. This creates a need for additional investments in storage capacity. Research indicates that approximately 200 GW of additional storage must be installed by 2030 to mitigate curtailment and negative pricing.

Critical raw materials: Europe’s hidden vulnerability

Europe’s energy dependency is mirrored, and in some cases, dramatically exceeded by its reliance on critical raw materials. The European Commission has identified 34 raw materials essential to Europe, for which import dependency exceeds 80% for the majority, and reaches 100% for several³. Reuters reporting on the Critical Raw Materials Act confirms that Europe currently lacks sufficient domestic mining, processing, and recycling capacity to support its electrification and decarbonisation objectives⁴.

The overarching implication is clear: Europe’s industrial ambitions are growing, while access to the underlying resources is tightening on the back of increasing macroeconomic uncertainty and volatility.

This is why the energy transition and material scarcity should be qualified as industrial system challenges, not simply climate narratives. Electrification, renewable power generation, battery storage, and grid infrastructure all materially increase demand for scarce metals. The International Energy Agency estimates that demand for minerals such as lithium, copper, and rare earth elements could increase between four- and sixfold by 2040 on the back of net-zero pathways⁵. Without structural innovation in materials efficiency, substitution, recycling, and system redesign, Europe risks replacing energy dependency with materials dependency. In essence, this would mean shifting vulnerability rather than eliminating it.

The European Green Deal reflects this reality quite well, despite its climate framing. The Green Deal calls for an industrial reset aimed at preserving Europe’s relevance in a world defined by scarcity and geopolitical competition. Circularity, advanced recycling, alternative materials, and energy-efficient industrial processes are not secondary policy ambitions; they are the foundation of a viable European industrial model.

Investment opportunities

From an investor’s perspective, this transition creates a compelling investment opportunity. Market demand is policy-driven, providing a structural market pull and a strong hedge. Moreover, Europe is de-risking innovation through regulation, funding instruments, and strategic coordination⁶.
The coming years will be both transformative and decisive. Legacy systems are no longer meeting evolving market realities and dynamics. As such, a continued push for breakthrough innovation is required to rebuild Europe’s industrial capabilities. Investments in energy transition and circular economy technologies are therefore investments in industrial relevance, strategic autonomy, and long-term competitiveness.

Graph 3: Major EU suppliers of critical raw materials in 2023 and their governance levels based on the average of six worldwide governance indicators

Source: European Commission

¹ Eurostat, Energy Import Dependency Statistics, 2023.
² Grid operators and electricity producers decide to limit/switch off the output of certain generators.
³ European Commission, Critical Raw Materials List and Supply Risk Assessment.
⁴ Reuters, EU must set aside over €10 billion for key minerals under the Critical Raw Materials Act.
⁵ International Energy Agency (IEA), The Role of Critical Minerals in Clean Energy Transitions.
⁶ Reuters and Bloomberg, coverage of EU industrial policy, clean-tech funding, and strategic autonomy initiatives.