Energy Shift
What is the Cost of Europe’s Energy Crisis?
What is the Cost of Europe’s Energy Crisis?
Europe is scrambling to cut its reliance on Russian fossil fuels.
As European gas prices soar eight times their 10-year average, countries are introducing policies to curb the impact of rising prices on households and businesses. These include everything from the cost of living subsidies to wholesale price regulation. Overall, funding for such initiatives has reached $276 billion as of August.
With the continent thrown into uncertainty, the above chart shows allocated funding by country in response to the energy crisis.
The Energy Crisis, In Numbers
Using data from Bruegel, the below table reflects spending on national policies, regulation, and subsidies in response to the energy crisis for select European countries between September 2021 and July 2022. All figures in U.S. dollars.
Country | Allocated Funding | Percentage of GDP | Household Energy Spending, Average Percentage |
---|---|---|---|
🇩🇪 Germany | $60.2B | 1.7% | 9.9% |
🇮🇹 Italy | $49.5B | 2.8% | 10.3% |
🇫🇷 France | $44.7B | 1.8% | 8.5% |
🇬🇧 U.K. | $37.9B | 1.4% | 11.3% |
🇪🇸 Spain | $27.3B | 2.3% | 8.9% |
🇦🇹 Austria | $9.1B | 2.3% | 8.9% |
🇵🇱 Poland | $7.6B | 1.3% | 12.9% |
🇬🇷 Greece | $6.8B | 3.7% | 9.9% |
🇳🇱 Netherlands | $6.2B | 0.7% | 8.6% |
🇨🇿 Czech Republic | $5.9B | 2.5% | 16.1% |
🇧🇪 Belgium | $4.1B | 0.8% | 8.2% |
🇷🇴 Romania | $3.8B | 1.6% | 12.5% |
🇱🇹 Lithuania | $2.0B | 3.6% | 10.0% |
🇸🇪 Sweden | $1.9B | 0.4% | 9.2% |
🇫🇮 Finland | $1.2B | 0.5% | 6.1% |
🇸🇰 Slovakia | $1.0B | 1.0% | 14.0% |
🇮🇪 Ireland | $1.0B | 0.2% | 9.2% |
🇧🇬 Bulgaria | $0.8B | 1.2% | 11.2% |
🇱🇺 Luxembourg | $0.8B | 1.1% | n/a |
🇭🇷 Croatia | $0.6B | 1.1% | 14.3% |
🇱🇻 Lativia | $0.5B | 1.4% | 11.6% |
🇩🇰 Denmark | $0.5B | 0.1% | 8.2% |
🇸🇮 Slovenia | $0.3B | 0.5% | 10.4% |
🇲🇹 Malta | $0.2B | 1.4% | n/a |
🇪🇪 Estonia | $0.2B | 0.8% | 10.9% |
🇨🇾 Cyprus | $0.1B | 0.7% | n/a |
Source: Bruegel, IMF. Euro and pound sterling exchange rates to U.S. dollar as of August 25, 2022.
Germany is spending over $60 billion to combat rising energy prices. Key measures include a $300 one-off energy allowance for workers, in addition to $147 million in funding for low-income families. Still, energy costs are forecasted to increase by an additional $500 this year for households.
In Italy, workers and pensioners will receive a $200 cost of living bonus. Additional measures, such as tax credits for industries with high energy usage were introduced, including a $800 million fund for the automotive sector.
With energy bills predicted to increase three-fold over the winter, households in the U.K. will receive a $477 subsidy in the winter to help cover electricity costs.
Meanwhile, many Eastern European countries—whose households spend a higher percentage of their income on energy costs— are spending more on the energy crisis as a percentage of GDP. Greece is spending the highest, at 3.7% of GDP.
Utility Bailouts
Energy crisis spending is also extending to massive utility bailouts.
Uniper, a German utility firm, received $15 billion in support, with the government acquiring a 30% stake in the company. It is one of the largest bailouts in the country’s history. Since the initial bailout, Uniper has requested an additional $4 billion in funding.
Not only that, Wien Energie, Austria’s largest energy company, received a €2 billion line of credit as electricity prices have skyrocketed.
Deepening Crisis
Is this the tip of the iceberg? To offset the impact of high gas prices, European ministers are discussing even more tools throughout September in response to a threatening energy crisis.
To reign in the impact of high gas prices on the price of power, European leaders are considering a price ceiling on Russian gas imports and temporary price caps on gas used for generating electricity, among others.
Price caps on renewables and nuclear were also suggested.
Given the depth of the situation, the chief executive of Shell said that the energy crisis in Europe would extend beyond this winter, if not for several years.
Electrification
Where are Clean Energy Technologies Manufactured?
As the market for low-emission solutions expands, China dominates the production of clean energy technologies and their components.

Visualizing Where Clean Energy Technologies Are Manufactured
When looking at where clean energy technologies and their components are made, one thing is very clear: China dominates the industry.
The country, along with the rest of the Asia Pacific region, accounts for approximately 75% of global manufacturing capacity across seven clean energy technologies.
Based on the IEA’s 2023 Energy Technology Perspectives report, the visualization above breaks down global manufacturing capacity by region for mass-manufactured clean energy technologies, including onshore and offshore wind, solar photovoltaic (PV) systems, electric vehicles (EVs), fuel cell trucks, heat pumps, and electrolyzers.
The State of Global Manufacturing Capacity
Manufacturing capacity refers to the maximum amount of goods or products a facility can produce within a specific period. It is determined by several factors, including:
- The size of the manufacturing facility
- The number of machines or production lines available
- The skill level of the workforce
- The availability of raw materials
According to the IEA, the global manufacturing capacity for clean energy technologies may periodically exceed short-term production needs. Currently this is true especially for EV batteries, fuel cell trucks, and electrolyzers. For example, while only 900 fuel cell trucks were sold globally in 2021, the aggregate self-reported capacity by manufacturers was 14,000 trucks.
With that said, there still needs to be a significant increase in manufacturing capacity in the coming decades if demand aligns with the IEA’s 2050 net-zero emissions scenario. Such developments require investments in new equipment and technology, developing the clean energy workforce, access to raw and refined materials, and optimizing production processes to improve efficiency.
What Gives China the Advantage?
Of the above clean energy technologies and their components, China averages 65% of global manufacturing capacity. For certain components, like solar PV wafers, this percentage is as high as 96%.
Here’s a breakdown of China’s manufacturing capacity per clean energy technology.
Technology | China’s share of global manufacturing capacity, 2021 |
---|---|
Wind (Offshore) | 70% |
Wind (Onshore) | 59% |
Solar PV Systems | 85% |
Electric Vehicles | 71% |
Fuel Cell Trucks | 47% |
Heat Pumps | 39% |
Electrolyzers | 41% |
So, what gives China this advantage in the clean energy technology sector? According to the IEA report, the answer lies in a combination of factors:
- Low manufacturing costs
- A dominance in clean energy metal processing, namely cobalt, lithium, and rare earth metals
- Sustained policy support and investment
The mixture of these factors has allowed China to capture a significant share of the global market for clean technologies while driving down the cost of clean energy worldwide.
As the market for low-emission solutions expands, China’s dominance in the sector will likely continue in the coming years and have notable implications for the global energy and emission landscape.
Energy Shift
The ESG Challenges for Transition Metals
Can energy transition metals markets ramp up production to satisfy demand while meeting ever-more stringent ESG requirements?

The ESG Challenges for Transition Metals
An accelerated energy transition is needed to respond to climate change.
According to the Paris Agreement, 196 countries have already committed to limiting global warming to below 2°C, preferably 1.5°C. However, changing the energy system after over a century of burning fossil fuels comes with challenges.
In the above graphic from our sponsor Wood Mackenzie, we discuss the challenges that come with the increasing demand for transition metals.
Building Blocks of a Decarbonized World
Mined commodities like lithium, cobalt, graphite and rare earths are critical to producing electric vehicles (EVs), wind turbines, and other technologies necessary to burn fewer fossil fuels and reduce overall carbon emissions.
EVs, for example, can have up to six times more minerals than a combustion vehicle.
As a result, the extraction and refining of these metals will need to be expedited to limit the rise of global temperatures.
Here’s the outlook for different metals under Wood Mackenzie’s Accelerated Energy Transition (AET) scenario, in which the world is on course to limit the rise in global temperatures since pre-industrial times to 1.5°C by the end of this century.
Metal | Demand Outlook (%) 2025 | 2030 | 2035 | 2040 |
---|---|---|---|---|
Lithium | +260% | +520% | +780% | +940% |
Cobalt | +170% | +210% | +240% | +270% |
Graphite | +320% | +660% | +940% | +1100% |
Neodymium | +170% | +210% | +240% | +260% |
Dysprosium | +120% | +160% | +180% | +200% |
Graphite demand is expected to soar 1,100% by 2040, as demand for lithium is expected to jump 940% over this time.
A Challenge to Satisfy the Demand for Lithium
Lithium-ion batteries are indispensable for transport electrification and are also commonly used in cell phones, laptop computers, cordless power tools, and other devices.
Lithium demand in an AET scenario is estimated to reach 6.7 million tons by 2050, nine times more than 2022 levels.
In the same scenario, EV sales will double by 2030, making the demand for Li-ion batteries quadruple by 2050.
The ESG Challenge with Cobalt
Another metal in high demand is cobalt, used in rechargeable batteries in smartphones and laptops and also in lithium-ion batteries for vehicles.
Increasing production comes with significant environmental and social risks, as cobalt reserves and mine production are concentrated in regions and countries with substantial ESG problems.
Currently, 70% of mined cobalt comes from the Democratic Republic of Congo, where nearly three-quarters of the population lives in extreme poverty.
Country | 2021 Production (Tonnes) |
---|---|
🇨🇩 Democratic Republic of the Congo | 120,000 |
🇦🇺 Australia | 5,600 |
🇵🇭 Philippines | 4,500 |
🇨🇦 Canada | 4,300 |
🇵🇬 Papua New Guinea | 3,000 |
🇲🇬 Madagascar | 2,500 |
🇲🇦 Morocco | 2,300 |
🇨🇳 China | 2,200 |
🇨🇺 Cuba | 2,200 |
🇷🇺 Russia | 2,200 |
🇮🇩 Indonesia | 2,100 |
🇺🇸 U.S. | 700 |
Around one-fifth of cobalt mined in the DRC comes from small-scale artisanal mines, many of which rely on child labor.
Considering other obstacles like rising costs due to reserve depletion and surging resource nationalism, a shortfall in the cobalt market can emerge as early as 2024, according to Wood Mackenzie. Battery recycling, if fully utilised, can ease the upcoming supply shortage, but it cannot fill the entire gap.
Rare Earths: Winners and Losers
Rare earths are used in EVs and wind turbines but also in petroleum refining and gas vehicles. Therefore, an accelerated energy transition presents a mixed bag.
Using permanent magnets in applications like electric motors, sensors, and magnetic recording and storage media is expected to boost demand for materials like neodymium (Nd) and praseodymium (Pr) oxide.
On the contrary, as the world shifts from gas vehicles to EVs, declining demand from catalytic converters in fossil fuel-powered vehicles will impact lanthanum (La) and cerium (Ce).
Taking all into consideration, the demand for rare earths in an accelerated energy transition is forecasted to increase by 233% between 2020 and 2050. In this scenario, existing producers would be impacted by a short- to medium-term supply deficit.
The ESG dilemma
There is a clear dilemma for energy transition metals in an era of unprecedented demand. Can vital energy transition metals markets ramp up production fast enough to satisfy demand, while also revolutionising supply chains to meet ever-more stringent ESG requirements?
Understanding the challenges and how to capitalise on this investment opportunity has become more important than ever.
Sign up to Wood Mackenzie’s Inside Track to learn more about the impact of an accelerated energy transition on mining and metals.
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