The Iran war has set Beijing up for global clean energy dominance, but it's a double-edged sword. While it has accelerated the need for decarbonization, it has also heightened concerns about dependence on China for critical materials and technology. The EU, for instance, is now grappling with the idea of swapping one dependency for another, as it seeks to reduce its reliance on fossil fuels. The bloc's carbon tax is aimed at protecting its industries from cheap imports, but it also risks slowing down the energy transition. The question now is whether governments will put aside their reservations and embrace Chinese investment to bolster their energy security, or continue taking measures to protect their economies from China's dominance. The war in Iran has served as a painful reminder that as long as economies run on fossil fuels, they will be exposed to uncertainties beyond their control. Fuel shortages across Asia have led to conservation measures, while households and industry face skyrocketing bills. The long-term solution is to speed up the phase-out of fossil fuels, but there are fears that renewables come with their own dependencies. China produces nearly 80% of the world's solar panels and an even greater share of their core electronic components. This dominance has turned China into the engine of global decarbonization efforts, but it has also heightened concerns in some countries that domestic industries could be undercut or that China could use its grip on those materials to its advantage. The EU's efforts to build out domestic production resemble measures put in place by former President Joe Biden, who sought to loosen China's grip on batteries, solar panels, and EVs. However, the Trump administration abolished those measures, and China's clean technology exports are now overtaking US fossil fuel sales. In contrast, the EU must reduce its dependence while remaining an attractive trading partner for China. The war in Iran has pushed countries to rethink their energy strategies, and some are embracing cheap, clean energy supplies from China for now, while others are seeking to reduce their dependence on China. The reality is that China showed up with capital, speed, and a willingness to build in markets that Western firms often considered too risky or too small.
