Provider of in-depth & balanced analysis on hot issues around the world

Spain is suffering a prolonged drought, sparking water rationing in some parts of the country because of depleted reservoirs, causing the wildfire season to start months earlier than usual and destroying crops or farmers deciding not to plant them, which could push up food inflation (13% in April).  April was abnormally hot. The state meteorological agency Aemet said temperatures were between 7ºC and 11ºC above the average, making that month the hottest since records began in 1961. The temperature at one point in Andalusia reached an unprecedented 38.8ºC in Córdoba, underscoring Spain’s vulnerability to climate change. The temperature cooled down in May, but there was very little rain.  Spain’s dramatic situation came as the World Meteorological Organisation predicted that annual average temperatures will most probably break records again in the next five years.  So desperate are people for rain that parishioners in the Andalusian city of Jaén held a procession this month, bearing aloft a statute of Christ known as El Abuelo and calling for the first time since 1949 for the Lord to open the heavens and bring rain.  The Socialist-led coalition government announced an unprecedented €2.2 billion package of measures, including increasing the availability of water by building desalination plants and doubling the proportion of water reused in urban areas. Olive oil production –Spain accounts for 45% of the world’s supply– could be more than halved this year. The government also announced legislation that will ban outdoor workers when the meteorological office issues high temperature alerts. This followed the death of a Madrid street sweeper during last July’s heatwave.Drought is not a new phenomenon in Spain, but this one is something extraordinary. Spain has not had ‘normal’ levels of rain for three years. Just 12 litres per square metre of rain fell in the first three weeks of April, one-quarter of the normal amount. In early May, 27% of Spanish territory was in either the drought ‘emergency’ or ‘alert’ category, creating a tinderbox. Blazes ravaged 54,000 hectares of land in the first four months of the year, three times the amount in the same period of 2022, according to the European Forest Fire Information System (EFFIS).  Spain’s last severe drought was in 1993-96 when around one-quarter of the population was subject to water restrictions. Some towns in Andalusia had supplies cut off for more than 15 hours a day. In 2008 a prolonged drought forced the authorities to bring in water to Barcelona via boat to guarantee domestic use. Catalonia is again one of the most affected regions. Restrictions in many areas have been in force since March, including limiting showers to five minutes, banning the cleaning of cars and the watering of gardens. At the town of L’Espluga de Francolí (population 3,600), water supplies are turned off for nine hours during the night. The Sau reservoir, a key drinking water source, is so low that a medieval village, flooded when the reservoir was created in the 1960s, has emerged.  Rain is very unevenly distributed in Spain. The areas with the highest water abundance per surface unit are in the north and Galicia (known as the ‘wet’ Spain), much more sparsely populated than in the south, in particular, with values higher than 700 mm/year. A popular saying among Galician farmers –la lluvia es arte– (‘rain is art’) was once turned into a tourism slogan. In the rest of the country (the ‘dry’ Spain), water availability does not exceed 250 mm/year. The lowest water availability in Spain occurs in the Segura basin, where it does not reach 50 mm/year (around 20 times less than in Galicia and five times lower than the national average).  In the late 1970s the Spanish government turned Murcia, Alicante and Almería in the south-east –an area where water is minimal and none of the major rivers flow– into ‘Europe’s market garden’ by transferring water from the Tagus through the 300km Tajo-Segura Trasvase, a system of pipelines and an aqueduct. This feat of hydraulic engineering was originally planned during the Second Republic in 1931, built during the Franco dictatorship and put into service after the dictator’s death.  In a country with 17 regional governments of different political colours, as of the 1978 Constitution, water management is a sensitive issue that crosses boundaries and inflames sentiments. One of the major providers of water for the trasvase is the vast reservoir at Buendía in the region of Castilla-La Mancha, where I have long had a house. Farmers there feel aggrieved when they are restricted in using ‘their’ water because it is needed elsewhere. The trasvase has long been embroiled in disputes over how much water should or should not be transferred through it.  Farmers in the south-east benefiting from the trasvase, who produce around 70% of Spain’s vegetables and a quarter of fruit exports, are up in arms over the plans of the Socialist-led minority national government to raise the minimum level of the Tagus at source as this will result in less excess water being transferred. The level needs to be increased in order to remain in line with EU regulations on river water levels, following court rulings. Ecologists say the Tagus is at risk from overexploitation by agriculture and climate change. The plan aims to increase the river’s flow from 6 cubic metres per second to 8.6 cubic metres by 2027.  Without sufficient water, 100,000 jobs are at risk, according to the farming association SCRATS. The father of the novelist Antonio Muñoz Molina, who had a market garden in Úbeda, Andalusia, used to greet ecstatically the year’s first rain with the following words: Es lo mismo que si estuvieran cayendo billetes verdes (‘It’s as if it were raining green banknotes’, in reference to the 1,000 peseta notes at the time).  The politics of the trasvase are complicated: the Socialists control the region of Castilla-La Mancha and back the national government; Valencia, which Alicante forms part of, opposes the plan, despite being also governed by the Socialists, as does Andalusia, where Almería is located, and Murcia, both of them regions run by the conservative Popular Party (PP).  Farmland surrounding the Doñana national park, Europe’s most important wetland and a UNESCO World Heritage site, has been particularly prone to illegal wells. The authorities have long turned a blind eye. Virginijus Sinkevičius, the EU’s environmental chief, attacked a plan last month by the government of Andalusia to increase the amount of irrigable land around Doñana by 800 hectares. This would be tantamount to an amnesty for the strawberry farmers who have already sunk illegal wells there. He said the bloc would use ‘all the means available’ to make sure Spain complied with a 2021 European Court of Justice ruling condemning it for breaking EU rules on excessive water extraction in Doñana.  Farmers switched some years ago from olives to strawberries and other berries, which consume more water. Close to half of Spain’s aquifers are already in poor condition. Before 1985, groundwater was treated as private property and thus not subject to any regulations.  In another part of Andalusia, near the city of Malaga, the Civil Guard arrested 26 people in raids on illegal wells. The Guard’s environmental crimes division identified 250 infractions by fruit farmers. Spain is Europe’s biggest producer of tropical fruit.  Prime Minister Pedro Sánchez called the drought ‘one of the central political and territorial debates of our country over the coming years’. Resolving the water problem will require a national political consensus, something that is woefully lacking in so many other areas.

A single European Union cleantech manufacturing capacity target should be based on an understanding of the situation in each cleantech sector. Securing a competitive edge in cleantech manufacturing has increasingly come to be seen as a priority for Europe. China’s dominance of this sector and the subsidies offered under the United States Inflation Reduction Act (IRA) (Kleimann et al, 2023), compelled the European Commission in February 2023 to publish a Green Deal Industrial Plan with the goal of boosting the European cleantech sector and speeding up the transition towards climate neutrality (European Commission, 2023a). The industrial plan’s regulatory pillar is the draft Net Zero Industry Act (NZIA), which includes a target for the European Union by 2030 to have the capacity to manufacture at least 40 percent of its cleantech deployment needs (European Commission, 2023b). Assessing Europe’s cleantech manufacturing capacity Meanwhile, basic facts on the status of cleantech manufacturing in Europe are missing from the discussion, which has so far been mainly about global shares of cleantech manufacturing capacity (Figure 1). When looked at from a high-level perspective, China is dominant but this perspective does not allow the situation in Europe to be captured fully. Figure 1: Regional shares of manufacturing capacity of selected clean technologies, 2021  To address this, we provide an overview of Europe’s current cleantech manufacturing capacity and compare it to current cleantech deployment levels. This assessment is useful for two reasons. First, it allows for a better appreciation of the scale of the EU’s manufacturing capacities. Second, it shows that adopting a one-size-fits-all 40 percent manufacturing target, as proposed under the NZIA, may make little sense considering the very different situations of different clean technologies. A caveat is here important. A significant share of European cleantech production is currently destined for export and not the EU domestic market. We ignore this trade dimension and compare only domestic cleantech manufacturing capacities to deployment levels, thus taking an approach that is similar to the NZIA and its 40 percent headline target. Our analysis covers the manufacturing and deployment levels of five technologies pinpointed by the NZIA: solar photovoltaic (PV) panels, wind turbines (onshore and offshore), electric vehicle batteries, heat pumps and electrolysers (Figure 2). A variable picture Figure 2 shows the limited scale of the EU solar PV industry. EU countries installed 41.4 GW of new solar PV capacity in 2022, while EU manufacturers only produced 1.7 GW of wafers, 1.37 GW of cells and 9.22 GW of modules (SolarPower Europe, 2023). In other words, EU solar manufacturers, had all their output been deployed in the EU, would have met only 4 percent, 3 percent, and 22 percent of solar deployment needs, respectively. For wind turbines, however, Europe is well placed. In 2022, EU countries installed 19.2 GW of new wind power capacity in 2022: 16.7 GW onshore and 2.5 GW offshore (Wind Europe, 2023). In 2021, for onshore wind capacity, EU manufacturers produced 17 GW worth of turbine blades, and more than 11 GW of nacelles and towers (Wind Europe, 2023), equivalent to 102 percent and 71 percent of the deployment needs of the following year. For offshore capacity, they produced blades, nacelles, and towers equivalent to 2.9 GW, 6.7 GW and 7 GW respectively (IEA, 2023), or the equivalent of 116 percent and 286 percent of the deployment needs of the following year. Meanwhile, over 90 percent of clean energy transition-related additions to battery capacity in the EU in 2021 were related to electric vehicles (Bielewski et al, 2022). European electric vehicle sales in 2021 amounted to 2.3 million units, roughly equivalent to a battery capacity of 156 GWh. But domestic battery manufacturing capacity hovered around 60 GWh, or the equivalent of about 38 percent of the domestic deployment needs (but currently representing only about 7 percent of global manufacturing capacity) (IEA, 2022). Heat pumps produced in Europe mostly serve the domestic market. In 2021, global heat pump production capacity (excluding air conditioners) was 120 GW. The EU contributed about 19 GW and accounted for 68 percent (Lyons et al, 2022) of Europe’s 2.18 million newly installed heat pumps. China supplies most compressors for air-air pumps, while Europe remains the main source for air-water and ground-source pumps. Finally, water electrolyser manufacturing capacity in Europe stands currently between 2 GW and 3.3 GW per year (Hydrogen Europe, 2022), many times more than the current installed capacity, which is equal to 0.16 GW (European Commission, 2023c). The wide disparity between the current manufacturing capacity and deployment is explained by delays between investment decisions and operational deployment, lack of hydrogen demand compared to supply capacity, and regulatory bottlenecks. It is noteworthy that EU electrolyser manufacturing capacity is still far from the 17.5 GW/year target set for 2030. Too easy for some, too hard for others One implication of this analysis is that applying the same 40 percent manufacturing target to each cleantech sector as set out in the NZIA proposal, may make little sense considering the very different situations of different clean technologies. For solar panels, reaching this target would be very challenging and likely very costly, while it would be much easier (and even too conservative) for other technologies, including wind turbines and batteries. It is also unclear to what extent the target would apply to the components and materials used in the identified clean technologies. This is a crucial issue, because access to these components is often a major bottleneck for domestic manufacturing in Europe (Le Mouel and Poitiers, 2023). Instead of setting cleantech production targets, the EU would better focus on facilitating private sector investment in cleantech by providing the right enabling framework conditions. That is the only course of action that might ultimately secure Europe a competitive edge in cleantech manufacturing.

Annotation The features of the implementation of the industrial policy of the European Union aimed at achieving the goals of ensuring the functioning of green energy are considered, an assessment of the prospects for regional and global development in the context of rising prices for energy products is given The beginning of 2023 showed the correctness of scientists who have long warned about the strengthening of the negative impact on humanity of natural and climatic changes, natural disasters, man-made disasters and their consequences, which leads to a decrease in the sustainability of global economic and social development. The most incomplete list of them includes the earthquake in Turkey, the danger of a new pandemic, the strongest tornado in the USA. As for the problems of climate change for the European Union countries, at present the problem of drought and the increasing shortage of fresh water is becoming increasingly urgent there. Moreover, in the most unexpected places, natural hazards that are not characteristic of the region, including volcanic activity, may also occur. Clearly, overcoming this kind of problem will require, at a minimum, a reliable energy supply. However, the orientation of the region's industrial policy towards green energy, the creation of capacities for the production of alternative energy sources means, if we do not consider the negative environmental consequences of this, a sharp decrease in the reliability of energy supply. This is all the more important since the EU own energy production is at a rather low level. The prospective restructuring of regional gas supply means for the EU a significant decrease in the competitiveness of goods produced in the region, which, without the supply of cheap Russian natural gas, leads to the loss of the main markets.  At the same time, it is possible that regional crises, such as climate, environmental, migration, demographic, food, logistics, which continue to intensify, will one day lead to global consequences, including a financial crisis. And it will eventually lead to an exchange crisis, which will necessarily spread to commodity markets with appropriate consequences. In a natural way, ordinary EU citizens understand how the abandonment of a cheap and reliable source of energy supply will end, including its long-term consequences. And the companies of the global energy market are now confident that the time has come for long-term contracts. The fact is that modern competition, conducted by individual subjects of international relations in a very specific way, began to deny international law, primarily the UN Charter (at least Article 1.3). The result of all this will be serious disproportions in the development of the global economy and very many will have to refresh the survival skills formulated by Robert Baden-Powell (1857-1941) at the beginning of the twentieth century.

At the end of March, the negotiations that started in June 2021 on the accession of the United Kingdom to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) were successfully concluded, reflecting radical changes in British trade priorities after Brexit. More broadly, this move by London undoubtedly confirms the special importance that the Indo-Pacific region has acquired in the concept of "Global Britain" and in its subsequent relevant updates. The signing ceremony is scheduled for July 2023, for which the trade ministers of the participating countries and the United Kingdom will meet in Auckland (New Zealand). As a result of London's accession, this bloc will surpass the EU in terms of the combined population of its constituent countries. However, unlike the European Union, which the United Kingdom, on the contrary, left, the CPTPP does not have - to the satisfaction of British Eurosceptics - its own court like the EU Court of Justice, or a supranational budget. The union operates as a multinational trade agreement. An important obstacle that hindered reaching an agreement more quickly was London's refusal to weaken national food standards. But in the end, Ottawa (Canada) backed down on calls for London to lift the ban on importing beef with growth hormones. Beijing has also applied for membership in the CPTPP following London (the Chinese application is dated September 16, 2021, but negotiations have not yet begun). However, with London's accession as a full member of the agreement, China's chances of joining the bloc look somewhat weaker, as London is likely to obtain veto power on this issue. It is possible that they will use this veto under the pretext of ensuring higher trade standards within the agreement (including issues related to ecology and food safety). In any case, as It is known, the current British Prime Minister Rishi Sunak refers to China as a "systemic challenge", which London intends to respond to with "dynamic pragmatism." Currently, the CPTPP includes 11 states (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), none of which are European. These countries collectively account for 13% of global GDP. The new partnership replaced the Trans-Pacific Partnership agreement of 2016 with 12 participants, after former US President Donald Trump withdrew the US from the agreement in 2017. In 2020, the 11 countries of the CPTPP accounted for 8.4% of goods and services exported from the United Kingdom. In turn, 6.8% of imports to the United Kingdom came from these countries. The terms of the Trans-Pacific Partnership eliminate unnecessary barriers to mutual trade of services by opening financial markets and reducing obstacles to cross-border investment, facilitating data exchange, increasing business mobility, and ensuring regulatory transparency. All of this will support the British government's plans to turn the country into a global technology and service hub, strengthen semiconductor and critical mineral supply chains to produce electric vehicles and wind turbines.London already has trade agreements with most members of this trading bloc, but now these relationships can deepen, and 99% of British goods exported to the bloc countries will be subject to zero import tariffs. Tariffs on imports of Peruvian bananas, Vietnamese rice, crab sticks from Singapore, and Malaysian palm oil into the UK will be reduced (this is a controversial issue that has sparked discussion in the UK, as the production of palm oil, as ecologists point out, leads to deforestation of tropical forests). At the same time, according to assessments by the British government itself, joining the CPTPP is expected to add no more than 0.08% per year to the country's economic growth in the long term (while the slowdown in growth due to Brexit is estimated at 4%). Many politicians and trade experts rightfully point out that participation in the Trans-Pacific Partnership is not capable of compensating for the economic losses that the UK is experiencing due to its departure from the EU. Moreover, due to differences in its rules and standards from European regulations, Britain's accession will prevent it from returning to the European Union in case of a change of priorities. In other words, this agreement is like driving an additional wedge into the relationship between London and Brussels, which are just starting to improve. It is worth remembering in this regard that it was Liz Truss, a former trade minister in Boris Johnson's cabinet and one of the main advocates of independence from the EU, who submitted the British application to join the CPTPP. So far, for London, it is not so much a direct economic, but rather a strategic and symbolic acquisition, firstly due to the rapid growth (according to some estimates, up to 65% by 2030) in the number of middle-class consumers in a dynamically developing region, committed to innovation, and secondly, because of the fact that in the foreseeable future, mid-ranking trading powers such as Thailand and South Korea, which have already submitted applications, are planning to join the Trans-Pacific Partnership. Membership in the TPP is becoming more important for Britain due to the unattainability of a large trade agreement with the United States and the crisis in the World Trade Organization, which is currently unable to firmly enforce the rules of global trade. The matter is not limited to trade alone as London's foreign policy is clearly shifting towards the Indo-Pacific region. In this sense, Australia and Japan, concerned about economic pressure from China and its military ambitions, see Great Britain as a natural ally in opposing Beijing. It is assumed that stronger economic ties will lead to the strengthening of geostrategic alliances. Due to the high dependence of countries such as Chile on Beijing, which is the largest trading partner and main investor for Chileans, Britain's participation in the CPTPP, according to London's opinion, will contribute to the establishment of necessary connections that are seen by Britain's partners in the region as an attractive alternative to ties with China.

IntroductionEurope is confronting twin energy crises resulting from the impact of climate change and its energy dependence on Russian fossil fuels. Addressing these crises will require the European Union (EU) and its member states to engage in nothing short of an energy revolution that will decarbonise Europe’s energy usage and end dependence on Russian fossil fuels. Russia’s invasion of Ukraine has focused transatlantic attention on the importance of energy security and ending energy reliance on Russia. While the EU and US are now both taking immediate steps to reduce consumption and reliance on Russian supplies, some of these steps may result in increased emissions or will lead to greater reliance on other autocratic suppliers. To address the twin challenges of climate catastrophe and Russian aggression, significant action will be needed on the energy transition front in the short, medium, and long term.  Estonia, like other EU (and NATO) members is therefore at an energy crossroads. Unlike many of its EU fellow member states, it has not been highly dependent on Russian energy supply and is relatively energy secure. Domestically produced oil shale accounts for 55% of Estonia’s domestic energy supply (as of 2020).While, prior to the Russia-Ukraine war, Estonia received roughly 93 percent of its natural gas from Russia, natural gas accounts for less than 8% of Estonia’s overall energy consumption.Furthermore, the imports of the Russian gas came to an end as a result of steps taken by the Estonian government, in response to Russia’s aggression, and were replaced by liquified natural gas (LNG) from other suppliers. However, oil shale is very carbon-intensive, while increasing reliance on natural gas will do little to decarbonise energy system in the long-term. In order to meet Estonia’s climate commitments, embedded in the EU’s Green Deal and “Fit for 55” goals, Estonia will need to develop alternative sources of energy but will encounter manifold challenges in this transition. As the climate crisis deepens, the failure to meet climate targets could also have significant reputational costs internationally. Moreover, the effort to “electrify everything” – from cars to heating – will likely lead to increased demand for electricity. This will require not simply swapping out energy sources but producing more electricity with the goal of having an abundance of energy. Additionally, an abundance of cheap and clean energy will be necessary to support carbon removal projects, such as through direct carbon capture and storage technology. Thus, no matter the technological developments in other energy types, there will be demand for an abundance of clean energy. Furthermore, while there have been significant advances in renewables, there are also concerns about intermittency – when the sun is not shining, or wind is not blowing – as well as space needed for deployment. One potential zero carbon technology for Estonia to consider is new advanced nuclear technology in the form of small modular nuclear reactors (SMR). Developing a small modular reactor could contribute to enhancing regional energy security within the EU and to achieving the EU’s climate objectives. A decision to adopt nuclear energy, however, has implications not only for the national energy system or broader climate objectives. It is a sensitive area that intersects with geopolitical and national security considerations. Its pursuit means new opportunities for deepening strategic partnerships, and cooperation in nuclear energy technology is often an effective vehicle to enhance not only commercial and technological interactions but also security and foreign policy ties between countries. This is of particular importance to countries such as Estonia that seek the greater involvement of main allies such as the US, UK, France, and Germany in the Nordic-Baltic area to counter geopolitical pressure from Russia and China. The United States stands out as a pivotal ally, but the US “footprint” in Estonia remains small compared to what it could be. Also, Estonia’s foreign and security policy is currently heavily tilted towards diplomatic, military and cyber aspects when it comes to engaging the US, while energy security and energy technology receive far less attention. Nuclear energy cooperation would create new opportunities for enhancing US-Estonia ties.  At the same time, any efforts of Estonia to have “more US” in the region – particularly in such sensitive sector as nuclear energy, but also across the board – may encounter resistance. Some of it would inevitably arise from Russia and its geopolitical confrontation with the West, but it would also stem from the notions of “European sovereignty” as well as some persistent characteristics of intra-European relations, structural issues in national energy policies, and diverging geopolitical perspectives of some key countries in the EU. These aspects must be factored in when considering the geopolitical prospects of nuclear energy in Estonia and the highly appealing transatlantic dimension of these aspirations.1. Estonia’s Energy Security and Nuclear Energy OptionThe Estonian government is yet to make its decision regarding the adoption of nuclear energy for electricity generation. There is an inter-agency nuclear energy working group established to analyse the issue and articulate recommendations by 2024.The electricity prices crisis of late 2021-early 2022 drew attention and elicited many favourable assessments from various public figures. The government even decided to expedite decision-making on the matter. Prime Minister Kaja Kallas and the then Minister of Economic Affairs and Infrastructure Taavi Aas indicated their support to possible adoption of nuclear energy. Political leadership of major parliamentary political parties both in the governing coalition and opposition are mostly in favour, while only the Greens, who do not hold any seats in the parliament, are opposed. Public opinion polls conducted in early 2022 also showed high public support to nuclear energy, with 59% of the respondents being in favour. At the same time, some officials emphasize that Estonia need to carefully follow the International Atomic Energy Agency (IAEA) guidelines on national nuclear energy programme deliberations, limiting how much decision timelines could be compressed.The political decision-makers might also decide to put the option for a vote in a referendum. Estonia, by some accounts, has a strong anti-nuclear undercurrent in society, stemming from the negative experiences of Soviet-era environmental mismanagement and the civil nuclear disasters of Chernobyl in 1986 and Fukushima in 2011. If Estonia is to adopt nuclear energy, this sentiment would have to be engaged and mitigated well before any further practical steps are made, which opens opportunities for hostile disinformation operations by malignant actors. Currently, there is only one clear proposal on the table – by Fermi Energia which also has Swedish Vatenfall as a minority shareholder and expects more investors to join soon. Fermi Energia assesses that it can ensure, within a framework of a long-term contract, supply of electricity at the price of €55 per MWh for 15 years, which is about half or even one third of the current market prices in NordPool spot market in early 2022. Given that price volatility is likely to continue and even worsen, while pressure to accelerate decarbonisation will only increase, as Estonian electricity production is the most greenhouse gas-intensive in Europe, this could be seen as an economically attractive and competitive proposition. In addition, there would be heating supply available to nearby municipalities at a very competitive price compared to natural gas option. Theoretically, Estonia could, instead of developing own nuclear power, join as an investor and participant in a larger project (e.g., in Poland). However, the lead times of such projects are often too long and compound various risks, as illustrated by the recently cancelled Hanhikivi-1 project in Finland.Estonia also has a very negative experience from the Lithuanian Visaginas Nuclear Power Plant (NPP) project debacle that led to failure of Lithuania to launch a regional NPP project agreed with the other Baltic states and Japan’s Hitachi in 2011-12, while the option of buying into one of the upcoming Polish projects might not be very appealing to Estonia.In the view of some Estonian energy executives and policymakers, Polish energy needs would likely supersede those of any other participating country’s when allocating the output, and many small investors are not of high interest to nor needed by the Polish companies behind Poland’s nuclear projects. There is, however, room for cooperation in training, regulatory capacity building, R&D and similar aspects, much of which could be undertaken in the framework of the Three Seas Initiative (3SI), where the US has a leading role. Even in construction, if it takes place in parallel, some common pooled purchases could be undertaken.  Thus, should there be an affirmative decision by the government, Estonian developers are leaning towards having a national solution, even though remaining open and even actively courting participants from neighbouring countries as investors, thus in reality turning it into a regional project. Latvia is among the priorities and shows a clear interest, as demonstrated by discussions between Fermi Energia and state-owned energy corporation, Latvenergo (in this case, if Latvenergo joined the project, Estonia would deploy four SMR units instead of two). There are also ongoing talks with Finnish Fortum as a potential investor into the Estonian project, as the Russian electricity trade embargo enacted by the Kremlin – possibly in response to Finland’s application to join NATO – and the failure of the Hanhikivi-1 venture prompted Finland to seek new sources of supply in the region to satisfy future electricity demand.Thus, the company leading the Estonian project sees it as a regional one, just without the governments being in the lead. On the other hand, some officials insist that governments would inevitably come to play an essential role in such a project of strategic importance not only to Estonia, but also to the wider region. The Estonian project developers have already chosen BWRX-300 by GE Hitachi, a joint US-Japanese venture. So far, it appears that BWRX-300 will be the only reactor type that might be fully licensed – by Canada – and could obtain license in Estonia by 2030. This date is a crucial milestone for Estonia due to the plans to close oil shale-based power generation plants and the need to make further and faster progress towards fulfilling Estonia’s climate neutrality commitments – the pace of which is strongly criticised by the civil society – without losing domestic generation capacity necessary to provide stable baseload which the rapidly growing but intermittently performing renewables would not be able to ensure. At the same time, some of Estonia’s energy policy stakeholders insist that, come 2030-40, the renewable sector will possibly have addressed, through technological innovation in grid storage and other areas, the intermittency problem and, given especially the offshore wind potential in the Baltic Sea, might make introduction of nuclear energy with all the attendant complexities and societal stigma unnecessary altogether. Indeed, the government's decision in August 2022 to accelerate the energy transition to 100% renewable electricity consumption in Estonia as early as 2030 indicates the abundance of optimism about such innovation. Others, however, believe that renewables and nuclear energy can successfully co-exist and point to Finland as an example, but there are views that an Estonian SMR could be ready by 2040 at the earliest. If Estonia decides to adopt nuclear energy and given that the company leading the project selected GE Hitachi SMR, its deployment can be expected to be a high priority in US-Estonia and Canada-Estonia cooperation and possibly the highest value business engagement for the period of 2024-35 until the reactors have been deployed and operate routinely. The US would be the main partner on maintenance services, training, and education. According to the Fermi Energia executives, GE Hitachi would be the design supplier, which includes all technical drawings, equipment specifications, safety studies, and personnel training, as well as the supplier of final fuel elements, fuel assembly services, instrumentation equipment and software, turbines, generators and more. Canada, as the first-of-a-kind (FOAK) deployment nation for this type of SMR, would be important in personnel training and supply chain management, with very significant supplies such as reactor pressure vessel (RPV), primary steam piping, RPV internals, valves, pumps, and uranium being provided by the Canadian suppliers. French Orano, 51% owned by the French government, could have a significant role in fuel cycle by providing the uranium enrichment and spent fuel recycling services, thus mitigating potential French objections to more US tech in Europe as contravening European “tech sovereignty” notions. It is likely that companies and export credit agencies from Sweden, Finland, France, US, Canada could be important investors and creditors. The envisaged capital expenditures (CAPEX) breakdown would be roughly as follows: in the US – 30%; in Canada – 30%, other countries – 10%; in Estonia – 30% (local suppliers of construction materials, services during the construction, etc). In addition, given its nuclear competence, very close economic ties with Estonia, and Vattenfall’s investments, Sweden would also be an important partner, especially in personnel training. Estonia’s success could also provide know-how and a point of reference to countries such as Lithuania, where there are already some voices calling for deploying SMRs as a solution to achieving energy independence, a goal of its national strategy.The fact that Estonia is “nuclear naïve” at the moment does not seem to put off potential investors; quite to the contrary, it makes Estonia’s lack of legacy baggage more interesting to partners from Sweden, Finland or Canada. However, it is the political sentiment and geostrategic considerations in the US and EU – both in the EU institutions and among key member states – that will be of paramount importance if Estonia goes forward with nuclear energy and selects an SMR solution of US origin.2. The US Policy and InterestsThe United States has a strategic interest in increasing European energy security, particularly in the Baltic region. Washington has long been concerned about European dependence and reliance on Russia for its domestic energy. Throughout the previous decade, US administrations have opposed the Nord Stream 2 (NS2) pipeline and have pressed Europe to diversify its energy supply away from Russia. In the aftermath of Russia’s invasion of Ukraine, the US and Europe sought to increase pressure on the Russian economy, and Russia’s energy sector which accounts for about 45% of Russia’s total exports became one of the key targets of comprehensive sanctions. Admittedly, the US also has its own parochial reasons to push Europe away from Russian gas. Over the last decade, America has undergone its own energy revolution, becoming a major producer of natural gas with fracking technology. It has become a major exporter of LNG and has encouraged Europeans to expand their LNG infrastructure to take advantage of American supplies. There are major US political stakeholders that have an interest in expanding US LNG exports to Europe and see an opportunity in the current crisis to increase market access for US exports, which would justify increasing investment to expand domestic production. However, LNG is not the only game in town when it comes to the US interests. Nuclear energy sector is increasingly becoming a pivotal area of geoeconomic competition with such rivals as Russia and China. SMRs and their potential market are viewed as an important aspect of US efforts to regain a share of the global nuclear reactor market and are a feature of both US commercial marketing and diplomatic outreach. The establishment of the Foundational Infrastructure for Responsible Use of Small Modular Reactor Technology (FIRST) programme in April 2021, which Estonia joined in January 2022, is indicative of the US government’s focus on SMRs in its near-term nuclear export strategy. Market research organisations estimate the SMR market to grow by 15% and reach roughly $19 billion by 2030. The United States began considerable investment in SMR development in 2012 with the US Department of Energy’s establishment of the SMR Licensing Technical Support Program. Since that time, a wide variety of SMR designs have been under development and are in various stages of licensing. The twin geopolitical and geoeconomic interests have seen the United States become a major proponent of the 3SI. This initiative was launched by the Presidents of Poland and Croatia in 2015 with the goal to develop north-south infrastructure, particularly relating to energy infrastructure. The United States views the 3SI as a way to expand LNG imports to reduce dependence on Russian natural gas, as well as provide a potential counter-balance to China’s Belt and Road Initiative and its 16+1 format. There is strong US support for the Three Seas Initiative (3SI). For instance, President Donald Trump attended the 2017 Three Seas Annual summit. In November 2020, the House of Representatives passed a bipartisan resolution “expressing support of the Three Seas Initiative in its efforts to increase energy independence and infrastructure connectivity thereby strengthening the United States and European national security” (H.Res. 672, 116th Congress). In December 2020 the US approved a $300 million investment in the 3SI Investment Fund, “primarily for projects focused on energy security.” This investment was enabled by the European Energy Security and Diversification Act of 2019, which eased restrictions on investing resources for energy infrastructure projects in higher-income countries, such as the European Union. In February 2021, a bipartisan group of members of congress urged the new Biden Administration to continue the previous Administration’s pledged financial support for the 3SI and to finalise its approved $300 million investment. While the 3SI has drawn significant attention, its projects are largely supported by European, not US, investments and several pre-existing projects were simply rebranded as part of the 3SI. Nevertheless, 3SI has focused attention on the need for north-south infrastructure within Europe. For instance, 3SI is supporting a gas interconnection between Poland and Lithuania, thus connecting the three Baltic states and Finland to the European gas network. Of note, however, is that this project was funded through EU and member state contributions. The United States is a secondary player when compared to the EU in terms of infrastructure investment. For instance, three-fourths of the funding to desynchronise Baltic states from the Russian grid and synchronise them with the continental comes from the EU, with the US playing a much smaller financial role. Nevertheless, the pressure from Congress on the Biden administration to make investments in European energy security will likely increase due to Russia’s aggression. Congress will be especially focused on expanding LNG infrastructure. The Ukraine supplemental funding bill, which passed congress in March 2022, urged the administration to create a “Baltic Security and Economic Enhancement Initiative.” The purpose of such an initiative is to provide the Baltic states with security assistance, bolster “physical and energy security needs,” look for opportunities for US foreign direct investment, and improve “high-level security and economic cooperation.” Congress has also called on the administration to send high-level representatives to the Baltics at least twice a year and attend trade, energy, and business fora.How and whether this initiative will be implemented by the Biden administration remains to be seen. But there is now significant funding being made available to the administration for security assistance and energy financing. Pressure will therefore increase on US agencies to show support for the Baltics and Eastern Europe, leading US agencies to scramble to identify sensible projects and investments. Should Estonia pursue American SMR technology, there will be immense US support for the project from the US congress and the Biden administration. It is increasingly visible that the US government has already identified the Trimarium region as one of the priority directions for advancing nuclear energy through the so-called Partnership for Trans-Atlantic Energy and Climate Cooperation (P-TECC) – an international platform initiated by the US Department of Energy. This nuclear energy strand of a broader effort to improve energy security and resilience across the region clearly checks a lot of boxes for US government agencies: It serves a strategic purpose of expanding European energy supply, it promotes American businesses, and develops new zero carbon technology. Thus, there would be strong support from within the US government for stronger bilateral engagement in this area. This is illustrated by a recent P-TECC meeting that focused on nuclear energy in the Central and Eastern Europe. The Estonian SMR project, if pursued, would likely become a show-piece project for the US government, and the US officials would take great interest in its success. For instance, one major topic on the agenda during the visit of Assistant Secretary of State for Non-proliferation, Elliot Kang, to Estonia was SMR technology. There is little doubt that proceeding with a climate-friendly energy project that has geopolitical ramifications and is based on cutting-edge US technology would help to deepen diplomatic relations with the United States. It would also further bolster Estonia’s image in the United States as an incredibly capable and cutting-edge ally that punches above its weight within the transatlantic alliance.3. Security Dimension of Nuclear Energy and Cooperation with the USThe evolution of the bilateral security cooperation agenda that is likely to take place as a result of Estonia’s choice to pursue nuclear energy based on the US SMR technology largely depends on what security risks result from this choice and how the US government could assist Estonia in addressing those risks.Traditionally, US security assistance to help protect and secure nuclear facilities has been largely focused on countering the threats posed by terrorism – whether preventing terrorist attacks against the plant itself or addressing the proliferation threats to ensure nuclear materials do not fall into the wrong hands. However, the war in the Ukraine has made clear that nuclear power plants are also national strategic assets and therefore potential military targets. Moreover, the hybrid threat environment in which Estonia finds itself means that its SMR project could be exposed to the use of various vectors of attack (e.g. cyber, disinformation, etc) applied by hostile state powers seeking to advance their interests through the medium of so-called “grey zone” conflict. Interaction between the US government and Estonian authorities in monitoring and countering such risks would form an important strand of bilateral security cooperation. 3.1 Conventional Military ThreatRussia’s invasion of Ukraine provides important lessons for Estonia to consider when assessing whether to proceed with an SMR. This war has created an unprecedented situation in which nuclear power plants have been in the crossfire of war. The war in Ukraine demonstrates that an SMR would be a potential target for Russia, whether in a conventional military operation against Estonia or in conducting asymmetric or grey-zone operations to weaken or undermine the government in power. For instance, Russia in 2015 targeted Ukraine’s power sector through a cyberattack, successfully shutting off the power for 200 000 Ukrainians before Christmas. Similarly, during the war in Ukraine, Russia has also launched cyberattacks against Ukraine’s power grid. The targeting and seizing of power plants in Ukraine means that Estonia must consider the likelihood that Russia will target an SMR in a potential conflict. In a conflict with Estonia, Russia’s military objectives may also differ significantly than its objectives with Ukraine. Russia has appeared intent on changing the regime in Kyiv and occupying the country and has therefore allowed plants to continue operating. But in an attack against Estonia, Russia may have more destructive ends that would resemble the aims of its large-scale strike campaign against Ukraine’s energy system since Autumn 2022. Hence, instead of seizing and operating power plants, Russia may simply seek to destroy the SMR and deprive the country of significant source of electrical power. Thus, the construction of an SMR, which if built, would likely provide Estonia with an important portion of its power supply and potentially provide power to Latvia as well, would be a prime target for Russia in the event of a military conflict. 3.2 Cyber, Espionage, and Terrorist TargetAn SMR, especially one tied to the United States, would also be a prime target for Russian cyber and espionage campaigns. Developing robust cyber security standards would be a must, as would maintaining extremely careful security protocols for staff. Power plants and power grids have been major targets for Russian cyber operators in the past. For instance, Ukraine’s electrical grid was taken offline in December 2015, with the attack impacting more than 225 000 Ukrainian customers. Russian intelligence and cyber hackers would likely see the plant as a key target both to disrupt operations at the plant, as well as to conduct industrial espionage to improve Russia’s nuclear industry. Lastly, an SMR or any high-profile critical infrastructure must be seen as a potential target for terrorist networks. 3.3 Disinformation TargetThe impact of malignant disinformation campaigns on political processes and national security is well understood by the US and Estonian governments, as is the role of hostile state powers in orchestrating such campaigns. Given the societal sensitivities about nuclear energy, disinformation is one of the most serious challenges that an SMR project would face in Estonia, especially during the public debate on adopting nuclear energy and then during the project’s implementation. In 2006-12, Lithuania’s intentions to build an NPP together with Latvia and Estonia would have significantly changed the current picture of electricity generation in the Baltic region, but Russia’s actions designed to negatively influence the public debate contributed to the suspension of this project. Similar actions should be expected to target Estonia.4. Headwinds and Tailwinds from Other PlayersFrom the geopolitical standpoint and as far as diplomatic strategy concerns, three fellow EU member states and NATO allies – Germany, France, and Poland – stand out for Estonia when considering embracing US nuclear technology and cooperation. The former two have historically formed the most important tandem in shaping the direction of the EU, while the latter has emerged as an important hub for the Trimarium. All three are highly important security and defence partners for Estonia and other two Baltic states. They are, however, positioned on different points of two axes – anti-/pro-nuclear axis and transatlantic/Eurocentric axis – and thus pose different, if somewhat overlapping, sets of challenges. When it comes to the nuclear part, France and Poland are natural allies in making a continued case in favour of nuclear energy’s role in future climate neutral world. Poland also would be an important partner whenever collaborative efforts are required to maintain and benefit from the US involvement in nuclear energy development in the region. Due to the scope of its nuclear ambitions, Poland may come to dominate the US attention and thus diminish the potential political benefits for Estonia, particularly in terms of visibility. Inevitably, Tallinn will have to be very careful and specific about which aspects of practical nuclear cooperation with Poland are desirable – for example, pooled training, specialist mobility, R&D, etc. – and which ones are not. It would be important for the Estonian government, ministerial and commercial actors, as well as civil organisations, such as think-tanks and academic organisations, to establish regular and institutionalised consultations with their Polish counterparts in SMR deployment. A consistent, shared legal, regulatory and standards framework, if possible, would seem highly desirable, to simplify cooperation for decades hence. However, it is important to understand that, although the Polish SMR deployment – just as in Estonia – is more an industry-initiated and led endeavour with state support, the overall Polish programme specifically focuses on large-scale reactors. Germany’s policy, on the other hand, continues to be dominated by anti-nuclear sentiment and “renewables-only” perspective about future energy supply, which is unlikely to change due to the structural and ideological forces at play in German economy and society. Contrary to Estonia’s already strong emphasis on and commitment to renewables, such as offshore wind, Estonian nuclear aspirations are therefore likely to be unpopular in Berlin and will possibly draw continuous criticism. This criticism would lack credibility, given the complete failure – in geopolitical and energy security terms – of the German energy policy, exposed by Russia’s war against Ukraine. However, unlikely as it is to do much significant damage to the overall bilateral relations in foreign and security affairs, Berlin’s anti-nuclear stance – given the sheer lobbying weight of Germany – may still dampen the enthusiasm in the Baltic region and, more importantly, in Brussels over the long-term prospects of nuclear energy industry in the EU. Furthermore, reliance of the Estonian programme on the US may kindle the anti-American instincts in those sections of the German political establishment and policy community that have long sought to balance out the US role in the European security order through energy relations with Russia and industrial relations with China. There will also be growing geoeconomic competition between Germany and the US over the shape of energy policies and the attendant commercial opportunities in the Trimarium, with the former advocating for more alignment with the philosophy of global energy transition, or Energiewende, and with the latter emphasizing the need for nuclear power in the energy mix as a pathway to energy security of the region. Tallinn will have to invest diplomatic efforts into cultivating the transatlanticist policy stakeholders in Berlin and highlighting the strategic benefits of the US involvement in energy security of the Baltic region and Europe as a whole. Estonia’s constructive role in maintaining German interest in building synergies and complementarities with the US contribution to the region’s energy security – including through the 3SI framework – rather than competing with the US would be beneficial to all sides. It might even help Berlin offset some of the loss of political capital and credibility in the Trimarium, incurred by the NS2 saga and then its ambivalence regarding the extent, speed, and nature of support to Ukraine during the war with Russia. Reliance on the US in a nuclear energy programme, however, may prove more problematic in the geopolitical and geoeconomic analysis of Paris. Its agenda of pushing forward European sovereignty means that extensive technological dependence on the US may not be viewed very favourably in some quarters, especially as France continues developing its own SMR for sales in international markets. Estonia should expect that France will make a persistent case for cooperation on the European SMR and will highlight that the EU framework already provides sufficient range of security cooperation instruments to address the risks associated with the adoption of nuclear energy. Some of the potential political opposition from France can be defused by integrating its nuclear industrial base into the supply chains of the Estonian nuclear energy programme, even after choosing the US SMR as the proposed project intends, but this will be hardly sufficient to avoid the optics that Estonia is not supportive of strengthening the EU’s sovereignty aspirations in practice. Estonia will have to be prepared to make a strong case to Paris that dependency on the US – be it in energy technology or military technology – is not contrary to Europe’s interests but rather conducive to greater cohesion and strength of the collective West. The EU has been playing a pivotal role in pushing for and coordinating common responses to the climate crisis and Russia’s use of energy as a tool of geopolitical coercion. Policy instruments and strategies agreed by the member states, such as the EU Green Deal and RePowerEU, advance the diversification of energy sources, promote the energy transition to climate neutrality, and provides for greater coherence, solidarity, security, and closer integration of national energy systems.Although choices concerning national energy mix remain the prerogative of the member states, the overall policy direction undertaken by the EU and the general sentiment in Brussels about the approaches of individual member states clearly matter in assessing the risks and opportunities for Estonia related to nuclear energy. At the end of 2021, the Commission finally completed an extended process that culminated with a decision to include nuclear energy – and natural gas – in its Green Finance Taxonomy (often referred to as simply “green taxonomy” in most discussions), established under the Union’s Green Deal. On the upside, the pro-nuclear decision can be considered a victory for science- and data-driven policy against green-populism, with crucial input made by various scientific studies on the climate impact of nuclear energy. The EU Commission’s decision primarily represents an acknowledgement of the reality that nuclear energy is, de facto, the only scalable solution to reliable base-load carbon-free generation that can displace coal – and eventually natural gas – and does not require the installation of massive, generalizable grid-scale storage, as does an over-reliance on variable renewables. With such popular and ideological forces in favour of the 100%-renewables-and-no-nuclear-model, only the appearance of significant difficulties with this model motivated the Commission and ministerial actors to weather the formidable shaming of “green washing” to open new opportunities for nuclear energy.ConclusionThe United States remains of pivotal importance to Europe’s and Estonia’s security, and this importance was further underlined by its role in countering Russia’s aggression against Ukraine as well as strengthening NATO’s deterrence posture on the eastern flank (or “eastern front,” as it is increasingly referred to). Its continued bilateral and, through various cooperative formats such as 3SI, minilateral engagement in the Baltic region is vital foreign and security policy interest of Estonia. Maintaining this engagement will be increasingly difficult because the US repeatedly seeks to pivot to the Asia-Pacific, as the great power competition dynamics in that area of the globe requires its strong focus on countering the long-term challenge of increasingly assertive China, while European – let alone Baltic or Estonian – security concerns will often struggle to remain among the strategic priorities in Washington. Adding civil nuclear energy cooperation to this continuous engagement is a unique opportunity, available both because of alignment with the bi-partisan pro-nuclear sentiment in energy policy of the United States and the need for the US companies to regain their competitive edge in the international nuclear energy market with novel technology to counter China. It also provides a useful vector for increasing US contribution to the energy security of Estonia and the entire Baltic region that goes beyond the present-day focus on LNG supply – a focus that will diminish in importance due to the temporary “bridging” role of natural gas in energy transition towards “zero carbon” future. In the long-term, it would also help to create a competence base in Estonia enabling country’s integration into the US SMR technology chains, thus further strengthening the bilateral partnership. Full exploitation of this opportunity, however, is clearly contingent on Estonia being among the first movers in adopting the American SMR and thus positioning its programme to be a showcase of the successful adoption of the new generation US nuclear energy technology.

Russian Deputy Prime Minister Aleksandr Novak has announced that Russia’s production and exports of liquefied natural gas (LNG) rose by almost 9% to around 33 million tonnes (c. 46 bcm) in 2022. Most of the Russian LNG was produced at the Yamal LNG project (c. 20 million tonnes), whose main shareholders include Russia’s Novatek (50.1%), France’s TotalEnergies (20%) and China’s CNPC (20%) and the Silk Road Fund (9.9%). Nearly 15 million tonnes from this project went to Europe (up 14% y-o-y), and around 5 million tonnes were shipped to China. In addition, more than 10 million tonnes were produced in the Gazprom-controlled Sakhalin-2 project in the Russian Far East, an increase of 2% year-on-year. The main customers for this gas were Japan (the Japanese companies Mitsui and Mitsubishi are shareholders in the project) and China. According to Chinese customs data, a total of 6.5 million tonnes of LNG were shipped to the PRC from Russia in 2022, up from 5.7 million tonnes a year earlier. LNG is also being produced in two small-scale projects in the Leningrad region in the Baltic Sea. The Novatek-owned Vysotsk terminal produced around 700,000 tonnes and the Gazprom-owned Portovaya LNG produced around 350,000 tonnes. Gas from both projects was supplied to the European market. The deputy prime minister also asserted that Russia intends to deliver on its ambitious plans to double its LNG production in the next few years, and increase its LNG exports to 100 million tonnes in 2030 as a result. This would be achieved mainly through the development of Arctic LNG projects, including the Novatek-owned Arctic LNG 2. This expansion has been promised even though Russian production may decline in 2023 due to planned maintenance work on two (out of four) Yamal LNG production lines. CommentarylLNG was the only Russian fuel whose supplies to Europe increased in 2022. Consequently, the importance of LNG has increased both with regard to Russia’s exports (LNG accounted for 25% of all Russian gas supplied to the EU) and the EU’s imports (less 20% of the EU’s total LNG imports).lIt will be very difficult, if possible at all, to realise Russia’s ambitious plans for a robust increase in LNG production in the years to come. Forecasts from the Russian Ministry of Energy published in May 2022 showed that LNG production will be much lower than previously assumed. Under the current baseline scenario, LNG exports are projected to reach almost 31 million tonnes in 2023 and 35.7 million tonnes in 2024, compared to the previous target of over 50 million tonnes. lAs a result of sanctions following the Russian invasion of Ukraine, Russia’s LNG sector has been cut off from the Western technology and equipment which played a key role in the development of this sector. Many foreign companies (German, French, Spanish and others) have withdrawn from cooperation with Russia in this area; for example, one of the shareholders in Arctic LNG 2, France’s TotalEnergies (10%), has stopped investing in the project and started the process of completely withdrawing from the venture, which should be finalised in the first half of 2023. Nonetheless, the Russian authorities are insisting that they will manage to complete the construction of the first Arctic LNG 2 production line by December 2023 (about 90% of the work had already been done when the sanctions were introduced), and that the next two lines will also be put into operation according to the original schedule, that is, in 2024 and 2026. Leonid Mikhelson, the CEO of Novatek, has affirmed that the corporation has managed to purchase the necessary equipment by cooperating with companies from countries such as Turkey and the United Arab Emirates. Russian companies are also working on developing their own gas liquefaction technologies. At present, these are inefficient (the production lines are capable of producing a maximum of 1 million tonnes per year) and often fail. It is unlikely that Russia will be able to fully replace Western technologies and equipment by circumventing the sanctions or developing its own solutions. Indeed, the effectiveness of such efforts so far proven to be limited.  

China’s silence towards the European Union’s electric vehicle probe could mean that a more harmful retaliation is on its way During her State of the Union address on 13 September, European Commission President Ursula von der Leyen announced that the European Union would undertake an anti-subsidy probe against the Chinese electric vehicle (EV) sector. This signalled a major step in the EU’s shift to a more aggressive trade defence against China and raises the question of how China will react, given the importance of the Chinese market to key sectors of the European economy (including the auto and luxury sectors), and also given China’s crucial role in providing goods to the EU for the green transition? An EU-China High Economic and Trade dialogue on 25 September in Beijing, between EU Trade Commissioner Valdis Dombrovskis and his Chinese counterparts, may have given a glimpse into China’s mindset. There were fears Chinese officials would respond aggressively to von der Leyen’s announcement during Dombrovskis’s visit but this was not the case. Nevertheless, the silence may be deceptive. Three main factors should be taken into account when considering potential Chinese retaliation. Subtle but harmful retaliation First, China might file its own anti-subsidy investigation at the World Trade Organisation against key European sectors. This would not be difficult since Europe has ramped up its subsidies massively since the pandemic, and more recently has attempted to gain more ‘strategic autonomy’ in sectors including semiconductors. There is very little the EU can do about this potential retaliation, which would be costly for the sectors targeted and for the EU’s image as a free-trade and WTO champion. Second, China could try to persuade EU governments that the Commission-led investigation should be withdrawn. A similar probe happened in early 2014, when the EU launched an anti-subsidy investigation into solar panels produced in China. President Xi Jinping visited then Chancellor Angela Merkel right after the anti-subsidy investigation was announced. Subsequently, the issue was settled quickly, with the Commission withdrawing the case from the WTO. Based on this previous experience, China might prefer to take up the issue bilaterally, possibly with Germany again, rather than enter discussions with the Commission. But a major difference this time is the relative importance of the auto sector in the EU compared to solar power. The auto sector accounts for 14 million jobs in Europe and a good part of the EU’s exports. Exports of cars and components are heavily concentrated in a few EU countries, especially Germany. These exports to China have plummeted in 2023, with a close to 30% drop, and Chinese competition in third markets and even the EU market, has become much more intense. Third, also unlike the solar-panel probe, it is the Commission and not the sector being harmed that has filed the case. It will be harder for the Commission to withdraw the investigation because it would lose credibility. Merkel decided to accommodate Xi Jinping’s request in 2014 because she wanted to save the auto sector, even at the cost of hurting a smaller part of the German economy – the solar panel companies. The new investigation aims to protect the automotive sector. There could be consequences for major European auto companies producing electric vehicles in China, but jobs in Europe are now more important than the future of those companies in China. In any case, the future of European manufacturers is bleak; they seem to have already lost the EV race to their Chinese competitors. China will find it much harder to move the EU away from its decision to pursue an anti-subsidy investigation, differently to what happened in 2014. Lessons to learn There might be a lesson for Europe in what happened to Apple in China in September. Days before Apple’s launch of its new iPhone 15, Huawei launched its Mate 60 with upgraded functionalities which require high-end semiconductors. Beyond raising doubts about the effectiveness of US-led export controls on advanced semiconductors, this announcement constituted a direct challenge to Apple’s phone sales in China. Chinese officials were also prohibited from using iPhones and rumours spread in Chinese media in advance of the Apple launch about the underwhelming quality of the iPhone 15. Investors dumped Apple stock globally and the company lost about 6% of its value in a few days. China’s retaliation against the Commission’s anti-subsidy investigation might not be as direct and transparent, but it will still be harmful and might offer less room for the EU to respond. Europe’s strategic dependence on China is greater than in 2014 and this probe has the potential to cause a bigger fall-out for the EU. China has strengthened its position as a global power and uncompetitive behaviour could hit European core sectors harder because China has more power to retaliate. On the flip side, the stakes are higher for the EU given the importance of the auto sector in terms of jobs and exports. For that reason, China may not manage to deter the EU’s investigation as easily as it did in the past. But this may prompt China to threaten even larger retaliation.

Russia’s war on Ukraine has pushed the climate crisis off the agenda. But we need a ceasefire and global demilitarisation for a 1.5°C world War brings death and destruction – not least to the environment and climate. Russia’s invasion of Ukraine offers a depressing reminder of that fact, and further increases the military sector’s already enormous global CO2 footprint. In addition, the eastern Ukrainian cities where fighting is taking place are home to fossil fuel infrastructure such as chemical factories, oil refineries, and coal mines, the bombing of which produces a cocktail of toxic substances that has devastating environmental impacts. Efforts to arm the two sides, moreover, are consuming materials and resources that could otherwise go towards tackling the climate crisis. Based on the global C02budget, humanity has less than eight years to ensure it still hits its 1.5-degree warming target. To do so, we need to urgently implement reforms in all areas, to bring about ‘systemic change’, as the IPCC report from early April puts it. The military sector barely gets a mention in this almost 3,000-page document, however, with the word ‘military’ coming up just six times. You might thus conclude that the sector is of little relevance to the climate emergency. The reality is rather different. Using military hardware results in huge quantities of emissions. In the war in Ukraine, 36 Russian attacks on fossil fuel infrastructure were recorded in the first five weeks alone, leading to prolonged fires that released soot particulates, methane and C02 into the atmosphere, while oil infrastructure has been ablaze on the Russian side too. The oil fields that were set on fire in 1991 during the second Gulf War contributed two per cent of global emissions for that year. While greenhouse gas emissions are one of the most significant impacts of war, the quantity emitted depends on the duration of the conflict and on what tanks, trucks, and planes are used. Another is the contamination of ecosystems that sequester CO2. Staff from Ukraine’s environment inspectorate are currently collecting water and soil samples in the areas around shelled industrial facilities.Military emissionsThe ramifications for the climate can be catastrophic in scale. According to a study by the organisation Oil Change International, the Iraq War was responsible for 141 million tonnes of C02equivalent emissions between its outbreak in 2003 and the report’s publication in 2008. By way of comparison: some 21 EU member states emitted less CO2equivalent in 2019, with only six states topping that figure. Post-war rebuilding also produces significant emissions. Estimates suggest that reconstruction in Syria will lead to 22 million tonnes of CO2 emissions. The rebuilding in Ukraine, too, will consume vast amounts of resources. At the World Economic Forum in Davos, President Volodymyr Zelensky stated that at least 5 billion US dollars of reconstruction funding was needed per month. Every effort should thus be made to achieve an immediate ceasefire – both for the sake of the climate and to avoid further human suffering. Emissions from armed forces and military equipment cause considerable environmental harm around the globe. And yet, bowing to pressure from the US, military CO2 emissions were excluded from climate treaties such as the Kyoto Protocol of 1997 and the Paris Agreement of 2015. As a result, they do not form part of their binding agreements and are neither surveyed systematically nor published transparently. The consequent lack of data means we can only make vague estimates as to the military sector’s impact on global heating. According to a study by Neta Crawford, co-director of the Costs of War project at Brown University, the US defence ministry alone is a bigger contributor to the climate crisis than individual countries such as Sweden or Portugal. This makes it the largest institutional source of greenhouse gases in the world. Globally, the military sector is estimated to generate around six per cent of all CO2emissions.Germany’s roleWith its new €100bn fund for the military, Germany seems willing to countenance further far-reaching climate impacts. This military investment will tie up financial and intellectual resources, making it highly unlikely that the 1.5-degree target can be achieved. That countries wish to better protect themselves against potential Russian aggression is understandable. But the public debate around this issue needs to balance an uncertain increase in security against a reduction in our ability to fight climate change. The German military was already responsible for around 4.5 million tonnes of CO2 equivalent emissions in 2019, significantly more than the 2.5 million tonnes contributed by civilian aviation within Germany. This is now set to increase. Just one of the F-35 jets ordered from Lockheed Martin emits around 28 tonnes of CO2 equivalent per tank of fuel. For comparison: the average annual emissions footprint in Germany is 11.2 tonnes per head. The income from the sale of fossil fuels provides ongoing funding for Russia’s war of aggression. From 24 February to 24 April 2022, the country’s fossil fuel exports via sea routes and pipelines had an estimated value of €58bn. The EU accounts for 70 per cent of that total, or €39bn, while Germany is the largest single importer of Russian fossil fuels at €8.3bn worth. Our fossil fuel dependency is thus a factor in both the climate crisis and the invasion of Ukraine. And yet representatives of politics and business are using the war as an excuse to delay the necessary socio-ecological transformation. While corporations still stuck in the fossil fuel age – such as BP, Shell, and Saudi-Aramco – are posting record profits, the climate crisis continues apace. The likes of Rheinmetall and NATO chief Jens Stoltenberg may champion climate-neutral warfare using eco-friendly tanks and hydrogen fuel, but this is surely not the answer. Western armed forces, security experts, and arms manufacturers are well aware of the significane of climate change, as evidenced by the numerous security strategies, policy statements, and sustainability reports published on the subject in recent years. These outline ways to adapt to a changing climate while ensuring the doctrines of growth and hegemony are nonetheless defended against any and all resistance.Ceasefire nowTogether with the EU and NATO, Germany is preparing for scenarios such as war, environmental disaster, and influxes of refugees in order to ensure its foreign policy will still be fit for purpose and its security interests protected. A cynical approach given that the worst affected – those who, as some see it, Germany needs protecting from – will be those who have contributed least to global warming. And one that seems even more absurd when you consider that the environmental destruction brought about by military investment and resource-related conflicts will help to further heat the climate. At the same time, steps are being taken to reduce dependence on fossil fuels. Nonetheless, a Greenpeace report published last year demonstrates that the majority of all EU military missions have links to the protection of oil and gas imports. This dangerous relationship between fossil fuels, military missions, and war needs to end. More arms mean more damage to the climate, not greater security. Rising defence budgets among NATO states will simply convince Russia and China to increase military investment in turn. At $2.1 trillion, global arms spending has already reached record levels. As the war in Ukraine goes on, the biggest challenge of the 21st century – the climate crisis – has slipped down the agenda. We mustn’t forget, though, that efforts to tackle that crisis can only succeed if all countries – including Russia – work together. The immediate demand is for a ceasefire, followed by measures to build trust, such as international disarmament treaties. Moreover, Russia will need outside help if it is to transition to a climate-friendly energy industry. What’s required is a fundamental socio-ecological transformation, with policy-making dictated by the needs of all. That may seem inconceivable at present, but what’s the alternative? Unchecked global warming would be catastrophic for the planet’s entire population.