First glance

Draghi’s industrial masterplan has decarbonisation at its core

The report represents a solid basis for the development of an EU Clean Industrial Deal

Publishing date
09 September 2024
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A report on the future of European competitiveness, prepared by former Italian prime minister Mario Draghi and long awaited in Brussels, is finally out. It is expected to significantly shape the work programme for the next five years of the European Commission, led by Ursula von der Leyen, who commissioned the report.

The report is a masterplan for a new European industrial strategy. Draghi sees decarbonisation at its core. While some voices – especially on the far-right – portray the green transition as an existential threat to Europe’s industrial competitiveness, the report stresses that ambitious climate policy can and should unleash substantial industrial opportunities for the continent.

Decarbonisation is indeed an opportunity for Europe to cut energy prices and to take the lead in clean technologies. To marry decarbonisation with technological leadership, Draghi puts forward a “joint plan for decarbonisation and competitiveness” that matches a new flagship initiative proposed by von der Leyen for 2024-2029 – the ‘Clean Industrial Deal’. This is aimed at further developing the under-addressed industrial aspects of the flagship initiative for the last five years, the European Green Deal.

Draghi is very blunt about what’s at stake in this regard: Europe’s green strategy is premised on the creation of new green jobs, so its political sustainability could be jeopardised if decarbonisation leads instead to the de-industrialisation of Europe.

Draghi’s plan has what any modern industrial policy should have: a combination of horizontal actions to set the right framework conditions for investment, and vertical actions to fix sector-specific issues. This also reflects a general principle underpinning the report – the EU’s need to focus on developing a competitive, open and innovative knowledge economy, while putting in place targeted interventions for those situations in which EU companies face asymmetries, such as different speeds of decarbonisation in Europe and around the world.

The report sets out four main horizontal actions. First, there should full implementation of the EU single market along the lines envisaged in another report produced by a former Italian prime minister, April’s Letta report. Second, measures should be implemented to better coordinate industrial, competition and trade policies in order to avoid the pitfalls of internal incumbent favouritism and external protectionism. Third, measures are needed to mobilise the massive investments required, including new EU borrowing for European public goods, such as breakthrough innovation and cross-border electricity grids. Fourth, EU-level industrial policy coordination should be strengthened, to overcome the traditional fragmented approach that prevents the EU from achieving economies of scale and obtaining global leverage.

On vertical policy actions, the report spotlights the key trade-off of decarbonisation versus competitiveness versus security. Textbook examples are Chinese solar panels and electric cars: while they are certainly good for European decarbonisation, they are also problematic for its competitiveness and security. 

To manage this difficult trade-off, Draghi suggests avoiding black-and-white solutions in the European context. Most notably, his report firmly rejects the temptation to emulate the United States approach of systematically shutting out Chinese clean technologies, which would make the European green transition more difficult and expensive. Instead, Draghi rightly suggests that Europe should deploy smart and technology-specific green industrial policies, tailored to the circumstances of each industrial sector.

On solar panels, for instance, for which Europe has no strong comparative advantage, the report suggests keeping Europe’s doors open and basically free riding on the expensive manufacturing subsidies provided by the countries of origin, while diversifying suppliers to the greatest possible extent to maximise security.

However, in industries such as wind turbines, on which Europe does have a strong comparative advantage, Draghi suggests that Europe ramp-up support, also introducing explicit minimum quotas for local products and components in public procurement. His report also stresses the need to make more use when necessary of trade policy instruments – starting with tariffs – to ensure the level playing field. He stresses the need to deploy all possible tools to support and protect infant industries where Europe has an innovative edge and future growth potential.

The detailed nature Draghi’s recommendations will be an authoritative basis for the European Commission to develop the Clean Industrial Deal. The EU already has the Net Zero Industry Act, a law aimed at supporting clean-tech manufacturing by addressing some of the barriers to the scaling-up of clean-tech companies. This represented a first step in the right direction and should be promptly implemented, but the Draghi report makes clear that much stronger actions, on both clean-tech manufacturing and on the decarbonisation of established energy-intensive industries, including steel, aluminium, cement and chemicals, are still required to ensure that Europe can efficiently combine decarbonisation and technological leadership.

About the authors

  • Simone Tagliapietra

    Simone Tagliapietra is a Senior fellow at Bruegel. He is also a Professor of EU Energy and Climate Policy at The Johns Hopkins University - School of Advanced International Studies (SAIS) Europe.

    His research focuses on the EU climate and energy policy and on the political economy of global decarbonisation. With a record of numerous policy and scientific publications, also in leading journals such as Nature and Science, he is the author of Global Energy Fundamentals (Cambridge University Press, 2020) and co-author of The Macroeconomics of Decarbonisation (Cambridge University Press, 2024).

    His columns and policy work are widely published and cited in leading international media such as the BBC, CNN, Financial Times, The New York Times, The Economist, The Guardian, The Wall Street Journal, Süddeutsche Zeitung, Frankfurter Allgemeine Zeitung, Corriere della Sera, Le Monde, El Pais, and several others.

    Simone also is a Member of the Board of Directors of the Clean Air Task Force (CATF). He holds a PhD in Institutions and Policies from Università Cattolica del Sacro Cuore. Born in the Dolomites in 1988, he speaks Italian, English and French.

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