The European Commission published its long awaited Clean Industrial Deal (CID) yesterday in response to growing economic, environmental, and escalating geopolitical challenges, supposedly aiming to strengthen Europe’s industrial base while accelerating the decarbonisation of industries and acceleration of clean and digital technologies. As expected, it unveils a strategy aiming at repackaging old priorities into climate-friendly rhetoric with its main focus to maximise productivity growth and drive innovation through deregulation.
Katy Wiese and Emilie Tricarico wrote this piece.
The European Commission seems to follow Draghi’s report as it sees EU regulation as a major obstacle for high-tech innovations both reflected in its “Competitiveness Compass” published on 29 January and the accompanying “Omnibus Directive.” These feel like attempts to Make Europe Great again by doubling down on private capital to boost ‘new growth engines’ (AI, clean tech, defense, space tech and the likes) and elevate EU companies to the top of global value chains. This approach not only risks reinforcing current power imbalances, rewarding private shareholder interests while penalising working classes, minorities and low-income countries, but it also falls short on delivering the transformative change necessary to address the intertwined ecological and social crises we face.
From competitiveness to wellbeing within planetary boundaries
The CID doubles down on the EU’s drive for global competitiveness, echoing a long-standing fixation on economic growth rather than a structural shift towards true sustainability and well-being. This approach risks perpetuating the very systems that contribute to ecological degradation and social inequality. The stagnation of productivity growth in Europe over recent decades can be largely attributed to the increasing financialization of the economy since the 1970s and austerity-driven fiscal policies. Simultaneously, stringent budgetary constraints have led to chronic underinvestment in critical public infrastructure and services, including healthcare, education, transport, and research and innovation. However, there are also clear limits to productivity growth due to planetary boundaries and it is therefore essential to orient industrial and macro-economic policies around redistribution rather than shoring up profits. Instead, an adequate European green industrial policy beyond growth should:
- Adopt beyond-GDP indicators to measure progress, including ecological limits and social wellbeing. Mounting evidence suggests that relying solely on GDP growth as a measure of success overlooks critical aspects of societal well-being and environmental health and will also be unlikely to resolve the challenges we face.
- Set binding material footprint reduction targets to curb raw material extraction and waste generation, capping per capita material use at 5 tons by 2050. Only mandatory measures can deliver resource efficiency and circularity objective outlined in the deal.
- Revise trade and investment rules by developing a new framework embodied in the United Nations Ethical Trade Zone (UNETZ) to replace the current WTO rules to break dependence on exploitative supply chains and ensure trade serves people and the planet, not just corporate profits.
Beyond market mechanisms: state-led investment & public ownership
Despite various assessments that large public investments (around an additional 800 billion euros per year) are necessary to meet the needs of the social ecological transition, the CID’s investment plan banks on the repurposing of current funds, the reliance on cash injections from the European Investment Bank together with doubling down on instruments aimed at leveraging and derisking private capital. The EU basically wants to provide guarantees (financial safety nets) to private investors like banks and funds to reduce their risks and encourage investment in manufacturing, including via the completion of its flagship Savings and Investment Union (former Capital and Markets Union), which would reallocate citizens’ savings towards private companies. This has major downsides: it shifts financial risks to the public, limits democratic control, and allows financial institutions to set the terms of Europe’s industrial transition.
Instead, the green and social transformation requires active state intervention to steer markets towards sufficiency and solidarity. This means:
- Massive public investment to close the estimated €855 billion annual green investment gap based on a new Next Generation 2.0 supported by progressive taxation (including wealth, financial transaction, windfall profit taxes and capital gain taxes), EU joint borrowing, and phase-out of fossil fuel subsidies.
- The creation of a European Credit Council (modelled on the French example from 1945-1984) to pursue active credit and investment guidance and set rules for commercial banks decrease investments in harmful activities while managing stable levels of aggregate demand (e.g. by reducing harmful or unnecessary production) and inflationary pressures.
- Expanding public ownership of key sectors like energy, transport, and healthcare to ensure democratic control, quality jobs and long-term sustainability objectives.
- Environmental and social conditionalities on public funding and procurement to uphold labour rights, fair wages, and circular economy principles.
Quality ‘green jobs’: Job guarantees and place-based just transitions
Deindustrialisation is leaving entire regions behind, fueling inequality and social unrest. In addition, industrial policy has historically prioritised sectors such as manufacturing, construction, energy, and heavy industry, which are traditionally male-dominated. The CID is following this approach with a focus on green and tech jobs. This is problematic as only 22% of transport, 32% of energy and 10% of construction workers in the EU are women A regional, justice-driven approach must:
- Provide a European Job Guarantee for those willing to work, combined with working time reductions, to secure high-quality green jobs with fair wages, social protections, and improved labor standards, especially in underfunded sectors like education and healthcare.
- Deliver a Universal Care Income to revalue unpaid care work to the level of traditionally male dominated jobs.
- Broaden our understanding of green jobs. Care work and education are particularly female-dominated sectors that need to be included as jobs at the core of the transition and green industrial policy agenda. Working conditions in these sectors must be brought to the level of male-dominated jobs through fair wages, job security, improved labour standards and access to social protections and childcare.
- Guarantee job-to-job transitions for workers impacted by the transition and rebalance economic disparities through a legally binding EU Just Transition Directive and a SURE 2.0 mechanism to protect current layoffs in manufacturing, energy intensive sectors and those at risk of AI/digitalisation with company incentives to provide training/upskilling, long-term investment and social conditionalities.
Conclusion
The return of industrial policy discourse to the forefront of the EU policy agenda opens clear opportunities to outline a macroeconomic policy programme that can truly respond to the overlapping challenges Europe is facing. However, despite its ambitions, the EU’s new flagship CID depends on outdated economic models that are likely to worsen our social and environmental crises by prioritizing market forces, deregulation, short-term economic profits, and corporate interests. Instead of Make Europe Great again, the EU should focus on strategies that consider wellbeing and environmental sustainability and enhance resilience of our economies in the long-term. We have several tools at hand to uphold the current power structures and redirect economic gains and accountability to the benefit of workers, communities and the planet. Which direction will Europe take remains a question of political will.