25. 09. 2025
AUTHOR: Neil Makaroff and Tristan Beucler
On 29 September, industry ministers will meet for a Competitiveness Council in Brussels, at a crucial time for the European Union’s (EU) industrial policy. A few important files are on the agenda: the Competitiveness Fund, the Single Market strategy, and the “reconciliation” of the 2040 climate target and industrial competitiveness. Ministers have the opportunity to discuss what industrial policies and incentives are necessary to ensure the 90% target leads to scaling up strategic industries in the EU and reducing import dependencies. This discussion between Ministers can lay the groundwork for the European Council's debate on the 2040 climate target on the 23 and 24 October and provide the Commission with a solid direction for the upcoming Industrial Accelerator Act. Seven months after the publication of the Clean Industrial Deal and one year after the publication of the Draghi Report, this legislation could be a long-overdue step to support the EU’s strategic industries, such as batteries, green steel, wind turbines or electrolysers. At a time when these sectors are falling behind and facing high energy prices, uncertain demand, and unfair international competition, ministers can set a new tone for the EU industrial policy. It is time to follow Mario Draghi’s advice and “use industrial policy to cut dependencies and guard against state-sponsored competition”. A European industrial strategy that backs a 90% climate target can generate €233 billion of manufacturing added-value and create 2 million new jobs.
Creating the right framework for investment into industrial decarbonisation
The first point on this Council’s agenda is the European Competitiveness Fund, which will be at the heart of the EU’s investment into decarbonisation and industrial competitiveness. At least €668 billion is necessary for the EU to reach a 90% climate target while reindustrialising its economy by 2040, leading to savings amounting to €850 billion in fossil fuel imports and €133 billion in technology imports. Both energy-intensive industries and cleantech companies will need support to switch their processes and scale up. Although an agreement on the Competitiveness Fund will take time, ministers can already frame a number of principles for its effectiveness, such as a focus on strategic technologies and innovation, the implementation of a One-Stop-Shop to ease access for companies, and a European preference for investment. Short-term investments can already follow those principles through the Innovation Fund, for instance. Setting clear priorities for the Fund can reassure countries that more finance will flow to make the 90% pathways achievable.
Initiating lead markets to support European net-zero products
Commission President Ursula von der Leyen confirmed that lead markets would be a priority so investors know that there will be a demand for clean European products during her State of the Union speech. Indeed, one of the main challenges faced by the EU’s strategic industries is the lack of sufficient, predictable demand for EU-made clean products. Industry ministers can use the debate on the Single Market to set out the key principles for effective lead markets that will support industries on the way to 2040 and can be included in the Industrial Accelerator Act.
Introducing sustainability criteria combined with Made in Europe criteria can reward the EU’s industrial frontrunners while providing security for investors. Such a policy incentivises more sustainable products, reinforcing the EU’s competitiveness compared to imports that tend to be more CO2-intensive, and ensures strategic industries stay in Europe. By applying these criteria to all relevant uses of public money, the Industrial Accelerator Act will create much stronger demand for strategic sectors. According to our analysis, those rules can lead to 81% of new car sales made in Europe and equipped with a European battery by 2035 and secure up to 98% of the green steel lead market for EU producers.
By signalling their support for lead markets and a European preference, ministers have the opportunity to send a strong signal to the Commission that the European industry needs guarantees in order to reach 2040. As Mario Draghi puts it, the EU should recognise that “the line between economy and security is increasingly blurred”.
During next week’s Competitiveness Council, ministers can show that they have heard Mario Draghi’s plea for greater speed and ambition for the EU’s industrial policy. They can signal alignment on key industrial enabling conditions for an agreement on the 2040 climate target, both through the upcoming Industrial Accelerator Act and the Competitiveness Fund.
