Lead Markets: Driving Net-Zero Industries Made in Europe

European manufacturers face multiple challenges undermining their business case to produce zero-carbon technologies and products on the continent. Demand for net-zero technologies and products is currently insufficient to drive investment and production in the EU. To respond to these challenges, the European Union (EU) proposes to implement lead markets under the Clean Industrial Deal to restore the business case for net-zero industries.

Our new report, “Lead Markets: Driving Net-Zero Industries Made in Europe,” explores how well-designed sustainability and circularity standards combined with a clear preference for Made-in-Europe technologies can transform the European Union’s industrial landscape. These measures, also called “lead markets,” are essential to strengthening the competitiveness of European companies vis-a-vis their Chinese counterparts. They can grow predictable demand and restore the business case for the frontrunners in steel, electric vehicles (EVs), and wind turbines that are at the heart of the Clean Industrial Deal.

Among its main findings, the report highlights that lead markets based on sustainability standards and European preference criteria have the potential to:

• Secure up to 98% of the green steel lead market for EU producers and create 16,000 jobs in the sector in 2035. 
• Ensure that 81% of new car sales are made in Europe and equipped with a European battery by 2035, and create 449,000 new jobs in the automotive and battery sectors in the EU. 
• Protect 80% of the wind market for EU manufacturers, generating 50,000 additional jobs by 2035.

The Clean Industrial Deal proposes lead markets to drive demand for EU-made net-zero products, supported by a European preference. To maximise their effectiveness, four key principles should be applied:  

1. Timely and temporary implementation: Lead markets should be launched quickly to maintain a strong industrial base. The Industrial Decarbonisation Accelerator Act and the implementing legislation of the Net-Zero industry Act can kick off lead markets in 2025 and introduce a European preference. The revision of the Public Procurement Directive is another opportunity in 2026. They are temporary measures that remain relevant until net-zero technologies become mainstream and market conditions take over.  
2. Focus on strategic sectors: Lead markets should target industries essential to Europe’s economic, energy, and military security or those with the potential for global competitive advantage. European preference criteria can help safeguard EU interests and attract investment.  
3. Rewards for first movers: Lead markets should set standards to incentivise innovation, sustainability, and circularity. As more industries adopt these processes, increasingly stringent requirements can continue driving progress.
4. Avoid a two-speed Europe: simple and consistent criteria applied in the whole single market are essential to avoid a fragmented implementation. This argues in favour of turning the Public Procurement Directive into a regulation. Providing financial support to regions with lower fiscal capacities to implement them is also necessary.