As climate change and geopolitical rivalries intensify, the European Commission unveiled its long awaited Clean Industrial Deal (CID), coupled with the plan on energy affordability and proposal to simplify environmental requirements for companies. With a renewed commitment to cut 90% of EU greenhouse gas emissions by 2040, the CID lays out a comprehensive set of measures – such as on lead markets, circularity and skills – needed to decarbonise European industry while making it more competitive. Notwithstanding the importance of such a vision, old questions remain unanswered while new ones come to light.
Climate transition in the EU will require hundreds of billions of euros annually, which have to be invested strategically to ensure desired results. While the importance of EU funds, state aid, public procurement, carbon markets cannot be overstated, this will not be enough, especially given competition for funding with other priorities, such as defence.
The proposed simplification of regulatory requirements on sustainability reporting and compliance across supply chains promises to reduce the costs for European companies. However, such measures risk undermining not only the Union’s climate and environmental ambitions but also legal certainty – crucial for a healthy business environment.
In addition, the CID does not offer a clear perspective regarding the challenges and opportunities Trump 2.0 brings to the EU’s green economy; nor how to advance both decarbonisation and socio-economic development in partner countries, as the EU is de-risking its economy from global actors like China.
Last but not least, the CID takes a narrow approach towards the European Green Deal, focusing on decarbonisation, despite the risks that pollution, biodiversity loss and lack of climate adaptation pose for European public health and infrastructure, all of which are crucial for long-term economic prosperity.
The EU must stay committed to its Green Deal objectives and identify creative ways how to effectively align sustainability and economic competitiveness. To finance the green transition, the EU should reach out to the capital markets. Member states must agree on a new joint borrowing scheme before the current one expires in 2026. In tandem with its sustainable finance agenda, the EU should complete the Savings and Investments Union, as envisaged by the Letta report and complemented by the Draghi report in 2024, and mobilise private investments to advance the green transition.
The EU should double down on turning digitalisation into an enabler for greater sustainability. For example, common rules on data governance and sharing of information, coupled with tools such as AI, blockchain and digital product passports, could facilitate and streamline environmental reporting and supply chain transparency. This could also make industry and energy systems more efficient and productive while reducing emissions and waste. At the same time, the EU must tackle cybersecurity threats and the environmental impacts of digitalisation.
The EU should aim to maintain and improve transatlantic collaboration on climate. Yet it should not shy away from capitalising on a potential US slowdown on the green transition, restoring the Union’s lead on cleantech, and preventing technologies of the future from falling into the hands of other global competitors. Green partnerships with reliable partners should recognise the genuine needs of third countries to both develop their economies and protect their local environment.
The Clean Industrial Deal is an important step towards implementing the EU’s climate ambitions. While walking the talk, the Union must use all instruments at its disposal as quickly as possible. In doing so, the EU should not lose sight of the full scale of the triple crisis – climate change, pollution, biodiversity loss – and ensure that the Green Deal commitments are more than empty promises.
Stefan Šipka is Head of Sustainable Prosperity for Europe programme, European Policy Centre