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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.