Greg VAN ELSEN

political economist and Senior Industrial Policy Advisor at Climate Action Network (CAN) Europe

The European Commission’s proposal for an Industrial Accelerator Act marks a significant step towards a genuine European industrial policy. By combining ‘Made in Europe’ requirements with low-carbon criteria, the Commission is signalling that industrial transformation and climate action can no longer be treated as separate agendas. Despite its potential, the Industrial Accelerator Act will only benefit people and the climate if the proposal itself and the wider EU industrial policy toolbox are both strengthened. 

When Industry Commissioner Stéphane Séjourné announced the Industrial Accelerator Act (IAA) earlier this year, he spoke of ‘a change in doctrine’. He was right. By seeking to protect strategic sectors from international competition and actively stimulating demand for European products, the Commission is moving further away from the market orthodoxy that has dominated European economic thinking for decades.

The proposal’s already-troubled path illustrates just how significant this shift really is. Repeated delays reflected resistance within the Commission itself, where some members remain deeply attached to the principles of free trade and limited state intervention. The debate has now moved to the Council and the European Parliament, where discussions centre on whether the IAA’s preferential measures should be reserved for European producers or extended to ‘trusted partners’ outside the EU. The controversy reveals a broader European soul-searching exercise about how open it can remain in an increasingly fragmented global economy.

The IAA is one of the centrepieces of the Commission’s Clean Industrial Deal, its flagship strategy to turn decarbonisation into a driver of industrial renewal. Yet it is striking that the proposal’s headline objective – raising manufacturing output to 20 per cent of the EU’s GDP – contains no explicit clean industry component. This reflects a broader shift in emphasis, as ‘decarbonisation’ already disappeared from the act’s original title, the ‘Industrial Decarbonisation Accelerator Act’.

Whether returning manufacturing to levels not seen since the early 1990s is a desirable objective at all remains an open question. The declining share of manufacturing in advanced service-oriented economies has been a structural trend for decades, including in China. More importantly, an aggregate manufacturing target risks obscuring the real challenge: ensuring that Europe’s industrial base becomes climate-neutral, resilient and socially sustainable.

The risks of such an approach are already visible. Incumbent fossil-fuel-dependent industries have begun invoking the 20 per cent target to argue against climate legislation and delay the transition. Rather than measuring success through a broad manufacturing indicator, the EU should develop sector-specific targets linked to emissions reductions, circularity, quality jobs and strategic resilience. This is particularly important because the list of ‘strategic sectors’ in annex I of the IAA remains excessively broad and is not limited to genuinely decarbonised industrial activities.

Despite these shortcomings, the IAA contains important and welcome innovations. At its core, it seeks to achieve three objectives. First, it creates demand for European production by requiring that part of public spending in strategic sectors – including energy-intensive industries such as steel and cement, the automotive sector, and clean technologies such as batteries, renewable energy and heat pumps – benefits companies producing in Europe. Second, it seeks to ensure that foreign investment in strategic sectors creates genuine local value rather than merely treating Europe as a sales market and assembly line. Third, it aims to accelerate industrial projects by simplifying permitting procedures and improving access to energy and finance.

The creation of lead markets for low-carbon products is perhaps the most promising element of the proposal. While the EU has made substantial progress in decarbonising electricity generation, energy-intensive industries remain among the biggest laggards of the transition, accounting for more than a quarter of final energy consumption and over 20 per cent of greenhouse gas emissions. Too often, these sectors have responded to climate policy by seeking exemptions, compensation and delays rather than embracing transformation. Lead markets can help change the business case by creating demand for low-carbon steel, cement and – with time – chemicals. But they are not a substitute for strong climate policy. Staying the course on the EU Emissions Trading System remains essential: without a meaningful and predictable carbon price signal, lead markets risk leading nowhere.

However, the environmental integrity of these lead markets must be safeguarded. Only genuinely low-carbon, circular and resilient production should qualify as ‘green’. In some sectors, notably the cement sector, the current proposal risks setting standards that are insufficiently ambitious. The same applies to steel: fossil-based steel has no place in a net-zero industrial strategy and should never be eligible for green public procurement or preferential treatment under the IAA. Europe’s industrial policy should support the transition away from coal and fossil gas, not reward its continued use. Public support must accelerate transformation, not prolong high-carbon production models through marginal efficiency gains. 

The IAA should also go further in linking public support to social outcomes. Industrial policy cannot simply be about producing more goods; it must also shape the kind of economy and society Europe wants to build. Companies benefiting from public support should therefore meet minimum social conditions. These conditions should include engaging in collective bargaining, respecting collective agreements, investing in worker reskilling and upskilling, and reinvesting profits into productive activities such as research and innovation. Restrictions could also be placed on share buybacks, excessive dividend payments or relocations aimed at exploiting lower labour or tax standards elsewhere.

Ultimately, the IAA confirms the emergence of the EU as a more interventionist, even ‘geo-dirigiste’, state actor. This is a logical adaptation to a world where the United States, China and other major economies are increasingly deploying industrial policy to pursue strategic objectives.

Yet two fundamental challenges remain.

The first challenge is how to avoid turning industrial policy into a global zero-sum game. If every region simply seeks to out-subsidise or exclude competitors, the result could be fragmentation, inefficiency and international tensions. Europe must therefore combine strategic autonomy with international cooperation, particularly with developing countries that also seek to build clean industrial capacity. Global decarbonisation will also require continued – and in some areas even intensified – cooperation with China, which remains the world’s leading producer of many clean technologies. 

Rather than being driven by Europe’s geopolitical anxieties or blanket de-risking narratives, the EU’s industrial strategy should adopt a sector-by-sector approach based on clear criteria, including economic potential, decarbonisation contributions and relevance for strategic autonomy. Making such choices, however, requires a level of state capacity that Europe is only beginning to rebuild.

The second challenge is therefore institutional. Europe still lacks much of the administrative capacity required to design, implement and evaluate ambitious industrial policies. For decades, policymakers were told that markets would allocate resources efficiently and that governments should merely set framework conditions. Industrial policy requires different capabilities: technological expertise, long-term planning and the ability to resist capture by powerful incumbents. Building this capacity may ultimately prove as important as the policies themselves.

The Industrial Accelerator Act is therefore more than another piece of legislation. It represents a test of whether Europe can develop a new economic model that combines climate ambition, economic resilience and social progress. Ultimately, the choice facing Europe is not simply between ‘making’ and ‘fading’. The real challenge is to ensure that industrial policy serves a broader purpose: accelerating global decarbonisation, strengthening resilience, creating quality jobs and delivering prosperity within planetary boundaries. Europe’s future will be determined not by how much it produces, but by what it produces, how it produces it, and who benefits from it.

Photo credits: Shutterstock/Skorzewiak