Sustainable? Competitive? The EU’s Industrial Autonomy – Facts and Fantasies

Edited by Francesco Cappelletti, Gerard Pogorel

ISBN: 978-2-39067-066-7

The US presidential election, Russia’s war against Ukraine, and a more aggressive American approach to China put the European industries in a tough position, making competitiveness jump to the top of the European agenda. Competitiveness, or lack thereof, impacts the EU’s autonomy in areas ranging from defence to sustainability. 

The European Union’s industrial policy is confronted with a policy ‘trilemma’ across sectors. This trilemma involves the need to simultaneously uphold security, foster sustainability, and maintain the focus on competitiveness. Focusing too much on one of these three areas will have a detrimental impact on the other two. 

How can the EU achieve industrial autonomy while upholding security, sustainability, and competitiveness? Some solutions can include prioritising and incentivising investments in sustainable and digital technologies, investing significantly in workforce transition strategies and strengthening international alliances. In ELF’s latest study ‘Sustainable? Competitive? The EU’s Industrial Autonomy – Facts and Fantasies’ dives deep into European competitiveness and the sustainability of our industries with a series of contributions from academia, practitioners and policymakers. 

Tough choice between autonomy and protectionism

Alongside competitiveness, another important aspect of the European industry is the scale of its autonomy. In today’s world, ‘industrial autonomy’ can only be partial due to the availability of natural resources, the benefits of international trade, supply chains and production competencies. China is one of Europe’s largest trading partners and, with a share of 15.4% of EU-27 trade in 2022, is second only to the United States with 15.6%. 

Industrial autonomy involving a complete decoupling from China would be incredibly costly for Europe and have significant impact purchasing power in Western countries. China is the dominant supplier of a large variety of products imported into the EU, which cannot be easily substituted, including critical raw materials – which are essential for the European energy transition. 

Competitiveness but not at the cost of the environment  

The European Union must pursue industrial competitiveness while ensuring that sustainability remains a core pillar of its policies. Achieving this balance requires a strategic industrial policy integrating market mechanisms, state intervention, and financial incentives without compromising climate goals. Strategic autonomy is particularly important in energy production, critical mineral access, and resilient supply chains. However, decoupling from external dependencies must not lead to environmentally damaging alternatives. The EU must foster green innovation by investing in sustainable technologies, digitalization, and circular economies. Industrial policies should support clean energy transitions, promoting renewable energy and eco-friendly manufacturing to ensure economic growth aligns with environmental protection.