Investment needs and gaps for the sustainability transition in Europe: Rethinking the European Green Deal as an EU industrial strategy

The implementation process of the European Green Deal Strategic Framework (EGDSF) and its many legislation provisions was slowed down during the last two years. In some areas, like climate and energy, most of the policy initiatives have been implemented whereas in other areas, like pollution and chemicals, the process is lagging behind. All the official and non-official estimates of the investments needed to achieve the key EGD-related targets and objectives as well as the sustainability transition in general, bring to very high figures. In spite of the uncertainties affecting the different estimates, the additional investment need is about €520 billion per year in the present decade with respect to the average level of the last decade, of which €392 billion/year for climate and energy. The investment gaps, as the difference between the estimated needs and the present level of investments, are very large in key transition sectors, like clean energy and mobility. At the same time, the picture on European domestic manufacturing capacity in selected clean tech for energy and mobility - compared to the deployment of those same technologies in EU countries - shows a mixed picture. Resources from the private sector, and in particular private industrial investments, are called into the fore as a force that is necessary to complement public funding. An often-disregarded but key factor for mobilizing investments is the cost of capital. The cost of capital is very different across Member States and regions. This difference can favour the companies located in certain countries in accessing finance to make investments, thus possibly contributing to an industrial divergence in key transition areas like clean tech. The difficulties faced by the EGD-triggered transition in the EU suggest to look at the space it can have within the evolution of the EU macro policies. A preferred pathways requires redesigning the EGD as an EU-level industrial strategy. Among the ingredients of a true green industrial strategy there are major EU-level initiatives to achieve the needed European scale in clean tech industrial investments and the redirection of the policy instruments to go beyond a central role of the regulatory approach. A European industrial policy and a ‘New EGD’ must go hand in hand.