Challenges to EU Industrial Policy Legitimacy

Despite the repeated cries of “crisis,” Europe’s automotive industry remains one of the most profitable and politically powerful sectors on the continent — yet continues to receive billions in subsidies, lenient regulations, and political protection under the banner of a “green transition.” A new SOMO study (by Jeroen Merk, Alejandro Gonzalez, Rodrigo Fernandez and Boris Schellekens | link in comment) exposes a clear contradiction: EU industrial policy claims to support climate action, yet systematically prioritises carmakers’ profits over people and the planet. 🔍 Key insights: 🚘💰 Europe’s carmakers maintain a 38% global market share and now capture over 40% of global automotive profits — the highest margins worldwide. 🫰📉 Yet they invest less than competitors, with capital expenditure stagnating while financial reserves balloon to €200+ billion. 🇪🇺🚘 EU subsidies and state aid frameworks continue to favour large, polluting vehicles, while affordable and low-carbon mobility options — public transport, cycling, shared mobility — remain underfunded. 🥹🫴 Behind the narrative of “industrial peril” lies a deeper reality: a powerful lobby shaping EU policy to delay genuine decarbonisation. From the diesel scandal to oversized SUVs, automakers have used their influence to weaken emissions targets, defend combustion engines, and steer the “green” agenda in their favour. That leaves Europeans with a transport system that locks them into car dependency, rising emissions, and material overuse — all while being publicly financed. 💡 A just transition demands a new direction. Public money should drive real transformation, not sustain business-as-usual. All state aid must come with binding environmental and social conditions, supporting: ✅ Affordable, zero-emission transport ✅ Shared and public mobility ✅ Lighter, resource-efficient vehicles Europe’s true crisis is not industrial decline — it’s policy capture (or lack of political courage and vision). The future of mobility cannot be built around defending incumbents. It must be designed around people, climate, and fairness.

Could some circularity policies go against competitiveness and environment?🤔 Ten years after the first EU circular economy roadmap, we face an uncomfortable truth: Europe's circularity rate has stagnated and recycling capacity in key sectors is declining. The paradox is that this isn't happening despite our policies. It's happening because of them. Take PET plastic. We set ambitious recycled content targets in the Single-Use Plastics Directive to drive investment in recycling infrastructure. The result? Approximately 1 million tonnes of recycling capacity lost or never developed. Why? Because we designed mandates that can be met with cheaper imported recyclate rather than European post-consumer waste. European recyclers can't compete. Facilities close. Collected plastic goes to incineration. Bad for competitiveness, bad for the environment. This forces us to confront what we're actually trying to achieve: - Are we maximizing global circularity metrics—even when that undermines European recycling industries, exports jobs, and results in incinerating perfectly recyclable collected waste? - Or is circularity supposed to be at the core of our industrial policy, creating resilient local value chains and aligning economic with environmental goals? Current policy suggests we've chosen the former while claiming the latter. I understand the legal constraints. WTO rules create real limitations. But when France announces it will implement proximity principles for recycled content in 2026, it shows member states are filling the void left by EU-level creativity. We found WTO-compatible solutions for CBAM, for critical raw materials, for countless other challenges. Why not for circularity? The US Inflation Reduction Act and China's Five-Year Plans show what happens when industrial policy is backed by state apparatus. The EU has detailed regulations but minimal financial commitment and little integration with trade, state aid, or procurement policy. The main problem is that we regulate circularity while continuing to subsidise the linear economy. Unless the EU changes the economic incentives, the market today favours linear over circular products. After ten years, we need honesty about trade-offs between supporting European industry vs. providing cheap inputs, local resilience vs. global efficiency, ambition vs. WTO compliance and real commitment for circularity. If circularity is truly core to EU industrial policy we must design policies that actually build European market for circularity. The current path—ambitious targets, cheap imports, minimal investment—is failing both competitiveness and the environment. What are your ideas on how to fix this? I have elaborated on potential ways to address this challenge in a substack article: https://lnkd.in/eiZs_sT7 #CircularEconomy #EUPolicy #Recycling #Sustainability #IndustrialPolicy #GreenDeal

𝗘𝘂𝗿𝗼𝗽𝗲’𝘀 𝗚𝗿𝗲𝗲𝗻 𝗧𝗿𝗮𝗻𝘀𝗶𝘁𝗶𝗼𝗻: 𝗔 𝗵𝗼𝘂𝘀𝗲 𝗱𝗶𝘃𝗶𝗱𝗲𝗱 The EU likes to style itself as united in diversity. Yet the green transition —one of our generation’s defining economic project— reveals a more awkward truth: Europe is attempting structural transformation atop structural asymmetry. A new article by Dario Guarascio, Jelena Reljic and Annamaria Simonazzi in 𝘎𝘰𝘷𝘦𝘳𝘯𝘢𝘯𝘤𝘦 shows that the Union’s #decarbonisation agenda risks reproducing the very divides it claims to remedy. The authors map the continent’s industrial capabilities, #fiscal space and exposure to transition shocks, revealing that Europe’s “#green leaders” (e.g., #Scandinavia) and “#manufacturing core” (#Germany and its orbit) are pulling away from those destined to bear the costs with fewer tools in hand. The result is a political economy riddle: how to pursue a strategic, capital-intensive transition when the capacity to invest is so unevenly distributed? The #EU’s answer —loosening state-aid rules while relying on national coffers— amounts, politically, to asking the #periphery to run the same race from several yards behind. If #Europe wants a net-zero pathway that is both fast and legitimate, it must abandon the fiction that horizontal policies suffice. Place-based strategies, coordinated public #investment and a genuine continental industrial strategy are not luxuries. They’re prerequisites for holding the European project together. The full article can be found here: https://lnkd.in/d9gqVXcx

The European Court of Auditors has published a sobering assessment of the EU’s critical raw materials policy. Its conclusion is unambiguous: the EU has set a strategic course, but it still rests on incomplete foundations. The findings are telling: 📦 The EU remains fully import-dependent for 10 of its 26 critical raw materials. 🧲 Rare earth elements are neither mined nor processed domestically. 🤝 Despite 14 strategic partnerships, imports from partner countries declined for 13 key materials between 2020 and 2024. The report also underlines the growing gap between policy ambition and delivery. While strategic projects benefit from faster permitting and greater visibility, many are unlikely to contribute meaningfully to EU supply by 2030. This reflects a structural reality: Mining projects are inherently long-term. By contrast, midstream capacity -refining, separation, and processin- can be scaled faster, but faces thin margins, high energy costs, and intense global competition. What is missing is not ambition. Even with frameworks such as the Critical Raw Materials Act and REsourceEU, Europe remains structurally vulnerable due to slow permitting, fragmented financing instruments, and risk-averse investment structures. What we now need is clear: 💰 Deploy capital at speed and scale to bring strategic projects to financial close 🏗️ Treat midstream capacity as strategic industrial infrastructure 🤝 Make strategic partnerships supply-relevant through volume commitments and bankable offtake ♻️ Integrate recycling and circularity into industrial planning and manufacturing demand The report is a timely wake-up call. Aligning policy frameworks with industrial reality is no longer optional. The window to act is narrow and closing fast. Links: https://lnkd.in/eZnU6pRC

The EU has a lot of big ambitions, for its industry, for its economic sovereignty, for defence and for the green transition. But none of those ambitions will be realised without securing reliable supplies of the #criticalrawmaterials that are vital for the technologies the future will be built around. Right now, the EU remains dependent on foreign supplies. For example, China provides 97 % of the EU’s magnesium (used in hydrogen-generating electrolysers) and Türkiye provides 99 % of the EU’s boron (used in solar panels). This poses a challenge for the EU’s strategic autonomy and highlights the need to increase domestic production and use resources more efficiently. In recent years, the EU has taken a number of steps to increase the security of supply of critical materials, including the adoption of the Action Plan on Critical Raw Materials and #CriticalRawMaterialsAct. European Court of Auditors Special Report “04/2026: Critical raw materials for the energy transition” examines the results of these efforts. We found a number of issues - although the Critical Raw Materials Act sets a strategic course, its targets lack justification and underlying data is not robust. Efforts to diversify imports have yet to produce tangible results and bottlenecks hamper progress in domestic production and recycling. While strategic projects can benefit from faster permitting and more visibility, many projects will struggle to secure supply for the EU by 2030. Read the report here: https://lnkd.in/dD7mbN3D One Highlight: Trade distortions and geopolitical challenges reduce the EU’s access to critical raw materials In April 2025, China placed seven rare earth elements on an export control list, making them subject to export licenses and therefore slowing exports. These materials play a key role in the manufacture of permanent magnets (i.e. magnets that do not rely on any external field or current), which are used in wind turbines and many other industrial sectors. The Commission engaged in bilateral contact with the Chinese authorities from the outset. In June 2025, the Commission created a portal to allow the manufacturing industry to submit information on the status of the export licence application process. If cases are urgent, the Commission then passes on this information to the Chinese authorities for fast-track treatment. However, the European Chamber of Commerce in China reported that, based on the information from 22 European companies between August and early September 2025, Chinese authorities had only approved 19 out of 141 licence applications, with 121 “urgent” applications still pending. By December 2025, the EU had not filed a complaint at the WTO.