The Competitiveness Compass, recently outlined by European Commission President Ursula von der Leyen, sets a strategic direction for Europe’s economy amid increasing global competition[1]. It builds on insights from the Draghi Report and paves the way for the upcoming Clean Industrial Deal. The report emphasizes the link between decarbonization and competitiveness, introducing a range of new strategies and action plans. However, the specific implementation details and financing mechanisms remain uncertain.
The sector-specific action plans and strategies about decarbonisation and their expected publication date are summarized in the figure below. For example, the EU will present a Steel and Metals Action Plan in 2025, alongside a Chemicals Industry Package, to address investment needs and trade challenges. High energy prices also remain a major challenge in the EU. The Affordable Energy Action Plan aims to cut costs through better market integration, revised tariffs, and investments in grids, hydrogen transport, and carbon storage.
Sweet Spot of Deregulation
In response to political pressure from her own party, France and Germany, von der Leyen has committed toreducing administrative burdens with 35% for SMEs. France is even pushing to pause the Corporate Sustainability Reporting Directive (CSRD), as many businesses struggle to comply. However, deregulation must be handled with care. The U.S. model, which allows for rapid technological innovation due to lighter regulation, has also led to financial crises and systemic risks – as seen in the 2008 financial meltdown. The challenge is to find a middle ground: ensuring capital market access and simplified regulation for clean industries while maintaining safeguards to prevent environmental and economic risks.
A Pragmatic Path ForwardAs the Clean Industrial Deal develops, the EU will need to make a tough choice: How much deregulation is necessary to stay competitive? We will need the Competitiveness Compass and its forthcoming measures to steer Europe through turbulent waters, strengthening its position in both decarbonization and global competitiveness.
[1] https://commission.europa.eu/document/download/10017eb1-4722-4333-add2-e0ed18105a34_en
