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https://doi.org/10.60637/2025-b01

This publication is part of a cooperation project between ÖFSE and AK Wien and was financially supported by the Network Science of AK Wien.

Open Preface

Preface

By Mariana Mazzucato

Industrial policy has returned to the European Union’s agenda with remarkable force. For decades, economic governance in Europe was dominated by the belief that the role of the state was simply to fix market failures while leaving the direction of growth to market forces. Today, that view is no longer tenable. The climate emergency, the digital revolution, geo-economic rivalries, and the war in Ukraine have made clear that markets do not automatically produce socially desirable outcomes. They must be shaped—by design, with purpose, and through capable public institutions.

This is the essence of the entrepreneurial state: not a passive fixer of problems, but an active shaper and co-creator of markets. From the internet to renewable energy, history shows that transformative innovations did not emerge spontaneously from the private sector alone. They were catalysed by bold public investments, risk-taking,

Open The Renaissance of Industrial Policy in the European Union: An Introduction

The Renaissance of Industrial Policy in the European Union: An Introduction

By Werner Raza, Christa Schlager, Viktor Skyrman, Michael Soder

The EU's renewed embrace of industrial policy risks prioritising security and competitiveness over social justice and climate action—but a progressive alternative remains possible.

After decades of marginalisation, industrial policy has returned to the European Union's political agenda with remarkable force. While this shift in economic discourse deserves welcome in principle, progressives must urgently examine the fundamental questions driving this renaissance: why pursue industrial policy, how should it operate, and—crucially—who benefits? What motivations underpin these initiatives? Which objectives take priority? Who sits at the decision-making table, and who bears responsibility for implementation?

These pressing questions animate the contributions to this volume. Though our authors span different institutional and disciplinary backgrounds, we sha

Open Europe's Energy Divide: Why the Green Transition Risks Leaving Half the Continent Behind

Europe's Energy Divide: Why the Green Transition Risks Leaving Half the Continent Behind

By Dario Guarascio, Jelena Reljic, and Francesco Zezza

As fossil fuel dependency threatens sovereignty, the EU's fragmented response deepens existing inequalities.

The war in Ukraine has made one thing painfully clear: reducing Europe's dependence on fossil fuels is no longer just about fighting climate change. It is equally about preventing future inflationary shocks — like those that eroded European workers' purchasing power between 2022 and 2024 — and regaining the EU's economic sovereignty.

While decarbonisation and climate goals remain extremely urgent, accelerating the shift towards a fossil-free and technologically autonomous energy system — from batteries to solar panels — has become crucial for restoring competitiveness and ensuring a socially sustainable growth model. Yet this is anything but an easy task. [The path ahead is riddled with obstacles](https://www.elgaronline.com/view/journals/ro

Open Europe's Critical Raw Materials Strategy Demands Equitable Global Partnerships

Europe's Critical Raw Materials Strategy Demands Equitable Global Partnerships

By Bernhard Tröster, Simela Papatheophilou and Karin Küblböck

The EU's industrial ambitions hinge on transforming extractive relationships into sustainable partnerships with resource-rich nations.

The properties of certain mineral raw materials underpin virtually every aspect of modern life. From smartphones to wind turbines, these materials enable the technologies that power our economies and promise to deliver our climate goals. Others prove irreplaceable for digital infrastructure, aerospace engineering, and defence systems. Building new industrial capacities in these sectors depends fundamentally on securing both access to these raw materials and the capabilities to process them.

Europe's dependence on imported raw materials stretches back decades, punctuated by periodic supply crises that briefly thrust resource security into the spotlight. [Discussions](https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=C

Open Europe’s Quest for Technological Sovereignty: A Feasible Path Amidst Global Rivalries

Europe’s Quest for Technological Sovereignty: A Feasible Path Amidst Global Rivalries

By Christian Reiner and Roman Stöllinger

The European Union must pursue robust industrial policies to counter technological dependencies and safeguard its future prosperity and stability.

The era of unbridled hyperglobalisation, characterised by a relaxed attitude towards dependencies on other countries’ resources, productive capacities, and technological competencies, has ended. Recent global disruptions – from critical product shortages during the COVID-19 pandemic to energy price surges following Russia’s invasion of Ukraine, and the intensifying geopolitical and geoeconomic rivalry between China and the United States – have forced the European Union to reassess its traditionally liberal approach to trade, investment, and technology. A surge in protectionist policies, coupled with the pervasive influence of Silicon Valley’s "surveillance capitalism" and th

Open Europe's Green Jobs Crisis: Why Slow Decarbonisation Threatens Employment More Than Climate Action

Europe's Green Jobs Crisis: Why Slow Decarbonisation Threatens Employment More Than Climate Action

By Bela Galgoczi

Lagging investment in clean technologies poses a greater risk to European jobs than the green transition itself.

While the green and digital transitions will inevitably lead to job losses, the real danger lies elsewhere. A lack of investment in green technologies risks seeing new low-carbon industrial jobs created outside Europe, leaving the continent behind in the race for clean-tech dominance.

Decarbonising the economy and bringing human activity back within planetary boundaries is having—and will continue to have—profound impacts on employment and skills. The policies necessary to correct our current resource-depleting production and consumption model affect the world of work both qualitatively and quantitatively. Whilst the transition to a net-zero carbon economy will create millions of jobs, many will also disappear or relocate to other regions. This will alter the aggre

Open Europe's Green Transition: A Fund Under Pressure

Europe's Green Transition: A Fund Under Pressure

By Valeria Cirillo, Marialuisa Divella, Lidia Greco, Eustachio Ferrulli

The EU's flagship Just Transition Fund, designed to mitigate social inequalities, faces significant challenges in achieving its ambitious goals.

In line with the Paris Agreement, the European Union (EU) aims to achieve climate neutrality by 2050. This objective necessitates profound shifts in energy production, technological development, and national economic structures, inevitably leading to significant social consequences, including job displacement. To ensure a fair and inclusive transition, the European Commission has introduced measures to support potentially affected regions, industries, and workers. The Just Transition Fund (JTF) stands as a pivotal initiative for this purpose.

Approved in 2021, the JTF targets regions whose economies are reliant on coal extraction and highly polluting industries. Its remit includes diversifying these economies, fostering clean en

Open Industrial Policy Must Include Citizens And Workers

Industrial Policy Must Include Citizens And Workers

By Werner Raza

Europe's twin transformation needs social conditionalities to prevent corporate capture and build democratic legitimacy.

The green and digital transformations will produce deep changes to our modes of production and consumption, indeed to our entire way of life. Along this transformative journey, some segments of society will profit handsomely, whilst others—particularly large numbers of workers in shrinking industries—will find themselves negatively affected, at least during the transitory period of the next two to three decades. Thus, whatever the specific motivation for industrial policy, to be accepted by societal stakeholders, it must be considered legitimate by those it affects.

Given the fundamental uncertainty of the process and the associated social concerns, sustained political support critically depends upon a positive, if not optimistic, vision of the future. Citizens as well as affected workers will need to be

Open The EU's Industrial Policy Needs Better Governance

The EU's Industrial Policy Needs Better Governance

By Wolfgang Polt

Europe's fragmented approach to industrial strategy undermines its ability to compete with China and the United States.

The European Union stands at yet another crossroads. A "poly-crisis" demands fundamental changes to patterns of production and consumption to meet the challenge of climate crises, keep pace with the economic and societal challenges of the new wave of digital transformation, and ramp up defence production to meet looming military conflicts—all against the backdrop of losing competitiveness in major industries and facing ruptures in international value chains. Any successful response clearly hinges on an elaborate and forceful industrial policy—primarily, though not exclusively, of the mission-oriented type.

The reasons for needing an explicit, well-funded and forcefully implemented industrial policy are manifold. First, many of the goals are societal in nature—such as abating global warming—which markets w

Open Europe's Innovation Agencies Need Radical Reform To Meet Today's Grand Challenges

Europe's Innovation Agencies Need Radical Reform To Meet Today's Grand Challenges

By Rainer Kattel

Innovation agencies in the EU are no longer fit for purpose. A major overhaul of both the concept of innovation and of institutional structures is urgent.

Europe today faces no shortage of crises. From climate breakdown and geopolitical instability to social fragmentation and digital disruption, the continent is being reshaped by forces that defy easy policy responses. In this increasingly turbulent landscape, innovation is no longer a technocratic pursuit confined to boosting productivity or improving competitiveness, as the consensus of the early twenty-first century prescribed. It has become a political, economic and institutional necessity—one that demands not only new ideas but new ways of organising the public institutions that can turn those ideas into systemic change.

At the heart of this challenge lie innovation agencies. Long the workhorses of science, technology and industrial poli

Open Mind the Gap: Can Europe Afford Its Green and Digital Future?

Mind the Gap: Can Europe Afford Its Green and Digital Future?

By Viktor Skyrman

Amid vast investment shortfalls, the European Union must rethink its funding strategy to achieve its ambitious goals.

Significant new investment is crucial if the European Union is to meet its decarbonisation and digitalisation targets, yet funding remains the Achilles heel of its green industrial policy. Amid a climate of austerity, policymakers’ attempts to subsidise and “crowd in” private investment, mainly through public guarantees, have failed to close Europe’s green investment deficit, which is estimated to be some €406 billion, or 2.6 percent of GDP, in 2024.

A recent report by the former Italian prime minister, Mario Draghi, calls for an additional €750 billion to €800 billion in yearly i

Open EU's New Fiscal Rules: Balancing Budgets with Green and Digital Ambitions

EU's New Fiscal Rules: Balancing Budgets with Green and Digital Ambitions

By Philipp Heimberger

The recently enacted EU fiscal framework aims for fiscal prudence but poses challenges for funding the green and digital transition.

The European Union's revamped fiscal rules, which took effect on 30 April 2024, mark a significant shift in how member states manage their public finances. This comprehensive reform, the most substantial since the post-financial crisis tightening, seeks to rein in national deficits and debt. However, this renewed emphasis on fiscal consolidation raises crucial questions about the future of public spending, particularly concerning the ambitious green and digital transitions the EU is championing.

While a recent decision to exempt additional defence spending will lead to a more expansionary overall fiscal po

Open The ECB Must Embrace Europe's Green Finance Rules To Secure Both Climate Goals And Financial Stability

The ECB Must Embrace Europe's Green Finance Rules To Secure Both Climate Goals And Financial Stability

By Gaston Bronstering, Agnieszka Smoleńska, David Barmes

Integrating sustainable finance standards into central bank operations would align market incentives and strengthen the eurozone's climate resilience.

The EU has set ambitious sustainability objectives over the past few years. In the field of financial market policies, one important element is the EU sustainable finance framework, which currently comprises over 20 pieces of legislation. These span foundational definitions relating to sustainable business activities (Green Taxonomy), corporate governance rules (disclosures), product and service standards (EU Green Bond, ESG ratings), as well as prudential reforms. As an increasing number of legislative interventions shape the emergence of the EU's "green macrofinancial regime", especially through EU sustainable financ

Open A Progressive Industrial Policy for the Global South: A Latin American Perspective

A Progressive Industrial Policy for the Global South: A Latin American Perspective

By José Miguel Ahumada and Fernando Sossdorf

The Global South must redefine industrial policy to build new productive capabilities and address escalating global challenges.

The global economy is undergoing a profound transformation, moving away from the neoliberal globalisation that defined international economic relations from the 1980s until the 2008 financial crisis. This shift is driven by the climate emergency, the digital revolution, rising military tensions, and an escalating trade war involving the United States, the European Union, and China. This conflict extends beyond tariffs, encompassing the race for critical minerals, control of digital platforms, the restructuring of global value chains, and the appropriation of intellectual property.

This structural conflict has had two major consequences. First, the neoliberal multilateral t

Open Industrial Policy for the Twin Transformation – Towards a Progressive Agenda

Industrial Policy for the Twin Transformation – Towards a Progressive Agenda

By Werner Raza, Christa Schlager, Viktor Skyrman, Michael Soder

Industrial policy is making a comeback, yet it remains tentative. The EU’s twin transformation requires a careful balance between climate action, digitalisation, and social fairness.

The tentative return of industrial policy marks a pivotal moment for Europe. After decades of marginalisation, industrial strategy has reappeared on the political agenda, yet fundamental questions persist. What objectives should it pursue? How can the ensuing change be managed equitably? What are the respective roles of the state and private sector? The contributors to this eBook explore these issues and offer some initial insights and preliminary answers.

Whilst the primary motivations for renewed EU industrial policy — combating the climate crisis and navigating digital transformation — are evident, rampant protectionism propagated by the Trump administration and percei

Open About the Authors

José Miguel Ahumada is an Assistant Professor at the Institute of International Studies, University of Chile. He has a PhD in Development Studies from the University of Cambridge and MSc in Development Studies from the London School of Economics.

David Barmes is a Policy Fellow at the LSE Grantham Research Institute, where he focuses on sustainable central banking, financial supervision, and macroeconomic coordination.

Gaston Bronstering researches the role and influence of index providers for economic decision-making at the International Relations Department, LSE. He has worked as a researcher at the academic think tank Sustainable Finance Lab associated with the Utrecht School of Economics and experience and conducted research for the United Nations Environment Programme.

Valeria Cirillo is Associate Professor of Economics at the University of Bari Aldo Moro (Department of Political Sciences). She is external affiliate of the Institute of Economics at the Sant’Anna School of Advance