A new, climate-innovation led industrial strategy for Europe

Europe is an undisputed global leader in clean technologies like offshore wind. But to ensure European companies and workers can compete in a global economy that will be increasingly fuelled by climate innovations, much more needs to be done, argue Peter Sweatman and Thomas Pellerin-Carlin.

Peter Sweatman is the CEO of Climate Strategy & Partners, a leading climate consultancy based in Madrid. Thomas Pellerin-Carlin is the director of the Jacques Delors Energy Centre in Paris.

In his just-released book, Bill Gates says that to avoid a climate disaster, the world in the next 30 years will need scientific breakthroughs, technological innovation and global cooperation on a scale never before seen. Gates also calls upon the Biden administration to increase the U.S. federal budget for climate and clean energy research to $35 billion a year.

For policymakers in Brussels, many of whom will be gathering this week at the European Union’s flagship conference on EU industry, that begs a question: What is Europe doing to win this new clean tech innovation race to the top?

As co-chairs of a growing network of more than a dozen organisations focused on climate-related research and innovation policy in the European Union, we can say that the answer is ‘a lot but not nearly enough’.

Europe is a world leader in research. So far, the EU’s 27 member states have registered 50% more patents in green technologies than the United States. (For all its cleantech muscle, China is nowhere near the top.)

In December, EU policymakers also agreed on Horizon Europe, which at €95.5 billion is the world’s largest research and innovation programme. More than a third of this – €33.4 billion – is earmarked for climate-related R&I.

Such EU-level resources are necessary, as is the culture of innovation that permeates through our cities, rural areas, universities, small businesses, and big corporations. However, even with our established innovation culture, this EU climate-related funding for innovation is not nearly enough.

To ensure European companies and workers can compete in a global economy that will be increasingly fuelled by climate innovations, much more needs to be done.

Beyond Horizon Europe, to truly achieve its ambitious climate goals and reach net-zero pollution, Europe has two major opportunities to set its economy on a path to sustainable, enduring economic growth in the coming months.

First, the European Commission needs to craft an EU Industrial Strategy that puts climate innovation at its core. Fortunately, we already have a framework in place to do this. How?

The best way to ensure major European industries like steel and cement can continue to compete globally is to intimately link the EU’s Industrial Strategy with the objectives of the EU Green Deal. This will not only require new ecosystem approaches, but also new metrics to measure competitive sustainability factors in key decarbonising industries.

Second, EU member states must be strategic in how they allocate €300-plus billion in EU recovery funds. Even with Horizon Europe, the EU provides just 5 percent of all European research funding.

That means there is an onus on national governments to step up, too. They can start by allocating some of their COVID stimulus funding to help boost clean tech start-ups and clean economy SMEs in their own countries.

They should also avoid harming our net-zero emissions trajectory by not directly subsidizing companies and industries that have no real plans to slash the carbon emissions fuelling climate change.

Europe has shown how focusing on climate-related innovation and playing to existing strengths in research boosts economies across the continent and creates good jobs. Just look at offshore wind.

European companies are the undisputed global leaders in this fast-growing sector. For example, a decade ago the Danish energy company Orsted shifted its focus from oil and gas to renewable energy.

It invested in turbine blade technology and analyzed reams of data to sharpen its operational performance. Now, the company is a global offshore wind leader and a first mover into lucrative yet largely untapped foreign markets like the U.S. This means more high-paying European jobs – and more clean, renewable energy on the grid.

In our own jobs, we engage directly with European innovators who have the courage to imagine a better world and the determination to pursue it. But we are struck by how often they say they lack the resources necessary to turn their vision into a reality. With the future of our climate and Europe’s economy in the balance, this is unacceptable.

The fact is, steady investments in R&I, a regulatory environment that enables climate innovators, and a willingness to act early and take calculated risks can help Europe lead in the kinds of clean economy sectors that will deliver prosperity for generations.

By making long-term, strategic, and common-sense policy decisions today, we can replicate the dynamic we have seen in offshore wind in industries like renewable hydrogen, building renovation, next-generation solar panels, batteries and green cement and steel.

This year, the European Union needs to put innovation at the core of its policy decisions, starting with the Industrial Strategy and member state allocation of EU recovery funds. Climate research and innovation investment isn’t a silver bullet. But without it, much more valuable silver will be wasted buying technology from abroad.