Europe’s industrial policy worsens the crises it claims to solve, say researchers

The European Union’s industrial strategy, centered on Single Market Resilience, Strategic Autonomy, and Competitive Sustainability, is riddled with contradictions that risk exacerbating the very crises it seeks to address.

According to a recent study published in Globalizations by the Institute for Environmental Science and Technology of the Universitat Autònoma de Barcelona (ICTA-UAB), the EU’s current industrial policy will not achieve its own objectives unless it is fundamentally rethought.

Resilience can only be achieved by strengthening foundational sectors such as health care, housing, care, and public transport—which together account for nearly 40% of employment in Europe. The study warns that such resilience will remain out of reach unless there is a commitment to public investment, better working conditions, and vocational training aligned with social needs.

The research, led by Jason Hickel (ICTA-UAB), Richard Bärnthaler (University of Leeds), and Sebastian Mang (New Economics Foundation), argues that strategic autonomy requires a substantial reduction in material and energy demand. Current policies, such as the Critical Raw Materials Act, promote expanded resource extraction, which could heighten geopolitical tensions and fuel conflicts within Europe over extractive activities.

Drawing on findings from low-energy demand scenarios, the study highlights that Europe could cut its energy demand in half by 2050—making energy independence possible and significantly reducing import dependencies.

Moreover, the research critiques the current approach to the green transition, which relies heavily on market-based incentives such as public subsidies, guarantees, and deregulation. “This model encourages innovation, but it fails to include exnovation—the intentional phase-out of unsustainable technologies and infrastructures—thereby reinforcing structural inertia,” says Hickel, ICTA-UAB researcher.

The EU currently lacks effective mechanisms to shut down carbon-intensive sectors, realign private capital with public priorities, and steer production toward social well-being. The authors argue that without stronger public planning, credit guidance, and greater public ownership—particularly in the energy and finance sectors—the green transition will be too slow, too fragmented, and overly dependent on profit margins.

“We are living in a century of overlapping crises—climate, social, energy, and geopolitical. Industrial policy is back, but it is not equipped for this reality. There is no coherent strategy to strengthen essential public services or to significantly reduce material and energy use,” said Bärnthaler, assistant professor at the University of Leeds.

Hickel warned that “efficiency alone is not enough in growth-driven economies. Technological gains are often offset by rising production. If Europe is serious about decarbonization and strategic autonomy, it must scale down non-essential, resource-intensive sectors directly. Current EU industrial policy does not address this.”

Mang, political economist at the New Economics Foundation, added, “The EU says it wants resilience, autonomy, and sustainability—but it’s using the wrong tools. We need ambitious public investment, coordination between central banks and governments, and democratic control over resource allocation. Without placing care, climate, and equity at the center, this industrial policy will stay off course.”

As a way forward, the authors call for a fundamental rebalancing of Europe’s industrial strategy around three core priorities: strengthening foundational sectors such as care, public transport, and affordable housing; embedding demand reduction as a structural principle for strategic autonomy; and expanding green economic planning through public credit guidance, monetary-fiscal coordination, enhanced fiscal capacity, and increased public ownership—especially in energy and finance.