7. Energy Transition and Industrial Competitiveness in the EU

The energy transition in the European Union is shaped by complex technological, economic, and geopolitical interdependencies. A coherent policy approach must account for the interaction between efforts to decarbonize the energy mix and measures that support the adoption of end-use clean technologies, in particular in the industrial sector. Photovoltaic and battery storage systems face structural challenges in Europe, including elevated production costs and limited upstream integration. Heat pumps, while more mature, would require demand stimulation and workforce skill development to fully realize their potential. Concurrently, industrial electrification presents considerable technical potential, especially for low- and medium-temperature heat processes, but progress remains constrained by infrastructure gaps, regulatory barriers, and cost competitiveness. Moreover, manufacturing industries are highly exposed to international competition, making them particularly sensitive to trade policies. A comprehensive policy framework should prioritize effective use of EU funds and ensure stable regulatory conditions. Key actions involve developing clean technology gigafactories, securing critical raw materials, supporting circular economy practices, expanding recycling capabilities, and fostering R&D collaboration. Complementary fiscal incentives, green finance mechanisms, and workforce upskilling are essential to reduce external dependencies, advancing Net-Zero Industry Act (NZIA) targets, and generating socioeconomic and environmental benefits. To bolster EU industrial competitiveness, accelerating the deployment of renewables, facilitating access to long-term instruments such as power purchase agreements, and establishing a coherent EU-wide framework to support industrial electrification are imperative. In particular, hard-to-abate manufacturing sectors will require targeted incentives—whether in terms of capital expenditures (CAPEX) or operational ones (OPEX)—to bridge the cost gap with fossil fuel-based reference technologies.