Competitiveness of companies in the decarbonisation process

The global energy transition presents European companies with a dual challenge. On the one hand, they must rapidly decarbonise their production and processes to meet ambitious climate targets. On the other, they face fierce international competition, particularly from Asian markets that benefit from lower production costs and aggressive industrial strategies. Addressing this challenge requires more than innovation alone: it calls for strategic collaboration on key components of the technologies that will define our future.

Leading in ambition, trailing in competition

Europe is rightly recognised for having some of the most ambitious climate targets in the world. These targets provide certainty to investors and companies that are committed to making the energy transition a success.

They also create fertile ground for innovative businesses that help decarbonise industry and develop future-oriented business models.

Yet despite this ambition, European industry risks being outpaced by Chinese and American competitors. In key technologies such as digital infrastructure, artificial intelligence, solar photovoltaics, electric vehicles and batteries, Europe risks playing a perpetual game of catch-up. Competing products are often more advanced or simply offer better value for money.

However, this would not be the first time Europe has started from behind and ultimately emerged on top. The story of Airbus offers valuable lessons for policymakers and industry alike.

Airbus: success through collaboration

In 1970, France, Germany, Spain and the United Kingdom decided to join forces to “strengthen European aviation technology and economic and technological progress in Europe.” Each country had its own aviation industry, but all faced the rise of a powerful new competitor: Boeing. Without a joint programme for aircraft development, Europe risked being left behind by Boeing’s jumbo jets. Airbus was born out of this realisation.

By pooling resources on components, coordinating R&D programmes and sharing investment risks, these countries strengthened their industries by looking beyond national borders. Collaboration proved to be the key to success.

Collaborate on components, software, and investments

Today, under similar external pressure, Europe must once again join forces to secure a competitive advantage in strategic sectors. Take battery production as an example. The battery supply chain is estimated to grow by around 30% annually – yet even this rapid expansion does not fully meet global demand, which continues to surge.

Batteries are vital for our future economy. Beyond their economic importance, they are a strategic technology that shapes Europe’s geopolitical position. A strong battery industry strengthens Europe’s autonomy today and safeguards it for tomorrow. Batteries are indispensable for decarbonisation, alongside many other key technologies.

That is why governments must enable industry to collaborate – to innovate together, invest together and share risks. Joint action can reduce the cost of key components, boost research and development, and lower financial uncertainty. Platforms for collaboration can lay the foundations for a competitive European industry in batteries, battery recycling, solar panels, heat pumps and many other sectors of the future.

Output based support for clean tech and innovative technologies, as seen with the Inflation Reduction Act, can be a tool worth considering. Moreover, governments should not be hesitant to take a stake in companies of strategic importance. 

Even more so, de-risking cross-border investments with conditioned low-interest loans or guarantees for companies that serve the public good can be a way to help start-ups and industries in transformation. Partial ownership, until the loan has been paid, could be such a condition – thereby further steering a business to serve the public. Because conditioning the use of public resources by private companies is not only morally sound, it can direct investment strategies to improve the public good.

Compete on quality

Europe must compete on quality. This means not only the quality of the final product, but also the quality of the production process itself: ethically sourced raw materials, fair working conditions and environmental responsibility. 

At present, Europe cannot win a race based on production costs alone. Energy prices are higher due to external dependencies, and access to raw materials remains a major challenge. Lowering standards would only benefit those willing to lower them even further. In a race to the bottom, Europe stands to lose far more than it could ever gain.

Instead, Europe should create lead markets with strong social conditionalities. Requirements such as worker representation through trade unions can help raise standards, stimulate domestic production and accelerate industrial decarbonisation.

Decarbonisation is our guarantee for competitiveness

Ultimately, competitiveness and decarbonisation are two sides of the same coin. Climate ambition without a coherent industrial strategy risk hollowing out Europe’s manufacturing base. Industrial support without climate ambition risks locking Europe into outdated technologies.

The solution lies in a coordinated European approach that aligns climate targets, industrial policy and investment capacity.

Europe has the skills, the research base and the market size to succeed. What it needs now is the political courage to act collectively, to pool risks and rewards, and to back its industry with the same determination that once gave birth to Airbus.