Europe’s Route to Advancement: Enhancing Competitiveness While Achieving Climate Neutrality
By Ross McQueen
During her 2023 State of the Union address, European Commission President Ursula von der Leyen took a significant step: she appointed former Italian Prime Minister Mario Draghi to create a detailed strategy on how Europe could regain its competitive stature. The continent was under increasing strain—from stagnating productivity and a widening gap with other global leaders such as the United States, to the pressing need to fulfill climate objectives.
The task? Transforming Europe into a leader in innovation and industry, while also becoming the world’s first climate-neutral continent. A year later, Draghi’s suggestions have established a foundation for what he termed as “radical change.”
Europe at a Turning Point
Draghi’s report, published in September 2024, began with a stark evaluation: Europe’s economic engine has been decelerating since the early 2000s. The productivity divide with top economies has expanded, and without targeted intervention, the continent may risk diminishing its role on the global economic and technological stage.
Yet Draghi remained hopeful. Europe’s advantages—its varied economies, talented labor force, and emphasis on fairness and sustainability—still provide rich soil for rejuvenation. What he posited as essential is a cohesive and unified strategy aimed at long-term competitiveness.
The Framework Steering Europe’s Renewal
To facilitate this shift, the European Commission introduced a “competitiveness compass” in January 2025—a strategic framework to direct policy initiatives across the EU. This compass relies on three key pillars:
– Innovation – cultivating an environment where startups and disruptive technologies can flourish.
– Decarbonisation – guaranteeing access to clean, dependable, and affordable energy to drive the green transition.
– Security – decreasing Europe’s reliance on external sources for essential resources and technologies.
These goals are reinforced by five “enablers” aimed at unlocking policy capabilities:
1. Streamline access to EU funding.
2. Eliminate internal market obstacles.
3. Mobilize resources for public and private investments.
4. Encourage high-quality job creation and skills enhancement.
5. Synchronize policy efforts among Member States and EU institutions.
Together, these components outline a roadmap for revitalizing Europe’s productivity, promoting innovation, and fulfilling its climate objectives concurrently.
Innovation at the Heart
Following the 2024 elections, newly appointed EU Commissioners embraced the challenge of utilizing their portfolios to boost competitiveness. Specifically, Commissioner for Startups, Research and Innovation Ekaterina Zaharieva took on one of the most pivotal roles—energizing Europe’s innovation landscape.
“Significantly reducing bureaucracy and simplifying access to EU funding,” she emphasized, was indispensable. Europe is not beginning from scratch—in fact, more startups were initiated in the EU than in the U.S. over the past six years. Nevertheless, European startups frequently face hurdles in scaling due to insufficient access to funding, talent, integrated markets, and robust regulatory support.
To bridge these gaps, the Commission is formulating a new “Startup and Scaleup Strategy” to assist businesses in expanding smoothly throughout the Single Market. Complementing this will be a proposed European Innovation Act aimed at easing the regulatory framework and drawing in venture capital. A strong life sciences strategy alongside a flagship AI agenda will further bolster Europe’s goal of becoming a leader in emerging technologies.
Converting Policy into Advancement
Substantial change, however, necessitates effective execution. In early 2025, the Commission embedded competitiveness deeply within the European Semester—the EU’s yearly policy coordination process. This indicates that national reforms and budgets will be assessed through the lens of competitiveness, alongside the traditional areas of sustainability, employment, and fiscal stability.
Moreover, policy coordination is being enhanced to address fragmentation among Member States. Initiatives to harmonize tax structures, labor regulations, and digital standards will contribute to reinforcing the Single Market, enhancing Europe’s appeal for businesses and investors alike.
Harmonizing Climate and Growth
A significant trial of the EU’s approach will be upholding the integrity of its climate commitments while spearheading economic change. As industrial policy discussions intensify globally, there is growing temptation to soften climate targets for the sake of growth.
Yet the EU remains steadfast. Through this competitiveness strategy, it intends to demonstrate that reducing emissions and fostering growth can occur concurrently. Indeed, by leading in clean technologies, Europe could access new markets, jobs, and future industries.
In a global arena characterized by geopolitical turbulence, energy disruptions, and technological upheaval, Europe’s strategy is founded on resilience and fundamental values. The green transition, if executed correctly, is seen not as a burden, but as a rare opportunity for economic revitalization.
Conclusion: Remaining Committed
If the EU successfully realises this ambitious vision, it could emerge not only as the first climate-neutral continent, but also as a more vibrant, economically competitive, and resilient union. The message from Brussels is unequivocal: there will be no regression from the EU’s core principles.