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Is Green Industrial Policy the Right Choice for the EU?

Author

Listed:
  • Sandström, Christian

    (Linnaeus University)

  • Stenkula, Mikael

    (Research Institute of Industrial Economics (IFN))

Abstract

This paper critically evaluates the European Union’s shift towards large-scale green industrial policies. It highlights the risks of government-directed resource allocation, such as inefficiencies, misaligned incentives, rent-seeking, and lobbying. Politicians and bureaucrats at the EU level lack the ability to identify the future industries, products, and technologies for this policy to work effectively. The EU is not designed to operate large top-down interventions successfully. There is a substantial risk that large amounts of resources will be spent on initiatives that ultimately fail. Instead, this paper emphasizes competition- and technological-neutral frameworks, emissions trading systems, and general policy incentives. The paper concludes that a decentralized, market-driven approach is more sustainable for fostering innovation.

Suggested Citation

  • Sandström, Christian & Stenkula, Mikael, 2025. "Is Green Industrial Policy the Right Choice for the EU?," Working Paper Series 1523, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1523
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    More about this item

    Keywords

    New industrial policy; Green investments; Innovation policy; Mission-oriented policies;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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