Seizing Europe’s industrial and decarbonized future

The renewal of European institutions offers a critical opportunity to address the fundamental challenges facing the region’s economy and industries. As outlined in Mario Draghi’s recent report, Europe’s future — its prosperity, competitiveness and capacity for innovation — depends on a renewed focus on strengthening industrial growth, ensuring economic security and driving decarbonization. These pillars are not just economic ambitions; they form the bedrock of the European project, underpinned by values of equity, freedom, peace and democracy within a sustainable framework.

In an increasingly competitive global market, European industry must regain the ground lost to its international counterparts, particularly those in the United States and China. To prevent further erosion of our industrial competitiveness and social welfare, it is essential that the EU and its member states act swiftly on the Draghi report’s three essential recommendations: closing the innovation gap, pursuing decarbonization and competitiveness as parallel goals, and securing our supply chains.

Recognising the role of renewable and low-carbon fuels in decarbonization

Europe has long been at the forefront of innovation in renewable and low-carbon fuels. Today, it holds 60% of the world’s high-value patents in renewable fuels, demonstrating a leadership position that can be expanded with the right regulatory framework. Draghi’s report highlights this strategic advantage and calls for a revision to the EU’s carbon dioxide fleet emissions regulation with a technology-neutral lens. This change is essential to ensure that the potential of carbon-neutral fuels is fully recognized and integrated into Europe’s decarbonization strategy. A holistic EU strategy for transitioning liquid fuels, to decarbonize all transport sectors and support this process in other crucial industrial sectors, is urgently needed. Without such a plan, Europe risks missing out on one of the most effective paths to net zero. This is not just a matter of environmental stewardship; it is an industrial imperative that supports the circular economy, strategic autonomy and a competitive energy supply chain.

As Draghi rightly emphasized, technology neutrality in transport is key to fostering innovation and ensuring that all viable solutions, including renewable fuels, contribute to the energy transition. With energy security and resilience becoming increasingly urgent, the fuel manufacturing sector remains a cornerstone of Europe’s industrial ecosystem, offering critical support to the circular economy and a competitive energy supply chain.

Safeguarding energy-intensive industries

Europe’s energy intensive industries (EIIs) play a pivotal role in the economy and contribute significantly to the EU’s GDP. Unlike global competitors, many of whom benefit from significant public subsidies without equivalent decarbonization targets, EU-based EIIs are bearing disproportionate burdens in the shift toward a low-carbon economy.

Draghi’s report rightly underscores the need for public support to offset these challenges and prevent de-industrialization. However, support must go beyond funding. It requires dismantling unnecessary regulatory hurdles, ensuring affordable energy prices and addressing delays in permitting processes. We must also align with the Net Zero Industry Act to build critical infrastructure quickly and efficiently, making it possible for EIIs to innovate and thrive in a decarbonized future. A clean industrial deal is imperative in Europe and the liquid fuels manufacturing sector should have a clear role in it.

FuelsEurope, with its strategic industrial manufacturing assets across Europe, and a clear vision and transition plan, has long advocated for regulatory coherence and simplified legislation. In line with the Antwerp Declaration, the Draghi report recommends measures to streamline the complex regulatory landscape for EIIs, promoting a single market for energy and recycled materials and incentivizing innovation through mechanisms like regulatory sandboxes and intellectual property protections. It also seeks to avoid unnecessary administrative burdens that undermine European industries’ competitiveness.

Addressing the impact of the Carbon Border Adjustment Mechanism

The Carbon Border Adjustment Mechanism (CBAM) is designed to create a fairer market for European industry by preventing carbon leakage and levelling the playing field with global competitors. However, its complex implementation, potential circumvention risks and impacts on EU exporters need urgent attention. If CBAM is to be a truly effective tool, it must consider the reality of today’s competitive landscape, ensuring that the goods produced in the EU are not disadvantaged in foreign markets.

FuelsEurope supports Draghi’s call for a thorough review of CBAM by the European Commission, especially in assessing carbon leakage risks for EU-produced goods intended for export. A clear framework is essential for CBAM’s effective implementation, which is critical for both environmental progress and industrial competitiveness.

Alleviating the regulatory burden for European businesses

Amid recent geopolitical and economic pressures, European businesses are grappling with an increasingly heavy regulatory burden. As Draghi’s report underscores, this legislative complexity adds both direct costs and an administrative burden that diminishes Europe’s competitiveness. FuelsEurope fully supports the report’s recommendation for a 25% reduction in reporting obligations across sustainability and finance-related legislation. We also advocate for a competitiveness test to be applied to new regulatory proposals, along with a rigorous assessment of cumulative impacts.

A collaborative future for Europe’s fuel manufacturing industry

The Draghi report represents a pivotal moment for Europe’s fuel manufacturing industry to contribute actively to a decarbonized, competitive Europe. FuelsEurope is fully committed to working alongside the Commission and member states to bring these recommendations to life. In More than a Manifesto…an Offer for Europe, which we published in May 2024, practical steps for building a resilient, sustainable and competitive Europe are outlined. We believe that with the right policy focus, our sector can become a cornerstone of the EU’s decarbonization journey, ensuring a balanced energy transition that supports the entire value chain.

Draghi’s report lays out a clear and compelling roadmap for the future of European industry and economy. Now, it is up to the EU’s leaders to turn these recommendations into actionable policies that drive sustainable growth. Let us seize this opportunity to reaffirm Europe’s leadership in the global economy and its commitment to a decarbonized future.