Is Green Industrial Policy the Right Choice for the EU?

This chapter critically examines the European Union’s (EU) turn towards large-scale green industrial policies. It highlights the risks inherent in government-directed resource allocation, including inefficiency, distorted incentives, rent-seeking, and lobbying. We contend that policymakers and bureaucrats at the EU level lack the capacity to identify future industries, products, and technologies with sufficient accuracy for such policies to succeed, and the Union is not institutionally designed to implement large top-down interventions effectively. As a result, substantial public resources risk being channelled into projects that ultimately fail. Instead, the chapter argues for competition- and technology-neutral frameworks, robust emissions trading systems, and general policy instruments as more effective means of advancing sustainability. It concludes that a decentralised, market-driven approach provides a more viable foundation for fostering innovation and achieving climate objectives.