The European Union’s climate policy is currently structured in such a way that a scenario where heavy industry emits nothing by 2040 is entirely plausible. However, according to energy expert Remco de Boer, this will not be due to rapid and successful decarbonization but rather because European industry will have been decimated: “More factories closing, more industrial production scaling down. If the EU doesn’t want that, now is the time to act. While it still can.”

This week, the European Commission is presenting the Clean Industrial Deal, a plan that acknowledges the increasing struggles of the industrial sector. Yet, despite recognizing these challenges, the EU remains unwilling to reconsider one of the fundamental drivers behind them—its ambitious climate targets and corresponding policies. Without a shift in course, the Clean Industrial Deal is unlikely to be the solution industry needs.

In addition to the Clean Industrial Deal, the European Commission is also unveiling the Action Plan for Affordable Energy. Both initiatives are part of a long—and ever-growing—list of acts, plans, and strategies aimed at boosting the EU’s competitiveness while simultaneously accelerating the energy transition. Yet one of the most critical factors affecting the industry’s competitiveness remains untouched: the climate goals.

The EU’s Climate Targets: A Global Outlier?

By law, the EU must become the world’s first climate-neutral continent by 2050, despite being responsible for just 6% of global emissions. An interim goal is set at a 90% reduction by 2040, with 100% emissions reduction for heavy industry in the same year—essentially eliminating emissions altogether.

In contrast, the world’s largest emitters—China (30%), the U.S. (11%), and India (8%)—are far less ambitious. China has set its net-zero target for 2060, and India aims for 2070. Crucially, both have made it clear that economic growth takes priority over decarbonization. Meanwhile, in the U.S., former President Trump has already dismantled much of the Biden administration’s net-zero framework, casting uncertainty over the country’s long-term climate ambitions.

The EU’s motivation for its rapid transition extends beyond combating climate change. A heavy investment in domestic renewable energy is intended to reduce reliance on energy imports, particularly since the EU possesses few natural resources and is reluctant to extract what it does have. Additionally, the EU seeks to penalize high-carbon importsthrough mechanisms such as the Carbon Border Adjustment Mechanism (CBAM), forcing exporters to either decarbonize or pay extra costs to sell within the bloc.

The Green Deal’s Unintended Consequences

The Green Deal, widely celebrated as the EU’s flagship climate strategy, is now revealing significant drawbacks. European industry faces:

• Higher energy costs compared to competitors in the U.S. and Asia.
• Rising carbon costs, making manufacturing more expensive.
• Increasing regulatory burdens, which limit operational flexibility.
• Insufficient financial support to offset the costs of decarbonization.

While the “stick” (strict regulations and penalties) is firmly in place, the “carrot” (incentives and support) remains lacking.

Exporting industrial products from Europe is becoming increasingly difficult. As Dow Chemical’s CEO bluntly put it:

“Dow’s cost position allows it to serve the domestic market, but it is not in Europe to export. Europe doesn’t have the cost position anymore to export.”

The European automotive sector faces similar challenges, struggling to compete with cheaper and often superiorChinese electric vehicles. This has already prompted EU protectionist measures, such as import tariffs on Chinese cars and carbon-based tariffs (CBAM) on industrial imports. While these policies may protect domestic producers, European consumers will ultimately bear the cost.

At the same time, the EU is losing economic momentum. The Draghi Report clearly outlined that the bloc’s economic competitiveness is declining. Trade wars loom, transatlantic alliances are weakening, and geopolitical tensions are rising. The global landscape today looks very different from when the EU first embarked on its net-zero journey.

Stability vs. Pragmatism: Adjusting Course in Time

A common argument against revising climate targets is that stability and predictability are essential for businesses. This is true—constantly shifting policies create uncertainty. However, blind adherence to a fixed course can be just as damaging:

“Stable policy is useless if you’re driving straight into a wall—and crashing into it in a perfectly stable manner.”

Course correction is necessary. The EU must:

• Expand domestic energy production, including renewables and fossil fuels.
• Diversify energy imports to reduce dependency.
• Provide financial support to retain critical industries.
• Increase raw material extraction and processing within the EU.
• Cut bureaucracy and reduce the regulatory burden on businesses.

If the EU refuses to adjust its climate goals and policies, then even the most ambitious acts, plans, and strategies will fail to secure the future of European industry.

The alternative? Accepting the shrinking of Europe’s industrial base in favor of a smaller, greener, circular economy. However, given Europe’s poor track record in scaling and commercializing green innovations, it remains highly uncertain whether this new industrial vision will be globally competitive.

Right now, EU climate policy is designed in a way that a zero-emissions industry by 2040 is a real possibility. But unless adjustments are made, this will not happen through innovation and sustainability—it will happen because European industry has been hollowed out. More factory closures, more industrial decline.

If the EU does not want this outcome, now is the time to act. While it still can.