The European Commission’s report on ‘The Future of European Competitiveness,’ authored by former Italian Prime Minister Mario Draghi, outlines key strategies for boosting the EU’s global standing. While our previous blog covered horizontal recommendations, this blog delves into sector-specific proposals to drive innovation and boost investment in Europe, targeting key industries such as energy, digitalisation, raw materials, and defence.
Energy and clean technologies
The energy sector is a cornerstone of Draghi’s vision, with a clear focus on lowering consumer costs, expanding electrification and accelerating decarbonisation through a range of technologies, including carbon capture, renewables, nuclear power, hydrogen, and advanced battery technologies. Draghi proposes joint procurement of natural gas to stabilise markets and suggests using European Emissions Trading System (ETS) revenues to fund carbon capture and storage technologies, crucial for the long-term success of decarbonisation efforts. The report also stresses the importance of hydrogen, recommending that ETS revenues are directed toward early-stage hydrogen production—a key pillar of Europe’s green energy future.
To secure Europe's autonomy in clean technologies, Draghi stresses the need for a resilient supply chain for green technology components, namely through upgrading Europe’s aging electricity grids. The full implementation of the recently-adopted Net Zero Industry Act is also critical to achieving this, whilst he also advocates for public procurement policies to prioritise locally produced clean technologies.
Digitalisation, advanced technologies and semiconductors
Draghi aspires for Europe to lead in digitalisation and advanced technologies, which he views as crucial drivers of economic growth and job creation. AI is one of the priority areas: Draghi urges the EU to secure leadership in AI by focusing on key industries like manufacturing and robotics. A new EU Cloud and AI Development Act is proposed to strengthen capabilities alongside a strategy to harmonise national AI regulations and simplify the implementation of GDPR in AI contexts.
Elsewhere, he calls for reducing country-specific regulations in telecom markets to encourage innovation and investment in high-speed broadband and suggests the EU develop its own alternatives to non-EU mobile operating systems to reduce the EU’s reliance on foreign tech giants.
Acknowledging the strategic importance of semiconductors, Draghi advocates for increased investment in R&D to strengthen Europe’s semiconductor manufacturing. He proposes an EU Semiconductor Strategy supported by subsidies and a streamlined permitting process to ensure efficient production. Additionally, the report suggests a coordinated EU Quantum Chips plan to optimise funding and avoid duplication of efforts across Member States.
Critical raw materials and energy-intensive industries
Draghi calls for the full implementation of the EU Critical Raw Materials Act, advocating for domestic production and simplified permitting. He also proposes an EU-wide strategy covering the entire raw materials value chain, from mining to recycling, to ensure self-sufficiency.
For Europe’s energy-intensive industries, the report outlines a path toward decarbonisation that balances competitiveness with environmental responsibility. Draghi emphasises the need for policy coordination across energy, climate, and trade sectors to ensure a smooth transition to greener technologies. To further support these industries, Draghi calls for greater financial backing through instruments like the European Investment Bank guarantees, as well as reforms to the EU taxonomy to include small and medium-sized enterprises.
Pharmaceuticals
In the pharmaceutical sector, Draghi urges the EU to maintain and expand its capacity for R&D, addressing emerging competitiveness challenges. The key to this is maximising the potential of the European Health Data Space, streamlining cross-border clinical trials, and accelerating market access for new medicines. Additionally, the report calls for clear guidance on the use of AI in pharmaceutical development to boost innovation in this vital industry.
Automotive and transportation
The automotive sector faces a dual challenge: maintaining affordability while staying competitive in global markets. To support this, Draghi recommends a comprehensive EU Industrial Action Plan that strengthens both vertical and horizontal coordination in the automotive value chain. Regulatory coherence is essential to ensure that upcoming EU regulations do not place undue burdens on the sector. Additionally, a tech-neutral approach is recommended when revising climate and environmental policies such as the Fit-for-55 package. The controversial emission reduction targets and the end of the combustion engine in 2035, which were only adopted recently, look set to be amended in the coming years following backlash from conservative parties, industry and some members of the public
The report also calls for harmonising transport rules across Member States to create a truly integrated, intermodal transport system.
Defence and space
Finally, amidst growing geopolitical tension and war at Europe’s borders, the report identifies defence as another key sector where Europe must strengthen its industrial base. Draghi emphasises the need for increased investment in defence R&D to boost technological capabilities. Harmonising standards and equipment across Member States will improve interoperability, while a reinforced European preference principle will prioritise EU defence solutions over non-EU alternatives.
Draghi positions the space sector as vital for Europe’s strategic autonomy. He recommends creating a Single Market for space and an EU Space Fund to finance critical innovations. Guaranteeing autonomous access to space is essential for both defence and telecommunications, ensuring that Europe can remain a leader in space-based technologies.
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The sectoral recommendations in the Draghi report present a bold vision for Europe's future, stressing the need for swift and coordinated action across industries. These proposals, if adopted, will help Europe remain competitive in a rapidly changing global landscape, driving innovation, resilience, and sustainability across its economic sectors.
Whilst we have seen some of the ideas already reflected in the mission letters of the new EU Commissioner-candidates, it remains to be seen how much of this vision can be achieved and whether individual Member States will grant their backing that is essential if Commission-led initiatives are to succeed.
