EU green value chains are losing competitiveness, but strong regional specialisation means support should target regions with the best industrial fit.

The European Union is gradually becoming less competitive in green value chains, implying that it is becoming less well-positioned to generate economic growth from these industries. We show this using measures of EU specialisation in green exports, relative to the rest of the world. Behind this aggregate trend, there is wide variation across countries and technologies. Belgium, for example, has a good industrial base in batteries and wind power, while Italy, Germany and Poland are relatively more specialised than other countries in heat pumps. We compare countries in terms of green export diversity, specialisation and relatedness, revealing distinct technological strengths. 

Most trade data is available only at the national level. To investigate regional patterns, we use a database covering more than €200 billion of announced site-specific European clean-tech manufacturing investment. This reveals similarly strong geographic specialisation across green value chains. 

Together, the Growth Lab Greenplexity and Bruegel European Clean Tech Tracker databases highlight the importance of geography for industrial policy. Green value chains are fiercely competitive, and regions differ in the industrial capabilities they can draw on. When deploying public support to develop domestic green value chains, European policymakers should target investment in particular industries towards regions where the existing industrial ecosystems offer the best fit.

Source : Bruegel