Introduction

The report highlights that industry plays a central role in Europe’s economy, with the manufacturing sector alone employing approximately 30 million people and generating around EUR 2.5 trillion in value added in 2023. However, industrial activities continue to contribute substantially to environmental and climate pressures. Industry accounts for 20% of greenhouse gas (GHG) emissions, 15% of nitrogen oxides (NOx), 36% of sulphur oxides (SOx), and 17% of particulate matter (PM2.5) in Europe. Additionally, the sector is responsible for 23% of final energy consumption, 16% of water abstraction, and 54% of hazardous waste generation. A transition towards clean, decarbonised, and resource-efficient facilities is critical for safeguarding the environmental baseline and future-proofing the economy.

Policy drivers of clean industrial transformation

The European policy landscape has evolved through three distinct waves, moving from a focus on pollution control (1980s-2000s) to decarbonisation (2010-2020) and currently towards industrial transformation and competitiveness (2021-today). Strategic frameworks such as the Zero Pollution Action Plan (ZPAP), the Fit for 55 package, and the Clean Industrial Deal (CID) shape this direction. Key legislative instruments include the Industrial Emissions Directive (IED), which requires the adoption of best available techniques (BATs), and the Net-Zero Industry Act (NZIA), which targets domestic manufacturing capacity for clean technologies. While National Energy and Climate Plans (NECPs) increasingly address industrial competitiveness and skills development, they frequently lack the timebound measures and detailed instruments necessary to meet specific targets.

Environmental and climate performance in EU industry

Between 2010 and 2024, total GHG emissions from EU industry fell by 27%, consistently across sectors. However, output-based carbon intensity—measured as CO2 emissions per tonne of product—presents a more challenging picture. While intensities for aluminium and basic chemicals have declined markedly, progress for cement and iron and steel has been marginal or stagnant. This suggests that much of the decoupling observed to date reflects structural economic shifts towards higher-value activities rather than a fundamental transformation of production processes. In contrast, releases of major air pollutants have fallen substantially: sulphur oxides decreased by 80%, nitrogen oxides by 58%, and particulate matter by 76%.

Resource efficiency gains are also noted, as the manufacturing sector generates significantly more economic value for each unit of water and raw material consumed compared to 2010. Nevertheless, total water abstraction in manufacturing increased by 3%, and the EU’s material footprint remains above the global average. Circular material use rates have stagnated at approximately 12.2%, falling short of the 24% target set in EU policy. Verified emissions data further reveal that just 30 manufacturing installations account for roughly a fifth of all EU industrial emissions, indicating that targeted interventions could significantly mitigate the sector’s total impact.

Supporting a clean industrial transformation

The report finds that industrial transformation is increasingly constrained by system readiness rather than technology readiness. Europe faces an estimated annual funding gap of EUR 30 to 60 billion for industrial transformation up to 2040. Key infrastructure barriers must be addressed, including doubling annual investment in power grids to around EUR 100 billion. The report also highlights that Europe’s technical skills base is a critical enabling condition; however, the EU produces approximately 850 STEM graduates per million inhabitants per year, which is notably lower than the 1,100 produced in the United States.

Social and systemic dimensions of transformation

Successful transformation depends on social legitimacy, effective governance, and place-based implementation to ensure workers and communities benefit from changes. It requires a balanced strategy that simultaneously scales up clean technologies while deliberately phasing out unsustainable practices. Resilience in this context is understood as the capacity to fundamentally transform production systems and value chains when existing structures are no longer viable. Case studies such as the adaptive reuse of mining infrastructure in Genk, Belgium, and the Norwegian maritime industry’s shift to battery and hydrogen technologies illustrate how regions can navigate industrial restructuring while maintaining long-term competitiveness.

Towards long-term competitive transformation

The report identifies a portfolio of strategic options for a clean and competitive industrial base. These include “shielding” measures like the Carbon Border Adjustment Mechanism (CBAM) to manage transition risk and protect industry from unfair competition. “Scaling” involve creating green lead markets through demand-side measures such as green public procurement and product standards. Finally, “restructuring” involves changing the industrial model through smart specialisation and the strategic outsourcing of green intermediate products—such as green iron or ammonia—from regions with abundant, low-cost renewable energy. These measures aim to help industry manage upfront costs and deliver long-term economic and social benefits.