Published on 17 September 2024, the Draghi Report outlines a strategic vision for ensuring Europe’s long-term competitiveness and sustainability. With a focus on public investment, regulatory reform and industrial strategy, the report warns that Europe’s leadership in clean technologies could falter without cohesive action to unify decarbonisation efforts and economic growth. Its recommendations span multiple sectors and address systemic challenges, laying the groundwork for the upcoming EU “Clean Industrial Deal”.

Central to the report is the identification of three core priorities: closing the innovation gap with global competitors, aligning the decarbonisation agenda with competitiveness, and reducing Europe’s dependence on third countries for critical resources and technologies. These goals, combined with a proposed annual investment of EUR 750–800 billion (4-5% of the EU’s GDP), form the foundation of a strategy aimed at securing Europe’s place in an increasingly competitive global economy.

Addressing Barriers to Competitiveness

The Draghi Report highlights several barriers impeding Europe’s economic resilience. Chief among them is regulatory overreach, particularly in Environmental, Social, and Governance (ESG) compliance. The Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy Regulation are singled out for imposing excessive compliance costs and creating uncertainty, particularly for small- and medium-sized enterprises (SMEs). Simplifying these frameworks is deemed essential to fostering innovation without stifling economic growth.

Fragmentation in the EU’s Single Market also emerges as a significant challenge, driving high-growth companies to seek opportunities abroad. Inefficient resource allocation, sluggish policy-making, and outdated decision-making processes further hinder Europe’s ability to respond dynamically to global challenges.

Key Sectoral Strategies

• The Draghi Report proposes targeted reforms across critical sectors to address systemic inefficiencies:

• Telecommunications: A unified EU Telecoms Act would streamline regulation, harmonise spectrum allocation, and support the creation of EU-wide players capable of competing on a global scale.

• Computing and AI: The report recommends an EU Cloud and AI Development Act to establish standardised infrastructure, foster AI training, and ensure Europe remains competitive in these transformative fields.

• Pharmaceuticals: A stronger R&D environment, expedited market access, and full implementation of health technology assessment regulations are critical to maintaining competitiveness in life sciences.

• Energy: Reducing energy costs, decoupling renewable energy pricing from fossil fuels, and accelerating grid investments are vital to supporting the energy transition while ensuring industrial competitiveness.

Renewable Energy and Decarbonization

Renewable energy takes centre stage in the Draghi Report as both an environmental and economic priority. Simplifying permitting processes for renewable energy projects and energy grid upgrades is emphasised as a way to accelerate Europe’s decarbonisation agenda. The report advocates for decoupling renewable energy pricing from fossil fuels through long-term contracts, which would stabilise costs and promote investment in renewables.

To support industries with high energy demands, the report encourages self-generation and storage solutions, as well as Power Purchase Agreements (PPAs) to secure renewable energy at competitive prices. A focus on grid modernisation and the integration of flexible energy sources, such as hydrogen and battery storage, aims to improve system resilience and ensure consistent access to renewable energy.

Public-private alignment is highlighted as critical to the success of these initiatives. While private sector investment is essential, the Draghi Report emphasises the importance of a robust public policy to provide the framework and stability necessary for significant private sector contributions.

Implications for European Policy

The Draghi Report’s recommendations are poised to shape the forthcoming “Clean Industrial Deal,” which aims to unify Europe’s decarbonisation efforts with its economic objectives. For policymakers, the report provides a roadmap for balancing environmental priorities with the need to remain globally competitive. Streamlining regulatory frameworks, fostering innovation, and modernising infrastructure are presented as essential steps to ensure Europe’s sustainable growth.

The report also underscores the importance of energy security, proposing coordinated, long-term gas purchasing policies alongside investments in renewables. Electricity market reform, targeted tax reductions, and energy efficiency measures are seen as pivotal to reducing costs while maintaining Europe’s commitment to decarbonisation.

Conclusion

The Draghi Report presents an ambitious vision for Europe’s future, emphasising that sustainability and competitiveness are not mutually exclusive but mutually reinforcing. By addressing regulatory inefficiencies, investing in key sectors, and fostering alignment between public and private initiatives, the EU has an opportunity to secure its place as a global leader in clean technologies and innovation.

As the EU prepares to implement its “Clean Industrial Deal”, the Draghi Report serves as a critical blueprint for navigating the complex challenges of the 21st century. Through decisive action, Europe can ensure its economic and environmental resilience, setting a precedent for sustainable growth in an increasingly interconnected and competitive world.

Ștefan Baciu, Associate CMS Cameron McKenna Nabarro Olswang LLP SCP