Climate protection goals have triggered a drive for innovation and a profound industrial transformation based on so-called clean technologies, around which a global competitiveness challenge is unfolding.
In this context, Europe faces the task of closing the competitiveness and innovation gap with China and, to a different extent, the United States. The new Commission, starting with its initial acts, has emphasised a more effective framework for decarbonisation prospects, coordinated with the recovery of the Union’s competitiveness gap.
The Green Paper for a new industrial strategy
In Italy, the publication of a national industrial strategy by the Ministry of Enterprises and Made in Italy (MIMIT) last October was timely. A new vision for national industry, integrated with the decarbonisation agenda, is indeed essential to keep up with the ongoing transformation process, whose driving forces are rooted in global markets and, despite the complex geopolitical situation, will not slow down so easily.
This strategy, outlined in a Green Paper, underwent a public consultation process to which ECCO also contributed, highlighting the various implications of climate policies inherent in the process. Therefore, the full integration of decarbonisation within Italian industrial planning and a greater synergy with the European strategy are fundamental. As emphasised in the Draghi report, the challenge of international competitiveness can only be won if the European industry moves together towards bridging the innovation and productivity gap. Reducing strategic dependencies and renewing the link between competitiveness and decarbonisation are, in fact, the key elements that the Commission has reiterated in the Competitiveness Compass, which outlines a strategic framework for the Commission’s future work on European competitiveness.
Against this backdrop, the development of a national strategy allows for a better understanding of the opportunities and challenges that decarbonisation prospects offer in relation to the Italian industrial fabric. Aligning the national strategy with these objectives would help influence the European strategy, enhancing the characteristics of the national production system: less intensive production, greater energy and resource efficiency, preponderance of small and medium enterprises, specialised industrial districts and artisanal manufacturing.
The role and involvement of supply chains
The involvement of supply chains through sectoral tables envisaged in the Green Paper, as the basis of national governance, is a central element that can help build a solid and integrated knowledge base. This approach is necessary for an industrial sector made up of a multiplicity of production processes and value chains with strong global interconnections. Sector-specific and targeted supply chain strategies are the starting point for developing a new vision of the industrial fabric in today’s complex geopolitical context. Breaking down supply chains into their foundational elements helps to determine the strategic elements of each supply chain in relation to market development, climate goals, their added value, the existing competitiveness gap with other global economies and employment implications. This knowledge base would make it possible to identify the strengths, weaknesses and interdependence with European and global partners, highlighting prospects and challenges for the country system.
The development of industrial policies in the context of multiple and interconnected value chains requires a differentiated approach. For some production processes, technological solutions to align production processes with Net Zero goals do not yet exist or are not economically competitive. Meanwhile, for others, solutions are already available and are the most cost-effective and efficient. On the one hand, therefore, there is a need to direct resources towards research and development where solutions are not yet widespread; on the other hand, there needs to be a focus on specific technologies that, when tested for cost-effectiveness, are more beneficial. Therefore, basing a strategy solely on policies that favour technological neutrality, such as carbon pricing, does not seem like a winning solution. On the contrary, these should be complemented by specific sectoral policies, integrated from both the supply and demand sides, to accompany the transition of various sectors. For a country with limited fiscal space, like Italy, it is indeed essential to direct resources precisely and, therefore, towards strategic technologies.
Horizontal strategies
Alongside the development of supply chain strategies, which are vertical and sectoral, there remains a need to develop strategies on common elements across all supply chains.
The first of these elements, closely connected to competitiveness and consistent with the Commission’s announcement of a future Affordable Energy Action Plan, is to ensure that the transition to renewables serves the competitiveness of businesses and that the resulting cost advantages benefit both businesses and consumers. In this sense, the strategy should start with the rebalancing of energy carrier prices, so that they properly reflect the contribution to the transition and energy security. There is also a need for a vision regarding the transitional use of natural gas and its substitutes, with privileged and exclusive channels for industrial uses of high-temperature heat, while continuing research and development of solutions aligned with climate goals.
Within this, it is necessary to develop a package of measures that further stimulates the energy efficiency of processes and harnesses the potential of the electrical vector in reducing emissions in the production of medium and low-temperature heat. The creation of an industrial plan can benefit from the adoption of a national strategic vision centered around the electrification of industrial heat. This is a no-regrets option that would allow Italian and European industry to adopt the decarbonisation technology that guarantees the lowest costs compared to other solutions, such as hydrogen, e-fuels and even biomethane.
The second element is the creation of ‘green’ markets, including through the Green Public Procurement tool, a key dimension of industrial policy at the European level. Italy has already established good practices in this area, having integrated green public procurement into the public procurement code as early as 2016. Climate goals create a demand for ‘green’ products aligned with the transition, but for this demand to turn into a market, it is necessary to introduce emission standards that serve as a reference benchmark. This would promote market prospects and create a positive feedback effect towards the spread of new production methods which are more in line with the objectives of circularity and sustainability.
Investment, education and employment
The definition of an industrial strategy must integrate a reflection of the impacts on the labour market and the mobilisation of investment. These elements will also be central to the European discussion with the Union of Skills and the debate on the new Multiannual Financial Framework. On these topics, it is crucial that Italy develops an integrated position. However, at present, they do not appear central in the Green Paper.
From the perspective of the labour market, sectoral strategies should focus on evaluating the professional roles and skills needed for the transformation, including both direct and indirect workers, and the development of educational pathways from high school to university. The lack of skills, as demonstrated by the case of Northvolt, can result in an inability to trigger growth. Conversely, identifying the supply chains most impacted by transformation allows for the creation of social plans to absorb redundancies through re-training or the use of social safety nets, thereby informing just transition plans. A key aspect within this context is the Union of Skills, an initiative outlined in the Competitiveness Compass that aims, among other things, to develop skills suited to future needs.
Financing the transition
The transition and the relaunch of competitiveness require a significant reorientation of investments. This implies the need for a concrete and autonomous strategy that enables public finance to leverage private investments, especially through direct investments in enabling infrastructure, innovation support, and through the structure of fiscal and financial incentives that channel (crowd-in) private resources toward desired objectives.
As national public spending is constrained by progressive debt reduction, aligning it with the achievement of EU competitiveness and climate goals would strengthen Italy’s position in discussions on the European Competitiveness Fund and, more broadly, in negotiations on the Multiannual Financial Framework.
Building a new vision for national industry that is integrated with the decarbonisation pathway is, therefore, essential to capitalise on the competitiveness opportunities and green markets that this pathway creates. It also represents an important building block in the development of other key strategies for the country system, such as those for labour and investment, which are themselves influenced by the changes imposed by decarbonisation. The Italian industrial transformation can succeed only if it is carried out in agreement and in synergy with the European one: an essential prerequisite to face the challenge of global competitiveness.
Photo by Khanchit Khirisutchalual
