Climate neutral market opportunities and EU competitiveness : executive summary.
Date: 2020-12-19
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs
Subjects: EU energy policy, European undertaking, climate change policy, competitiveness, data collection, innovation, market, qualitative analysis, quantitative analysis, recommendation, research and development, supply chain

Climate neutral market opportunities 
and EU competitiveness 

Executive Summary 

Written by ICF and Cleantech Group 
December 2020 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs  
Directorate C — Sustainable Industry and Mobility 
Unit C1 — Circular Economy and Construction 

Contact  

E-mail:  GROW-C1@ec.europa.eu 

European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Climate neutral market opportunities 
and EU competitiveness 

Executive Summary 

Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs  

2020 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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EUROPEAN COMMISSION 

CONTENTS 

EXECUTIVE SUMMARY ................................................................................................ 6 

Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs  

2020 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
CLIMATE NEUTRAL MARKET OPPORTUNITIES AND EU COMPETITIVENESS 

Executive Summary 

This study has assessed the competitiveness of European1 businesses within the global 
value chains of key strategic components of climate neutral solutions. Using 12 value chains 
as  a  basis  for  the  assessment,  it  has  identified  where  these  can  enable  European 
companies to gain additional comparative advantage while helping the EU to achieve its 
climate neutrality ambitions. 

The results of this study include: (i) a replicable Competitiveness Assessment Framework 
(CAF), as illustrated in Figure 0.1, that serves as a basis for assessing the competitiveness 
of the EU in global climate neutral value chains; (ii) a dataset and a strategic outlook for 
each of the 12 value chains analysed; and, (iii) key conclusions drawn from applying the 
CAF to all value chains, covering the main drivers and dynamics of climate neutral solutions 
in Europe. This includes a cross-comparison of the results for each value chain, together 
with key challenges and policy recommendations. 

Figure 0.1 Competitiveness Assessment Framework (CAF) 

Source: ICF, 2020 

The CAF consists of three key elements: 

  Value  Chain  Analysis  –  this  entails  a  qualitative  analysis  of  the  strategic 
components which define the structure of the value chain. It identifies key market 
participants,  looks  into  both  historic  and  forward-looking  market  trends,  maps 
investment flows and spots innovation trends within the value chain. 

  Data Collection – this involves gathering quantitative data on key indicators from 
multiple sources (see  Figure 0.2 below). These indicators inform both the current 
state of the market (e.g. imports, exports and production) and innovation aspects 
across the value chain (e.g. patent applications and RD&D investment). 

1  Throughout  the  report  the  “Europe”  category  includes  all  countries  that  are  part  of  the  European  single  market  –  which 
includes  the  27  Member  States  of  the  European  Union,  Iceland,  Norway,  Lichtenstein,  the  UK  and  Switzerland  – 
whenever data is available for them. Whenever data is limited to the EU-28 or EU-27 this is clearly indicated. 

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EUROPEAN COMMISSION 

  European Competitiveness Assessment – this consists of using the results from 
the  Value  Chain  Analysis  and  Data  Collection  to  inform  a  strategic  outlook  and 
Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis of the value chain. 
It also entails mapping key challenges and opportunities for European businesses 
and  suggesting  actions  which  can  bring  about  a  positive  impact  for  the 
competitiveness of the EU. 

Figure 0.2 Key indicators and judgement criteria underpinning the CAF 

Source: ICF, 2020 

To develop a set of indicators that could be used to assess EU competitiveness within global 
climate  neutral  value  chains,  a  thorough  review  of  literature  and  available  datasets  was 
undertaken and findings were discussed with the European Commission (EC), who have 
conducted extensive research of their own in this area2. Although the indicator set presented 
in Figure 0.2 is not extensive, it does cover multiple aspects of competitiveness which, when 
consolidated, allows for a robust and meaningful overview of the EU competitive position 
within a specific climate neutral value chain, compared to other countries and regions. It is 
important  to  stress  that  this  study  does not  include an assessment  of  barriers  to deploy 
climate  neutral  solutions,  nor  does  it  deal  with  affordability  of  costs  in  scaling  up 
technologies towards market uptake.  

Since  a  key  objective  of  this  study  was  to  explore  a  new  methodology  for  assessing 
competitiveness,  key  recommendations  for  addressing  the  challenges  and  limitations 
associated with implementing the CAF are summarised in Table 0.1. 

2 Asensio Bermejo, J.M. and Georgakaki, A., 2020, Competitiveness indicators for low-carbon energy industries, EUR 30404 
EN,  Publications  Office  of  the  European  Union,  Luxembourg,  ISBN  978-92-76-23345-9  (online),  doi:10.2760/43258, 
JRC116838. 
https://op.europa.eu/en/publication-detail/-/publication/29158e35-1411-11eb-b57e-
01aa75ed71a1/language-en 

Available 

at: 

Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs  

2020 

#Quantitative indicatorSourceJudgement Criteria1Public RD&D investmentIEAIs the value chain benefiting from sustained and/or growing levels of RD&D investment from the public sector?2Early stage private investment(Venture Capital)CTG3Late stage private investment(Venture Capital)CTG4Patent applicationsPATSTATIs the value chain effectively translating investment into tangible IP?5CompaniesCTGDo European value chains comprise of leading innovative firms in the global value chain? Are European firms achieving the market recognition to enable them to build market share?6EmploymentEurObserverDoes the value chain have an established labour market or is it emerging? Is it expanding or contracting?7ProductionPRODCOMIs there core EU28 production competence and capability in key parts of the value chain? Which Member States have the most significant production?8TurnoverEurObserverWhat is the significance of EU28 firm level turnover across the value chain? Which parts of the value chain demonstrate the largest sales?9Imports & ExportsPRODCOM, COMTRADEIs the EU28 generating strong exports into non-EU28 countries? What is the long-term trend in exports?10Trade BalancePRODCOM, COMEXTIs the EU28 able to sustain a strong and positive trade balance?Does the market recognise the potential for this value chain to invest in innovation and generate financial returns?Innovation and Future Market TrendsCurrent Market Trends 
 
 
 
 
 
 
 
 
 
 
 
 
                                                
CLIMATE NEUTRAL MARKET OPPORTUNITIES AND EU COMPETITIVENESS 

Table 0.1 Recommendations for addressing the limitations of the CAF  

Limitation of the CAF 

Technological 
Coverage 

Technological coverage is not aligned across 
the  different  indicators  within  a  given  value 
chain.  The  specific  coverage  and  product 
definitions  do  not  necessarily  match  across 
the different sources.  

Recommendations to resolve issue 

This  misalignment  does  not  compromise 
either the overview provided by the datasets 
or  the  CAF.  However,  it  is  essential  to  give 
sufficient  consideration  to  the  technological 
coverage when applying the CAF to a given 
value chain and to adequately disclose these 
limitations. 

Geographic 
Coverage 

Geographic  coverage  is  not  aligned  across 
the  different  indicators  within  a  given  value 
chain.  For  some  indicators,  the  data  is 
available  for  all  countries  -  i.e.  EU  and  the 
Rest of the World (RoW) - and in others for 
only  a  selection  of  countries  (e.g.  EU28 
Member States, IEA members). Furthermore, 
some countries keep their data confidential in 
some databases for one or multiple years. 

Due to these limitations, for some indicators, 
it  is  not  possible  to  compare  Europe  with 
RoW.  This  misalignment 
not 
compromise the overview provided by either 
the  datasets  or  the  CAF.  However,  it  is 
essential 
the  geographic 
coverage when applying the CAF to a given 
value  chain  and  to  adequately  disclose  any 
limitations. 

to  consider 

does 

Data gaps 

Some technologies are not covered by some 
of  the  databases  used  in  this  study.  For 
example, there is very limited data coverage 
of  employment  and  turnover  in  climate 
neutral value chains. 

Where  data  is  not  available  for  specific 
indicators,  additional  literature  review  and 
expert judgment should be used to complete 
the  SWOT  analyses  and  to  inform  the 
strategic outlooks. 

Source: ICF, 2020 

In recent years, several studies on the EU competitiveness of what could be considered 
climate  neutral  value  chains  have  been  conducted.  The  selection  of  the  value  chains 
analysed in this study took account of prior analysis and was informed by discussions with 
the Steering Committee (SC), recognising the EC’s priorities for this study, particularly in 
light of the European Green Deal. To help operationalise the CAF in the context of the EU 
climate neutral policy objectives, the selected value chains were grouped into four major 
thematic areas (Table 0.2).  

Table 0.2 Overview of the value chains selected for detailed analysis 

Thematic areas 

Value Chains 

Batteries 

 
  Hydrogen Fuel Cells 
Electric Power Trains 
 
Electric Vehicles Charging Infrastructure 
 

Prefabricated Buildings 
Superinsulation Materials 

 
 
  Heat Pumps 

  Wind Rotors 
 

Photovoltaic Solar Panels 

Building Energy Management Systems 

 
  Grid Energy Management Systems  
  Hydrogen Production 

Mobility 

Buildings 

Clean Power 

Integrators 

Source: ICF, 2020 

Figure 0.3 below summarises the key conclusions drawn from applying the CAF to the 12 
climate neutral value chains and comparing results across them. Based on this assessment, 
the main drivers, dynamics and trends regarding EU competitiveness were identified. This 
summary is based on the results of the data collection undertaken within Part 2 of the CAF. 
It illustrates: (i) how competitive a value chain is based on each of the indicators; (ii) the 

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EUROPEAN COMMISSION 

size of EU-28 production; and, (iii) the top producing Member States and their share of total 
EU-28 production in 2018. 

For  those  indicators  included  in  the  summary,  the  judgement  criteria  for  assessing 
competitiveness is based either on thresholds for the EU-28 or European share of global 
totals, or else on how the data has changed over the past years (i.e. increased, decreased 
or remained stable). 

The  summary  does  not  include  a  cross-value  chain  assessment  of  employment  and 
turnover, since the data on these indicators was only available for four out of the 12 value 
chains. 

Figure 0.3 Summary findings across the 12 assessed value chains for selected indicators  

Source: ICF, 2020 

EU-28  production  between  2016  and  2018  was  aggregated  to  compare  the  order  of 
magnitude across value chains. Although the Prefabricated Buildings value chain presents 
the highest production level, the data codes used in the analysis are not specific to low-
carbon  solutions,  meaning  that  this  total  also  includes  traditional  building  products.  This 
methodological  issue  also  relates  to  Hydrogen Production,  where  the  data  codes do  not 
differentiate between ‘grey’ and ‘clean’ hydrogen and therefore fail to illustrate that current 
clean hydrogen production in the EU-28 is still at a very small scale. Thus, the largest EU-
28 climate neutral value chains of the 12 analysed are Grids Energy Management Systems, 
Electric Power Trains and Wind Rotors. The production of Photovoltaic Solar Panels (Solar 
PV) has decreased in the EU-28. Production in all other value chains for which data was 
available has grown over the period. Germany was the top producing EU-28 Member State 
in 7 out of the 10 value chains in 2018. 

Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs  

2020 

 
 
 
 
 
 
 
 
 
 
 
 
CLIMATE NEUTRAL MARKET OPPORTUNITIES AND EU COMPETITIVENESS 

Public RD&D Investments have increased between 2009 and 2018 across most of the 12 
value chains. The exceptions are Wind Rotors, Solar PV and Hydrogen Production  – for 
which investments remained mostly stable – and Hydrogen Fuel Cells – where investments 
decreased. This may be due to the fact that these value chains are more established and 
public RD&D investments in them have already been at high levels. 

The  Private  Investment  data  focuses  on  venture  capital  only  and  it  covers  mostly  North 
America and Europe, since this is where there have traditionally been the largest venture 
capital investment flows. Across most value chains, the share of European investments is 
higher for early stage than for late stage (with Solar PV and Hydrogen Fuel Cells being the 
exceptions). This suggests that Series B+ investments3 in European companies focused on 
low carbon technologies can potentially be expanded to strengthen EU competitiveness. 

To put these trends in a wider perspective, European investments in seed, series A, series 
B, and growth equity rounds of energy and power companies grew at a rate of nearly 19% 
from  2015  to  2020,  and  totalled  EUR  1.8  billion  in  2019,  comprising  44%  of  global 
investments into the sector, versus an average of 20% in the previous four years. Likewise, 
investments  at  the  seed  through  growth  equity  stages  in  transportation  and  mobility  in 
Europe grew in the same period at a rate of 28% to total nearly  EUR 2.8 billion in 2019, 
10% of global investments in the sector (and 11% through Q3 2020).4 

With regards to patents, results indicate that Europe is highly competitive in more than half 
of the value chains analysed and weakly competitive in none, suggesting that Europe is a 
leading  region  for  patent  applications  around  climate  neutral  solutions  globally.  The 
European share of global high-value patent applications between 2014 and 2016 ranged 
between 15% for Hydrogen Fuel Cells and 63% for Wind Rotors. 

Competitiveness in companies is based on the share of European companies included in 
the Cleantech Group database, which covers mostly innovative companies, but also, to a 
certain extent, more established market players. Based on this indicator, the results indicate 
that the EU competitiveness is average in more than half of the value chains and weak in 
none. The share of European companies ranges between 25% for Hydrogen Production 
and 59% for Heat Pumps. 

With regards to exports, competitiveness is gauged by the share of EU-28 exports over total 
global exports between 2016 and 2018. The EU-28 is highly competitive only in the Wind 
Rotors value chain, where it dominates the global market with 39% of exports. 

With respect to balance of trade, a value chain was classified as highly competitive where 
the EU-28 has a positive trade balance that has been improving between 2009 and 2018: 
a value chain was deemed to be weakly competitive where the converse was true. Five of 
the eight value chains were assessed as highly competitive, including Grids EMS, Electric 
Power  Trains  and  Wind  Rotors.  The  competitiveness  of  the  Solar  PV  value  chain  was 
assessed as medium because the EU-28 trade balance is negative, although it has shown 
some improvement in the period. Likewise, the Heat Pumps value chain competitiveness 
was assessed as medium because the EU-28 trade balance is positive however it has been 
deteriorating over time. 

Based on the assessment of the EU competitiveness across the 12 value, key market trends 
across climate neutral solutions were identified together with cross-cutting challenges, such 

3 Series B financing is the second round of funding for a business through investment, including private equity investors and 
venture capitalists. The Series B round generally takes place when the company has accomplished certain milestones 
in developing its business and is past the initial startup stage. Source: Investopedia.  
4 Cleantech Group, 2020, i3 database. Conversion from USD to EUR based on https://xe.com.  

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EUROPEAN COMMISSION 

as  the  lack of European-wide  RD&D  cooperative  frameworks  and  limited end-of-life  and 
recycling  opportunities  for  some  climate  neutral  solutions.  Ten  recommendations  were 
identified to address the transversal challenges identified and contribute to  enhancing the 
competitiveness position of the EU along the 12 analysed value chains. 

Table 0.3 Policy Recommendations 

R1  Use  competitiveness  assessments  to identify  VC  segments  of  strategic importance for the 
EU economy and the transition to climate neutrality, to inform the design of strategic plans 
and  calls  for  proposals;  and,  where  necessary,  create  or  enhance  dedicated  funding 
'windows'  within  investment  programmes  and  mechanisms  to  ensure  sufficient  support 
across the innovation cycle. 

R2  Review the current European Strategic Cluster Partnerships, and overarching EU clustering 
strategy,  to  determine  whether  it  remains  fit-for-purpose  and  able  to  support  VCs  of  key 
importance to achieve climate neutrality by 2050. 

R3  Maximise the opportunities offered by public financial instruments deployed in recent years 
(e.g.  EIF  equity investments,  InnovFin  Energy  Demo Projects facility,  etc.) to increase  the 
the  scale-up  and 
flow  of  private 
commercialisation  stage  (i.e.  venture  capital  and  private  equity)  as  well  as  around  main 
market deployment. 

towards  climate  neutral  solutions,  at 

finance 

R4  Reduce  the  dependency  of  critical  raw  materials  for  innovative  climate  neutral  solutions 
through increased focus on exploiting the EU own sources, developing the recycling sector 
and circular economy in line with the Action Plan on Critical Raw Materials. 

R5  Build on the experience gained through establishment of the European Battery Alliance and 
the European Clean Hydrogen Alliance to adopt a more formal process to set-up coordinated 
sectoral strategies at EU level aimed at reinforcing the competitiveness of the EU in different 
industrial  ecosystems.  Adopting  a  stronger  sectoral focus  will  require more intensive inter-
service collaboration across the EC and the involvement of key stakeholders. 

R6  Develop EU export strategies for key climate neutral solutions, building on existing initiatives 

and networks. 

R7  Support  standardisation  of  climate  neutral  solutions  in  the  EU  and  beyond  to  ensure 
interoperability,  facilitate  the  deployment  of  new  technologies  across  the  EU  and  simplify 
market  adoption  of  leading  innovations  in  the  internal  single  market  and  across  global 
markets. 

R8  Exploit  further  the  NECP  progress  reports,  EU  Semester  process  and  Member  State 
Recovery and Resilience Plans to coordinate: (1) public investments towards climate neutral 
solutions  across  Europe;  (2)  the  development  of  appropriate  infrastructure  to  support  the 
transition  towards  climate  neutrality;  (3)  the  contribution  of  national  innovation/industrial 
ecosystems  to  the  building  of  European  strategic  and  climate  neutral  VCs;  and  (4)  the 
contribution of Member State policies to both the European RD&D and EU competitiveness 
objectives, while achieving the EU climate ambition. 

R9  Reinforce  the  European  low  carbon  energy  market  by:  (1)  further  strengthening  the 
transposition mechanisms at hand and ensuring that adopted European energy and climate 
legislation is correctly introduced on time into national laws; (2) coordinating large low-carbon 
infrastructure  auctions  (including  RES)  between  Member  States  to  enable  a  timely  and 
scheduled connection of large projects and the respective enabling infrastructure to the grid; 
(3) increase interconnection between countries to at least 15% and ensure that barrier-free 
and easier trade of RES across Europe is possible and stimulated 

R10  Develop  strong  demand-side  policies  to  drive market developments in  the  EU  and  benefit 
from the first-mover advantage in innovative climate neutral VCs. Demand-side policies must 
complement the set of existing policies and measures in place to support the competitiveness 
of  EU  businesses  developing  climate  neutral  solutions.  Creating  demand  and  markets  for 
clean, climate-neutral, energy-efficient and circular products is critical to ensure the EU can 
achieve its climate neutrality objectives.  

Source: ICF, 2020 

Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs  

2020 

 
 
 
 
 
 
 
 
 
 
 
CLIMATE NEUTRAL MARKET OPPORTUNITIES AND EU COMPETITIVENESS 

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doi:10.2873/411750 

     ISBN 978-92-76-26305-0