Strong Moves, Fast Scale-Up: How Europe Can Compete in Cleantech
Global investment in cleantech is accelerating rapidly and could reach €5 trillion annually by 2035 across 15 key technologies—from e-mobility and renewables to green materials and carbon-negative solutions. This surge could add up to one to two percentage points to global gross value added and create 25–30 million jobs.
Europe’s Position: Strengths and Rising Competition
Europe enters the cleantech race with strong climate commitments, advanced engineering capabilities, and supportive policies such as the Clean Industrial Deal. However, competition from China and the US is intensifying. In electric vehicles, for example, the Chinese share of the European market grew from 5% in 2015 to nearly 15% in 2023, while European manufacturers lost share.
A €5 Trillion Prize With Intense Global Rivalry
McKinsey’s analysis shows:
Half of all 2035 cleantech spending will come from e-mobility, especially battery-electric vehicles and zero-emission trucks.
Clean energy and power systems make up another third.
Only 25% of global capital spending is “local-only”; 75% is tradable and therefore vulnerable to foreign competition.
Europe could still capture €1 trillion in annual domestic investment and ~4 million jobs, but only if its companies remain competitive.
Where Europe Can Win—If It Accelerates
The largest opportunities lie in technologies moving through commercialisation and scale-up:
E-mobility: Europe’s automotive leaders face cost disadvantages of 20–30% versus Chinese manufacturers and slower development cycles. Rapid cost reduction, faster innovation, and region-specific operating models will be essential.
Green materials: Europe leads in electrolysis and has strong potential in green hydrogen, steel, and chemicals—but competitors, especially in China, are scaling faster and more cheaply.
Battery energy storage systems: Demand is soaring, yet Europe produces <10% of the global battery supply. Leadership may rely on system integration, software, and advanced analytics rather than upstream manufacturing.
CCUS and geothermal: Europe benefits from advanced engineering and strong policy backing, but must accelerate deployment.
What Must Change: A New Operating Model
To remain competitive, European cleantech companies will need to emulate the disruptive models used by leaders such as BYD and Tesla. This includes:
Step-change innovation every 1–2 years
Aggressive cost reduction and rapid scale-up
Globally optimised supply chains
Radically faster manufacturing and product cycles
This requires a cultural shift toward first-principles thinking, high ambition, rapid experimentation, and CEO-level product leadership.
The Public Sector’s Role
Governments can accelerate competitiveness by:
Streamlining permitting and regulation
Building infrastructure and resilient supply chains
Offering targeted tax incentives, concessional capital, and industrial-cluster support
Improving coordination on Europe-wide climate and industrial policy
The Bottom Line
Europe has the ambition and technological heritage to lead in cleantech, but global rivals are advancing quickly. Capturing a meaningful share of the €5 trillion annual cleantech opportunity by 2035 will require bold private-sector transformation, faster innovation, and coordinated public-sector support. Without decisive action, Europe risks falling behind in one of the century’s most important industrial shifts.