On 29 January, the European Commission unveiled its much-awaited Competitiveness Compass, a strategic programmatic document articulated around three main overarching themes: innovation, decarbonisation, and security. Based on the recommendations from the report on the future of EU competitiveness issued by Mario Draghi last year, and aiming to turn them into a roadmap, the Compass constitutes the first major initiative of the new mandate. 

The document sets out a framework with the objective of making the EU a leading actor in innovation, manufacturing, and commercialisation of new and clean technologies, and of addressing the productivity and innovation gap with other large economies. Overall, it identifies five main enablers for competitiveness: cutting red tape, lowering barriers to the Single Market, reducing the fragmentation of the Capital Markets and creating a Savings and Investments Union, promoting skills and quality jobs, as well as reinforcing policy coordination at both EU and national levels. 

More specifically, amongst the main proposals, the Compass advocates for an “unprecedented simplification effort”, notably calling for a reduction in reporting obligations by 25% for all private companies and 35% for SMEs. It also refers to the creation of a large European Competitiveness Fund, to be announced under the next Multiannual Financial Framework (MFF), the EU’s seven-year budget, which would aim at rethinking and centralising funding structures and allocation to better support competitiveness. 

The Commission also recommends building greater synergies through a new Competitiveness Coordination Tool, contributing to the alignment of industrial and research policies and investments at the EU and national levels, across different sectors, with energy at the forefront. Initially, the Coordination Tool is set to be used in selected areas such as grids, storage, or sustainable fuels, as well as AI and biotech. The Strategic Technologies for Europe Platform (STEP) is notably cited as a successful example in that regard, with over €6 billion redirected from Member States’ and regions’ Cohesion Policy Funds to support synergies at the EU level and wider strategic objectives. 

On innovation, the Compass announced the impending creation of the “AI Gigafactories” and “Apply AI” initiatives to boost artificial intelligence development and adoption across various industries. The expected EU Innovation Act and further action plans for advanced materials and quantum computing, amongst other topics, should also be part of the EU’s arsenal to foster competitive research and innovation. In addition, the Commission will put forward a dedicated EU Start-up and Scale-up Strategy and intends to simplify the rules applying to them. The Compass further calls for the creation of a “Union of Skills,” aiming to fight brain drain, encourage mobility and lifelong learning, as well as attract talent. Amongst its initiatives, it will include a Science, Technology, Engineering, and Mathematics (STEM) Education Strategic Plan. 

The Competitiveness Compass also touches upon the EU’s research environment and funding, underlining the importance of raising research and development spending to bring it up to the longstanding 3% of GDP target. The publication mentions the need for the European Research Council (ERC) and the European Innovation Council (EIC) to work towards the same strategic interests and cooperate more closely. However, this prompted parts of the research community to call for safeguarding the autonomy and bottom-up approach of the ERC, governed by an independent Scientific Council. 

When it comes to decarbonisation and energy policy, investing in the Union’s grids is cited as a central element in creating a net-zero society. The Compass moreover suggests further encouraging demand for low-carbon products by developing lead markets and rewarding early movers. On top of demand-focused measures, the Commission also emphasises the importance of translating innovation into manufacturing. To achieve these objectives, the Compass highlights the key role of upcoming legislation, such as the Clean Industrial Deal, expected next month. According to the document, it should facilitate permitting, support the reform of public procurement rules, and expand international partnerships and market access to mitigate the risks associated with concentrated dependencies. 

The Affordable Energy Action Plan and the Industrial Decarbonisation Accelerator Act, as well as the forthcoming review of the Carbon Border Adjustment Mechanism (CBAM) and the Emissions Trading System (ETS) Directive, are also cited as key upcoming pieces of legislation in the mandate. Additionally, the Commission underscores its plans to establish specific Action Plans for energy-intensive sectors, including steel, metals, and chemicals, and to create new Clean Trade and Investment Partnerships to secure joint supplies of raw materials, energy, and clean technologies. 

Overall, the Compass clearly sets out the Commission’s work programme for the next few years. Well aligned with the Draghi report and the Commissioners’ mission letters, it is to be noted, however, that it focuses on a narrow notion of competitiveness, encompassing mainly the economic dimension while leaving its environmental and social aspects in the background, with the 2040 climate target, for example, only weakly addressed. Another point of attention concerns the proposed blueprint for funding the ambitious proposals, which may prove particularly contentious in the way ahead, with little fresh money seemingly available to support the Union’s objectives.