The Competitiveness Compass and its impact on Climate policy

The European Commission launched the first major initiative of this mandate, the Competitiveness Compass. It sets a path for Europe to become the place where future technologies, services, and clean products are invented, manufactured, and put on the market, while being the first continent to become climate neutral.

Drawing from the Draghi Report on EU competitiveness, the Compass pursues two broad goals. First, to identify the policy changes needed for Europe to shift to a higher gear. The second goal is to develop new ways of working together to increase the speed and quality of decision-making, simplify the EU’s frameworks and rules; and overcome fragmentation.

The Compass sets out an approach and a selection of measures to translate into reality each of the three transformational imperatives identified to boost competitiveness: closing the innovation gap, a joint roadmap for decarbonisation and competitiveness, and reducing excessive dependencies and increasing security.

These imperatives are complemented by action on horizontal enablers, which are necessary to underpin competitiveness across all sectors: simplifying the regulatory environment, reducing burden and favouring speed and flexibility; fully exploiting benefits of scale offered by the Single Market by removing barriers; financing through a Savings and Investments Union and a refocused EU budget; promoting skills and quality jobs while ensuring social fairness; and better coordinating policies at EU and national level.

Even though the Compass is set to reignite economic dynamism and innovation in Europe, the European Commission remains invested in reaching the 2035 climate neutrality target for cars, promoting clean tech and decarbonised manufacturing in EU. Under the flagship of the joint roadmap for decarbonisation and competitiveness, the European Commission announced that an amendment of the Climate Law will be proposed still in 2025.

Nevertheless, the major announcement in the Compass regarding the climate change adaptation, resilience and preparedness is the European Commission’s commitment of presenting in 2026 a European Climate Adaptation Plan.

The Commission recognised that a changing climate and extreme weather events increasingly threaten European economic security. The EU and Member States must therefore improve their resilience and step up their preparedness, regularly updating climate risk assessments and improving critical infrastructure resilience by design. Integrating climate resilience in urban planning, deploying nature-based solutions, developing nature credits and adaptation in agriculture while preserving food security, are also among the options to protect the EU economy and society from the worst of natural calamities such as floods, droughts, wildfires and storms that compromise supply chains and productions sites.

Finally, the Compass also stressed the massive financing needs that the EU faces to deliver on its already-agreed objectives. Therefore, ensuring sufficient public and private investment is critical to boost productivity growth and achieve the EU goals on innovation, climate neutrality and defence.

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