The European Union is preparing a new legal framework that would require public authorities across the bloc to prioritise Europe-made components when procuring green technologies, marking a decisive shift toward climate-driven industrial policy. A draft proposal prepared by the European Commission would introduce minimum local content thresholds for batteries, solar panels, wind turbines, electric vehicles, charging infrastructure, cables and related clean energy systems.

The proposal aims to ensure that Europe’s climate transition strengthens domestic manufacturing capacity rather than accelerating industrial decline. It reflects growing concern over Europe’s exposure to Chinese supply chains, persistently high energy costs, and the competitive pressure created by new US trade and subsidy measures.

Climate Transition Framed as Industrial Strategy

According to the draft text reviewed by Reuters, the Commission views public procurement as a strategic lever to reinforce Europe’s industrial base and long-term competitiveness. The document warns that the EU’s share of global industrial gross value added fell from 20.8 percent in 2000 to 14.3 percent in 2020, highlighting a structural erosion that policymakers now link directly to climate, trade and energy security risks.

The proposal positions green procurement rules not merely as climate policy, but as part of a broader geopolitical and economic strategy to prevent deindustrialisation while accelerating decarbonisation.

Phased Localisation Rules for Batteries and Electric Vehicles

Battery systems purchased through public procurement would be subject to staged localisation requirements. Within twelve months of the legislation entering into force, battery assembly would need to take place inside the EU, alongside selected components such as battery management systems. After two years, the localisation criteria would expand to cover additional core components, including battery cells.

A similar approach would apply to electric vehicles and charging infrastructure. Public contracts for EV charging networks would favour European-made components and EU labour from the outset, reinforcing Brussels’ effort to protect domestic value creation in clean mobility. The Commission has explicitly referenced earlier experience in solar manufacturing, where Europe lost market share to Chinese producers, as a cautionary precedent.

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Investment Screening Linked to Local Content

Beyond procurement, the draft introduces stricter conditions for foreign direct investment in strategic clean technology sectors. Investments exceeding €100 million, equivalent to roughly $116 million, would require approval under new screening rules. Approval would be contingent on meeting localisation requirements related to EU-based production and workforce participation.

This measure reflects a growing alignment between industrial policy, supply chain resilience and national security considerations. It also mirrors broader global trends in investment scrutiny that have intensified since the pandemic and amid heightened geopolitical competition.

Echoes of the US Inflation Reduction Act

The Commission’s proposal shares conceptual similarities with the US Inflation Reduction Act, though the European model relies more heavily on procurement rules and investment screening than on direct fiscal incentives. The draft also explores minimum shares of low-carbon industrial goods produced within the EU for public contracts, signalling a more assertive role for governments as market shapers in the energy transition.

Divisions Among EU Member States

The proposal has already exposed differences among EU capitals. France has emerged as a strong supporter, arguing that local content rules are essential for safeguarding strategic autonomy in batteries, renewables and electric mobility. Paris views procurement-based industrial policy as necessary to ensure Europe captures value from its climate ambitions.

Other member states have expressed reservations. Sweden and the Czech Republic have cautioned that buy-local requirements could inflate public tender costs and weaken competitiveness across the single market. Some governments also fear retaliatory trade responses if sourcing rules become overly restrictive.

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Implications for Investors and Supply Chains

For investors and corporate executives, the proposal underscores how rapidly climate policy is converging with industrial strategy. Eligibility for public contracts, compliance with origin requirements, and traceability of supply chains may become decisive competitive factors for manufacturers operating in Europe.

Battery producers, EV suppliers and renewable component manufacturers could benefit from greater demand visibility and policy certainty. At the same time, tighter procurement rules may raise costs for governments and reshape foreign investment flows, particularly for Asian firms targeting Europe’s clean energy market.

Europe Stakes Its Claim in Global Clean Tech Competition

The Commission’s move reflects a broader realignment of global clean technology supply chains. With China maintaining dominance in batteries and solar manufacturing and the United States deploying tariffs and subsidies to anchor domestic production, Europe is carving out its own path using procurement and investment controls.

While negotiations with member states and the European Parliament will determine the final shape of the rules, the direction is clear. Climate policy in Europe is no longer just about emissions reduction. It is increasingly a tool for industrial competitiveness, strategic autonomy and geopolitical positioning, with public procurement emerging as a central instrument in that shift.

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