Over the past 15 years, theEuropean economy seems to have entered a trend of permanent poly-crisis. While for French President Emmanuel Macron, the times of plenty were already over in 2022, climate change, inflation and the energy crisis, as well as growing competition within a global market often dominated by digital giants of states The United States and China are just a few examples of the stress tests to which the European Union (EU) has been continuously subjected also during this year. Yet, never like today, the term is often abused European resilience seems to be spot on. Although galloping inflation and the energy crisis are trying to exhaust investments, in 2022 the EU’s GDP grew by 3.6% and the employment rate recorded positive trends.
However, the road to full recovery and the revitalization of the European economy is long and passes through a constant commitment to optimizing scarce resources, innovating the way we produce and supply goods and services. In terms of innovation, the situation is not as dramatic as it might seem. Although often referred to as ‘the old continent’, the European Union is still one of the most innovating regions in the world. According to the Global Innovation Index, in 2022 alone, 17 out of the 30 most innovative countries in the world came from the EU (Italy is in 28th place).
Europe pole of innovation: The Net Zero Industry Act
In fact, technological innovation remains at the basis of the transformation process necessary for the EU to create sustainable and long-term well-being, reinforcing a rapid transition to climate neutrality. This is especially urgent in light of the European Green Deal, which aims to make the EU the first climate-neutral continent by 2050 and to reduce net greenhouse gas emissions by at least 55% by 2030.
At this juncture certainly arises the Net Zero Industry Actthe European response not only to Chinese state interventionist policies, but also to the US Inflation Reduction Act, the American law that will allow Washington to finance green-tech companies with huge state aid (369 billion dollars). The Net Zero Industry Act aims to make sure that 40% of clean technologies are produced in Europe within the next ten years attracting investments, facilitating access to markets, supporting research and development and reducing bureaucracy to relaunch companies that deal with clean-tech, i.e. that technological innovation which is not only green and sustainable but which has a positive impact on the environment.
The undertaking is not easy and will require strong coordination between Member States. However, this is a necessary action. The European Union is currently a net importer of this type of technologies which have a market that globally will triple in the next 6 years, reaching a value of 600 billion euros by 2030. To date, however, to build an effective system of clean-tech innovation networks in Europe, it is necessary not so much to start from the largest systems, but to focus on the small ones, for example supporting the creation of new start-ups in the sectorwhich represent the beating heart of innovation.
Clean tech startups in the EU: the case of Germany, France and Italy
In Europe, the number of startups operating in the clean-tech sector is certainly on the rise. However, according to a study by the Centers for European Policy Network, the distribution of these companies is not harmonious. If we analyze the main European economies in terms of GDP, that is Germany, Italy and France, Berlin stands out at the top of the ranking, with Italy recording a third of clean-tech startups compared to Germany. Effectively only 14% of Italian startups operate in the clean-tech sector.
Beyond the numbers, however, what remains problematic is that, at the national level, there is no clear definition of what cleantech is. In France, for example, clean-techs fall within a wide range of companies that deal with both technological innovation tout court, “deep techs”, and those that deal with low-impact productions, such as green techs, which certainly they innovate, but unlike clean-tech they do not have a direct positive impact on the environment. Therefore, for the current European agendas to work, it is necessary to agree on concrete concepts and definitions of clean-tech that can be easily operationalized in the different Member States.
The difficulty of accessing finance
Furthermore, if in all three countries major subsidies to this type of company would be welcomed, in the Italian case the startups receive less funding than their German and French competitors. Indeed, the real problem that Italian startups operate in the clean-tech sector is precisely there difficulty accessing finance not only in the first phase of project development and incubation, but above all when they need resources to transform themselves into small or medium-sized enterprises.
Italian venture capital does not seem to believe in clean-tech startups. According to the Observatory of the Milan Polytechnic, from 2015 to 2020, only 13 startups in this sector obtained funding for a total of 36.8 million euros out of the 2.458 million euros earmarked for innovation. Furthermore, not only in Italy, but also in France and Germany, the startup accelerators, which are supposed to help companies take the leap up a level, are unable to provide sufficient resources and banks often require too high guarantees. If the problem of accessing adequate financing could be generalized to all startups, in the case of clean-tech companies it is more acute because the products created by the latter need more time to be developed and marketed and therefore often do not fall within the logic of economic efficiency which sees immediate gain as the first diktat.
As in Italy, also in the case of Germania, where the Future Fund launched by the government in 2020 has helped to boost investments, including private ones, in the clean-tech sector, there are significant obstacles related to the low liquidity of the market in the venture capital segment in general and the insufficient focus on innovation on clean solutions. In addition, theexcessive bureaucracy is identified by German startups as a significant obstacle to their growth. According to the Startup Monitor, 90% of startups consider bureaucratic simplification the first goal to achieve.
In the case of the Franceon the other hand, although the French authorities aim to favor the ecological transition through the country’s business innovation, not only the administrative delays but also the overlapping of different funding lines I’m a hindrance. Added to this is an all-French peculiarity, where there is always a tendency to favor projects developed in Paris. The concentration of clean-tech startups in specific geographic areas and cities is also common in Germany and Italy. However, while in the case of the latter, this is mainly due to the presence of greater public or private funding, as well as innovation or technological or human capital poles, in the case of France this seems more linked to a cultural issue, so the capital is preferred over the rest of the country.
The Net Zero Act and the risk of unexpected ambitions
In conclusion, despite the European Net Zero Act aiming to facilitate access to funds for the development of green and clean-tech activities, also through the reduction of bureaucratic constraintsthe risk is that a large-scale European plan will not be able to consistently address the barriers existing and persistent in the startup market of the member countries, which have always represented the basis of industrial and technological innovation.
For this reason, it is also necessary for the member countries to do their part by changing the cultural approach to startups and for national public institutions to be more committed to their role as guarantors, reducing bureaucracy and facilitating private investments in the form of accelerators or venture capital. These are all essential actions to allow clean-tech companies to acquire the necessary resources in an integrated and effective system which would not only allow the generation of new forms of prosperity but which would allow the European project to move from a state of resilience to one of social recovery and long-term economics.
Cover photo EPA/CAROLINE BREHMAN