The Strait of Hormuz Effect: Crisis as Catalyst for Europe’s Green Revolution

Picture Credit: by Caspian post

Since the publication of a major report by Mario Draghi in September 2024, competitiveness has become a central priority for the European Commission. The report warned that European industry risks a “slow agony” without decisive action. This concern has grown more urgent as Chinese exports to the EU have surged by roughly 30% this year, intensifying fears about the future of Europe’s industrial base.

In response, the Commission introduced the Industrial Accelerator Act (IAA), aimed at boosting green industrialisation and raising industry’s share to 20% of EU GDP. The policy focuses on key vulnerable sectors: automotive manufacturing, energy-intensive industries such as steel and cement, and green technologies like solar panels and batteries. Measures include simplifying permits, regulating foreign investment, and prioritising low-carbon, locally produced goods in public procurement.

While the IAA contains promising elements, its impact may be limited without broader structural change. Draghi emphasized the need for deeper reforms, including increased investment, streamlined governance, and a unified industrial strategy. However, political compromises delayed the IAA’s rollout, weakening its immediate effectiveness.

Picture Credit: by Moneycontrol

Complicating matters further is the geopolitical situation, particularly disruptions linked to the Strait of Hormuz. While this crisis threatens economic stability, it may paradoxically accelerate Europe’s transition away from fossil fuels. As energy prices rise, carbon-intensive industries become less competitive, effectively acting as an unintended carbon tax. Simon Stiell has noted that such events should hasten the global shift from fossil fuels.

Ultimately, the success of Europe’s industrial revival depends on reinforcing the EU Green Deal. Without a strong and consistent decarbonisation strategy, the IAA alone cannot deliver meaningful transformation.