When policies matter: Leveraging Net Zero for structural change in the EU

The climate-energy transition represents a major techno-economic transformation in which political and economic forces are deeply intertwined. This essay examines this transformation through a political economy lens, using the European Green Deal (EGD) as a case study of grand-scale, policy-induced structural change. Unlike previous energy transitions, which were largely driven by market prices and resource scarcity, the transition towards Net Zero is primarily driven by science-based assessments of climate-related scarcity and collective policy choices. The resulting shift from the fossil-energy paradigm towards a climate-change paradigm requires profound technological innovation, investment, and structural transformation. The EGD illustrates how ambitious policy targets can generate innovation trajectories and reshape emerging clean-technology industries. However, the scale and complexity of the transformation create substantial barriers, including massive investment requirements, competing technological, demographic, financial and military transitions, and changing international competitive conditions. The analysis highlights policy legitimacy and credibility as critical political economy mediators between policy design and transformative outcomes. The EGD's predominantly top-down and regulatory approach initially relied heavily on science-based legitimacy but insufficiently developed deep alliances with the socio-economic actors responsible for implementing the transition. The 2023–2025 industrial turn towards competitiveness, strategic autonomy and clean-tech manufacturing can be interpreted as an attempt to respond to these weaknesses and emerging negative feedback. The experience of the EGD suggests that grand transformation policies cannot be fully designed or governed ex ante because technological, economic and geopolitical conditions evolve unpredictably. Successful climate-energy transformation therefore requires adaptive policies capable of incorporating feedback and building broad socio-economic alliances. A political economy approach is consequently essential for understanding and governing paradigm shifts towards a climate-neutral techno-economic system.