As Europe enters the final months of 2026, the Strait of Hormuz remains largely closed to commercial shipping, extending a disruption that began in late February. Eight months on, energy prices remain high and the risk of physical shortages persists. Managing those immediate risks requires careful winter preparedness. The lesson for the longer term is equally clear: Europe must embed resilience into its energy system, reducing the structural dependence that leaves households and industry exposed to successive shocks.

The direction is now clear. President von der Leyen’s State of the Union address placed electrification at the heart of Europe’s energy independence. Fossil fuel imports have now cost Europe an extra €100 billion since the conflict began, without adding any energy to the system. The task is to electrify what we can, as fast as we can, with homegrown energy. This gives Europe a path towards greater security and affordability while advancing decarbonisation. It also accompanies a cautious effort to reassess its economic relationship with China, with greater attention to strategic vulnerabilities and the conditions for fair competition.

The data in this briefing shows encouraging, though uneven, progress. EU cleantech venture and growth investment reached €2.5 billion in Q3, 43% above the same quarter last year, and debt financing reached €7.8 billion, its strongest quarter since early 2024. Yet three rounds accounted for half of equity investment, while deal activity fell to 73. Larger transactions demonstrate that European companies can attract substantial backing, but declining early-stage activity risks weakening the pipeline behind them.

Energy-efficient computing attracted more than a third of equity investment. In the age of AI, digital infrastructure is pivotal to autonomy and national security, and Europe will need to build its own. It must do so aware of the additional strain data centres place on electricity grids, at a time when electricity demand is already growing as transport, heating and industry increasingly electrify. Grids, storage, flexible demand and firm clean power such as next-generation geothermal will determine whether Europe can manage both shifts at once.

Turning this momentum into industrial capacity now depends on three policy decisions due in the coming months.

The first is the Industrial Accelerator Act. With Chinese overcapacity weighing on European producers and Chinese investment moving into strategic value chains, the IAA is Europe’s chance to create lead markets for European production and to attach real conditions to foreign investment. The Franco-German agreement of 16 October brings welcome clarity, with a tight “Made in Europe” definition limited to the EU and a few reciprocal partners. However, moving automotive provisions out of the IAA and into the Automotive Package, in exchange for softer car CO₂ targets, sends the wrong signal. It separates demand for European vehicle components from the rest of the IAA framework and risks delaying it. For batteries, where resilience requires investment throughout the value chain, including anode active materials and cathode precursors, keeping these provisions in the IAA would give manufacturers a clearer and earlier signal to invest.
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The second is the ETS review. A credible ETS price trajectory matters twice as it strengthens the business case for clean technologies and generates revenues to finance projects and deployment. Weakening it undermines both private investment and public funding. Our ETS paper makes the case for defending this signal while using revenues more effectively. CBAM must reinforce that framework by extending carbon pricing to imports, while addressing competitive distortions further down the value chain.

The third is financing. Our Innovation Fund paper addresses the obstacles preventing funding commitments from becoming operating projects, so that companies can reach financial close on first commercial plants. The proposed Investment Booster, as a first step towards the Industrial Decarbonisation Bank, should reward frontrunners already investing. Yet the next EU budget is heading the other way: it risks reducing funding for future industries while protecting traditional priorities. Negotiations are edging towards a smaller budget focused overwhelmingly on agriculture and cohesion, with the European Competitiveness Fund cut by around 13% in the latest proposal. Without an EU strategy to scale and fund manufacturing, the burden will shift to national budgets, deepening differences between Member States and weakening the single market.

Policymakers have a narrow window to advance these files before key national elections in 2027 reshape Europe’s political landscape. Our Summit on 1 December will bring these questions together, with a focus on aligning industrial ambitions with credible demand, effective financing and investment certainty. Europe’s security and lasting prosperity increasingly depend on its ability to turn those ambitions into industrial strength.