Why Europe’s Green Entrepreneurial State Went Bust

By Johan Norberg & Christian Sandström

Tuesday, July 14, 2026

 

France, Estonia, the Netherlands, and Finland are concerned about the European Union’s intention to exclude green investments from its spending rules, according to recent reports. Concern is understandable: Taking the leash off more green “investments” is a recipe for sky-high spending, and six years into the EU’s Green Deal, it has become clearer than ever that this combination of environmental legislation and green subsidies has been detrimental for the continent’s already struggling economy.

 

“This is Europe’s man-on-the-moon moment,” European Commission President Ursula von der Leyen declared at the launch of the EU’s Green Deal in 2020. Today, that moonshot looks less like Apollo 11 and more like the Soviet N1 rocket: grand ambitions and vast resources, but no successful launch.

 

Europe’s economic decline is becoming difficult to ignore. Only four of the world’s 50 largest technology companies are European. Productivity growth has lagged far behind the United States over the past decade. In Germany, nuclear plants have been shuttered while policymakers doubled down on weather-dependent energy sources such as wind and solar. European electricity prices are roughly twice those in the United States, while German industry buckles under soaring energy costs.

 

Few intellectuals have been more influential in shaping the EU’s green agenda than Mariana Mazzucato of University College London. Her 2013 book The Entrepreneurial State argued that the state has a critical role in innovation and that policymakers should actively intervene in the economy to spur development.

 

Mazzucato has become one of Europe’s most prominent advocates for an activist industrial policy. Through advisory roles, reports to the European Commission, and her various responsibilities in EU policymaking, she helped shape the thinking behind the Green Deal. Mazzucato has argued that Germany’s energy transition was a good model for how to promote “technical change and growth across different sectors.”

 

But the results of Mazzucato’s theories have been meager. The Green Deal promised technological leadership, strategic autonomy, and industrial revival. Increasingly, however, it has delivered deindustrialization, fiscal burdens, and failed prestige projects.

 

Electrification — the central promise of Europe’s green transition — is barely advancing. European electricity production has declined over the past decade. In Germany, electricity generation has fallen sharply since 2014 as industrial activity weakens and energy-intensive sectors contract.

 

Last year Spain suffered one of the worst blackouts in modern European history after years of rapid expansion in intermittent power generation. Meanwhile, the hydrogen boom championed by European policymakers has largely collapsed. Former EU climate commissioner Frans Timmermans once called hydrogen the “rock star” of the green transition. But last year, almost 60 major hydrogen projects worldwide were canceled or delayed despite massive subsidies and  political support from Brussels.

 

Europe’s battery ambitions have fared little better. Northvolt, the Swedish battery champion that secured billions in subsidies and green loans, was intended to be Europe’s answer to Chinese dominance. Instead, its collapse became one of the largest bankruptcies in modern Swedish history.

 

The fundamental problem behind the EU’s green-energy experimentation is an intellectual one. Policymakers embraced the idea that governments should behave like venture capitalists — taking bold risks, directing capital, and actively shaping markets. In theory, this sounds dynamic and visionary; that’s one reason why industrial policy ideas are resurgent in the United States, on both the progressive left and the MAGA right. But if Europe’s experience tells us anything, it’s that such policies carry a long and disappointing track record.

 

Industrial policy advocates spend much time discussing market failures, yet they are curiously blind to government failures. Markets have a built-in correction mechanism called bankruptcy; industrial policy has a built-in survival mechanism called lobbying. Politicians naturally gravitate toward projects that generate headlines, ribbon-cuttings, and grand rhetoric. In practice, the long-term technical and economic viability of those projects often becomes secondary.

 

Easy access to subsidies, public guarantees, and cheap loans encourage firms to become subsidy entrepreneurs rather than competitive businesses. When taxpayers absorb much of the downside risk, excessive risk-taking becomes rational — and moral hazard flourishes.

 

There is also a broader political danger. Large industrial-policy programs create fertile ground for rent-seeking and the gradual fusion of political and corporate interests. The result is less a dynamic market economy and more a subsidy-driven system shaped by political access.

 

Mazzucato is now promoting a new book, The Common Good Economy, which advances many of the same themes that influenced the Green Deal. Once again, expansive political ambitions are wrapped in morally elevated language while fundamental questions go unanswered.

 

The common good sounds desirable, but who gets to decide what it consists of? How do we measure whether we are achieving it? And how do we ensure that capital can quickly be redirected to other ventures if green-energy efforts don’t show signs of success?

 

The EU’s green vision constitutes a top-down vision of the state that replaces the decentralized wisdom of millions of entrepreneurs and consumers with the ideological preferences of a few people at the top — people who do not risk losing their money if their decisions result in failure. And, as Thomas Sowell noted, there is no more dangerous way to make decisions than to put them in the hands of people who pay no price for being wrong.

 

By bypassing difficult trade-offs and subsidizing the politically connected, the EU’s invocation of the “common good” in green-energy conversations is often little more than cronyism with better branding.

 

Europe urgently needs a more sober conversation about energy, industrial policy, and economic growth. Americans, meanwhile, should take this fiasco as a reminder that flawed policy does not become sound simply because Americans run it.