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- European Transformation: Are we there yet?
Across Europe, the race is on to transform. In our Chart of the Week, we present the DWS European Transformation Scorecard. The scorecard provides an indication of how much a country has travelled in its transformation across 12 sectors.[1] It can also give an implicit indication of how much more of the journey lies ahead.[2]
To help us in this endeavour, we identified 12 key performance indicators (KPIs) which we believe provide a good proxy for the multiple dimensions of transformation. In many instances, we are helped by the European Commission setting explicit targets[3] to be reached by 2030. For example, by 2030 European countries must aim to cut greenhouse gas (GHG) emissions by at least 55% (base year 1990), the share of energy from renewable sources needs to rise to at least 42.5%, and the share of used material resources which come from recycled waste materials needs to hit 23.2%.
To track progress across the region, we examined 13 European countries performance for each of the KPIs relative to their respective 2030 target. For example, Austria’s 6% decline in GHG emissions since 1990 falls well short of the 55% decline target for 2030. This delivers Austria a score of 0.11 (-6/-55) or, put another way, the country has travelled just 11% of its decarbonization journey.
The DWS European Transformation Scorecard
* Weighted Score covers the distance towards 2030 climate, digital and social targets across the following 12 equally weighted sectors: climate, energy, biodiversity, economic development, technology, transportation, digital, supply chains, urban resilience, water, healthcare and social.
Sources: DWS Research Institute, DWS Investment GmbH as of 4/16/24
Our findings show that at a country level, Sweden is the winner, performing strongly in areas such as renewable energy, R&D spending and urban resilience with the Netherlands, and Switzerland as runners up. Spain, Poland and Italy are at the bottom of the scorecard, partly reflecting comparatively less certain regulatory environments for private sector investments.
Our analysis also identifies four sectors where stronger policy action and investment requirements are especially urgent: electrifying the transportation sector, energy efficiency measures in real estate, improving healthcare outcomes and delivering on decarbonization more generally. Of all the 12 sector transformations, only the technology, digital economy and the social pillar, encompassing housing affordability, education and training, can claim to be moving in the right direction across the countries investigated.
Europe must therefore continue to innovate and adopt transformational technologies by creating a supportive regulatory environment and prioritize investing in research and development. Deepening the Single Market and completing the Capital Market Union[4] should help to mobilize private capital, which are urgently needed to fulfil many of the ambitious goals set for Europe’s transformation. Looming elections to the European Parliament from June 6th to 9th could weaken these ambitions in the next legislature. However, the implementation measures now required are often quite technical and somewhat insulated from changing political winds. We expect progress to continue - unevenly.
