Europe’s transformational scorecard

To help assess progress in Europe’s transformation, we are introducing the DWS European Transformation Scorecard. With the use of quantitative metrics measured against their respective 2030 targets we track 13 European countries in their transformational journey across 12 sectors.
Our findings show that that policy action and investment requirements are particularly essential in four key areas: 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 can claim to be gaining some traction
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. At the bottom of the scorecard lies Spain, Poland, and Italy, all of whom have regulatory environments that do not sufficiently encourage private sector investment.
The Scorecard therefore provides measurement on the delivery of a successful economic and policy transformation, which demands an agenda that combines competitiveness and strategic autonomy with private sector and policymakers working hand in hand.
But heightened geopolitical risk may add further fiscal burdens in terms of defence spending on European governments. NATO1 expects European member countries to collectively spend 2% of their GDP on defence, and this may increase in future.
Europe faces at least a EUR2.5 trillion investment gap for green and digital goals (EU-27). Europe must therefore continue to innovate and adopt transformational technologies by creating a supportive regulatory environment and prioritise investing in research, development, and deployment. Deepening the Single Market and completing the Capital Market Union (CMU) should help to mobilize private capital, which are urgently needed to fulfil Europe’s ambitious goals.

Introduction

This paper continues our series of European transformation research papers^[1] and is organized in four sections. The first section introduces the DWS European transformation scorecard, which aims to measure transformational progress. The second section identifies the areas where policymakers and investors can drive transformation and deliver positive impact. The third section examines the ways private capital can be unlocked to plug investment funding gaps and the final section presents a chartbook featuring the extent to which 13 European countries are performing against 12 key performance indicators (KPIs).

1 / European transformation scorecard

1.1 Tracking transformation

Across Europe, the race is on to transform. In many sectors of the economy, the European Commission has set explicit targets^[2] to be reached by 2030. But are European countries succeeding or has progress stalled or is it accelerating particularly in the aftermath of the Covid-pandemic and the ongoing war in Ukraine? In this section, we attempt to answer these questions.

To construct our European sovereign transformational scorecard, we focus on 12 sectors measured across 13 European countries. These countries will play a central role in driving the climate transition, shaping the region’s industrial competitiveness, and addressing important social challenges. Combined, these countries account for three-quarters of European economic activity and over half of the region’s population.^[2] Our country selection is based not on the size of the economy, but rather on countries that are leading Europe in its transformation and providing a blueprint for other nations to follow.

To help assess progress, we have identified 12 KPIs, one for each sector, that we believe provide a good proxy for each sector’s transformation, Figure 1. To ensure that we conduct a like-for-like comparison across the countries in our sample, we use European Commission targets. For example, under the European Climate Law, the EU has set a goal to cut greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels. In the UK and Switzerland, the comparable 2030 reduction targets are 68% and at least 50% respectively.

For the energy sector, the European Renewable Energy Directive^[3] targets the share of energy from renewable sources rising to at least 42.5% by 2030, with an aspirational goal of 45%. When it comes to biodiversity loss and efforts to reduce the pressure on natural resources, the European Commission enacted the Circular Economy Action Plan^[4]in March 2020. As part of this programme, it aims to double the share of used material resources which come from recycled waste materials to 23.2% by 2030