United in Diversity? EU Core-Periphery Divides at the Time of the Green Transition

Executive summary

The green transition risks reinforcing Europe’s old divides. While the EU’s climate agenda promises innovation and cleaner growth, structural asymmetries in industrial bases, fiscal capacity, and green technological capabilities could widen core–periphery gaps. Without stronger coordination, the transition may jeopardize cohesion and undermine Europe’s collective ability to meet climate goals.

The EU core faces new vulnerabilities despite fiscal strength. Germany and its manufacturing partners remain heavily dependent on energy-intensive industries and automotive production. Their slow adoption of renewables and strong legacy sectors expose them to costly restructuring. At the same time, peripheral and Nordic countries with higher renewable shares often lack the fiscal or technological capacity to scale up, creating the risk of downward or divergent trajectories.

Mapping Europe reveals four country clusters with distinct challenges.

• German Manufacturing Core: high exposure to EIIs and autos, lagging renewables, but fiscally strong.
• Green Stragglers: weaker industrial exposure but underinvested in renewables, fiscally constrained.
• Emerging Green Adopters: high renewable share but low technological capabilities.
• Green Leaders: Nordic countries combining innovation, R&D, and renewables, but limited in scale.

Current EU green policy risks amplifying asymmetries. Fit for 55, RepowerEU, and the Net-Zero Industry Act signal ambition but rely heavily on national subsidies and loosened state-aid rules. This advantages fiscally stronger countries while leaving weaker states behind. Without corrective mechanisms, subsidy races threaten both the Single Market and the just transition narrative.

Policy Recommendations

1. Embed place-based conditionalities in EU green subsidies, directing investment to structurally weaker regions and sectors.
2. Coordinate industrial strategy across member states, pooling R&D, procurement, and infrastructure in key sectors (batteries, solar, EVs).
3. Recast green consumption as a public good, investing in affordable EVs, public transport, and demand-side incentives aligned with industrial goals.
4. Strengthen EU fiscal and industrial instruments to reduce reliance on national subsidies and prevent beggar-thy-neighbor competition.