Back in the pre-pandemic year of 2019, the European Union passed the European Green Deal, setting a goal of having the EU be climate-neutral in its emissions by 2050. Here in 2026, 20% of that 30-year time window has now passed. The government of the EU have a reputation for strong action toward these types of goals. How is it going? Magnus Henrekson, Christian Sandström and Mikael Stenkula have edited a collection of 16 essays that provide a cautionary progress report in A Green Entrepreneurial State? Exploring the Pitfalls of Green Deals (Springer International Studies in Entrepreneurship
Volume 49, 2026, open access).
In their introductory overview essay for the volume, Henrekson, Sandström, and Stenkula point out that the EU is embracing a wide array of policies: not just solar and (on-shore and offshore) wind, but also hydrogen, zero-emission cars, improved batteries, and much else. For example, “all new passenger vehicles and light commercial vehicles registered from 2035 must be zero-emission.”
The Hydrogen Strategy envisions the installation of “at least 40 GW of renewable hydrogen electrolysers in the EU by 2030, producing up to 10 million tonnes of renewable hydrogen. REPowerEU further strengthens this by calling for both 10 million tonnes of domestic production and an additional 10 million tonnes of imports by 2030 . Hydrogen is viewed as a key energy carrier for sectors where direct electrification is challenging, such as steel, chemicals, and heavy transport.” For perspective, 40 gigawatts is roughly equal to 25 new nuclear reactors.
The EU Offshore Renewable Energy Strategy includes “60 GW of offshore wind by 2030 and 300 GW by 2050. … To put this in perspective, the 2050 target would be nearly five times the total installed capacity of France’s 57 nuclear reactors, which stood at around 63 GW in 2025.”
In short, these and other proposals are enormous in scale. Several of the papers focus on specific programs. From the descriptions of the editors:
In their essay “Italy’s Superbonus and the Capture of Climate Policy by Modern Monetary Theory,” Luciano Capone and Carlo Stagnaro (2026) analyze how Italy implemented an environmental policy that produced the largest budget deficit in Europe since the Second World War. The program allowed households to claim a 110% tax credit for expenses incurred in improving the energy efficiency of buildings and enhancing their seismic resilience. These tax credits were fully transferable to third parties, such as construction companies or financial institutions. In total, the policy generated costs amounting to approximately EUR 220 billion, equivalent to about 10% of a single year’s GDP, while delivering limited environmental benefits and fostering widespread tax fraud. …
Launched in the early 2000s, Germany’s Energiewende has long been seen as a model for large-scale renewable energy transitions. By rapidly expanding solar and wind power, Germany aimed to replace both nuclear and fossil fuels, inspiring the European Green Deal and its goal of EU-wide carbon neutrality by 2050. Germany itself pledged to reach neutrality by 2045. In “The German Energiewende: A Green Deal Template or Planned Failure?”, Michel Deshaies (2026) highlights several weaknesses. To replace stable nuclear and fossil-based generation with variable wind and solar, three key conditions are required: large overcapacity, extensive and costly grid expansion, and massive storage capacity. Yet Germany focused mainly on deploying renewables, giving far less attention to grids and storage. Even optimistic projections for hydrogen or other energy carriers cannot eliminate the need for huge renewable capacity. Electricity makes up only about 20% of Germany’s total energy use; the remaining 80%—mainly transport, heating, and industry—still depends on oil and gas. This means deep decarbonization must go far beyond the power sector.
The Energiewende has also driven sharp increases in household electricity prices … leaving Germany with the highest household electricity costs in Europe, around 40% above the EU average. …In “Explaining Northvolt’s Bankruptcy and the Dilemma of Green Deals,” Christian Sandström (2026) examines the unintended consequences of green industrial policies by analyzing the bankruptcy of Northvolt, Europe’s largest initiative to establish an independent battery manufacturing facility. Founded in 2017 and growing rapidly to nearly 6,000 employees by 2023, Northvolt struggled to scale production and remained dependent on Chinese suppliers—undermining EU’s ambition of strategic autonomy. In March 2025, the company filed for bankruptcy.
For me, these kinds of grand plans offer a fascinating blend of technological optimism that these highly aggressive goals are in fact achievable (maybe some are, but not all), along with occasional outbreaks of technological pessimism that households just need to become accustomed to using less energy. Several political economy papers seek to diagnose the political process that is leading to these outcomes.
In his contribution entitled “Behavioral Political Economy and Environmental Policy: Explaining Persistent Deviations from Efficient Policies,” Jan Schnellenbach (2026) highlights that the design and implementation of Green Deals are almost never guided by neutral efficiency considerations alone. Instead, they are deeply shaped by behav-ioral dynamics biases, heuristics, and expressive political behavior—which distort both citizen preferences and policy choices. … As a result, citi-zens often embrace “bliss beliefs” about the environment, views that signal virtue or identity rather than reflect careful cost–benefit assessments. By contrast, dissenting opinions are stigmatized as unvirtuous and carry high social costs that few are willing to bear. Politicians, in turn, respond to these expressive preferences … According to Schnellenbach, this dynamic renders Green Deals vulnerable to emotionally salient but economically inefficient outcomes. …
In their contribution entitled “Raiders of the Entrepreneurial State: A Baptist and Bootlegger Analysis,” Jeffrey Muldoon and Derek Yonai (2026) critically examine the notion of an “entrepreneurial state” (Mazzucato 2013), and reframe its implica-tions for innovation, regulation, and rent-seeking through the lens of the “Bootleggers and Baptists” theory developed by public choice scholars. Muldoon and Yonai argue that instead of stimulating productive entrepreneurship, state-led industrial policy opens abundant opportunities for “plunder” by well-connected insiders (“Bootleg-gers”) who exploit the state’s moral legitimacy, often provided by well-meaning “Baptists” advocating the common good.
Consider two broad approaches to reducing carbon taxes. One approach imposes a tax on carbon emissions from all sources, and uses some funding from that tax for public funding of active research and development efforts into clean energy, along with demonstration projects. This approach relies on altering incentives and being at the leading edge of technology, but leaves considerable flexibility in how energy users react. In the other approach, the government hands out large subsidies and/or tax breaks to companies and households who undertake specific actions, along with specifying certain technologies and timetables and trying to set up “national champion” production facilities and firms. This second approach seems to have greater political viability, perhaps because it is also easier for lobbyists to game the system and for politicians to take credit, but it’s far from obvious that it has better outcomes.
The tools that are used for public policy matter more than the announced timelines and goals. It’s legitimate to ask whether the policies that make up the EU green deal (and similar proposals in other countries) are actually working to reduce carbon emissions in a cost-effective manner, or whether they mostly involve handing out subsidies and tax breaks.
