Is Europe’s Battle Against Industry Pollution Paying Off? What It Means for Healthcare and the Economy
- Prof Francesco Moscone
- Aug 15
- 3 min read
In recent years, European industries have faced mounting challenges. From the COVID-19 pandemic, which exposed dangerous dependencies in global supply chains, to the war in Ukraine, which sent energy prices soaring and triggered raw material shortages, the continent has been forced to reexamine its economic model. In response, the European Commission launched an ambitious industrial strategy aimed at reshoring production, cutting carbon emissions, and embracing a green and digital transition.
Yet despite these intentions, Europe’s industrial and environmental policies are under increasing strain, and their effectiveness is far from guaranteed.
Progress toward sustainability targets has slowed. Investment gaps remain significant, and more worryingly, the risk of industrial delocalization looms large. As companies relocate to regions with looser environmental rules and lower energy costs, Europe may not only lose its competitive edge, but also see past environmental gains erased. Meanwhile, these shifts could generate long-term economic fallout, from job losses to reduced tax revenue, ultimately weakening public services like healthcare.
The EU Emissions Trading System: A Policy Under Pressure
At the heart of the EU’s climate policy stands the Emissions Trading System (EU ETS), the world’s largest carbon market. It was designed to gradually lower industrial emissions by making pollution financially costly. Companies are allocated or purchase emission permits, which they can trade; the overall emissions cap declines over time.
While the EU ETS has gone through several updates, tightening caps, including more sectors, and introducing anti-leakage measures, the question remains: is it truly delivering the expected results, or are its economic costs becoming unsustainable?
There is evidence of emission reductions since the system’s introduction. CO₂ levels have declined across the most ETS-active countries (Figure 1), and respiratory health indicators, such as hospital admissions for chronic lower respiratory diseases among the youth, appear to have improved (Figure 2). But these correlations do not prove causality, and more rigorous analysis is needed.
Rising Stringency, Rising Risk?
The OECD’s Environmental Policy Stringency Index shows that EU countries are indeed imposing tougher environmental rules over time (Figure 3). This is often seen as progress, but from an economic standpoint, it raises concerns. Stricter regulation means higher compliance costs, which can disproportionately impact energy-intensive industries. In the current climate of geopolitical uncertainty and economic fragmentation, these burdens could accelerate industrial decline or outsourcing to less regulated regions.
Furthermore, there are signs that the broader EU policy direction is becoming internally contradictory. The European Green Deal, once the flagship initiative for a sustainable future, is now at risk. Soaring defence budgets in response to rising geopolitical tensions, particularly calls for European rearmament, are diverting attention and resources. Similarly, the recently proposed 15% tariff agreement between the EU and the United States may strain transatlantic trade relations and raise costs for European consumers and producers alike.
Healthcare Benefits—But at What Cost?
Air pollution reduction has well-documented benefits for respiratory health, particularly among vulnerable groups such as children and the elderly. EU ETS-related policies likely contributed to observed improvements in hospital admission data for chronic lower respiratory diseases. However, the scale of these health gains must be weighed against the potential economic costs of sustaining such policies under current conditions.
If industrial productivity drops or firms relocate, tax revenues may fall, putting strain on already stretched public health and welfare budgets. In the long run, this could offset some of the gains achieved through improved air quality, as underfunded health systems may struggle to cope with broader public health demands.
Economic Headwinds and Policy Crossroads
The European economy is navigating turbulent waters. Energy insecurity, trade disruptions, and inflation are colliding with ambitious climate goals. While the green transition may promise long-term innovation and growth, the short-term reality is less optimistic: increased costs, policy uncertainty, and industrial fragility. Policymakers face a difficult balancing act, one that requires more than slogans about sustainability.
Without serious reassessment, there is a risk that Europe’s environmental policies could become politically and economically unsustainable. This would not only threaten the Green Deal but could erode public support for climate action altogether.
Note: This article is based on the analysis carried out in the PRIN project n. P2022BNNEY funded by the MUR
