IP Lab Policy Brief No. 01
The Industrial Accelerator Act (IAA), presented by the European Commission on 4 March 2026, is the EU’s most ambitious recent attempt to strengthen its industrial base. Framed as a response to decarbonisation pressures, geopolitical concerns and competitiveness challenges, it combines strategic sector designation, green lead markets, local content requirements (LCRs) and foreign direct investment (FDI) requirements. This policy brief argues that the IAA is ambitious but often insufficiently precise. In particular, the introduction of LCRs and FDI requirements marks a significant shift towards more conditional industrial policy instruments. These tools are best understood against the background of China’s growing role in manufacturing. Overall, the IAA combines different objectives without clearly distinguishing their economic rationales and risks higher costs and unintended distortions without clear objective prioritisation and targeting. A more effective industrial policy requires sharper objective prioritisation, more precise instruments and continued openness towards trusted partners.
Authors
Binder J., Dohse D., Görg H., Liu W-H., Schoel B., Semrau F.O.
Publication Date
03/2026
JEL Classification
F13, F21, L52, O25, Q58
