Building Green Industrial Capacity Beyond Market Regulation: What the EU’s Industrial Accelerator Act Can Learn From East Asia’s Success

The European Commission’s proposed Industrial Accelerator Act (IAA) marks a dramatic effort to revive European industrial policy. Aiming to boost manufacturing to 20% of EU GDP by 2035 (from 14% in 2024) through "Made in EU" procurement rules, FDI conditions, and streamlined permitting for clean technologies, the IAA reflects a growing recognition that market forces alone cannot deliver the green transition. In many ways the IAA can be seen as another element of the EU’s new role as a “catalytic state”. Rather than relying solely on market rules or direct state ownership, the EU has increasingly used network orchestration ("nodality") and leveraged financial tools ("treasury") to facilitate industrial initiatives like the European Battery Alliance.  

Yet, as European policymakers turn to industrial policy tools, they largely neglect lessons from the most successful industrializers: the East Asian “developmental states” China and South Korea. In our newly published paper in the Journal of Economic Policy Reform (JEPR), we analyze industrial policies in the battery sector in China and South Korea. We show that while the EU's catalytic approach focuses on legal mandates to pull market demand, true industrial transformation in strategic green sectors requires a proactive, capacity-driven developmental model. While the EU is aiming at shaping markets, East Asian countries shape investments and capital itself.

Key insights from our JEPR study

By comparing the developmental states of East Asia with a focus on industrial policies in the battery industry, our JEPR paper highlights three structural reasons why Europe’s reactive approach risks falling short in industrial development and the green transition:

1. Green capacity building and state guidance

A central finding of our JEPR paper is that East Asian industrial policy succeeded because state support was paired with strict control mechanisms. As our paper illustrates, in strategic green sectors like lithium-ion batteries and electric vehicles (EVs), South Korea and China did not simply protect domestic producers; they conditioned access to state capital, cheap credit, and market protection on rigorous, enforceable performance targets such as technological scaling, battery cell performance benchmarks, and cost reduction.

The IAA, by contrast, relies on static legal rules ("Made in EU" quotas) without requiring recipient firms to build world-class technological capabilities. Without control mechanisms, reactive protectionism risks shielding high-cost, stagnant domestic producers rather than nurturing competitive clean-tech leaders.

2. Proactive supply creation vs. catalytic demand pull

Our JEPR analysis illustrates how China and South Korea achieved global dominance in critical green value chains, most notably battery manufacturing, by aggressively lowering fundamental supply-side input costs. They directed long-term state capital into upstream material processing, subsidized industrial energy, and expanded supply capacity before relying on consumer demand. Although China and South Korea differ substantially in abilities, market size and geo-political ambitions, they share the goal and willingness to actively shape supply chains. 

The IAA does the opposite: it uses public procurement rules (covering only about 15% of EU GDP) to pull green products into the market. However, as Quitzow and Prontera’s work implies, catalytic statecraft relies heavily on leveraging external resources. Demand signals cannot magically fix structural supply weaknesses, such as Europe's severe energy cost penalty or upstream material bottlenecks. Without direct supply-side capacity building, procurement quotas will simply force public buyers to pay higher prices for scarce domestic green supply. 

3. Strategic agility vs. administrative burden

Our paper demonstrates that developmental states maintained a strong administrative agility, adjusting subsidies and strategies dynamically to support fast-moving clean-tech ecosystems like advanced battery chemistry.

By contrast, the regulatory design of the IAA relies on tracking complex component origin ratios across 27 Member States and threatens to choke green industrial strategy in red tape. Instead of fostering rapid scaling, administrative complexity risks stalling the critical clean investments Europe urgently needs.

While the IAA and the EU's evolving catalytic state framework represent important steps away from passive market regulation, setting legal boundaries and convening alliances is not the same as actively cultivating green industrial capability.

To explore our full comparative analysis of China and South Korea's developmental states and understand the governance mechanisms that drive genuine industrial transformation, read our complete paper in the Journal of Economic Policy Reform (JEPR). 

Kalinowski, T., Pauls, R. & Kim, S. (2026). Industrial policy at the intersection of geopolitics and state–business relations. A comparative study of battery industries in China and South Korea. Journal of Economic Policy Reform, 29(3), 267–287. https://doi.org/10.1080/17487870.2026.2695653