Clean Energy Manufacturing: Eastern Europe’s Path to Net-Zero Leadership

The study highlights significant opportunities for Poland, Romania, Bulgaria, and Croatia to expand clean tech manufacturing, leveraging EU policies like the Net Zero Industry Act to localize production of electric vehicle batteries, wind turbines, and more. Poland leads the region in export potential, while addressing workforce gaps and policy innovation remains critical for all countries.

Authored by researchers from the International Finance Corporation and the World Bank’s Economic Policy Global Department, the study explores opportunities for four Central and Eastern European (4CEE) countries- Poland, Romania, Bulgaria, and Croatia in the clean technology (cleantech) sector. With the European Union (EU) accelerating its efforts to meet its net-zero carbon emissions target by 2050, the study identifies the pivotal role these countries can play in the localization of clean tech manufacturing. The focus lies on five key value chains electric vehicle batteries, solar photovoltaics, wind turbines, heat pumps, and electrolyzers. Through detailed analysis, the paper outlines export potential, necessary investments, and strategic challenges these countries must navigate to capitalize on the EU’s Net Zero Industry Act (NZIA), which mandates that 40% of clean tech production be sourced locally by 2030.

Policies Driving the Clean Tech Revolution

The EU’s transition to a low-carbon economy is guided by policy frameworks such as the European Green Deal, REPowerEU, and NZIA. Together, these initiatives aim to reduce reliance on fossil fuels and global supply chains, fostering self-reliance in strategic industries. Accompanying these measures are incentives like relaxed state aid rules and tariffs on non-EU imports, which aim to protect and promote domestic manufacturing. While these policies may trade off some economic efficiency, they are deemed essential for achieving decarbonization goals and strengthening Europe’s industrial resilience. The 4CEE countries, with their geographic proximity to Western Europe and integration within the EU single market, are positioned to benefit significantly from these shifts.

Poland Leads in Clean Tech Potential

Among the 4CEE countries, Poland stands out as the most promising, with substantial opportunities across all five value chains. Its strong manufacturing base and diverse product portfolio, combined with robust trade ties with key markets such as Germany and the Netherlands, give Poland a competitive edge. It is projected to capture 60% of additional clean tech exports under the NZIA scenario, with electric vehicle batteries and wind turbines being key growth drivers. By 2030, clean tech exports could account for 2% of Poland’s GDP, supported by an investment requirement of approximately $5 billion. This positions Poland as a leader in the regional cleantech transition.

Romania, while showcasing a more diverse clean tech portfolio than Bulgaria and Croatia, faces challenges in converting this diversity into export growth. Limited battery production capabilities and a narrow reach of export destinations have curtailed its potential. Meanwhile, Bulgaria and Croatia demonstrate specific strengths in wind-related products and end-product manufacturing but have fewer opportunities overall, reflecting their smaller economies and populations. Croatia, however, could see the highest proportional impact, with clean tech contributing 3.7% to its GDP by 2030.

Scaling Exports and Investments by 2030

The projections for clean tech exports from the 4CEE countries are remarkable. Under optimistic scenarios, exports could triple to quintuple by 2030. The NZIA scenario envisions significant growth, particularly for smaller economies like Bulgaria and Croatia, which could see exports increase fivefold from their modest 2022 levels. Investment requirements vary across countries, with Bulgaria and Croatia needing proportionally higher investments relative to their GDP. Romania’s capital needs are moderate, while Poland’s $5 billion investment requirement underscores its scale and ambition. These investments, driven largely by electric vehicle battery production, need to be initiated promptly to meet EU targets.

The geographic proximity of these countries to Western Europe is a significant advantage. Germany, the Netherlands, and Italy are expected to remain the primary importers of cleantech products, but Poland’s diversified trade relationships position it to expand its reach to new markets. In contrast, Romania’s limited export diversification restricts its potential, underscoring the need for targeted strategies to broaden market access within the EU.

Policy Innovation and Workforce Challenges

Realizing the full potential of clean tech manufacturing in the 4CEE region requires addressing critical challenges. One key issue is workforce development. The clean tech sector demands specialized skills, such as those required for solar installation and environmental engineering. Declining working-age populations in Eastern Europe and rigid migration policies exacerbate the challenge. Vocational training, reskilling programs, and labor market reforms will be essential to bridge these gaps.

Policy innovation is also critical. While subsidies under the Temporary Crisis and Transition Framework (TCTF) have been instrumental, they are not sufficient to achieve industrial goals. Policymakers need to adopt a broader toolkit, including public procurement policies that favor domestic producers and tax incentives for green manufacturing. Additionally, horizontal reforms to improve the business environment, such as reducing bureaucratic hurdles and enhancing infrastructure, are vital to attract and sustain investments.

A Transformative Opportunity for the Region

The clean tech transition presents a transformative economic opportunity for the 4CEE countries, but it also raises broader questions about the future of global trade networks and regional integration. Aligning workforce training programs with industry needs will be crucial to building resilient clean tech ecosystems. Further research is needed to explore how EU accession states can integrate into clean tech value chains and attract investments. The role of complementary service sectors, such as recycling and maintenance for clean tech products, also merits attention.

The study acknowledges certain limitations. It assumes that the NZIA targets will be met through competitive dynamics rather than strict local content quotas, which could affect the distribution of opportunities. Additionally, it does not account for the potential concentration of production in fewer large facilities, a likely scenario in certain value chains. Despite these caveats, the findings emphasize the urgency of coordinated action among governments, industries, and international institutions to harness the cleantech opportunity.

Ultimately, clean tech manufacturing offers a pathway for Central and Eastern Europe to emerge as a critical player in the EU’s low-carbon future. By addressing workforce challenges, fostering innovation, and implementing strategic policies, these countries can position themselves as key contributors to Europe’s clean energy transition while reaping substantial economic benefits. The clean tech sector represents not just a growth opportunity but also a chance for the region to align with global sustainability goals.