AI, Digital Sovereignty, and the EU’s Path Forward: A Case for Mission-Oriented Industrial Policy

During the last legislative term (2019-2024), the European Union (EU) made a significant push in technology regulation. Aiming to make Europe “fit for the digital age,”¹ the EU introduced various pieces of legislation, including the Digital Markets Act², the Digital Services Act³, and, most recently, the Artificial Intelligence (AI) Act⁴ — the world’s first comprehensive AI legislation. Despite these advances, the EU continues to face challenges in scaling new technologies and competing with established tech giants, and it remains heavily dependent on non-EU countries for strategic technologies such as AI. This reliance may complicate other policy goals like achieving climate neutrality by 2050 or strengthening the internal market, both of which may increasingly rely on technological advancements such as green energy and AI automation. At the same time, the EU must ensure that its efforts to become digitally sovereign do not undermine its values and strategic goals as a union — a line that is becoming harder to walk as global challenges become complex and interrelated.

Moving forward, the EU must structure its industrial policies for emerging technologies in a way that capitalizes on synergies with its other strategic objectives. The argument presented in this paper posits that the EU would be better positioned to do so if it treats AI and emerging technologies as supporting tools rather than as ends in themselves. Additionally, it poses that the EU may more effectively align its strategic objectives through “mission-oriented industrial policies”, an approach focused on achieving specific societal goals rather than promoting individual technologies or sectors. In what follows, this paper addresses why there is a need for European digital sovereignty and why the EU is struggling to achieve it. Then, it explains the concept of mission-oriented policy, which can help address increasingly interconnected policy issues. Finally, it assesses how the EU is positioned toward mission-oriented policy and suggest ways to further develop this approach, especially with regard to AI.

The Need for European Digital Sovereignty

A central objective outlined in the European Commission’s 2019-2024 political guidelines is to strengthen the EU’s digital sovereignty⁵. This involves ensuring that the EU can autonomously shape its digital future and set global standards for new technologies, for which the latter, AI has taken prominence. Throughout the past years, the EU adopted numerous pieces of technology legislation that extend to all (downstream) technology providers operating or selling in the European market. In effect, this externalizes the EU’s regulatory influence beyond its borders, which is a familiar (and somewhat intentional) by-product of European legislation frequently referred to as the “Brussels effect.”⁶ Especially considering the AI Act’s global impact as pioneering AI legislation, it is fair to say the EU has been successful in shaping technology standards internationally.

However, despite these regulatory achievements, the EU struggles to scale its own technological innovations and remains dependent on external AI providers, mainly from the United States and China. This dependence conflicts with the EU’s goal of technological autonomy and could hinder its other policy objectives, such as reforming the labor market, advancing the green transition, and strengthening geopolitical influence. For instance, AI can help optimize renewable energy systems and reduce emissions through intelligent automation, helping the EU meet its climate goals and reducing its dependency on non-EU countries, such as Russia, for energy. Moreover, as AI becomes embedded in societal infrastructures such as health care and transportation, as well as military intelligence and cybersecurity, the desire to be digitally sovereign will only grow.

Challenges Around European Digital Sovereignty

Several factors, explain the EU’s difficulties in achieving digital sovereignty, particularly in the case of AI. To name a few examples, the EU spends less on AI research and development than its global competitors and has a smaller pool of venture capital to support AI innovation.⁷ Moreover, it struggles to retain AI and STEM talent, with many skilled professionals leaving for the United States, where large tech companies and substantial research facilities offer more attractive opportunities⁸.

Notably, the structure of the AI industry, characterized by large investments and dominance by a handful of tech giants⁹, challenges core EU values such as equality and a commitment to solidarity among member states¹⁰. On the one hand, the EU’s commitment to solidarity helps reduce economic and social disparities between regions and advance digital maturity across the member states, ultimately supporting the union’s overall growth. On the other hand, it fragments policy initiatives and investment efforts, as resources are distributed across various economies with uneven infrastructures, resources, and levels of technological maturity. For the AI industry, which requires substantial investment and resources, this may dilute the effort needed to scale innovations and build globally competitive European ‘tech giants’. Alternatively, the EU could reconsider its approach to solidarity, centralizing efforts in the AI sector within a single member state on the premise that a successful European tech giant is preferable to having none. However, this strategy risks exacerbating regional inequalities by concentrating significant resources in one member state. Additionally, evidence from the U.S. shows that tech giants can intensify regional disparities¹¹. Ultimately, this dynamic raises critical questions about balancing the EU’s core values with its ambition to become a leader in AI.

The EU must also consider how AI investments may conflict with its other long term objectives. For example, while AI has the potential to make processes more efficient, it can also contribute to environmental degradation due to the energy demands of large-scale data centers and the environmental footprint of hardware production, undermining the European Green Deal and climate neutrality goals. AI-driven automation could also lead to job displacement, exacerbating inequality and weakening the EU’s social cohesion and vision of an “economy that works for people.”¹² Moreover, AI’s potential for surveillance, misinformation, and algorithmic decision-making poses serious risks to democracy and civil liberties, as these technologies can be exploited to manipulate public opinion, reinforce bias, and undermine transparent governance. With democracy and European solidarity already under strain, investing more in AI could deepen societal divides and erode democratic institutions, raising fundamental questions about how AI aligns with the EU’s core values.

An Argument for Mission-Oriented Policy Design

To achieve digital sovereignty in accord with its strategic agenda, the EU may benefit from mission-oriented policy. Unlike traditional industrial policy, which focuses on advancing specific sectors or technologies, mission-oriented policy sets ambitious goals to address pressing societal challenges, such as strengthening democracy or achieving climate neutrality. By redirecting technological development to serve broader societal goals, mission-oriented policies stimulate cross-sectoral collaboration, civil engagement, and bottom-up technological innovation.¹³

Rather than concentrating significant policy efforts and investments on developing a globally competitive AI sector, the EU would pursue AI initiatives that directly support its broader strategic objectives, such as achieving climate neutrality by 2050. This approach increases the likelihood that AI’s broader societal and environmental impacts will be thoroughly considered in cost-benefit analyses, as advancing the AI industry itself is not the ultimate goal. Furthermore, AI developments arising from this approach are more likely to generate net-positive spillover effects in other industries, given the careful evaluation or avoidance of potential negative impacts. If an AI initiative undermines the overarching mission, it would likely not be pursued. Thus, by positioning AI as a means to achieve broader societal goals, the EU can align AI innovation with its strategic objectives and values, promoting digital sovereignty in areas most relevant to its long-term ambitions.

The EU’s Potential for Mission-Oriented Policy

Mario Draghi, former president of the European Central Bank, emphasized the EU’s need for a more coordinated approach toward AI in his report for the European Commission on the future of European competitiveness. He warned that fragmented AI efforts across member states undermined the EU’s broader digital sovereignty goals.¹⁴ While Draghi recognized certain tensions between the EU’s objectives, like balancing competitiveness with sustainability, his primary focus was on ensuring AI leadership to prevent the EU from falling behind, with an emphasis on the need to vertically integrate AI into European industries. He noted that AI may undermine the EU’s social model regarding the workforce but did not elaborate how he would circumvent this issue in his strategy, nor did he sufficiently address how the technology may interfere with other strategic objectives and core values. Here, mission-oriented policy could offer a coordinated framework to reconcile competing objectives.¹⁵, ¹⁶

The EU already has a partial foundation for adopting mission-oriented policies. For instance, the European Commission’s political guidelines, which define the union’s priorities for each five-year term, could be reframed as “missions.” This approach would underscore the importance of structuring policy around the EU’s overarching goals, thereby discouraging siloed policymaking that may lead to misalignments. Additionally, the EU has acknowledged synergies among certain political goals, as demonstrated by efforts to align the green and digital transitions (often referred to by EU institutions as the “twin transitions”) and by the Draghi report, which emphasizes the need to harmonize European competitiveness with sustainability objectives., However, as with most governments, the European Commission is a large bureaucratic institution that assigns its policy portfolios to the respective directorate-generals (DGs). Although collaboration exists, each DG remains primarily responsible for its respective industry’s policies. As modern-day issues grow more interconnected, the policies pursued by one institution can thereby both support and hinder the work of others. For AI, which has broad societal implications, this rings especially true.

Given AI’s cross-sectoral and broader societal impacts, stronger coordination would ensure the European AI ecosystem develops in support of the EU’s long-term objectives, rather than simply racing to compete with its global competitors. To facilitate the stronger coordination that mission-oriented policy requires, the EU could introduce “coordination directorates” or “coordination units” across its institutions. These units could help to facilitate cross-institutional collaboration and identify potential conflicts between certain policy efforts or sectors, such as those related to AI and environmental policy. This would help the EU to invest in AI and other emerging technologies strategically, ensuring it becomes digitally sovereign in the areas that benefit its long-term goals.

Conclusion

While the EU has made significant progress in regulating emerging technologies like AI, it continues to face steep challenges in achieving digital sovereignty. Reliance on external providers and fragmented policy efforts within the union hinder its ability to scale innovation and compete globally. At the same time, investing in AI may conflict with its other key objectives, such as environmental sustainability and social cohesion, emphasizing the need for the EU to take a more integrated approach.

Now is as good a time as any to reform how the EU aligns its industrial policies with its strategic goals and values. The incoming Commission for 2024–2029 offers a fresh mandate, the Draghi report has inspired calls for industrial policy reform, and recent developments in the AI Act and AI industry provide momentum for a new regulatory foundation. These developments create an opportunity for the EU to rethink its operations while the path to AI integration is still being shaped, ensuring its approach to digital sovereignty not only enhances competitiveness but also upholds the values that define the union.