There’s no way around cities in Europe’s climate and competitiveness push – governments must empower them to deliver

Turning Europe’s climate targets into real investments depends on land use decisions,  permits and construction. Those steps are handled by cities, not EU institutions. 

Cities are where people live, businesses operate and infrastructure is built. They decide how land is used, how quickly permits are processed and how different systems connect. In practice, cities determine whether investments move forward on schedule or fail to materialise. 

Mario Draghi’s report on the future of European competitiveness makes one point unmistakably clear: Europe must drastically accelerate investment, innovation and coordination if it is to remain globally relevant. 

Yet cities are still too often treated as downstream implementers of national and  European policy, rather than as actors with a distinct role in enabling investment. This gap between where decisions are made and where projects are delivered is becoming a bottleneck. 

Cities shape the conditions for investment by managing land use and zoning, running permitting processes, investing in their own buildings and services, and coordinating local actors such as companies, residents and infrastructure providers. They also provide political continuity, which matters for long-term investment decisions. 

When cities provide clarity and predictability, projects move forward. When they do not,  costs rise, timelines slip and capital looks elsewhere. 

This is why cities must be treated as partners in Europe’s investment strategy. National governments remain responsible for taxation, regulation and macroeconomic policy. But without empowered cities, national ambitions will not be delivered. Cities need access to financing instruments that match local project pipelines, the ability to combine public and private funding, and a formal role in shaping national climate and investment strategies. 

The experience of Espoo, Finland’s second-largest city, illustrates how this works in practice. Espoo has set an ambitious climate neutrality target that has encouraged companies and other local actors to reduce emissions alongside the city. For many businesses, the value has been the signal of long-term direction rather than regulation. 

Espoo Clean Heat programme shows how cities can enable large-scale infrastructure investment without directly owning the energy system. The programme is a partnership between the city and an energy company to phase out fossil fuels in district heating by  2030 using heat pumps, electric boilers and waste heat recovery. The city’s role has  been to coordinate land use, manage permitting and provide long-term political commitment. 

This distinction matters. Espoo did not invest in energy system itself, but without the city’s enabling role, the investments would not have happened. According to recent study, over 1 billion euros has been invested to energy system (incl. electricity and district heating). As a result, CO₂ emissions have fallen by more than 40 percent, and jobs have been created in construction, energy and technology. 

Similar approaches are emerging across Europe. More than 100 cities are part of the  EU Cities Mission and have received a Mission Label for their Climate City Contracts.  These contracts translate climate neutrality targets into concrete investment roadmaps,  linking emissions reductions with economic development and social priorities, and helping cities communicate more clearly with investors. 

For companies investing in the green transition, cities matter. Emissions targets alone are not enough. Investors look for predictable permitting, modern infrastructure and access to skilled labour. Cities that anticipate infrastructure needs, coordinate land use and streamline processes reduce risk and shorten timelines. 

Public acceptance is equally important. Transitions stall when they are perceived as imposed or unfair. Cities are best placed to involve residents and local businesses early and connect climate action to everyday concerns. In Espoo, Espoo Clean Heat was developed through dialogue with stakeholders, helping to secure long-term support. 

At the European level, initiatives such as the EU Cities Mission are improving cooperation between cities, industry, national governments and EU institutions. City industry dialogues have begun in several countries, with more to come, and show how local demand for innovative, clean and low-carbon solutions, advanced technology and sustainable materials – driven by climate transition plans – can meet the supply from clean businesses and industries. 

What remains insufficient is scale. Cities still face fragmented funding streams and limited access to tailored financial instruments. Strengthening cities does not mean shifting responsibility away from national governments. It means enabling delivery where decisions are implemented. 

Europe’s climate and competitiveness goals will be built city by city. The investment interest exists, and the technologies are available. What is missing is not ambition, but empowerment. Without stronger national–local partnerships that give cities the tools to deliver, Europe’s targets will remain plans on paper.

illuminem Voices is a democratic space presenting the thoughts of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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