Navigating Europe’s twin transition — opportunities and challenges of digitalisation in the green transition

Why the twin transition matters now

As global drivers of change reshape the economic and geopolitical landscape, creating conditions of volatility, uncertainty, complexity and ambiguity (Figure 1), Europe faces unprecedented challenges and opportunities to strengthen resilience, enhance social cohesion and pursue more sustainable pathways to prosperity (EEA, 2020). These pressures are unfolding in a context of heightened strategic competition, rising energy costs and increasing exposure to external dependencies in areas such as energy, critical raw materials and key technologies (EEA, 2024b).

Figure 1. The twin transition in a volatile and uncertain global context

Against this backdrop, the convergence of the green and digital transitions — the twin transition — has the potential to fundamentally reshape how Europe produces, consumes and interacts with its environment, with far-reaching implications for competitiveness, resilience and sustainability. In particular, digital technologies are increasingly recognised as key enablers of industrial transformation. They can support decarbonisation through smart manufacturing, electrified and flexible energy systems, as well as more circular and resource-efficient value chains (EC, 2025a). Reflecting this shift, the European Council in October 2025 explicitly linked competitiveness to ‘a competitive green transition’ and a ‘sovereign digital transition’, signalling that these agendas are now treated as core strategic priorities (EC, 2025b).

Seen from this perspective, the twin transition is not solely an environmental or technological agenda. It is also an opportunity for industrial renewal and broader societal transformation (Mäkitie et al., 2023). By aligning digital innovation with sustainability objectives, it can revitalise investment, enhancing productivity and strengthening Europe’s industrial competitiveness (Muench. et al., 2022). Realising these benefits is not automatic and depends on how digitalisation is governed in practice. The challenge for Europe is therefore not whether to pursue the twin transition, but how to actively navigate and shape it under conditions of heightened uncertainty and intensified global competition.

This briefing examines how digitalisation can support environmental protection, enable more sustainable patterns of production and consumption, and strengthen evidence-informed decision-making. It also highlights the emerging environmental risks and trade-offs that must be anticipated and governed. It situates Europe’s twin transition within a global digital transformation unfolding at unprecedented speed and scale — a wave that Europe must navigate even if it cannot fully steer.

The twin transition as a systemic governance challenge

The green transition in Europe is envisaged as a systemic shift toward a climate-neutral continent, one that reduces environmental pressures while protecting nature and restoring ecosystems (EU, 2022). In parallel, the digital transition involves the widespread uptake of digital technologies reshaping economies and society, including data, artificial intelligence (AI), connectivity and automation. Although these transitions are often addressed separately, in practice they are deeply interlinked (Muench. et al., 2022). However, governing and aligning these interactions is not straightforward.

Green technologies can come with significant upfront costs, while their benefits often materialise over longer time-scales. This creates misalignment between short-term economic incentives and long-term sustainability objectives. Moreover, shifts towards more sustainable materials and production processes may disrupt existing supply chains. In addition, investments in emerging technologies involve uncertainties and risks that may deter firms and inadvertently slow adoption. As highlighted in the European Union (EU) Competitiveness Compass, the cumulative effect of regulatory requirements can also increase administrative and reporting burdens if not well designed.

At the same time, the alignment of green and digital strategies can bring valuable synergies. Digitalisation can enable new business models and data-driven optimisation of resource use, improving environmental performance and lowering input costs (Draghi, 2024). More broadly, it can open new market opportunities, support circular value retention, strengthen collaboration and knowledge-sharing across sectors. The Single Market can function more efficiently, helping ensure a level playing field (Letta, 2024). These opportunities are not guaranteed, however.

From a governance perspective, this interdependence presents both opportunities and risks (Kloppenburg et al., 2022). Digitalisation can enhance data availability, modelling capacity and early-warning systems, strengthening the evidence base for decision-making. However, it also has an growing environmental footprint, as data centres, networks and devices require substantial energy, water and critical raw materials (Xiao et al., 2025). Moreover, if deployed without systemic oversight, digital technologies such as AI can obscure trade-offs, create new dependencies and reinforce unsustainable production and consumption patterns (EEA, 2026).

This duality is central to the Eighth Environment Action Programme (8th EAP). This calls for systemic change to achieve ‘well-being for all within planetary limits’ by 2050, while recognising digitalisation as both an enabler of sustainability and a potential source of new environmental pressures. Navigating this tension within the twin transition — balancing its enabling potential against emerging environmental risks — has therefore become a key governance challenge for the EU (Figure 2).

Figure 2. Navigating tensions within the twin transition

From strategic alignment to effective governance

The EU has articulated ambitious objectives for both green and digital transitions. The European Green Deal provides the overarching framework for achieving climate neutrality, protecting biodiversity, reducing pollution and advancing a circular economy. Complementing this, the Digital Decade Policy Programme and the Digital Compass set targets for digital infrastructure, skills, public services and business transformation.

In principle, these agendas align. Digital technologies are expected to support energy efficiency, smart mobility, sustainable agriculture and improved environmental governance. Methodologies and tools developed by the European Green Digital Coalition to estimate the net climate impact of digital solutions form a valuable foundation to assess the environmental effects of digitalisation. Other initiatives reflect this shared ambition, including the European Digital Innovation Hubs and European Green Deal Data Space, together with global efforts including the Coalition for Digital Environmental Sustainability launched under the UN Secretary-General’s Roadmap for Digital Cooperation.

However, strategic alignment does not automatically translate into alignment in practice. While AI and data-driven tools are being increasingly adopted across EU Member States, evidence from Public Sector Tech Watch suggests only a limited share of digital use cases explicitly targets environmental protection. This gap reveals a broader risk: digitalisation driven mainly by productivity, competitiveness or convenience may deliver limited environmental benefits or even exacerbate environmental pressures (Muñoz de Bustillo Llorente, 2024).

As digitalisation can both support sustainability and introduce new environmental pressures, its governance lies at the core of current policy debates (Kovacic and Argüelles, 2025). The key challenge is to ensure that digitalisation is guided by explicit sustainability objectives, rather than assuming environmental gains will emerge indirectly from efficiency improvements alone. Addressing this requires clearer policy incentives, integrated assessments and stronger coherence across digital, climate and circular economy policies (Gaffney et al., 2025).

How digitalisation can support environmental action

Rapid advances in digital technologies and infrastructures, including AI, blockchains, the Internet of Things (IoT), data centres and communication networks are strengthening our capacity to anticipate environmental risks, track progress toward sustainability targets and design more responsive and evidence-informed policies. By improving the precision, timeliness, and accessibility of environmental data, digitalisation can significantly support key aspects of environmental protection. These contributions can be broadly grouped into three interconnected functions: data generation, data analysis and data actions (Figure 3).

First, digital technologies enable the collection and generation of large volumes of environmental data at unprecedented spatial and temporal resolution. Sensors, satellites, smart meters and citizen-science platforms provide near real-time information on air quality, water availability, land use, emissions and ecosystem change. This expanded data foundation supports more timely, granular and comparable assessments of environmental pressures, risks and policy progress across Europe (Reichstein et al., 2019).

Second, advanced analytics and modelling tools — including machine learning and digital twins — enable the analysis and simulation of complex systems. For example, digital twins of energy systems use real-time data and AI to integrate renewables, reduce losses, forecast demand peaks and support predictive maintenance. More broadly, Earth observation initiatives including the EU flagship project ‘Destination Earth’ (Box 1), IoT sensors and advanced analytics all improve the early detection of environmental risks. They also support climate adaptation planning and disaster risk reduction and response (Bauer, Stevens and Hazeleger, 2021).

Third, digital insights can be translated into operational improvements and targeted actions. AI-enabled optimisation can improve energy and logistics efficiency. Advanced digital tools and services, including drone-based applications, can support precision agriculture and more efficient operations. Digitalisation can also strengthen environmental protection through improved monitoring, modelling and enforcement (Stern et al. 2025). In parallel, digital services hold significant potential to streamline administrative processes, for example by automating the collection, processing and validation of environmental and social data, improving reporting efficiency, supporting compliance with regulatory requirements and enhancing the quality and comparability of sustainability disclosures, in line with the EU’s better regulation agenda.

Figure 3. How digitalisation supports environmental protection

These applications demonstrate how digitalisation can support environmental action. However, improved data and models alone do not automatically lead to improved environmental outcomes. Effectiveness depends critically on data quality, modelling assumptions and governance choices (Michalec, 2025). Overconfidence in model outputs or insufficient consideration of uncertainty can undermine trust and lead to misguided decisions. Responsible use of digital technologies therefore requires clear communication of limitations, assumptions and potential biases (Saltelli et al., 2020).

Environmental risks and rebound effects

As this briefing has outlined, digitalisation is not inherently green. As highlighted in Europe’s Environment 2025, digital technologies can generate significant environmental pressures across their life cycle, from resource extraction and production to use and disposal. These impacts extend beyond emissions and resource use to broader concerns regarding sustainability and planetary limits. This underscores how the environmental benefits of digitalisation cannot be assumed and must be shaped actively through policy and governance (Kaack et al., 2022).

The production of digital technologies relies heavily on critical raw materials. Extraction is energy-intensive and often associated with ecological degradation, water stress and human rights concerns. Data centres and digital networks consume growing amounts of electricity and water, while the rapid turnover of electronic devices produces expanding volumes of electronic waste. Design choices that limit repairability or encourage planned obsolescence further exacerbate these pressures (Baldé et al., 2024).

Beyond such direct impacts, digitalisation can also trigger rebound effects that offset efficiency gains. By lowering costs, increasing convenience and saving time, it can stimulate additional consumption and production, leading to higher overall resource use and emissions. Examples include a growing demand for data-intensive services, the expansion of e-commerce and associated logistics or productivity gains which, rather than absolute reductions in environmental pressures, translate into higher output (Santarius, Pohl and Lange, 2020).

Such rebound effects are complex, context-dependent and often underestimated. Empirical evidence suggests that, without complementary policies, efficiency improvements alone are unlikely to deliver absolute reductions in resource use at the scale required for sustainability (Finnveden et al., 2025). This challenges dominant narratives that frame digitalisation primarily as a technical efficiency solution. It also reinforces the need for sufficiency-oriented policies that explicitly address demand (Chandra and Verma, 2023).

The limits of governance under such conditions of complexity and uncertainty should be recognised. Policy interventions cannot eliminate all risks or fully control the direction and pace of technological change. Governance must be adaptive, reflexive and precautionary, combining continuous assessment, foresight and learning with the capacity to respond to emerging risks, trade-offs and unintended consequences over the long term (EEA, 2024a).

Enabling conditions for the twin transition

Today’s global digital landscape is shaped largely by developments beyond Europe, notably in the United States and China. The EU therefore cannot eliminate all environmental or societal risks alone. This challenge is compounded where environmental regulation is perceived to constrain growth and competitiveness, rather than contributing to sustainability and resilience. EU governance can nevertheless help shape how digitalisation evolves within Europe, by setting standards, aligning incentives, building green and digital capacities, supporting sustainable innovation and establishing boundaries intended to limit harmful impacts. These evolving parameters can support the EU’s long term-vision of ‘living well within the limits of the planet’.

Governance of the twin transition is increasingly also influenced by geo-strategic considerations. Europe’s dependence on digital infrastructure, data, critical raw materials and key technologies has moved to the centre of debates on competitiveness, security and strategic autonomy. These dependencies become particularly relevant as digital sovereignty policies evolve amid competing global digital power blocs. Managing them while maintaining environmental ambition, openness and international cooperation adds a further layer of complexity when shaping the evolution of digitalisation across Europe (Saura García, 2024).

Recent assessments of the net environmental impacts of digital technologies, including AI, suggest their potential benefits can outweigh the associated costs when incentives favour digital solutions that deliver clear ecological value (Stern et al. 2025). Achieving this balance requires explicit targets for the energy and material footprints of digital infrastructure (as set out in the Digital Decade Policy Programme), strong energy and resource-efficiency standards and the systematic integration of circularity across digital value chains.

Public procurement and regulation can play a particularly powerful role in shaping demand for sustainable digital solutions. Through the Ecodesign for Sustainable Products Regulation, the EU is extending sustainability requirements beyond energy efficiency to include durability, reparability, recyclability and material efficiency. These cover a broad range of products on the EU market. Data infrastructures and digital tools such as digital product passports and extended producer responsibility schemes can strengthen accountability further.

The social dimension of the twin transition also requires careful attention. Data governance frameworks should address privacy, security and inclusion to ensure the benefits of digitalisation are shared broadly (O’Sullivan et al., 2021). Digitalisation is also reshaping labour markets, skills requirements and working conditions across Europe. Ensuring a just transition will therefore require proactive policies on reskilling, social dialogue and decent working conditions. Without such measures, technological change may deepen inequalities and undermine public support for the transition toward sustainability (Aloisi, 2025).

Shaping a sustainable twin transition

Multiple and overlapping risks and pressures now shape European society. These are often collectively described as a polycrisis — a complex dynamic through which climate change, biodiversity loss, pollution, geopolitical tensions and economic pressures interact and reinforce one another (Muench et al., 2024). These pressures influence how citizens and policymakers perceive risks and opportunities and shape expectations around competitiveness, security and well-being. Under such conditions, short-term pressures can dominate decision-making, underscoring the need for forward-looking approaches. Foresight highlights the importance of anticipatory governance, shared sense-making and collective reflection to navigate long-term pathways under deep uncertainty (Vesnic-Alujevic and d’Ambrosio, 2025).

In this context, the direction of the twin transition is not only a technical or policy question, but a matter of societal choice that is shaped over time (Morozov, 2013). Technical measures and policy instruments are essential, yet not sufficient alone. How the twin transition ultimately unfolds depend on the socio-technical imaginaries shaping Europe’s future — the shared visions, values and expectations that influence what societies consider desirable, acceptable and viable (Jasanoff and Kim, 2015). These imaginaries play a critical role on shaping long-term trajectories by influencing problems, the goals prioritised and the pathways of change pursued (Kovacic et al., 2024).

Such imaginaries are explored in the EEA report Imagining sustainable futures for Europe. They illustrate how different societal choices can lead to markedly different outcomes for people and the environment. Scenarios that prioritise community, participation and respect for ecological limits assign different roles to digital technologies than those centred on automation, scale and expansion (EEA, 2025). In this way, imaginaries influence not just the pace of digitalisation, but its purpose and societal impacts.

Within such alternative framings, digital tools can support new forms of participation, transparency and collective learning, and enable experimentation with alternative business models, sharing practices and locally grounded solutions (EEA, 2023). Realising this potential requires a deliberate alignment of innovation with societal values and long-term sustainability goals, rather than allowing technological trajectories to evolve by default (EEA, 2021).

The twin transition offers Europe an opportunity to fundamentally rethink how its economies operate within ecological limits, while supporting well-being and resilience. If digitalisation is framed primarily as a driver of growth and competitiveness, environmental gains are likely to remain limited. By contrast, framings that emphasise sufficiency, resilience and well-being can help shift attention towards the reduction of absolute resource use, rather than optimising existing patterns of production and consumption.

Realising this potential will require addressing potential rebound effects, embedding circularity across value chains and ensuring social fairness. Digitalisation should be proactively guided to support environmental objectives while managing its social and environmental impacts. Such an approach could help position Europe as a global model for innovation within planetary boundaries. A successful twin transition would also strengthen social cohesion, advance climate neutrality and circularity, and enable more inclusive and resilient forms of prosperity.