ABSTRACT Despite its new‐found penchant for market interventionism, the European Union (EU) is often portrayed as lacking the fiscal and administrative capacity to conduct industrial policy. The EU can regulate markets, the conventional wisdom goes, but not steer them in specific directions. In this article, we challenge the notion that regulation and industrial policy are inherently antithetical, arguing instead that the Commission uses its regulatory authority over state aid to indirectly steer member states' industrial policies. We theorize and empirically investigate this rules‐as‐tools approach to industrial policy through an in‐depth, multi‐method case study on the transformation of the EU's state aid regime, with a focus on the General Block Exemption Regulation (GBER). Combining original interviews, topic modeling, document analysis, and descriptive statistics, we demonstrate that the Commission has long used state aid regulation not only to restrict but also redirect state aid. Increasingly, it employs these rules to encourage selective interventions in the economy—particularly those supporting the twin transitions of digitalization and decarbonization.
Bulfone et al. (Mon,) studied this question.