The government should be a regulator and set ground rules. It should provide a market and clear requirements. Then leave private business alone to meet those requirements. If they need funding, leave the business to the VC industry.
If they say, we are willing to spend X amount of money on Y number of launches. You can rent our launch sites for tests. Here is a list of requirements. They would see incredible results.
But no europe must micromanage and do things in their own bureaucratic way that has always failed.
I would expect reusability to be a requirement based on that factor alone. You ca produce carbon-neutral fuel, but there is a lot of environmental load involved in production of the very rockets.
I do think the ESA rockets use a more eco friendly fuel then others, that is probably more important then some metal on the seabed.