The EU Clean Industrial Deal: An overview to keep track of the upcoming changes

1. Introduction

On 26 February 2025, the European Commission introduced its Clean Industrial Deal (CID), an initiative designed to boost the competitiveness and decarbonisation of European industries. While the strategy is intended to position the European Union (EU) as a leader in the global clean technology market, it raises two questions:  how will it impact industry inside and outside Europe, and if adopted, when will these changes be implemented?
 

2. Current Situation

Currently, the EU is in a difficult position, as it tries to meet two seemingly conflicting demands. On one hand it is trying to deliver a climate-neutral industry whilst, on the other, remaining competitive in the global market. This dichotomy can be better understood in three main areas:

• with the EU aiming to achieve climate neutrality by 2050 the CID is a crucial component as it aims to reducie greenhouse gas emissions from industrial sectors.
• high energy prices and bureaucratic hurdles make it challenging for European industries to compete globally, so the CID seeks to address these issues by lowering energy costs and simplifying regulations.
• with countries such as the United States and China investing heavily in clean technologies, the EU has the challenging aim to position itself as a leader in the global clean tech market.

However, the CID is not the only measure to solve these European problems as EU regulation and legislation consists of a volume of deals, initiatives, and frameworks. To better understand the CID in context, the following key programmes should be noted:

• the CID builds on the European Green Deal's objectives by focusing on industrial decarbonisation and sustainable growth. It aims to create a more circular and resilient economy, aligning with the Green Deal's vision of a climate-neutral Europe.

• introduced in January 2025, the Competitiveness Compass outlines a plan to boost Europe's economic growth and prosperity. The CID is a key element of this strategy, linking decarbonisation with competitiveness and addressing structural issues such as high energy prices and dependency on fossil fuels.
• the Critical Raw Materials Act is a regulation adopted by the EU to ensure a secure and sustainable supply of critical raw materials essential for various strategic sectors, including renewable energy, digital technologies, and defence. Under the CID, the implementation of the Critical Raw Materials Act will become a priority to decrease exposure to unreliable supply within the EU. To achieve this, the CID foresees to publish a first list of strategic projects for critical raw materials in March 2025 and, in the following, to establish the EU Critical Raw Material Centre to jointly purchase raw materials for the EU market.
• the Carbon Border Adjustment Mechanism (CBAM) is a mechanism to adjust the carbon price of products produced outside the EU with European price standards. The mechanism will – under current planning – apply to imports in seven sectors and starting from 2026, whereby importers will be required to purchase CBAM certificates reflecting the difference between the carbon price paid in the country of production and the EU’s carbon market price. Under the CID, the EU intends to simplify the administrative efforts under the CBAM to benefit industries and their supply chains. However, at the same time the EU is reviewing the CBAM in 2025 to assess an enhancement to downstream sectors and to close loopholes. A legislative update in this regard is not expected before 2026.

 

3. Access to Affordable Energy

What you should look out for:
Legislative proposal on the extension of the Gas Storage Regulation	Q1 2025
Clean Industrial Deal State Aid Framework	Q2 2025
EIB pilot offering financial guarantees for PPA offtakers	Q2 2025
Recommendations on network charges	Q2 2025
Industrial Decarbonisation Accelerator Act	Q4 2025
Recommendations on energy taxation	Q4 2025
Guidance on combining PPAs and CfDs	Q4 2025
European Grids Package	Q1 2026

 

The EU has identified high energy prices – especially compared to trading partners and competitors – as a key factor for a weakened European economy. The reasons given include the dependence on Russian gas and a weak internal European network infrastructure, while the proposed solution is clean and domestically produced energy and expansion of the network in the internal market. The latter is to be achieved in particular by expanding interconnectors.

These goals are to be achieved by means of the ‘Action Plan for Affordable Energy’ (APAE, COM (2025) 79 final), which was adopted jointly with the CID. In the APAE, three central measures are particularly relevant for the industry: (i) the reduction of energy costs, (ii) the acceleration of the expansion of clean energy and electrification as well as (iii) ensuring well-functioning gas markets.

3.1 Reduction of Energy Costs

The EU considers a rapid increase in Power-Purchase Agreements (PPAs) and Contracts for Difference (CfDs) crucial formaking clean energy production more attractive to industrial users and reducing the dependency of energy costs on volatile fossil fuels in short-term markets.

To support the uptake of PPAs, the European Commission, in collaboration with the European Investment Bank (EIB), proposes to launch a pilot programme for corporate PPAs with an indicative amount of EUR 500 million. As part of this pilot programme, the EIB will counter-guarantee for a portion of the PPAs entered into by businesses, with a focus on small and mid-sized enterprises and energy-intensive industries, to support the long-term procurement of new renewable electricity generation. This initiative aims at enabling renewable energy project developers to finalize investment decisions by mitigating the risk associated with the offtake of PPAs.

Additionally, the EIB will introduce a "Grids manufacturing package" for the European supply chain, providing counter-guarantees and other risk mitigation support to manufacturers of grid components with an indicative amount of EUR 1.5 billion.

To provide short-term relief to industries the EU proposes that Member States should lower taxes on electricity to the legal minimum threshold and eliminate levies that finance policies unrelated to energy. To support this proposal, the European Commission will issue recommendations on energy taxation and, regarding network charges will also shortly propose recommendations and guidance on a harmonised design of tariff methodologies.

3.2 Accelerating of Clean Energy and Electrification

The EU acknowledges that maintaining energy-intensive industries will require a secure supply of clean and affordable energy.

Member States should take advantage of the opportunity to bring more affordable electricity into the system by transporting more flexible permitting rules in the new Renewable Energy Directive. The European Commission notes that only a few Member States have implemented the rules stipulated in the directive so far and therefore plans to support Member States in the implementation by sharing best practices and recommendations on energy permitting.

Further, long permit granting procedures are considered a major concern for energy-intensive industries that aim to electrify. To address this, the European Commission will propose concrete measures in the upcoming Industrial Decarbonisation Accelerator Act to tackle bottlenecks related to energy and industrial decarbonisation. These measures will build on experience gained from emergency measures on permitting, the Renewable Energy Directive, the Critical Raw Materials Act, and the Net-Zero Industry Act.

3.3 Reliable Gas Markets

As natural gas is anticipated to remain the primary determinant of electricity prices in the coming years, the European Commission intends to support Member States in crafting appropriate and effective State aid measures. These measures aim to mitigate extreme price spikes and exceptional price environments, decoupling the impact of high gas prices on electricity prices using proven models in emergency situations.

The cost of imported natural gas directly influences both EU gas and electricity prices. To reduce price volatility and speculation, it is essential for markets to function properly. This necessitates comprehensive regulatory oversight and close collaboration between energy and financial regulators to prevent market manipulation and address any potential transparency and market concentration risks.

 

4. Increasing Demand for a clean industry

What you should look out for:
Adoption of delegated act on low carbon hydrogen	Q1 2025
Industrial Decarbonisation Accelerator Act (low-carbon product label and procurement)	Q4 2025
Revision of the Public Procurement Directive (non-price criteria in EU funding calls)	Q4 2026

 

With regard to the market for clean technology within the EU, the European Commission recognises that the creation of a valid and resilient business case requires a significant strengthening of demand. In order for the EU to become a leading market for clean technologies, demand in both the private and public sectors will be strengthened. The overall intention is to reduce costs through scaling-up clean technologies and attract new investors by creating a global leading market for clean technologies and products.

4.1 Private and Public Demand

In the private sector, voluntary labels on the carbon intensity of products (starting with cement in 2025) are to be used in particular to show companies the carbon intensity of their products. In the long term, such labels could be linked to tax breaks or subsidies. However, it remains to be seen how this will be implemented in practice.

To increase public demand, the European Commission will make a proposal to revise the Public Procurement Framework by 2026. This shall put sustainable and local products and services – regardless of price factors – more in the focus of public procurement and increase public demand for clean technology.

4.2 Clarification the Rules on Low-carbon Hydrogen

Further action is needed in the field of renewable and low carbon hydrogen. With regard to regulatory certainty, the implementation of the delegated act on low carbon hydrogen in 2025 is intended to provide producers of low carbon hydrogen with certainty as to how their products qualify from a regulatory perspective. To increase demand in the hydrogen sector, the European Commission plans to launch a “third call under the Hydrogen Bank in Q3 2025 with a budget of EUR 1 billion”.

Under the European Hydrogen Bank, the winning bidders will produce renewable hydrogen in Europe and will receive a subsidy to bridge the price difference between their production costs and the market price for hydrogen, which is currently driven by non-renewable producers.

 

5. Promoting Public and Private Investments

What you should look out for:
Increase funds of InvestEU’s	Q1 2025
Clean Industrial Deal State Aid Framework	Q2 2025
Recommendation to Member States to adopt tax incentives to support the Clean Industrial Deal	Q2 2025
Industrial Decarbonisation Facility	Q2 2026

 

It is no longer a matter of debate that the EU needs significant investment from the public and private sectors to achieve a clean but competitive industry. According to the European Commission, these investments amount to an increase of EUR 480 billion per year  and can only be expected from the private sector if there is at least a long-term and reliable regulatory stability. In addition, to effectively mobilizse private capital, besides a stable regulatory framework, public incentives such as subsidies and tax reliefs are needed.

To achieve this, the EU is relying on a mix of short-, medium- and long-term measures. However, it is difficult to say at this stage which of these measures will bring the hoped-for breakthrough for Europe as a business case:

• The EU itself is providing an initial short-term stimulus to provide companies with immediate access to capital. Under the CID, the EU will provide EUR 100 billion for EU-made clean manufacturing.
• The CID also aims to strengthen the capabilities of InvestEU - an EU programme designed to leverage private and public funds addressed to key EU policy priorities, such as the green and digital transitions.
• The CID also focuses on providing a Clean Industry State Aid Framework to support the transition to a sustainable economy. It includes financial support and tax incentives designed to encourage investment in clean technology and industrial sectors and will provide the industry with a longer planning period of 5 years for received State aid.
• Additionally, the European Commission will recommend that Member States adopt corporate tax systems that support clean business cases, for example, by implementing shorter depreciation periods.

 

6. Strengthening International Partnerships

What you should look out for:
Negotiations for the first Clean Trade and Investment Partnership	Q1 2025
Trans-Mediterranean Energy and Clean Tech Cooperation	Q4 2025

 

To improve relationships to partner countries, the European Commission proposes so-called Clean Technology and Investment Partnerships (CTIP). CTIP essentially complement Free Trade Agreements and are tailored specifically to the clean technology and industrial sectors. The scope of CTIP includes:

• partner countries agreeing joint rules for clean investment and business opportunities for EU companies.
• regulatory cooperation aimed at achieving mutual standards in clean technology, decarbonisation, and circularity.
• identifying investments, under the CTIP, dedicated to specific clean technology projects.

The first CTIP are set to be launched in March 2025. However, in comparison to an earlier version of the CID, the European Commission seems to be refraining from naming a specific partner country. It therefore remains to be seen how far advanced any negotiations will be in March.

 

7. Free trade vs. Protectionism

While being keen on international partnerships and promoting trade, the CID also threatens to restrict investment opportunities within the EU for foreign investors. As the EU FDI Screening Regulation is currently reviewed and adopted guidelines for the Foreign Subsidy Regulation are envisaged for January 2026, the CID also proposes that Member States should consider conditions for foreign investments such as ownership of equipment or EU-based staff recruitments.

Although protectionist measures, such as enhancing the capabilities of Trade Defence Instruments (TDI), have already faced criticism upon the publication of the draft CID, it remains uncertain whether the European Commission will adopt a protectionist approach in the future or will remain open for free trade.

 

8. Takeaways and Outlook

The President of the European Commission, Ursula von der Leyen, has kept her promise made in the political guidelines (2024-2029) and implemented the CID within the first 100 days of the new European Commission. The measures are aimed, as intended, at the competitiveness and prosperity of the EU. The CID therefore has to meet high standards especially with regard to the economic and ecological future of the EU. However, it remains to be seen whether the European Commission's proposal will meet these expectations or whether the bundle of individual measures will ultimately not – as currently envisaged – effectively interlock and generate synergies. Affected companies should keep a close eye on the implementation of the individual measures envisaged in order to benefit in the best possible way.