Legal Alerts/28 Feb 2025

Clean Industrial Deal to Promote European Competitiveness and Decarbonisation

On 26 February, the European Commission released one of its main projects for the term, the Clean Industrial Deal (CID). The aim is to enhance the EU's competitiveness through an industrial plan as advocated in the Draghi report. At the same time, the goal is to maintain the EU's carbon neutrality targets and address dependency on critical raw materials.

The programme consists of six components:

affordable and stable energy prices,
lead markets,
accelerating the clean transition,
enhancing circular economy, maximising resources, reducing dependencies, and growing resilience,
international partnerships to ensure vital material supply, and
skills.

Key Highlights

The Commission aims to mobilise over EUR 100 billion to accelerate investments in clean manufacturing and industrial decarbonisation. This will be facilitated by an Industrial Decarbonisation Bank. This funding will be sourced from the Innovation Fund, additional revenues from parts of the Emissions Trading System (ETS), and revisions to InvestEU. The Bank will be piloted this year with a billion auction. The Industrial Decarbonisation Bank will be part of the new proposal of a competitiveness fund.

The Commission aims to simplify the next Multi-Annual Financial Framework’s (MFF 2028-2034) multiple funds into three funds, one of which would be a competitiveness fund that supports European industries. The fund simplifies different sustainable investment funding sources into one. To facilitate growth and investment in new innovative companies, the Commission will propose a 28th legal regime, which will simplify applicable rules. Companies could choose whether they follow national or EU-level legislation. Furthermore, the Commission will propose a European Savings and Investments Union, which includes banking and capital markets, to further harmonise the Single Market.

More flexible rules and incentives to support clean-tech scale-ups. A new state aid framework will be proposed by June 2025 to streamline the regulation, expedite the approval of state aid measures, and make the investment environment more predictable. Additionally, new IPCEI projects (Important Projects of Common European Interest) will be designated to enable the combination of private and public funding for large investment projects.

The European Investment Bank (EIB) Group will introduce new financing instruments to support the CID’s objectives. These include a Grids manufacturing package for manufacturers of grid components, a joint pilot programme with the European Commission for counter-guarantees on Power Purchase Agreements (PPAs) for SMEs and energy-intensive industries, and a CleanTech Guarantee Facility.

Support for energy-intensive sectors. The Commission’s affordable energy action plan aims to provide support for energy-intensive sectors. The purpose is to reduce external energy dependence and increase the integration of electricity grids. The aim is to enhance electrification and a fully integrated single market for energy. The Action Plan highlights three key initiatives relevant to the industry: 1) reducing energy costs, 2) advancing the deployment of clean energy and electrification, including the completion of interconnections and grids, as well as promoting clean manufacturing, and 3) ensuring efficient gas market operations.

Lead markets to boost demand for low-carbon manufacturing. To boost European competitiveness, the market needs stronger demand for low-carbon alternatives. The demand will be increased by revising Public Procurement Directives to mainstream the use of non-price criteria. Hydrogen has a central role in decarbonisation, especially in sectors where electrification is not yet possible. Therefore, the Commission will adopt in the first quarter of the year a delegated act on low-carbon hydrogen.

The Industrial Decarbonisation Accelerator Act (Commission’s proposal at the end of 2025) will extend accelerated permitting to more sectors in transition. Additionally, a proposal to update the EU Climate Law to set a 90% emission reduction target will be presented in the first half of the year. It is also proposed that the requirements of the carbon border adjustment mechanism be eased. The Commission encourages the member states to lower the electricity tax for industry.

The CID prioritises circularity to maximise resources, reduce dependencies, and enhance resilience. The Commission will adopt a Circular Economy Act in 2026 that aims to revise the existing e-waste regulation and harmonise End-of-Waste criteria to boost secondary raw materials use.

The CID emphasises the importance of international partnerships and trade agreements to secure access to critical raw materials and clean technologies. The EU aims to negotiate agreements that ensure a level playing field for its industries while fostering cooperation with countries rich in essential resources for the green transition, such as lithium and cobalt.

Committing to a just transition that delivers quality jobs and empowers people is central to the CID. The focus is on skills development and social fairness, ensuring that the workforce is equipped for the clean transition. This includes initiatives to retrain workers from high-carbon sectors and support new job creation in emerging green industries.

If you have any questions about this Legal Alert, please feel free to contact the undersigned or your regular Borenius contact.