More sustainability and more investments: what European industry can expect from the Clean Industrial Deal

In this Clean Industrial Deal, improvements in competitiveness and sustainability go hand in hand. In addition to regulation on sustainability, financial incentives – and thus State aid – are also needed, to ensure that private actors and governments can invest in industry more easily. The Commission announced this in the Clean Industrial Deal. 

The Clean Industrial Deal is a partial change in direction, but it ties in to a large extent with existing laws introduced under the Green Deal; see also our website (in Dutch) for an explanation of the Green Deal. The focus is still on sustainability, less dependence on fossil fuels, reduced CO2 emissions, and a circular economy. There are important changes, however: energy bills must be lowered, while financing, permit procedures, financial support and investments must be simpler.

Affordable energy

Ensuring affordable energy is an important part of the Clean Industrial Deal, because it is seen as a core prerequisite for the competitiveness of European industry and especially for energy-intensive sectors. To lower energy bills, the EU needs to accelerate electrification and the roll-out of clean energy, start using energy more efficiently, and improve grid infrastructure. To this end, the Commission will be adopting an Action Plan for Affordable Energy, most of which will be implemented by 2025. 

This plan includes measures around the following three goals:

1. Lowering energy bills for industries, businesses and households. Measures mentioned in this context include the promotion of power purchase agreements (PPAs), including guarantees by the European Investment Bank for an indicative amount of €500 million, an investment package of at least €1.5 billion for manufacturers of grid components, simplification of State aid rules (see also below), and Commission recommendations and guidance on how to reduce taxes on electricity and on promoting remuneration of flexibility in retail contracts.
2. Accelerate the roll-out of clean energy and electrification. This includes the Industrial Decarbonisation Accelerator Act, which aims to address permitting bottlenecks related to industrial access to energy and industrial decarbonisation.
3. Ensuring well-functioning gas markets. To this end, the Commission has established, among other things, a Gas Market Task Force that will examine EU gas markets and, where necessary, take measures to ensure optimal market functioning. 

Lead markets: boosting clean supply and demand

Through this initiative, the Commission aims to create a larger market for clean products and technologies, specifically through the following two pillars:

• Introduction of non-price criteria in public procurement procedures and incentives for private purchases. Public procurement policies will be revised to protect and benefit EU manufacturers. Non-price criteria will be introduced that promote innovation, ensure EU environmental and social standards, and create a level playing field. These criteria build on the experience of the Net Zero Industry Act for clean technology. The revised directives will be presented in Q4 2026.

  In addition, a label will be introduced to express the carbon intensity of industrial products. This label can be used (voluntarily) by industrial producers. Initially, the Commission will develop such a label for steel (planned in 2025), with labels for other products to follow later. 

• Promoting the uptake of renewable and low-carbon hydrogen. Hydrogen plays a central role in EU decarbonisation. A clear regulatory framework is needed to promote the use of renewable and low-carbon hydrogen. The Commission has announced that it will come up with several measures in 2025, including expanding public procurement by the European Hydrogen Bank. 

Circular economy

According to the Commission, the circular economy is essential for a competitive industry. If scarce raw materials last longer and are reused more, they become more affordable and the EU becomes less dependent on third countries, where these raw materials often come from. The Clean Industrial Deal commits to several measures:

• Identification of strategic resource projects. According to the Commission, a first list of strategic projects should be established by March 2025. Under the Critical Raw Materials Act (EU) 2024/1252, such projects can be designated for the extraction of critical raw materials. Such projects should be authorised quickly and with simple procedures. Also, an EU Critical Raw Material Centre will be set up to jointly purchase raw materials.
• Sustainable product requirements. Important materials should last as long as possible before becoming waste, and more sustainable or renewable raw materials should be included in products. Sustainable product requirements, for example on recycled or organic materials, should also be introduced. The Ecodesign Regulation, that we previously addressed in this blog, can serve as a tool for this purpose. The Commission will publish the first work plan under this Regulation in April 2025.
• New legislation for circular economy. In 2026, the Commission plans to present a new Circular Economy Act to promote the circular economy. This Act should lead to free movement of circular products, secondary raw materials and waste. It should also amend the Waste Electrical and Electronic Equipment Directive (2012/19/EU) to preserve and recover critical raw materials in appliances.

Simplifying the CBAM

The CBAM is a Carbon Border Adjustment Mechanism. This system was established with the CBAM Regulation (2023/956). Under the CBAM, importers must purchase and surrender certificates for importing carbon intensive goods from non-EU countries into the EU. The system aims to reduce the risk of carbon leakage, moving carbon intensive production to countries outside the EU. The CBAM entered into force on 1 October 2023. Since its entry into force, only a reporting requirement has applied, but from 2026 onwards a requirement to buy and surrender CBAM certificates for imported goods will also apply. A detailed explanation is provided in our earlier blog on CBAM and the obligations for importers.

The European Commission wishes to simplify the CBAM and reduce administrative burdens in order to make the system more effective. Data reported so far shows that only a limited number of importers are responsible for more than 99% of greenhouse gas emissions embedded in imported goods. The European Commission has therefore made the following proposals:

• Excluding small importers from the system. Small importers, mainly individuals and SMEs, import only a limited number of CBAM goods and are therefore responsible for only a very small proportion of embedded emissions. The European Commission is introducing a cumulative annual threshold of 50 tons of CBAM goods per importer. Those below that threshold are not covered by CBAM. According to the European Commission, this will exempt about 182,000 importers (90% of the total).
• Regulatory simplification. For the importers of CBAM goods above the threshold, the rules will be simplified, for example by adjusting how embedded emissions are calculated and by simplifying reporting requirements. The European Commission also proposes measures against fraud and the development of a joint anti-circumvention strategy with national authorities. To these ends, the Commission has submitted a Proposal for amending the CBAM Regulation. 

The European Commission has announced that the review report on CBAM will be published in the second half of 2025. In this report it will address its scope and its possible extension to other EU ETS sectors, downstream sectors and indirect emissions from CBAM sectors. According to the European Commission, the review will lead to a concrete legislative proposal. 

State aid: Clean Industrial State Aid Framework

For many of the initiatives discussed above, the Commission also considers it necessary that State aid can be granted by Member States. However, the granting of State aid to companies is prohibited in principle (Articles 107 and 108 TFEU), unless such aid is granted after notification to and approval by the Commission (standstill obligation). The Commission has promulgated schemes exempting from the standstill obligation, including (i) the de minimis Regulation, which allows small amounts of aid to be granted without notification to the Commission; and (ii) the General Block Exemption Regulation (GBER), which allows the provision of large (or larger) amounts of aid for specific economic activities. Among other things, the General Block Exemption Regulation (Part 7) already allows various types of investment aid and operating aid for sustainability and energy projects.

The Clean Industrial Deal includes a simplification of State aid rules to accelerate the energy transition, among other things. In that context, the Commission published the Draft Clean Industrial State Aid Framework (CISAF)for consultation on 11 March 2025 (consultation runs until 25 April 2025). The Commission will present the new framework by June 2025 ("second quarter of 2025").

The CISAF will replace the Temporary Crisis and Transition Framework, which was established in response to the war in Ukraine. Among other things, the Temporary Crisis Framework allowed for support to counter additional costs resulting from high energy prices. On the basis of this temporary framework, the Commission recently approved large projects in Germany and the Netherlands, among other countries. In early 2024, State aid amounting to €902 million was approved for a German battery plant (SA.107936 (2023/N)). In July 2024, a Dutch State aid measure of €750 million was approved for decarbonisation of industrial processes (SA.112112 (2024/N)). The CISAF will also allow for such large support measures and schemes.

The gist of the CISAF, as published for consultation, is as follows:

Need to stimulate investment in Europe through simpler and more flexible rules. The assumption is that this need exists. Those investments must come primarily from the private sector, but the government must act as a facilitator. The CISAF provides a framework for this purpose. This means giving Member States more certainty about the use of State aid, speeding up approval procedures, and allowing, for example, tax incentives such as accelerated depreciation. Institutional investors such as pension funds and insurance undertakings should also be encouraged to take more risk. And finally, specific products should be supported. The CISAF therefore adds new categories to existing guidelines to simplify State aid rules as laid down, for example, in the State Aid Guidelines for Climate, Environmental Protection and Energy 2022.

The aid is compatible if it complies with the CISAF. The CISAF is based on Article 107(3)(c) TFEU, which allows “aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest.” In short, it is assumed that aid that meets the requirements set out in the CISAF also meets the requirement of an incentive effect on the one hand, and the requirements of necessity, appropriateness and proportionality on the other hand, and is thus compatible with the internal market. Moreover, the criteria of an incentive effect and proportionality are considerably relaxed. The incentive effect can now be assumed in certain cases even for projects where work has already begun. And where proportionality – the amount of aid in relation to the eligible costs – should in principle be determined through a competitive bidding process, the Commission now also considers it appropriate, because of the urgency, to determine the aid administratively on the basis of (significant) aid intensities established in advance in the CISAF, or on the basis of a funding gap calculation. These are relaxations that deviate to a large extent from fundamental State aid law principles, and will facilitate the granting of large amounts of State aid for the stated purposes.

Finally, the aid is form-free and can be cumulated with de minimis aid, among other things. The aid will be granted for a period of five years, until the end of 2030.

Sectoral focus. Next, the Commission describes requirements for different types of support measures, primarily focusing on three sectors. The first sector is that of renewable energy and energy storage, with subsidies and tax incentives for solar and wind power, hydrogen production and storage technologies, among other things. What is striking is that aid intensities in this area are being broadened (more aid for a higher share of costs). Secondly, the focus is on industrial decarbonisation, encouraging companies to switch to electrification, clean fuels and carbon capture. Again, specific requirements apply, such as a 36-month period for the supported installation to operate. And particular attention must be paid to the necessity and proportionality of the support. The proposed aid intensity is significant, for example for investments that allow the use of hydrogen up to 200 million euros for 50% of the eligible costs. But as mentioned above, an even higher aid intensity can also be obtained through a funding gap calculation. Finally, the focus is on aid aimed at ensuring sufficient manufacturing capacity in clean technologies (batteries, solar panels, wind turbines, etc.), including the production of raw materials. 

Skills and quality jobs for social justice and a just transition

The Commission recognises that while industry in particular will be supported in the clean transition, it is important that all Europeans benefit. Therefore, the Commission has expressed its intention also to invest in the areas of skills and employment. For example, efforts will be made to increase support for acquiring relevant skills, including reskilling and job creation. The Commission will explore whether this can be achieved using State aid, such as subsidies, to encourage industry to invest in this. 

Further developments

It will be interesting to see how the measures proposed in the Clean Industrial Deal will concretely be implemented and what the announced legislation will actually look like. The Dutch government's position on the Clean Industrial Deal (the BNC sheet) is expected to be sent to the Dutch Lower House on 11 April 2025, and a position paper on the feasibility of the Clean Industrial Deal will be shared with it on 21 April 2025. 

Our team is closely monitoring the further developments and will keep you informed of important next steps. In the meantime, feel free to contact us if you have any questions or to discuss what the Clean Industrial Deal can do for your organisation.