The EU Clean Industrial Deal: towards reconciliation of economic competitiveness, strategic autonomy and decarbonization

The EU Clean Industrial Deal, introduced by the European Commission on February 26, 2025, emerges from a pressing need to enhance industrial competitiveness while addressing the urgent challenges posed by climate change. This initiative is rooted in the political guidelines set forth by U. Van der Leyen on July 18, 2024, which called for a new European Prosperity Plan aimed at decarbonizing the economy, reducing energy costs, and fostering innovation. The backdrop of the Draghi Report, published in September 2025, further emphasizes the widening productivity gap between the EU and the US, highlighting the necessity for the EU to close its innovation gap and develop a joint plan that links decarbonization with competitiveness.

 

Objectives of the Clean Industrial Deal
The Clean Industrial Deal is designed to tackle three major challenges facing the EU: climate change, competitiveness, and dependency on critical raw materials. Its primary objectives include:

1. Decarbonization of Energy-Intensive Industries: Providing urgent support to decarbonize and electrify industries that are heavily reliant on energy, thereby reducing their carbon footprint and enhancing sustainability.
2. Circular Economy: Promoting circularity to optimize resource use, minimize waste, and reduce (foreign) dependencies on scarce materials, fostering a sustainable industrial model.
3. Clean Technology Leadership: Establishing the EU as a leader in clean technology, driving competition and future competitiveness in the global market.
    

Main Action Pillars of the Clean Industrial Deal
The Clean Industrial Deal outlines six action pillars that serve as the foundation for its implementation:

1. Access to Affordable Energy: Ensuring that industries have access to affordable energy sources to remain competitive.
2. Lead Markets in Clean Supply and Demand: Creating a regulatory environment that encourages the development and adoption of clean technologies.
3. Financing Industrial Decarbonization: Establishing frameworks to facilitate funding for industrial decarbonization initiatives.
4. Circularity and Access to Materials: Promoting the efficient use of materials and resources through circular economy practices.
5. Acting on a Global Scale: Engaging in international cooperation to address global challenges related to climate change and industrial competitiveness.
6. Skills and Quality Jobs: Fostering the development of skills and quality jobs in the clean technology sector.
    

Key legislative and Regulatory Initiatives

The Clean Industrial Deal also includes 36 future legislative and regulatory initiatives aimed at achieving these objectives. Among these, the Commission highlights six initiatives as the centrepieces of the deal.

• The Industrial Decarbonisation Accelerator Act: this act will expedite the permitting process for industrial energy access and decarbonisation efforts, including the modernization of steel production facilities. It will introduce a low-carbon product label for steel and, subsequently, cement, enabling companies to capitalize on green premiums and providing consumers with information on product carbon intensity. Additionally, the Act will implement resilience and sustainability criteria to promote clean European supply chains for energy-intensive sectors, thereby increasing demand for EU-produced clean products.
• Revision of the Public Procurement Directive: This revision will add sustainability, and resilience criteria to EU public procurement in strategic sectors, also promoting private procurement with CO2 emission performance standards.
• Circular Economy Act: This act will create a Single Market for waste and reusable materials, optimizing resource use, minimizing reliance on scarce materials, and lowering production costs while fostering a sustainable industrial model.
• Clean Industrial Deal State Aid Framework: This framework will enable quicker approval of State aid for renewable energy deployment and industrial decarbonization.
• Delegated Act on Low Carbon Hydrogen: This act will outline the conditions for producing low carbon hydrogen, completing the regulatory framework and providing certainty to encourage industry investment.
• Strengthening the Carbon Border Adjustment Mechanism: This initiative will review the need to extend the mechanism to other ETS sectors and address exporter challenges, while simplifying CBAM as a first step.

In conclusion, the Clean Industrial Deal represents a significant step towards achieving a sustainable and competitive industrial landscape in Europe. By addressing the intertwined challenges of climate change and industrial competitiveness, the EU aims to position itself as a leader in clean technology while ensuring the long-term viability of its industries.

 

Financing Industrial Decarbonization

The EU plans to mobilize financing through multiple channels: the adoption of a new Clean Industrial Deal State Aid Framework, the strengthening of the Innovation Fund, the development of an Industrial Decarbonization Bank, the launch of a dedicated call under Horizon Europe, and amendments to the InvestEU Regulation to increase the amount of financial guarantees that InvestEU can provide to support investments.

The EU plans to finance 83% (€83 billion) of its new Industrial Decarbonization Bank through the carbon market, with €33 billion primarily sourced from carbon allowance auction revenues and €23 billion from the InvestEU scheme. However, the strategy depends on €30 billion in voluntary contributions from Member states, accounting for nearly 30% of the total funding, which introduces fiscal uncertainty. An additional €20 billion will be drawn from the EU Innovation Fund starting in 2025, possibly diverting budgetary resources from other technologies (ex: carbon capture, storage and renewable energy)

Implementation pathways across different sectors

The Clean Industrial Deal will also facilitate dialogue with industries, particularly SMEs, to create sector-specific transition pathways. This will support informed investment decisions and mobilize capital for a cleaner, more competitive industrial future. In 2025, work will focus on several sector-specific plans, with additional sectors addressed as needed.

Key Insights

As sovereignty and economic competitiveness gain greater prominence in European politics, the focus of the European Green Deal is shifting toward industrial decarbonization and further integration by reducing trade and manufacturing barriers among Member states. To support this agenda, the Commission plans to propose legislation favouring domestic economic operators, most notably through European preference criteria for public procurement. Additionally, the CBAM reform has been confirmed, incorporating the Omnibus streamlining proposal and an upcoming review that may expand its scope to include new sectors like chemicals, refined petroleum products, and other metal products. This review will also address export challenges, loopholes, and circumvention, focusing on carbon accounting and trade distortions. Another key element of this approach is the concept of a European energy union, aiming for increased harmonization across countries to align regulations on waste, energy contracts, and electric and autonomous vehicles, while also aggregating demand for gas and critical materials.