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The Clean Industrial Deal: Europe’s Path to Net Zero Industry

Matej Banovec

Background

On February 26, the European Commission unveiled the Clean Industrial Deal (CID), a communication aimed at fostering industrial competitiveness while accelerating the decarbonisation of the sector. The policy framework it presents responds to concerns over high energy costs, international competition, and the need for a regulatory environment that supports green industrial innovation. Building on the European Green Deal, REPowerEU and the Green Deal Industrial Plan, the CID proposes a mix of new or revised policy measures and financial instruments.

Some key elements of the CID are:

  • The establishment of an Industrial Decarbonisation Bank with up to €100 billion in funding to facilitate investments in clean technologies and industrial transformation.
  • The Affordable Energy Action Plan, designed to lower energy prices through infrastructure upgrades, improved market integration, and enhanced grid resilience.
  • A new CID State Aid framework (CISAF) to fast-track approvals for clean-tech investments, providing regulatory certainty for businesses and investors.
  • A Circular Economy Act to increase the reuse of (critical) raw materials and foster sustainability and resource efficiency across the industrial sector.
  • Simplification measures aimed at reducing administrative burdens and saving up to €6 billion annually while expediting project approvals.

Within the broader European industrial strategy, the CID is positioned as the cornerstone policy aiming to ensure that the transition to climate neutrality does not compromise competitiveness. It uses a two-pronged approach, focusing on addressing the structural challenges faced by energy-intensive industries (EIIs) and on boosting the EU’s clean technologies sector that is critical to the green transition.

Stated Objectives

The CID’s policy framework aims to:

  • Reduce dependency on imported fossil fuels and strategic raw materials, enhancing the EU’s energy security and value chain resilience.
  • Secure European leadership in green technologies and boost demand for their uptake
  • Enhance industrial resilience by supporting key sectors, including low-carbon steel, sustainable battery cells, chemicals, and advanced manufacturing.
  • Strengthen investment in energy efficiency and energy infrastructure

Beyond the internal objectives, the CID is a strategic response to growing global competition. The U.S. Inflation Reduction Act (IRA) and China’s dominance in clean tech manufacturing pose long-term competitiveness challenges to European green industries. The CID is structured to ensure a more level playing field, prevent investment leakage, and make the EU an attractive hub for clean technologies.

Additionally, the CID strives to support SMEs and regional economies, ensuring that the green transition benefits all stakeholders and does not disproportionately burden smaller enterprises. It also states it will improve the focus on the fairness of the green transition to workers and on ensuring quality long-term jobs.

Stakeholder Reactions and Feedback

Reactions to the CID have been mixed, reflecting the diversity of interests at play:

  • European industry groups, such as BusinessEurope and FuelsEurope, welcomed the initiative’s ambition and financial commitments but called for further clarity on funding accessibility and investment incentives
  • Environmental NGOs like WWF and EEB criticised the CID for continuing to explore funding of gas infrastructure and nuclear energy rather than prioritising renewable deployment, as well as the possible loss of focus on tackling EII’s environmental pollution
  • Trade unions expressed concerns over job security in energy-intensive industries undergoing rapid transformation, urging stronger protections for workers and investment in skills development and re-skilling programs (ETUC)
  • International business associations raised concerns about regulatory clarity and non-discrimination regarding financial incentives, fearing that the CID might favor European firms over global trade interests, possibly leading to retaliatory policies from abroad (AmCham)
  • Think tanks have raised questions about the “disjointed messaging” between the CID and the Omnibus Package, while also criticising the non-inclusion of the legislative proposal on the 2040 climate target in the CID (E3G)

Projected Impact

Despite its ambitious goals, the CID faces several challenges:

  • Financing Uncertainties: While €100 billion is proposed for the Industrial Decarbonisation Bank, how funds will be distributed and accessed remains uncertain. Most of them are unlikely to be “fresh money” but a rehash of existing funds, putting real added value into question. Furthermore, even though time is of the essence, there is concern that bureaucratic hurdles may slow the rollout of financial support. The true scope of the mobilisation potential for private capital is another big question mark.
  • Regulatory Balance: While businesses welcome simplifications in permitting and compliance, environmental groups caution against the risk that deregulation will weaken sustainability standards. The chemicals industry, one of the EIIs, has drawn particular attention in this respect. On the energy side, there is concern about the future role of liquid natural gas (LNG).
  • Global Competition: The CID must carefully navigate trade tensions, particularly with the U.S. and China but also with other global actors the EU has signed free trade agreements with over the recent years. This is especially important at a time when the intricate web of value chain interdependencies constructed over the last decades feels closer to untangling than ever.
  • Energy Price Volatility: The success of the CID depends on maintaining long-term stability in European energy markets, yet uncertainty remains over gas price fluctuations, grid constraints, and energy taxation policies. An important factor in this respect will be the final push to phase-out the remaining Russian fossil fuel imports to the EU.
  • Implementation Capacity: The effectiveness of CID policies hinges on cooperation between EU institutions, national governments, and private sector stakeholders. Omnipresent European coordination challenges could yet again hinder policy execution.

Expert Comment

The Clean Industrial Deal represents an important yet iterative advance in EU industrial policy. It demonstrates the EU’s commitment to climate goals while ensuring economic viability for key sectors. Stakeholders are expected to proactively engage with policymakers to shape funding allocations and ensure that industrial and public concerns alike are adequately addressed. Key indicators will include energy prices, global competitiveness, innovation levels, and environmental safeguards. In the end, as always, implementation will be crucial—the long-term success of the CID hinges on clear regulatory frameworks, swift and impactful financing mechanisms, and strategically-designed energy policies compatible with EU’s climate obligations.

Upcoming Timeline

  • 19 March 2025 – Publication of the Steel and Metals Action Plan.
  • Q2 2025 – Finalisation of the Clean Industrial Deal State Aid framework (CISAF); Start of implementation of the Affordable Energy Action Plan; Launch of the Hydrogen Mechanism under the European Hydrogen Bank.
  • Q3 2025 – Comprehensive CBAM review report, assessing the feasibility of expanding CBAM to additional industrial sectors.
  • Q4 2025 – Adoption of the Chemicals Industry Package; Implementation of the Industrial Decarbonisation Accelerator Act, focusing on permitting reforms and industrial energy access.
  • Q1 2026 – Legislative proposal on CBAM extension; adoption of the European Grids Package.
  • Q4 2026 – Finalisation of the Circular Economy Act and establishment of the EU Critical Raw Materials Centre.