On February 26, 2025, the European Commission (the Commission) presented the Clean Industrial Deal (the Deal), an industrial strategy bringing together climate, circularity, and competitiveness. In order to foster growth and prosperity throughout the continent, it pledges to support re-industrialization, encourage the circular economy, and expedite decarbonization. Two interconnected sectors are the primary focus of the Deal, namely energy-intensive industries and technologies that contribute to sustainability for the environment.

The Commission has identified the following business drivers for industry success in the EU: (1) affordable energy, (2) lead markets, (3) financing, (4) circularity and access to materials, (5) global markets and international partnerships, and (6) skills and quality jobs. The Commission contemplates future actions, including legislative action. The Commission is advancing several measures to enhance clean energy adoption and grid development.

Access to affordable energy

The Commission concludes that higher and more erratic energy prices are mostly the result of Europe’s reliance on imported fossil fuels, mandating the need for the EU to get closer to electrification and a single, fully integrated energy market. Three flagship action packages are raised in the Action Plan for Affordable Energy adopted on February 26, 2025:¹

1. Lowering energy bills: The Commission is advancing several measures to enhance clean energy adoption and grid development.

• It is launching a €500 million pilot program with the European Investment Bank (EIB) to support business Power Purchase Agreements (PPAs), providing financial assurances for energy-intensive industries and small and medium enterprises, alongside a €1.5 billion grids manufacturing package to support European supply chains of grid components.
• A recommendation on network charges is expected in Q2 2025 to ensure harmonized tariff methodologies across the EU.
• In order to expedite the deployment of renewable energy, the Commission will streamline State aid regulations by June 2025 advising Member States on how to draft contracts for difference and PPAs.
• New Commission guidelines for allocating cross-border forward capacity will be issued by 2026, as well as guidelines for retailers and Member States on how to encourage flexibility in retail contracts.
• Energy-intensive enterprises should see their taxes on electricity reduced, and for network charges, the Commission will provide directions on a unified design for tariff methodology.
• A European Grid Package (Q1 2026) will also be proposed to streamline trans-European energy networks and guarantee cross-border integrated project planning and execution. Finally, the Commission is ready to assist Member States with designing State aid measures for natural gas.

2. Accelerating the rollout of clean energy and electrification: The Commission emphasizes that it is critical to shorten permitting processes for grid, energy storage, and renewable energy projects. An immediate priority is ensuring full transposition of the Renewable Energy Directive across all Member States, as only seven have fully implemented streamlined permitting rules so far. Concrete steps to alleviate permission delays associated with industrial energy access and industrial decarbonization will be proposed in the future Industrial Decarbonization Accelerator Act (Q4 2025). Additionally, the Commission will promote the use of data spaces, EU space-based data and services, and AI to aid the digitalization of the permitting process.

3. Ensuring well-functioning gas markets: Gas and electricity prices in the EU are directly impacted by the cost of imported natural gas. The Commission has established a gas market task force to analyze the natural gas markets in the EU. Stakeholders will be consulted, and a report will be issued. Further reforms will focus on ensuring transparency in gas trading, strengthening oversight under the MiFID and REMIT frameworks, and reducing administrative burdens on market participants.

Lead markets: boosting clean supply and demand

The Deal aims to put in place the necessary conditions for demand for decarbonized products via non-price criteria in public procurement, incentives for private purchases, and promotion of the uptake of renewable and low-carbon hydrogen.

In order to give investors and producers certainty, the Commission will adopt the awaited delegated act on low-carbon hydrogen in Q1 2025, clarifying sustainability criteria and eligibility under EU industrial policies.

Furthermore, resilience and sustainability standards (e.g., clean, resilient, circular, cybersecure) will be introduced by the Industrial Decarbonization Accelerator Act. The Commission will also propose a revision to the Public Procurement Framework in 2026 in order to mainstream the use of non-price criteria. The Deal introduces the possibility of EU content requirements in public procurement, meaning that contracts may now prioritize EU-based production in alignment with sustainability and resilience goals. Non-EU companies should be aware that access to public contracts in the EU could be conditioned on meeting these requirements, which may impact market entry and competitiveness in key industrial sectors.

The Decarbonization Accelerator Act will create a voluntary label indicating the carbon intensity of industrial products by building on already existing measures, such as the Emission Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM) methodology. Concurrently, the Commission will keep working on creating thorough life-cycle assessments in order to expand on the voluntary label.

By Q4 2025, the Commission will identify priority areas and potential paths for simplification, harmonization, and robust verification.

Public and private investments

In order to amass the requisite investments for the clean transition of the economy, the Commission will act to: 

1. Strengthen EU-level funding, including but not limited to the following measures:

• Over €100 billion will be mobilized for clean manufacturing in the EU as part of the Clean Industrial Deal. In the upcoming EU budget, the Competitiveness Fund intends to create an investment capacity for European projects with the highest EU added value in the upcoming EU budget.
• Based on the available funds in the Innovation Fund, additional revenues from certain parts of the ETS, and the revision of InvestEU, the Commission will propose an Industrial Decarbonization Bank (the Bank) with a funding target of €100 billion. The main aim of the Bank will be maximizing emission reductions. It will support projects with carbon emission reduction as a metric to enable technology-neutral support across industrial sectors, as part of the EU ETS architecture. The Bank will be included in the future Competitiveness Fund’s governance.
• A European Savings and Investments Union, encompassing capital markets and banking, will soon be proposed by the Commission.

2. Leverage private investment

To boost InvestEU’s ability to take on more risk, the Commission is proposing a change to the InvestEU Regulation to increase its risk-bearing capacity. The Commission will additionally collaborate with the EIB on new projects that benefit industries targeted by the Deal, with assistance from InvestEU as needed.

3. Enhance the effectiveness of State aid in support of the Clean Industrial Deal’s objectives as well as those of other national support schemes

• With streamlined and flexible approval procedures, the new State Aid Framework established by the Deal will allow for necessary and proportionate State aid that attracts private investment.
• Additionally, national tax incentives—for which the Commission will recommend common guidelines—will provide public funding.

Powering the circular economy: a secure access to materials and resources

The Commission will give the Critical Raw Materials Act (CRMA) top implementation priority to ensure access to vital raw materials. It will establish the first list of strategic projects in March 2025 to diversify EU supplies from third countries and boost EU capacity to extract, process, and recycle strategic raw materials. The CRMA will lower the administrative burden and expedite the permitting process for important raw materials projects in the EU. Additionally, the Commission will establish a specific EU Critical Raw Material Center in Q4 2026 to work with Member States and interested companies on jointly buying raw materials.

In 2026, the Commission will enact a Circular Economy Act, making its provisions complementary to the Ecodesign for Sustainable Product Regulation.

In order to address the problem of embedded VAT in secondhand goods, the Commission will also reassess the secondhand scheme regulations in the VAT Directive, as part of a Green VAT initiative.

Global markets and international partnerships

More than ever, the EU needs trustworthy international partners. The Commission will shortly introduce the first Clean Trade and Investment Partnerships, which will diversify supply chains and create advantageous agreements, in addition to current and new trade agreements. Using a variety of trade defense tools and other measures, the Commission will simultaneously take even more forceful action to shield industries from unfair international competition.

Improving and expanding the CBAM

The CBAM remains central to the EU’s strategy for industrial decarbonization and fair competition, ensuring that imported goods face the same carbon costs as EU-produced alternatives. At the same time, the Commission acknowledges the need to simplify administrative procedures for businesses while maintaining the CBAM’s effectiveness in incentivizing global decarbonization efforts.

To achieve this, the Commission will:

• Substantially simplify the CBAM by reducing the administrative burden on industries and supply chains, while maintaining its core function of preventing carbon leakage and encouraging carbon pricing worldwide.
• Consider an extension of the CBAM’s scope in the second half of 2025, focusing on the inclusion of additional EU ETS sectors and downstream products; the possible inclusion of indirect emissions across all CBAM-covered sectors, particularly regarding the electricity costs borne by EU producers; and a strategy to mitigate circumvention risks, ensuring the mechanism remains robust and effective.
• Review how to address carbon leakage in EU exports, with a legislative proposal expected in the first half of 2026.
• Continue international engagement through the International Carbon Markets and Carbon Pricing Diplomacy Task Force, supporting partner countries in developing effective carbon pricing policies and robust international carbon market mechanisms.

Skills and quality jobs for social fairness and a just transition

The Commission will set up a Union of Skills that makes investments in employees, fosters skill development, and produces high-quality jobs. The Deal also encourages social conditionalities, supports high-quality jobs, and offers additional assistance to workers undergoing industrial transition.

Finally, implementing the Deal across sectors will be done by introducing sectoral plans: an industrial action plan for the automotive sector, a steel and metals action plan, a chemicals industry package, and a bioeconomy strategy.

Next steps

The Clean Industrial Deal’s bundle is made up of many initiatives, both legislative and non-legislative. Whether they can be swiftly and successfully adopted after being scrutinized in the European Parliament and the Council, is still up in the air.

Affected businesses should closely monitor how each of the planned measures is being implemented. Our team is well-positioned to help clients navigate these new requirements, mitigate risks, and seize opportunities in this evolving regulatory landscape. Reach out to us to ensure your business is ready to thrive in the European market.²