On February 26, 2025, the European Commission published the Clean Industrial Deal, which outlines a joint roadmap for European competitiveness and decarbonisation. It includes measures to drive more innovative and competitive business models via the supply of affordable renewable energy for industry, lead markets to drive EU-wide demand for clean products, and targeted EU public funding facilities to mobilise over EUR 100 billion to improve the business case for EU-made clean manufacturing.
Relies on RES roll-out
While the Clean Industrial Deal sends a strong signal for competitiveness and decarbonisation, there can be no industry decarbonisation without far greater use of renewable energy sources. “We need to accelerate electrification, and the transition to clean, domestically generated energy,” says the Communication. New nuclear capacity costs more than combinations of renewables & technologies for flexibility, even if decommissioning costs are disregarded, so in practice “clean” must mean “renewable” if electricity prices are to be kept competitive (see for example Study: Levelized Cost of Electricity – Renewable Energy Technologies – Fraunhofer ISE – Aug 2024).
The Communication goes on to call for the build out of 100 GW of RES annually. While the EU’s binding target is for 42.5% of its energy from renewables by 2030, this nice, round number is a memorable guideline with which to keep an eye on progress.
Projects funded under the Industrial Decarbonisation Bank must be innovative
An Industrial Decarbonisation Bank will be created to “maximise emission reduction” by rewarding projects that win a competition having “carbon emission reduction as a metric”. The Emissions Trading Scheme, which puts a price on carbon dioxide, is already a scheme that incentivises companies to reduce their carbon dioxide emissions. So to deserve a Bank bonus, a project would have to do something special, like break new technological ground in emissions reduction. Merely installing best in class technology or adopting best practice shouldn’t quite cut it, as the ETS alone should be enough of an incentive for that. So if an innovation should be the special ingredient, what would distinguish the ‘Bank’ from the innovation Fund? Maybe the fact that the innovation doesn’t need to be declared in an ex-ante funding application, but simply be apparent from a dramatic improvement in the carbon intensity of the finished product. In that case, especially if the Bank award is large, we ask that details of the innovation be shared with the public and (in more detail) with the scientific community.
CCFDs: caution!
If, as European Commission proposes, the Bank offers Carbon Contracts for Difference, then it must tread carefully. If the EU’s exposure on the CCFD is unlimited so long the contract is in force, then it could find itself in an awkward conflict of interest if the ETS carbon price drops. It will have a vested interest in tightening EU climate policy to throttle the supply of allowances, leaving it open to accusations from Eurosceptics and net zero sceptics that its climate policy has nothing to do with the common good but everything to do with shoring up its finances.
Better for CCFDs to be offered by Member States, not the EU, as no Member State alone wields enough influence on the EU to singlehandedly set its climate policy. Alternatively, if offered by the EU, then the European Commission should create a fund to cover the EU’s liability should the carbon price drop; and if the fund is drained, the CCFDs are cancelled.
Don’t forget the mission of the Net Zero Industry Act
The Clean Industrial Deal is coy about the source of funds for the Industrial Decarbonisation Bank, saying only that they will be constituted by “funds in the Innovation Fund, additional revenues resulting from parts of the ETS as well as the revision of InvestEU.” “Additional revenues resulting from parts of the ETS” must be code for re-routing to the Bank ETS auctioning revenues that today head to national coffers. It is vital to tap auctioning revenues, but they will have at least as great economic effect, we feel, if they are put towards leadership in net zero technologies rather than returned to companies with high emissions. “The Commission encourages Member States to devote a share of those revenues to scaling up manufacturing of net-zero technologies,” it wrote in 2023. That view should still be true today.
The Clean Industrial Deal introduces the Competitiveness Fund. We are glad to see it will fund ‘cleantech’ (a category that ought not be larger than NZIA’s list of Net Zero Technologies) alongside industry decarbonisation. The Fund must ensure public funding and support across the wider RD&I value chain – from early-stage innovation through to higher technology readiness levels.
Sustainability crucially included as non-price criterion under the Industrial Decarbonisation Accelerator Act
We welcome the criteria in public and private procurements that the Industrial Decarbonisation Accelerator Act will introduce. Recognition will be given to products that are “clean”, contribute to “resilience”, are “circular” or are made in plants that are cybersecure (which all plants already today surely aspire to be) via labels or privileges deriving from the use of these notions as criteria in as-yet-undefined procurement processes. A version of the Clean Industrial Deal that leaked widely a week before the final version was adopted made much of “EU preference”. This was toned down. “Sustainability, resilience and European preference criteria” are now put on an equal footing “in EU public procurement for strategic sectors.” It is good that sustainability remains on a par with others because consumers need a reason to buy European (or, under ‘resilience’, at least not to buy from China) beyond the requirement to do their economic and geopolitical duty. Quality matters too.
The Clean Industrial Deal’s support for innovation comes largely via its support for sustainability. That’s fine, as much innovation at least has some positive impact on sustainability. We read, “More than before, circularity should be a driver for innovation.” And, “Circularity will be a priority. […] EU the world leader on circular economy by 2030.”
Heat pumps are not the only fruit
Heating and cooling from renewables deserves more attention. The Clean Industrial Plan calls for 100 GW of new RES electricity capacity per year, but makes no such call for the deployment of non-electricity-driven heating or cooling technologies. The Affordable Energy Action Plan correctly claims “Ambitious electrification of the energy system and expanding clean generation sources will increase energy efficiency of the energy sector as a whole, help decarbonise industrial, mobility and heating and cooling sectors and support the uptake of clean and domestic energy production,” but gives no role to solar thermal despite the Solar Energy Strategy of 2022 acknowledging the contribution of solar heat collectors to decarbonising Europe’s building stock. Heat pumps are referred to in the Plan, but its promised Heating and Cooling Strategy must be wider ranging, considering the contributions of bioenergy, geothermal and solar thermal.