EU Clean Industrial Deal: A New Plan to Bring Together Climate Action and Competitiveness

The European Union has adopted the Clean Industrial Deal, a roadmap aiming to bring together climate action and competitiveness under one overarching growth strategy for the EU industry. The European Commission released the roadmap in February 2025 to be followed by further legislative and policy developments. The European Union remains committed to becoming a climate-neutral economy by 2050 through the intermediary 2040 target of 90% but recognizes that decarbonization needs to be well integrated with industrial, competition, economic, and trade goals and policies, and shifts its focus accordingly.

KEY OBJECTIVES AND POLICIES

The Clean Industrial Deal builds on the green growth objectives established by the 2019 EU Green Deal and the 2023 Green Deal Industrial Plan but prioritizes competitiveness and resilience of the EU industry. It is also a key element of the EU Competitiveness Compass, a plan to boost the European Union’s economic growth and prosperity.

The Clean Industrial Deal aligns with three key goals: (1) EU climate neutrality by 2050, (2) improving EU competitiveness, and (3) leadership in circular economy and sustainability. To this extent, the Clean Industrial Deal focuses on energy-intensive industries requiring support to decarbonize and clean tech that is crucial for industrial transformation and future competitiveness. These objectives will require further legislative and policy developments.

ACTION PLAN

The Clean Industrial Deal establishes six main action areas covering a plan for affordable energy, financing the clean transition, circularity, international partnerships, establishing lead markets, and skills and quality jobs.

In parallel to the Clean Industrial Plan, the European Commission resolved to simplify the EU sustainability rules, including the Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD), and published the so-called Omnibus Package, which aims to “regain competitiveness and unleash growth” of the EU market (on which we previously wrote). In April 2025, the EU officially decided to postpone the CSDDD and CSRD.

AFFORDABLE ENERGY

Access to affordable energy is a key condition for competitiveness and a cornerstone of the Clean Industrial Deal. The EU is addressing this challenge from different angles:

• Simultaneously with the Clean Industrial Deal, the Commission put forward the Action Plan for Affordable Energy setting out measures to lower energy bills in the short term while speeding up necessary structural reforms.
• The upcoming Industrial Decarbonisation Accelerator Act will propose concrete measures to address permitting bottlenecks related to industrial access to energy.
• Cross-border power purchase agreements (PPAs) and Contracts for Difference (CfDs)[1] will be key in making clean energy more attractive for industrial users and final energy bills less dependent on the volatile fossil fuels prices.
• The Commission will provide guidance to Member States on how to design CfDs including their potential combination with PPAs in line with the state aid rules.

DEMAND FOR DECARBONIZED PRODUCTS

Building a business case for decarbonized products requires a boost on the demand side. The new measures will complement the rollout of the European Union’s longstanding objective to create a market for permanent carbon removals to compensate for residual emissions from hard-to-abate sectors:

• The forthcoming Industrial Decarbonisation Accelerator Act will develop a voluntary label on carbon intensity of industrial products based on the methodology of the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM).
• The Commission will start with steel based on the existing reporting from the industry, to be followed by cement. The labels will allow industrial producers to distinguish carbon intensity of their industrial production and benefit from targeted incentives (e.g., for clean steel).
• It will also introduce resilience and sustainability criteria in public procurement to boost demand for low-carbon products and revise the Public Procurement Framework in 2026.
• The Commission will also assess how to include requirements and nonprice criteria in relevant product legislation, for example for low-carbon steel, renewables, or sustainable batteries.
• Further, the European Union will assess whether carbon removals can be integrated into the ETS. Additionally, the EU is considering whether to allow a limited use of carbon credits from projects in other countries to meet its climate goals.

Fair price on carbon is another aspect of the EU industry’s competitiveness. The European Union is undergoing a review of the CBAM, an instrument ensuring that the European Union’s industry emissions abatement efforts are not undermined by carbon-intensive imports from outside the European Union and incentivizes decarbonization and carbon pricing globally.

The Commission aims to substantially simplify the CBAM and reduce administrative burden on industries while continuing to incentivize global carbon pricing. The European Union has also launched the Task Force for International Carbon Pricing and Markets Diplomacy that is a Commission initiative aiming to promote the development of carbon pricing and carbon markets worldwide.

FUNDING

The Commission plans to adopt measures to support the Clean Industrial Deal’s objectives:

• Strengthen EU-Level Funding: The European Union will establish the Industrial Decarbonisation Bank for EUR 100 billion based on funds of the Innovation Fund, additional revenues from the ETS, and revision of InvestEU. The Industrial Decarbonisation Bank will support projects with carbon emission reductions, including through carbon contracts for difference.
• Leverage Private Investment: Including by amendment of the InvestEU Regulation to increase the risk-bearing capacity and working with the European Investment Bank.
• Enhance Effectiveness of State Aid: The new Clean Industry State Aid Framework will be tailored for the Clean Industrial Deal’s objectives and replace the Temporary Crisis and Transitional Framework. It will have simplified and flexible rules to allow for a quick approval of state aid measures for decarbonization and introduce “off-the-shelf” options for Member States to easily demonstrate compatibility instead of complex individual assessments.

ACCESS TO MATERIALS AND RESOURCES

The European Union prioritizes implementation of the Critical Raw Materials Act adopted to secure supply of critical raw materials essential for strategic sectors. The first round of Strategic Projects was officially approved on March 25, 2025.

This round comprises 47 Strategic Projects located across 13 Member States and covers one or more segments of the raw material value chain, with 25 projects composing extraction activities, 24 processing, 10 recycling, and 2 substitution of raw materials. The selected projects will receive coordinated support from the Commission, Member States, and financial institutions, focusing on financing and connecting with relevant off-takers.

The Commission will also set up the EU Critical Raw Material Center to jointly purchase raw materials on behalf of interested companies in cooperation with the Member States.

The European Union will continue working toward circularity of its economy and adopt a Circular Economy Act in 2026 to accelerate the circular transition, building on the EU single market.

FOREIGN INVESTMENT AND COMPETITION

Foreign Investment

Within the auspices of the Clean Industrial Deal, the Commission is looking to propose measures to ensure that foreign investments in the European Union better contribute to the long-term competitiveness of the EU industry:

• One option would be for the Member States to consider certain conditions for foreign investment, such as ownership of equipment, EU-based staff recruitment, joint ventures, IP transfer, etc.
• The Commission also aims to issue by Q1 2026 guidelines on the key concepts underpinning the Foreign Subsidies Regulation. The guidelines will, among other things, clarify in what circumstances the Commission may decide to review mergers under the foreign subsidy rules that do not meet thresholds but pose a risk to the level playing field in the single market.
• Furthermore, the ongoing review of the EU Foreign Direct Investment (FDI) Screening Regulation will also provide an opportunity to further strengthen the European Union’s investment screening framework in line with the Clean Industrial Deal’s objectives.

Competition and Trade Defense

• FTAs: Despite progress under the Critical Raw Materials Act, many critical raw materials will still need to be sourced outside the European Union. To enhance supply chain diversification, resilience, and security, the European Union will continue to pursue free trade agreements (FTAs) with third countries.
• CTIPs: The European Union will also launch Clean Trade and Investment Partnerships (CTIPs), which will complement FTAs with a more targeted approach to accommodate the specific business interests of the European Union and better align the European Union’s external action with its industrial policy objectives.
• Further, to achieve climate neutrality in a competitive manner, trade defense instruments (such as anti-dumping or anti-subsidy duties where necessary) will need to be made more effective.
• To improve coordination of policies at the EU and national levels, the Commission will also introduce a Competitiveness Coordination Tool to collaborate with Member States, ensuring the implementation of EU policy objectives at both the EU and national levels.
• The Commission may also provide informal guidance on compatibility with antitrust rules of cooperation projects contributing to the achievement of EU priorities, in particular those related to innovation, decarbonization, and economic security. The Commission also plans to revise its merger guidelines to better integrate into the competition analysis the impact on affordability of sustainable products, clean innovation, or creating efficiencies that bring sustainable benefits, and on innovation, resilience, and investment intensity of competition in strategic sectors.

NEXT STEPS

The Clean Industrial Deal is essentially an action plan, and its implementation requires further legislative and policy developments, most of which are scheduled for later in 2025 or 2026. We will continue monitoring these developments in due course.