EU Clean industrial deal

The greater purpose is to raise funds and drive innovation. For this, the CID identifies six key business drivers: affordable energy, lead markets, financing, circularity, global markets, and skills, essential for a sustainable industrial ecosystem. Companies can benefit from lead markets for the clean-tech sector and energy-intensive industries, which drive economies of scale and reduce costs. Ensuring access to affordable energy, particularly for energy-intensive sectors, is a cornerstone of the strategy, with the Affordable Energy Action Plan. The EU plans to transition to clean, domestically generated energy and improve the internal energy market.

Next to simplification of the legal and compliance framework, tax incentives play a crucial role. Member States are recommended to adopt tax incentives supporting clean investments in their corporate income tax system. Measures could include shorter depreciation periods for clean technology assets, allowing businesses to apply accelerated depreciation of investments and benefit from tax incentives that offset high initial investments. The use of tax credits for businesses in strategic sectors for the clean transition will also be encouraged to make it more financially attractive to invest in decarbonised practices.

The new Clean Industrial Deal State Aid Framework simplifies state aid rules, enabling quick approval for decarbonisation projects and clean tech manufacturing. Additionally, the proposed Industrial Decarbonisation Bank aims to provide 100 billion Euro in funding, leveraging private investment and enhancing the effectiveness of state aid to support industrial transition and clean tech innovation.

Building on the Green Deal and aligning with the Draghi report

The CID furthers the Green Deal's overarching goal of making Europe climate-neutral by 2050 and supports the Fit for 55 package's intermediate target of reducing net greenhouse gas emissions by 55 percent by 2030. With the CID, the Commission aims to introduce a new intermediate target of a net reduction of 90 percent in 2040. See here for the details and backgrounds of the Fit for 55 Package.

The CID aligns with the Draghi report by integrating decarbonisation policies with industrial, competition, economic, and trade policies to drive growth. It addresses the challenges highlighted in the Draghi report, such as high energy prices and global competition, by promoting affordable energy, clean technologies, and circular economy principles. The CID also supports strategic investments and innovation, reinforcing Europe's industrial leadership and open strategic autonomy, as recommended in the Draghi report. It emphasizes the need for a robust industrial base to ensure economic resilience and competitiveness.

Flagship actions

The Clean Industrial Deal outlines several flagship actions that are particularly relevant from a tax and incentives perspective. A few of the most relevant announced flagship actions are the Action Plan on Affordable Energy, which is published alongside the CID, the CBAM simplification and the EU Simplification Omnibus, both expected to be published in the first quarter of 2025. In the second quarter of 2025 the Clean Industrial Deal State aid framework is to be published with recommendations for Member States to adopt tax incentives supporting the CID. In the last quarter of 2025, we should see the Industrial Decarbonization Accelerator Act and in 2026 the Circular Economy Act and Green VAT initiative should be brought out.

Foreign Subsidy regulation

The Foreign Subsidy Regulation (FSR) is a European regulation introduced to address the distorting effects of foreign subsidies on the EU internal market. This regulation enables the Commission to investigate subsidies from non-EU countries and take action against subsidies that distort competition within the EU. In the first quarter of 2026, the FSR Guidelines – towards greater clarity – will be introduced, providing clarification on situations where the Commission may investigate sub-threshold M&A activities if there is a risk of distorting the level playing field.

The FSR was introduced to ensure a level playing field for all companies operating in the EU internal market. Foreign subsidies can disadvantage European companies by creating unfair competitive advantages through state aid to companies outside the EU. This can lead to market distortions, job losses, and a decline in investment in the EU. By addressing these foreign subsidies and taking measures against them, the EU aims to protect its economic sovereignty and maintain the integrity of its internal market.

Enforcement of the FSR impacts:

• foreign companies operating in the EU: these companies must comply with the new rules and may be investigated for subsidies received.

• European companies: they benefit from a fairer competitive environment without the distorting effects of foreign subsidies.

The FSR provides the European Commission with the ability to investigate subsidies that give foreign companies an unfair advantage in mergers and acquisitions, public procurement, and other market activities within the EU. The guidelines to be adopted in Q1 2026 will clarify how the Commission will assess the distorting effects of foreign subsidies and in what circumstances it can review mergers that do not meet the thresholds but still pose a risk to the level playing field in the internal market.

For European companies, the FSR offers an opportunity to compete on fair terms, which can lead to increased investment and innovation within the EU. Moreover, companies that comply with the new rules can benefit from a more stable and predictable business environment.