Subsidies

EU Clean Industrial Deal advances subsidies and other support options for EU industry

The Clean Industrial Deal, widely regarded as the next iteration of the EU Green Deal, indicates a clear shift in EU thinking on the development of EU industrial support. These developments are especially relevant in terms of the perceived shift in net zero investment climate between the US and EU. The increase in EU industrial support is mainly aimed at Net-Zero industries and decarbonization projects, with specific action plans for the automotive sector, steel and metals sector, Chemicals industry sector, sustainable transport sector as well as the bioeconomy sector. Support from the EU for these sectors is either direct, with new subsidy instruments or changes to existing instruments, or aims to expand the support options of national funding programs or support by the European Investment Bank. Based on these three categories, the main proposed changes are found below.

New subsidy instruments and adaptations to existing EU subsidies

European Grid package is introduced, in an effort stimulate the development of trans-European networks for energy. Currently such projects are supported by CEF-E subsidies, which requires projects to partake in a lengthy procedure to be eligible for support, including the inclusion in the Project of Common Interest (PCI) list. This change allows for more rapid development of cross-border energy connections.

Changes to technology sourcing norms for existing EU subsidy calls. In an aim to boost EU technology sovereignty, existing subsidy calls will incorporate norms from the Net Zero Industry Act, with the aim of sourcing 40% of project technologies from the EU market.

The EU introduces a new Facility for Industrial Decarbonization Bank in Q2 2026. This new fund of €100 Bn is aimed at large scale decarbonization of ETS sectors. This is opposed to the existing Innovation fund which requires technological innovation as a condition for funding. The main award criteria for this auction based new facility is expected to be the cost-effectiveness of decarbonization, expressed in €/tonne CO2. The first pilot of €1 Bn will be launched in 2025.

The EU introduces a new EU Competitiveness fund, which allocates funding for national governments to set up funding programs to facilitate sustainable investments. This funding will specifically be aimed at projects with defined criteria for EU added value in clean tech manufacturing, infrastructure and industrial decarbonization.

A more significant role for the European investment bank

The EU introduces the Grids Manufacturing Package in 2025, providing derisking support specifically for manufacturers of grid components. This should kickstart large-scale production of grid components through counter-guarantees, providing manufacturers with the capacity to ramp up production.

The EIB will increase its risk bearing capacity with €50 Bn in additional financing and investment in key EU policy priorities, such as the modernization of industrial processes, manufacturing and deployment of clean tech and clean mobility solutions, waste reduction and recycling.

The commission and the EIB will deploy a TechEU investment programme providing access bridge the financial gap for clean tech start-ups and scale ups, of 100 billion Euro over 5 years.

Opportunities for new national subsidies

With the proposed adaptations in state aid rules, the EU introduces the possibility of making use of EU templates for new grants and auctions for decarbonization projects, to be supported by EU member states. This applies to decarbonization projects as well as hydrogen projects.

The EU provides support for national governments to provide guarantees for project development, effectively derisking decarbonization and net zero technology projects.