The EU in the process of climate and energy transition
In the European Green Deal,[1] the European Union has set long-term targets and actions to move the EU economy towards climate neutrality through decarbonisation and electrification based on investment in renewable energy sources.
After five years in which the EU’s internal market has faced pandemic-related constraints and an energy crisis, the EU is continuing the climate-energy transition by extending its action to the industrial sector through the Clean Industrial Deal.[2] However, there has been a significant overhaul of EU economic policy.
Mario Draghi’s report shows,[3] among other things, that high energy prices in the EU are holding back economic growth. In addition, strategic areas such as energy require the urgent implementation of innovative tools such as AI, while the production of renewable technologies is located outside the EU.
The EU is therefore seeking to integrate measures to achieve climate neutrality while stimulating economic growth. This will be achieved by closing the innovation gap, decarbonisation and diversification.[4]
A key element of the EU’s Competitiveness Compass is the Clean Industrial Deal, which aims to create attractive conditions for industrial development in the EU.
Goals of the Clean Industrial Deal
The Clean Industrial Deal is the EU’s response to high electricity prices and the growing technological advantage of third countries, which threaten the competitiveness of Europe’s energy-intensive sectors and clean technologies.
As part of its efforts to reduce energy prices, the EC plans to:
- Implement the Electricity Market Design reform – including the use of flexibility services, which can address low grid capacity and unlock the full potential of renewable energy
- Simplify state aid rules for the deployment of RES and the decarbonisation of industry – the European Commission will adopt the relevant changes by June 2025
- Adopt guidelines on the design of contracts for difference and their combination with PPAs – by 2026
- Adopt guidelines on promoting remuneration of flexibility in retail contracts with industrial consumers – by Q4 2025
- Issue recommendations on how to effectively lower taxation levels in a cost-effective way in connection with the solution adopted in the Energy Taxation Directive to decrease electricity taxation down to zero for energy intensive industries
- Issue recommendations and guidance on a harmonised design of tariff methodologies for network charges, and propose new legislation
As part of its efforts to accelerate the introduction and production of clean energy, the EC plans to:
- Issue recommendations and launch a dialogue to support the simplification of the administrative permit-granting procedures for the deployment of grid, energy storage and renewables projects
- Propose measures to address permitting issues that will enable industrial decarbonisation
- Implement incentives for the digitalisation of administrative procedures
As part of its measures to ensure the proper functioning of gas markets, the EC plans to:
- Strengthen regulatory oversight and cooperation between regulators
- Set up a Gas Market Task Force to comprehensively scrutinise the EU natural gas markets and, where necessary, take actions to ensure their optimal market functioning and prevent commercial practices distorting market-based pricing
As part of its efforts to strengthen the competitiveness of industry, the EC plans to:
- Introduce resilience and sustainability criteria (e.g. clean, resilient, circular, cybersecure) to foster the supply of clean EU-made energy for energy-intensive sectors
- Make a regulatory review of public procurement – in 2026
- Work to simplify and harmonise carbon accounting methodologies
As part of its efforts to promote green and grey hydrogen, the EC plans to:
- Adopt a delegated act on low carbon hydrogen production rules to increase investor certainty – in Q1 2025
- Launch the Hydrogen Mechanism under the European Hydrogen Bank – in Q2 2025
- Launch a third call under the Hydrogen Bank with a budget of up to EUR 1 billion – in Q3 2025
Financing the clean industry transition
As a first step, the European Commission plans to allocate EUR 100 billion for the development of clean industries, including additional guarantees of EUR 1 billion.
It will then propose the creation of an Industrial Decarbonisation Bank, which will have a budget of EUR 100 billion to provide financing based on funds in the Innovation Fund. Additional revenues will come from parts of the ETS and InvestEU.
A pilot with a EUR 1 billion auction is to be launched later this year on the decarbonisation of key industrial processes across various sectors.
Research into clean technologies will also be supported. As part of the Horizon Europe programme planned for 2026–2027, the European Commission will allocate a total of ca. EUR 600 million to support fit-for-deployment projects to reduce the carbon footprint and increase the share of renewable energy.
Key legislative changes
The European Commission has announced that it will work towards the adoption of a Critical Raw Materials Act and the setting up of an EU Critical Raw Material Centre to jointly purchase raw materials on behalf of interested companies and in cooperation with Member States.
In 2026, the European Commission plans to adopt a Circular Economy Act, which aims to enable the free movement of circular products, secondary raw materials and waste.
Summary
The Clean Industrial Deal is a continuation of the EU’s efforts to achieve climate neutrality while boosting the competitiveness of the economy.
The EC intends to remove regulatory and administrative barriers to industrial decarbonisation and innovative technologies.
In the short term, the plan is to mobilise EUR 100 billion for the development of clean industries and further support under the funds foreseen in the Multi-annual Financial Framework for climate and energy transition.
This is undoubtedly an opportunity for investors, who will be able to take advantage of preferential conditions for doing business in clean technologies in the EU.
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[1] Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions: The European Green Deal (COM/2019/640 final)
[2] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A Clean Industrial Deal: A joint roadmap for competitiveness and decarbonisation (COM/2025/85 final)
[3] The Future of European Competitiveness, report
[4] Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions, A Competitiveness Compass for the EU (COM/2025/30 final)
