EPG says the Clean Industrial Deal includes “almost no new public funding for industrial transformation”

On February 26, the European Commission published the Clean Industrial Deal (CID), a wide-ranging strategy aimed at supporting the transformation of the EU’s industrial sectors. It is a non-legislative document, foreseeing several future legislative measures in the fields of energy, investment, procurement, and carbon pricing, among others. It was first announced as a key policy piece in the EU Competitiveness Compass, as part of an effort to enhance the Union’s position in the global race to a net-zero, innovative, and secure future. The Clean Industrial Deal was released together with the Affordable Energy Action Plan, which has the purpose of securing affordable, efficient and clean energy.

“The Clean Industrial Deal is a welcome signal of the EU’s commitment to a competitive, low-carbon industry. It seeks to address the urgent challenges highlighted in the Draghi report and includes practical, relevant proposals to enhance demand for clean products, unlock access to affordable clean energy, and strengthen supply chains (including circular ones), among others,” says Luciana Miu, Head of Clean Economy at Energy Policy Group (EPG). 

“However, the Deal falls short of the paradigm shift in European industrial policy needed to ensure concerted action. The primary pain point of industrial transformation – the cost of energy – is addressed mostly through recycling already-agreed reforms or recommendations to Member States. Almost no new public funding is mobilised for industrial transformation – while this may be understandable in the context of other pressing priorities, an opportunity is missed to leverage key funding streams such as regional development funding, for example through conditionalities on green public procurement.

For countries in Central and Eastern Europe, the above shortfalls are compounded by a lack of recognition of the importance of regional cooperation. We have shown recently that a regional approach to industrial transformation can unlock efficiencies in public spending, build capacity, and create spillover benefits. While the CID is a commendable step forward, it rather misses the mark on the kind of policymaking that is needed for the new world order Europe is now in,” adds Luciana Miu.

“Despite the mixed political messages over the past few weeks, the Clean Industrial Deal reinforces the idea that decarbonisation and reindustrialisation go hand in hand. The Commission has now committed to proposing a 90% GHG emissions reduction target for 2040, as the EU will have to focus simultaneously on dealing with the climate crisis, addressing competitiveness concerns, and improving economic resilience. The associated price tag will significant,” explains Mihnea Cătuți, EPG Executive Director.

 “Unfortunately, the financial proposal brings more of the same and will likely fall short of mobilising the necessary finance. Reallocating some of the Innovation Fund can only render limited results and the utilisation of the STEP Sovereignty Seal can change the nature of the financial instrument. Reshuffling MFF resources in a new Competitiveness Fund will face tough negotiations, but can offer at least a partial solution to the public finance gap expected post-2026.

The plan also seems to concede that industrial policy remains firmly within national remit, with limited EU-level action. The document does not envision any credible EU-level governance tool. The reform of the state aid framework effectively prolongs the status quo under the Temporary Transition and Crisis Framework and the General Block Exemption, with few additional safeguards for avoiding national subsidies that are distortive to the Single Market. No new fiscal redistribution mechanism has been proposed, while the revision of the ETS in 2026 appears to only bring some vague changes to revenue utilisation.

The development of harmonised and simplified standards for green steel and green cement is a promising proposition, especially as the text explicitly mentions their utilisation in EU-budget spending and making them operational for all levels of public administration.

Promising EU-action is also foreseen with the new Clean Trade and Investment Partnerships (CTIPs) which will increase the cooperation with third countries to increase supply chain resilience, mobilise finance and set up regulatory frameworks. A clear review of the need to increase the scope of CBAM to cover indirect emissions is also a positive step forward, while the Commission has also committed to entering the difficult conversation on export rebates,” concludes Mihnea Cătuți.