On Wednesday, the European Commission presented a raft of measures and recommendations intended to boost European industries and cut their greenhouse gas emissions. At the heart of the push is the Clean Industrial Deal, a rebranded version of the Green Deal.
As the Commission tells it, the CID will serve as a blueprint to strengthen the bloc’s competitiveness without compromising climate goals. It aims to “present European industry with a stronger business case for large climate-neutral investments in energy-intensive industries and clean tech," according to the strategy document.
A plan to lower energy costs and the first in a series of proposals aimed at cutting bureaucracy accompanied the CID release.
The initiative marks the EU’s first concrete steps towards implementing major reforms proposed by former Italian Prime Minister Mario Draghi, in a report last September. It comes at a time when the European economy and especially its hard industry, from steel producers to car makers, face high energy prices, state-sponsored competition from China and the looming threat of tariffs from the United States.
What does the Clean Industrial Deal cover?
The CID is not a single piece of legislation. Rather, it’s a constellation of smaller measures designed to collectively strengthen EU firms’ ability to compete globally.
First, the EU wants national governments to leverage public procurement in a bid to stimulate demand for important sectors and technologies, such as so-called green steel, cement and chemicals. These are hard-to-decarbonise processes and therefore still expensive to do.
If public tenders are done right, they could incentivise awarding projects to EU businesses in a €2 trillion market. Yet it will have to get the balance of openness and protectionism right, otherwise "higher costs might turn out to be key obstacles,” Simone Tagliapietra, a senior fellow at Bruegel, an economic think tank in Brussels, told The Parliament.
The idea builds on the Net-Zero Industry Act, adopted last year in response to the US Inflation Reduction Act to prevent US tax breaks from luring EU companies across the Atlantic. It included a “buy European” provision in procurement rules governing cleaner technologies and renewable energy auctions — marking a shift away from free-market orthodoxy.
How does the plan lower energy prices?
The EU’s economic success was long tied to cheap oil and gas from Russia. With that source gone due to sanctions in response to Russian aggression in Ukraine, the EU has struggled to keep pace with their rivals in the US, which thanks to increased domestic gas and oil production has become largely energy independent.
Since Russia’s full-scale invasion of Ukraine three years ago, European manufacturers have been paying three times more for energy than their American counterparts. Meanwhile, China, which does not participate in Western sanctions, has received Russian oil and gas at a discount.
The EU wants to accelerate electrification efforts. As a first step, the European Investment Bank, the bloc’s public investment arm, will launch a scheme to help smaller companies secure guarantees for power purchase agreements. These long-term contracts with renewable energy providers hope to stabilise energy costs.
The strategy also addresses the taboo topic of energy taxation, with the CID outline nudging European capitals to lower taxes on electricity to the legal minimum thresholds and eliminate levies that finance policies unrelated to energy.
Obsolete tax rules, which lack metrics to reflect the environmental cost of energy sources, make fossil fuel prices artificially cheaper than renewables for electricity production. That creates a vicious circle that stymies the uptake of cleaner and cheaper energy by consumers and industries.
Yet if recent history is any guide, the issue of taxation could be an uphill battle. Efforts to revamp the Energy Taxation Directive, in 2021, ended in stalemate, as countries already battling an inflationary cost-of-living crisis wanted to stay away from a law that risked raising costs for fuels.
Then there is the call for a “genuine energy union,” urging the 27-member bloc to do what it takes to reach a fully integrated energy market. The Commission estimates doing so could save consumers an additional €40 billion per year by 2030.
Where will the money come from?
To finance the effort, the Commission has proposed establishing an Industrial Decarbonization Action Bank, which it estimates could provide over €100 billion in funding over the next decade. Details, however, remain sketchy.
Instead of earmarking new money, which would have likely led to strong pushback from fiscally conservative members, Brussels plans to leverage existing resources, such as the Innovation Fund and extra revenues from the bloc’s flagship carbon market.
The Commission’s hope, EU climate commissioner Wopke Hoekstra told reporters, is to ultimately attract private capital worth as much as €400 billion.
The lack of financial commitment reflects the sense of uncertainty, with the EU having just started negotiations over its next long-term budget. The Commission is also expected to relax state aid rules, allowing member states to increase the help they give to their national companies. The Commission vowed to adopt a new framework by June.
What about red tape?
The EU executive also released a package of proposals aimed at cutting red tape.
It targets sustainability reporting, which the Commission says could save a total of €6.3 billion and generate up to €50 billion in public and private investments.
The Commission has suggested revisiting the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD), as well as the Carbon Border Adjustment Mechanism (CBAM) and the EU Taxonomy.
These regulations were introduced with the aim of enhancing transparency over potential environmental damage and human rights violations across the supply chain, or to restore a level playing field between EU companies facing stringent environmental rules and their foreign rivals. They have drawn criticism for compliance costs, which business advocates say drive up costs and burden economic performance.
Easing up on these rules is likely to upset civil society groups, which have been raising alarm bells that targeting primary legislation opens the door to deregulation instead of simply streamlining complex bureaucracy.
"Greenwashing is now the hallmark of the European Commission," Olivier Guerin, an advocacy officer at think tank Reclaim Finance, said in a statement. "It is proposing a ‘clean industrial deal’ to green our economy, while cutting the majority of the rules that will deliver finance for that industrial transition."
What’s missing?
The Clean Industrial Deal made no mention of the Competitiveness Coordination Tool — a governance instrument designed to align industrial strategies at both the EU and national levels.
“This absence is surprising,” Bruegel's Tagliapietra said, adding that coordination represents the single biggest challenge in delivering effective, EU-wide industrial policy.
First introduced in Draghi’s report and later reiterated in the Competitive Compass, expectations were high for further details in today’s plan — but they remain absent.
The strategy also lacks clarity on how international partnerships, known as Clean Trade and Investment Partnerships, will work in practice. This leaves uncertainty around the EU’s ambitions to strengthen collaborations with third countries and secure critical raw materials.
Also raising eyebrows among climate campaigners was the Commission’s last-minute postponement of a plan to formally announce new climate goals for 2040.
“‘Today, we saw the Commission publish a potentially powerful roadmap for industry with an incoherent finance plan and without legal certainty on 2040,’’ Linda Kalcher, executive director of Strategic Perspectives, a climate think tank, said in a statement.
EU climate chief Hoekstra dismissed concerns of weakened climate policy, insisting that the delay was purely logistical.