Michael Button
Senior Policy Manager - Real Economy
The long-awaited Clean Industrial Deal from the European Commission sets out a vision for a ‘clean, competitive and just transition’ for European industries, supporting clean manufacturing and decarbonisation. Simpler regulation, reduced implementation barriers, and strengthened financial instruments are a big part of the plan that aims to mobilise over EUR 100 billion in the near term. This latest insight piece explores what the deal means for investors.
Published on 26 February, the Clean Industrial Deal (CID) is central to European Commission President Ursula von der Leyen’s political objectives for 2024-2029. It aims to drive both the decarbonisation and the competitiveness of EU industry by focusing on two closely linked areas: energy-intensive industries and the clean technology sector.
Encouragingly, many of its priorities align with the recommendations outlined in our EU Call to Action, which set out the investor perspective on how the EU could accelerate its transition to a competitive, energy-secure and climate-neutral economy. We examine the CID in relation to those investor priorities and our wider work with the investor community.
While the CID represents a positive step forward, the EU Commission’s Omnibus proposal on sustainable finance is less encouraging, potentially making things harder for investors and undermining some of the CID’s objectives. A separate insight explores the latest developments.
The CID outlines six key business drivers — accompanied by a list of supplementary policies and materials to be published later this year — for building a thriving European industrial system. These include:
- Access to affordable energy
- Lead markets: Boosting clean supply and demand
- Public and private investments
- Powering the circular economy: A secure access to materials and resources
- Global markets and international partnership
- Skills and quality jobs for social fairness and a just transition
Access to affordable energy
The CID aligns with the policy recommendation in IIGCC’s EU Call to Action which urged policymakers to ‘accelerate the shift to a decarbonised, more efficient and more integrated European energy system’.
Ensuring affordable energy is key to EU industry competitiveness, as outlined in the Affordable Energy Action Plan, published alongside the CID. We welcome the efforts to lower renewable energy costs for industries and households, particularly through effective implementation of the Electricity Market Design reforms adopted last year.
On this, the CID aims to scale up Power Purchase Agreements (PPAs) and Contracts for Difference (CfDs) to enhance incentives for clean energy financing and reduce fossil fuel price volatility. This should help address the concerns our members raised with EU policymakers in January about the need to manage risk and returns for long-term renewable energy infrastructure investments. We now look forward to the Commission’s guidance on combining these two instruments, expected later this year.
The CID also reflects our call for short-term policies to strengthen Europe’s energy grid, including market integration, energy storage, and improved cross-border connections. The Industrial Decarbonisation Accelerator Act, expected in Q4 2025, should further address existing bottlenecks.
Investors will pay close attention to the European Investment Bank’s (EIB) expanded role in financing industrial decarbonisation, with a pilot programme proposed for counter-guarantees to support corporate PPAs and a “Grid Manufacturing Package” to de-risk investment in grid components. These steps align well with investor asks around increasing the deployment of targeted public and blended financing tools to mobilise private investment.
New commitments to phase out fossil fuel subsidies will push Member States to lower taxes on electricity and finalise negotiations to revise the Energy Taxation Directive mark important progress. However, the lack of clarity on timelines for these actions reduces the decision-usefulness of the policies for investors.
Lead markets
Investors are clear that building the business case for decarbonised industry requires stronger demand-side measures. Product labelling, paired with the right incentives, are crucial to accelerating the transition to low-carbon manufacturing.
The Industrial Decarbonisation Accelerator Act, part of the CID, will introduce a voluntary label for the carbon intensity of industrial products, with incentives through access to targeted member state support schemes. Work on labelling for steel will begin this year.
This decision aligns with investor recommendation to integrate the EU’s climate and competitiveness agendas by providing clearer pathways for industry transition. It also reflects recommendations from IIGCC’s policy paper on transitioning the European steel sector – including increasing demand for high-quality recycled materials, defining lifecycle emissions reporting, and leveraging public procurement to scale decarbonised industrial products.
Financing the clean transition
The ‘public and private investments’ business driver focuses on strengthening EU-level funding, leveraging private investment, and enhancing the effectiveness of state aid to achieve the CID's objectives.
The CID notes that the EU will need to increase its annual investment in energy, industrial innovation and transport systems by EUR 480 billion annually over 2021-2030 compared to the previous decade.
Investors will welcome the Commission's acknowledgement that leveraging private capital will be key to reaching this investment target, primarily through long-term regulatory stability, public incentives for decarbonisation, and effective policy coordination.
Ensuring a stable investment environment has long been one of the EU's strengths. This, coupled with effective public financing instruments, will help attract the capital needed for its net zero ambitions.
The CID outlines several initiatives, such as the EU Competitiveness Fund, to incentivise and finance industrial decarbonisation. The Commission estimates that an InvestEU Regulation amendment will increase its risk bearing capacity and mobilise around EUR 52.7 billion additional financing and investment towards key EU policy priorities. This aligns with investor's recommendations on financial instruments needed to finance decarbonisation.
Our Call to Action recommends that the EU explore partnerships with institutional investors to develop de-risking vehicles that align risk-return requirements and attract capital to clean-tech, infrastructure, and industrial transition projects.
The new EIB initiatives for priority sectors should also support the mobilisation of private finance. Investors require further clarity on how these and other initiatives will map on to sectoral investment needs and key technologies, as well as transparent data sources to help track public and private capital flows. However, it is worth noting that the proposed sustainable finance Omnibus will likely increase the data gaps for investors by reducing corporate sustainability reporting.
Additionally, regular financing dialogues with stakeholders will be essential to identify barriers and opportunities, refine financing mechanisms, and support the CID’s key performance indicator of increasing industrial transition investment beyond EUR 52.7 billion.
Skills and quality jobs
The inclusion of skills and quality jobs as a core business driver is a positive one, aligning with investor calls for a just transition. Considering workers in high-carbon industries today and preparing them for the low-carbon industries of tomorrow is vital for economic resilience and social cohesion.
Our Call to Action recommends that the EU assesses all sector legislation for its consistency with climate goals, including consideration of the socioeconomic impacts of sector decarbonisation through a just transition lens.
Implementing the Clean Industrial Deal
To ensure coherent action, the Clean Industrial Deal (CID) looks set to serve as a framework for industry-wide dialogue to develop EU sectoral transition pathways. These pathways will inform investment decisions and help mobilise capital towards industrial decarbonisation, advancing both competitiveness and sustainability. Several sectors, including automotive, steel and metals, and chemicals are highlighted as the initial priorities for 2025, with other sectors following as appropriate.
This commitment to develop sectoral pathways reflects one of the key points suggested by our EU policy team and our members when they met senior EU politicians and policymakers in Brussels in January and is particularly welcome. To be effective, these pathways should reflect the principles for sector decarbonisation roadmaps set out in our recent paper for policymakers, which was co-developed with investors.
The CID reflects our recent calls for policymakers to develop sector decarbonisation roadmaps in a manner that can attract the long-term investment needed to implement ambitious climate goals.
It will be important that these European sectoral transitional pathways are credible and decision-useful for investors; provide clarity on how current and anticipated policies will interact; and are accompanied by financing mechanisms that will de-risk and crowd-in private capital.
To ensure investors can support the EU’s transition, we will continue emphasising the need for ongoing engagement between industry, private finance, and policymakers – both on sector pathways and more broadly. The Clean Industrial Deal provides a crucial blueprint for all these key players to discuss and build on.
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