Clean Industrial Deal: EU sustainability strategy from stick to carrot

The European Commission in February presented its Clean Industrial Deal, a strategy to revamp the EU clean tech industry and protect the EU’s heavy industry. The proposal will mobilise EUR 100bn in funding in total over 10 years from the EU – a better number than we expected, although we would be cautious in reading too much into the headline number as it is still unclear what the actual incremental fresh money is. 

Notably, though, the Clean Industrial Deal reflects an important change in strategy and a pivot from the stick to the carrot approach. It shows that the EU remains committed to the transition and is taking a more flexible and protective stance towards the cleantech space. 

The Clean Industrial Deal focuses on creating demand for green products, boosting investments and reducing energy prices. Of the EUR 100bn to be mobilized over 10 years, EUR 20bn will be pulled from the existing EU Innovation Fund, EUR 30bn from voluntary top-ups from member states, EUR 25bn from the EU’s carbon market and EUR 25bn from private funding, according to Politico (accessed 26 February 2025). 

Below, we summarise a selection of the measures included.

To boost demand for European green products:

Buy “Made in EU”

The European Commission wants to set minimum “green EU quotas” for the procurement by public authorities of specific products. The Commission will also assess how to include requirements for private procurement of some products, such as green steel or car batteries. The EU aims to make 40% of the EU’s key clean technology components within the bloc by 2030.

Auto and steel plan

The Commission in March published a strategy to support the auto sector, followed by plans for the steel and metals industry and the chemical sector (later in 2025).  

Labels

The measures include introducing new voluntary product labels for industrial goods to show how much CO₂ was emitted in the manufacturing process for specific sectors, starting with steel in 2025, followed by cement.

Carbon Border Adjustment Mechanism

The Commission proposes to “substantially simplify” the new carbon border tariff to reduce bureaucratic burdens, but also to look to expand it to new sectors through a revision this year, followed by a legislative proposal next year.

Green hydrogen

There is also a proposal to promote the uptake of green hydrogen, with the help of the European Hydrogen Bank, to be launched later in 2025.

To boost investments:

Short-term relief

To provide relief to the industry, the Clean Industrial Deal will mobilise EUR 100bn over 10 years in an Industrial Decarbonisation Bank to improve the business case for EU-made cleantech manufacturing. Funding would come from the Innovation Fund, parts of the Emissions Trading System (ETS) and a revision of the InvestEU. The Commission commits EUR 6bn from the Innovation Fund already in 2025.

Industrial Decarbonisation Facility

The Commission will propose a facility for industrial decarbonisation based on the ETS and will pilot it with a EUR 1bn auction, using a combination of existing resources and auction-as-a-service (launch later in 2025).

State aid

The proposal will simplify rules to accelerate the rollout of renewables, industrial decarbonisation and boost cleantech manufacturing capacity (by June 2025).

To reduce energy bills:

Support long-term energy contracts

The European Investment Bank (EIB) will launch a EUR 500m pilot plan to offer counter-guarantees to power purchase agreements (PPA) undertaken by businesses, in particular, SMEs. 

Accelerate renewables

Measures include installing 100GW/year of new renewables in the period up to 2030 (78GW in 2024). The plan also enables the introduction of new legislation to speed up accelerating renewable energy permits (so far, only seven countries have implemented the EU recommendations).

Grid

The EIB is set to provide EUR 1.5bn (indicative amount) of de-risking support to manufacturers of grid components. The Commission is set to accelerate the expansion and modernisation of grids via easier permitting, better cost-sharing and more efficient planning (European Grid Package, Q1 2026). 

The plan also confirms the EU’s intention to stick to its ambitious 2040 climate target of reducing greenhouse gas emissions by 90% by 2040 relative to 1990, which, according to our previous estimates, implies a moderate acceleration versus the current trajectory. 

EU Clean Industrial Deal: Flagship actions

Source: European Commission and Nordea