Amidst growing global threats to the EU’s competitiveness, sparking Mario Draghi’s call to “do something” and Enrico Letta’s warning not to “cherry-pick” only few measures from his report, the European Commission’s Clean Industrial Deal (CID) seeks to align decarbonisation with industrial competitiveness. By addressing key challenges such as energy costs, supply chain resilience, and technological advancements, the CID is the real compass that identifies key critical issues and potential pathways for developing EU industrial decarbonisation and competitiveness.
The Communication focuses also on providing guidelines for implementation of key legislation such as the European Electricity Market Design (EMD) while enabling member states to take the lead in terms of implementing financing instruments by making state aid rules more flexible. it also provides an important impulse with regard to the coalition treaty of its biggest member state, Germany. Yet, some gaps remain, including clarity, concrete implementation measures, structural grid fee reform, strong hydrogen ramp-up actions, potential landfill inclusion in EU ETS, and equitable cohesion fund distribution.
To remain globally competitive and meet its climate targets, Europe’s industries must address pressing challenges, including high energy costs, supply chain resilience, and technological development. Although the CID aims to ensure that Europe’s industries remain globally competitive while meeting ambitious climate targets, it lacks clarity and features gaps. The CID marks a defining moment in Europe's green transition, reinforcing its commitment to industrial decarbonisation. Its pledge to the 2040 target of a 90% reduction in greenhouse gas (GHG) emissions sends a strong signal for a structured and accelerated path towards climate neutrality, while providing long-term stability for industry and businesses.
The greater involvement of the European Investment Bank (EIB), and expanded guarantees are a welcomed move. Maximising the successes of these tools will be imperative to support the scaling of cleantech deployment and ensure long-term financial stability for Europe’s clean industrial development. The focus on lead markets, leveraging of public procurement, guarantees e.g. for Power Purchase Agreements (PPAs) for SMEs, and tax cuts is more conducive to industrial development than reliance on subsidies. These tools can better de-risk private investments and provide predictable revenue streams for emerging technologies to boost the competitiveness of European industry.
The CID pushes for member states' implementation of the latest review of the EMD, embracing the combination of Contracts for Difference (CfDs) and PPAs. This approach represents a crucial move that can enhance investment certainty and affordability for businesses seeking long-term renewable energy contracts. Providing a blueprint for guarantees to make PPAs also available for SMEs and guidelines for a CfD design that avoids cannibalisation with PPAs complements the EMD, and can contribute to more market-driven and cost-efficient renewable energy expansion. It also aligns well with the industry’s needs for a predictable and competitive framework for clean energy adoption.
The CID also emphasises the role of flexibility as second pillar of the renewable energy system. It highlights the need to reduce grid fees through government subsidies, aiming to enhance energy networks and flexibility. Although this can help in the short term, a structural reform of the grid fee system incentivising more flexibility is needed for longer-lasting benefits. Providing guidelines and exerting pressure to implement grid tariff reforms can help to render the electricity system more flexible and efficient, while reducing electricity costs for companies, households and system costs for taxpayers. Efficient transmission networks and interconnectivity will be imperative to reduce energy costs for industries and to enhance overall system reliability. EPICO has extensively discussed the importance of hybrid and market-based capacity mechanisms, which allow industries to integrate new flexibility technologies while maximising energy security. However, there is a need for additional measures to ensure small and mid-sized industries can benefit from these mechanisms without excessive regulatory burdens, leaving work to be done by the forthcoming Omnibus package.
With regard to hydrogen, the CID features a big gap and is indeed a missed opportunity for more pragmatism in the light of a stalling hydrogen ramp-up. Boosting infrastructure and aggregating offtakers, for example for aviation and steel, is a move in the right direction, but action needs to follow. The Gas and Hydrogen Package also introduced the pooling of demand, which never followed suit. At the very least, the door has now been opened a little for a more pragmatic hydrogen ramp-up. The CID proposes greater investments in renewable and low-carbon hydrogen production, developments to the next auctions of the Hydrogen Bank with the allocation of €1 billion in funding, and regulatory clarity to facilitate hydrogen market expansion. Additionally, the pilot programme supporting corporate PPAs and de-risking renewable hydrogen producers echoes the Hydrogen Purchase Agreement (HPA) concept, bringing certainty to clean energy markets and ensuring a stable revenue stream for producers and a reliable supply for consumers. These agreements are crucial for securing financing and de-risking investments in offshore hydrogen infrastructure, as EPICO has highlighted in the past.
The CID also provides space to enhance the EU’s circular economy architecture. The potential expansion of the EU ETS to include incineration plants yet misses the inclusion of landfilling, in accordance with the waste hierarchy, and the aim “to incentivise diversion from landfill”. The expansion of the ETS to cover Waste to Energy plants requires financial mechanisms to mitigate economic burdens on operators and municipalities. Additionally, Carbon Contracts for Difference (CCfDs) would stabilise carbon costs, ensuring financial viability for low-carbon waste management solutions, while preventing excessive costs being passed to consumers.
Finally, cohesion funds must be distributed equitably, ensuring they support industrial transition across the whole of the EU, without overshadowing broader regional economic development needs. A more diversified financing approach is necessary to accelerate Europe’s clean industrial transformation. The focus of the proposals on increasing the competitiveness of European industry and reducing electricity prices is in principle a step in the right direction.