An EU Investment Package for Clean Industry?
How the European Commission’s so-called “Clean Industrial Deal” fails to live up to its name
Is a strategy for climate-friendly industry in Europe really credible if it barely receives any funding and is accompanied by the loosening of already weak sustainability rules for imported goods? The EU Commission must ask itself this question after its 26 February 2025 presentation of the Clean Industrial Deal (CID), its much-touted package of measures for a more climate-friendly industry.
Indeed, the lack of funds for restructuring is not the only problem with the package. Alongside the EU’s communication on industry and its accompanying action plan (both of which propose specific legislative acts and financing mechanisms), the Commission also presented a further so-called “omnibus package” containing legislative amendments whose form has already been finalized. Development NGOs have criticized this package for making further concessions to corporations under the guise of “reducing bureaucracy” — for example with regard to the Supply Chain Act — while human rights are being undermined.
But let’s take one thing at a time.
An Industry Deal Is to Follow the Climate Package
During the last legislative period, Brussels adopted an ambitious package of measures — the “Fit-for-55 package” — to significantly reduce greenhouse gas emissions as part of the Green Deal. The CID is now turning its attention to industry. In simple terms, Fit-for-55 was about enshrining into law the EU’s new overall climate protection targets for all sectors of the economy — a 55 percent reduction in emissions by 2030 and a 100 percent reduction by 2050 compared to 1990 levels — while providing the instruments to achieve this. Some of the necessary (and in some cases effective) tools were already in place, but simply had to be tightened up in terms of climate policy, and loopholes had to be closed. Examples include: emissions trading for the energy sector and industry; the system for allocating emissions reduction commitments among member states in the construction and transport sectors; the directives for renewable energies and energy efficiency; and the CO2 regulation for cars and small commercial vehicles. Other instruments were created from scratch, like EU CO2 pricing for imported goods (the Carbon Border Adjustment Mechanism, CBAM) or the EU’s controversial second emissions trading system, which will cover the building heating and mobility sectors from 2027. With the Social Climate Fund, attempts at reducing social inequality have also been made, albeit inadequate ones. In other words, in the face of runaway climate change, they are just as inadequate as the EU climate targets themselves.
The EU Commission is now taking a further step towards implementation — no doubt under pressure from crisis-linked energy prices that are higher than those in competing regions in Asia and the USA. The slump in industrial production in energy-intensive industries, as is occuring in Germany, is largely attributed to high energy costs. On top of that, there are trade disputes, misguided domestic decisions (such as the German automotive industry) and especially Chinese overcapacity, for example, in steel production.
The CID now being presented is intended to improve conditions for the manufacturing industry in such a way that climate protection targets can be achieved without European industry suffering an economic collapse. In the best-case scenario, the EU Commission hopes that a climate-friendly transformation will even strengthen the position of European industry against international competitors.
The investment package had been eagerly awaited — after all, it is the first major package presented by Brussels following EU elections in which the parliamentary majority shifted to the right. Would Ursula von der Leyen use it to water down the Green Deal, the EU’s climate protection programme, and roll back the EU’s climate protection legislation, which has thus far been fairly ambitious? And would this be compatible with the UN climate protection process, which stipulates that the signatory states need to initially boost their national climate protection commitments at the next UN climate conference in November — but must not weaken them under any circumstances?
Von der Leyen has been performing a kind of balancing act. The CID does not itself alter the current climate protection targets or the interim target of a 90 percent reduction in emissions by 2040, which was introduced by the last EU Commission. However, this target still has to be enshrined in EU climate protection legislation by the new majority in the EU Parliament. And while this has been confirmed on page one of the CID statement, the draft legislation has been postponed for the time being. Is this a concession to the soon-to-be-installed new German government, which might act against it?
The CID does not change the path towards emissions reduction, nor the annually-decreasing emission ceilings in the EU Emissions Trading System, crucial to industry and the energy sector. These were significantly tightened only two years ago. This means that in 2039 the last certificates allowing for the emission of one tonne of greenhouse gases will be auctioned. If we take banked emission allowances into account, the energy sector and industry across Europe ought to be, at the latest, climate-neutral within two years of those final auctions.
Instead, the Commission wants to take two approaches to facilitating the process for companies. Firstly, greater support is to be given to the cleantech sector and to the decarbonization of traditional industries. Secondly, Brussels wants to reduce bureaucratic costs for companies through the aforementioned “omnibus package” — at the expense of human rights, as discussed below.
Questionable Financing in the Push for Cleantech and Decarbonization
The EU Commission wants to make green industries competitive. This could be achieved, for example, by the proposed law regulating the use of low-CO2 green steel in public construction projects (“Industrial Decarbonization Accelerator Act”), as well as the planned development of a voluntary label for the carbon intensity of industrial products. Another proposed law intends to ensure that companies have more climate-friendly fleets of cars (“greening corporate fleets”). This could include requirements for the purchase of domestically-produced electric vehicles. In general, the Commission wants to extend “non-price criteria” — such as sustainability and resilience — to the EU budget, other EU funding programmes, and public and private procurement. In addition to these measures to create “green flagship markets”, a third round of funding for green hydrogen production is also to be launched via the European Hydrogen Bank.
Other key areas are support and financing. A new institution, the “Industrial Decarbonization Facility”, is to ensure “technology-neutral support” across various sectors. It will focus in particular on industrial decarbonization and electrification. The targeted reduction of greenhouse gases is to serve as a benchmark for the amount of funding awarded.
However, Brussels is not providing any fresh investment for this. The Commission only wants to redirect existing money from the EU Innovation Fund and tie in national funding. This is to be made more attractive to member states by revising the legal framework for state aid for “clean industry” and the awarding guidelines for EU investment programmes so that countries are afforded more freedom in this area. In addition, simpler rules and more scope for risk assumption should allow for faster approvals and better financing for cleantech projects. Furthermore, a “Bank for Industrial Decarbonization” is to be created in 2028 as part of another new competitiveness fund, which will bundle together dozens of funding programmes from the EU budget (European Competitiveness Fund, ECF). The bank will make available 100 billion euros, again primarily by drawing on existing financial instruments: the EU Innovation Fund and the current InvestEU programme. It is also expected to generate additional revenue from EU emissions trading in the future — money that, if the calculations are correct, would be the exception in that it would represent new public funds.
The organization Germanwatch has argued that bundling together support programmes and reforming state aid only make sense if access to public funds is linked to clear, concrete benefits for workers and the environment. However, the Commission’s statement fails to mention this.
The CID also refers to a legislative act on the circular economy announced for 2026 (by 2030, 24 percent of materials in production should be recyclable) and points to future initiatives for better access to raw materials. To this end, an EU centre for critical raw materials will also be established, which will jointly purchase raw materials for interested companies. In the key area of “global markets and international partnerships”, the first “partnerships for clean trade and investment” are to be launched — whatever this might mean.
The EU climate tariffs on imported goods that have already been approved (Carbon Border Adjustment Mechanism, CBAM) are to be eased: around 90 percent of importers, especially small and medium-sized businesses, are to be exempt from the system. According to the EU Commission, however, the remaining 10 percent account for 99 percent of the emissions generated during the production of goods imported from outside the EU. If the figures are correct, this should pose little problem. After the summer, a review will be carried out to determine whether the climate tariffs can be extended to other product groups and indirect emissions in turn. The review will also include how goods exported from the EU can be dealt with to offset disparities in cost resulting from different climate laws around the world. So far, the CBAM has imposed climate tariffs on imports but not on exports.
Employee Qualifications and a Fair Transition Process
Finally, according to the CID paper, the Commission also wants to take care of providing qualifications for the labour force and ensuring a fair transition process. For example, an initiative aims to make it easier for qualifications acquired in one country to be recognized in another. Furthermore, a “roadmap for quality jobs” will offer support to workers during transition phases of the transformation. To this end, Brussels wants to combine income protection and active labour market policy measures — including job placement services, training and retraining opportunities, and support for companies and socially-vulnerable groups. The Commission even wants to set up a “Fair Transition Observatory” for this purpose next year. Individual citizens could also benefit: the Commission wishes to draw up guidelines for member states on social leasing, which in effect should make it possible to rent emission-free vehicles, heat pumps, and other clean products instead of having to buy them. If these guidelines are well designed and implemented by member states, the initial investment threshold could be lowered, especially for poorer households.
An Action Plan for Lower Energy Costs, and Trump’s Cheap Gas
To support companies in the short term, the CID comes accompanied by an “Action Plan for Affordable Energy”, which bundles together proposals to change EU legislation and financing mechanisms at a later date. Among other things, Brussels wants to enforce a reform of grid fees in member states, if necessary even with the use of coercive measures. Its aim is for grid fee systems to promote industrial electricity consumption which is adapted to fluctuations in electricity supply, and to encourage investments in the electrification of industrial processes rather than slowing them down, as is often the case at present. In terms of the economy as a whole, the electrification rate is to be raised from 21.3 percent today to 32 percent in 2030. Furthermore, the European Investment Bank (EIB) is to finance special guarantees (“counter-guarantees”) via a funding programme of 500 million euros to enable the rapid creation of direct power purchase agreements between green electricity producers and companies. The EIB is also to put together a 1.5 billion euro package to offer manufacturers of electricity grid components a stable market via a similar guarantee mechanism. A “European Grid Package” will be used to expand the grid, accelerating the slow approval process for the construction of new lines.
The EU Commission also wants to relieve the burden on energy-intensive industry with a package of measures for “well-functioning gas markets”. This is intended to counteract price fluctuations and speculation, and to promote the joint purchase of natural gas by European companies. Protests from environmental organizations were sparked by the announcement of subsidies for US export terminals for liquefied natural gas (LNG) based on the “Japanese model” — in exchange for more LNG being delivered to Europe. LNG from the US is predominantly sourced from environmentally-harmful fracking and is also considered to be particularly damaging to the climate, owing to leaks and unintended gas emissions during production and transport. Finally, a reduction in electricity taxes via reform of the Energy Tax Directive (ETD) is also intended to provide short-term relief for industry.
Driving an (Omni)bus over Human Rights
Human rights and development organizations have been horrified by the third part of the Commission’s initiative, which deals directly with legal issues. This is known as an “omnibus package”. In such packages, Brussels combines draft laws from a number of related legislative areas. With the purported aim of reducing bureaucracy, this would tear up important obligations of the EU Supply Chain Act, the EU environmental taxonomy, and EU sustainability reporting, among others. In future, these obligations are to apply to significantly fewer companies — in the case of sustainability reporting, for example, to only 20 percent of the companies previously affected. Meanwhile, the laws will require less data, making for a decrease in depth and oversight. The Supply Chain Act will now come into force a year later than planned: in July 2028. Even worse: possible minimum penalties and liability risks in the event of violations are to be reduced.
The legislative proposals of the omnibus package will now be submitted to the European Parliament and the Council for examination and adoption. A joint statement by environmental and development organizations says that the EU is planning to fast-track changes to laws which had been negotiated at great length in order to reach compromises. In the case of the Supply Chain Directive, for example, Armin Paasch from the Catholic aid organization Misereor warns that those affected by human rights violations outside the EU will no longer have any chance of obtaining compensation and reparation through civil courts under the new regulations.
Further Action Plans Will Follow
The Commission’s action plan for the automobile industry, which was adopted on 5 March 2025, could also see the first changes to the climate protection regulation of Fit-for-55. In the action plan, the EU Commission has announced that it will amend the annual targets for carbon-emitting passenger vehicle regulation in a way that is favourable to companies, where failure to meet these targets could otherwise result in severe fines being imposed by Brussels. Manufacturers will now only have to comply with emission limits over a three-year period and not — as previously — for a single year. The action plan does not change the decision to phase out the combustion engine for new cars from 2035, even though the new EU Transport Commissioner Apostolos Tzitzikostas wants to review it earlier than previously planned. That review is to take place this year and not in 2026 as had been mooted — and will be open to all technologies, a point emphasized by Commission President Von der Leyen.
On 19 March, Brussels also presented an action plan for the steel industry, and another for the chemical industry at the end of the year. It remains to be seen to what extent this will reflect the new conservative majority’s climate and social policies.
Uwe Witt is an advisor on climate protection and structural change at the Rosa Luxemburg Foundation.
Translated by Christopher Fenwick and Rowan Coupland for Gegensatz Translation Collective.