Q&A: EU aims to bolster competitiveness through Clean Industrial Deal
[Find the Commission documents here.]
Why is the EU working on a Clean Industrial Deal?
The European Union is under pressure to strengthen its industrial competitiveness and plot a viable pathway to a net-zero economy. While it made progress with its flagship European Green Deal in the last mandate (2019-2024) and later proposed the Green Deal Industrial Plan, there were still big gaps around industrial decarbonisation.
Across the board, Europe’s traditional industries, like steel and chemicals, and clean tech sectors, like heat pumps and wind power, are struggling. One issue for European businesses is that EU energy prices are considerably higher than in competing economies, like the United States and China. Meanwhile, geopolitical tensions are growing. The EU has slapped tariffs on Chinese electric vehicles. Donald Trump’s return to power in the U.S. has also caused tensions between the two economic blocs and forces the EU to become more self-sufficient.
There are also concerns that Europe is being outpaced in the clean tech race. China dominates clean tech production and much of the critical raw material supply needed for these technologies. The U.S.’ Inflation Reduction Act (IRA) also raised concerns, including that businesses would relocate to take advantage of the incentives offered.
Europe needs to bring down energy prices, boost innovation, reduce dependencies - particularly on China - and decarbonise, according to the landmark Draghi report on Europe’s competitiveness by former Italian prime minister and European Investment Bank chief Mario Draghi. The report also highlighted the need for a “new industrial strategy” and for 800 billion euros a year in investment to boost European growth.
Building on this, Commission president von der Leyen has announced a Competitiveness Compass as her first major initiative and something that will frame the next five years of the Commission’s work. This was developed based on the three pillars of the Draghi report: closing the innovation gap with the U.S. and China; the need for a joint plan for decarbonisation and competitiveness; and increasing security and reducing dependencies. The Clean Industrial Deal will address the second, von der Leyen said.
How is it different from the European Green Deal?
The European Commission has framed the Clean Industrial Deal as the follow-up to the European Green Deal. It will build on the EU’s work to transition to a sustainable economy and focus on strengthening industry and increasing competitiveness within this context.
While the European Green Deal included broad strokes to transition the whole economy, including boosting renewables and energy efficiency, reducing emissions and driving the shift to circularity, it lacked a broad industrial strategy to steer Europe’s industry towards cleaner processes.
The Clean Industrial Deal will continue to address this and build on existing laws, including those proposed under the Green Deal Industrial Plan like the reform of Europe’s electricity market, the law to boost clean tech and the law to secure the supply of critical raw materials Europe needs for the green and digital transitions.
EU countries must also implement the legislation agreed under the European Green Deal.
Is it a law?
The Clean Industrial Deal is a broad, non-legally binding action programme that summarises the issues faced by Europe’s traditional and clean tech industries. It creates a list of upcoming proposals and accompanying measures that the European Commission intends to table for discussion. The deal is similar to the original European Green Deal proposal in 2019.
What does the Clean Industrial Deal contain?
The Clean Industrial Deal includes plans to lower energy prices, increase demand for clean products, provide finance for the transition, boost circularity and access to materials, work on global partnerships to help meet EU goals, and create jobs and skills. All of this will be achieved by implementing existing legislation, proposing new laws and initiatives, and garnering public and private support.
On the same day as it proposed the Clean Industrial Deal, the European Commission tabled the Action Plan for Affordable Energy, intended to save 260 billion euros a year by 2040. The plan should help European industry become more competitive by lowering prices, as well as reducing bills for European citizens.
The Clean Industrial Deal also contains support for new technologies. Over 100 billion euros should be invested in clean tech manufacturing in Europe alongside measures to boost sales, like public procurement and a voluntary label on the carbon intensity of industrial products. This will be established through the Industrial Accelerator Act, which the Commission is due to present at the end of 2025 and aims to increase demand for EU-made clean products.
Circularity is also a core aspect of the deal. The European Commission plans to table the Circular Economy Act in 2026 to ensure that scarce materials are used more efficiently and accelerate the transition to a circular economy.
Other elements include a key performance indicator (KPI) to increase the economy-wide electrification rate from 21.3 percent today to 32 percent in 2030 and another to install 100 gigawatts of renewable electricity capacity per year until the end of the decade.
How have stakeholders reacted?
Renewables groups welcomed the electrification goal and planned support from the European Investment Bank (EIB) to help de-risk long-term agreements and boost grid equipment manufacturing. The solar industry said it is key to get the upcoming European Grid Package right and include support for battery storage when it comes out at the start of next year.
Meanwhile, think tank Agora Energiewende said that the deal gives a positive message that industrial competitiveness and climate action reinforce each other. However, it added that the ultimate test for the deal will be translating the proposals into concrete actions backed with sufficient funding.
German industry has welcomed the plan. However, the French government and the country’s industry have criticised it for not being strong enough, with French industry and energy minister Marc Ferracci likening it to a homeopathic remedy.
The European Commission has also been criticised for not including a legal proposal for the bloc’s 2040 emission reduction target, with green groups seeing this as an important guide. While the deal mentions a 90 percent emission reduction target for 2040, it is not legally binding.
Further criticism has been levied against the support for fossil gas, particularly in the Action Plan for Affordable Energy.
