Europe’s Industrial Future is on the line – The Clean Industrial Deal must deliver

Europe’s industrial competitiveness is lagging, and without decisive action, it risks falling further behind. 

Strengthening industry is not just an economic necessity—it is a precondition for successful decarbonisation. The Clean Industrial Deal (CID) takes important steps toward aligning industrial competitiveness with the EU’s climate objectives, recognising that Europe cannot afford to lose industrial capacity in its pursuit of net-zero. However, without a technology-inclusive approach, more flexible industrial policies, and mechanisms tostabilise energy costs, the CID risks falling short of its ambition. To secure Europe’s industrial future, it must provide industries with the tools to decarbonise while ensuring they remain globally competitive, attract investment, sustain jobs, and drive innovation.

A Defining Moment for Europe’s Industrial Competitiveness

The Clean Industrial Deal (CID) is more than just another policy initiative—the European Commission aims for  the Communication to be a transformational plan to decarbonise European industry while keeping it competitive on the global stage. It acknowledges that Europe’s economic resilience depends on accelerating industrial decarbonisation while ensuring access to reliable, affordable energy.

Over the past decade, Europe has established itself as a clean energy leader with pioneering climate policies and a strong decarbonisation regulatory framework. Geopolitical shifts, global market competition, and the rapid industrial policies of major economies, however, are putting increasing pressure on European industry. Rising energy costs, supply chain vulnerabilities, and aggressive industrial strategies in the U.S. and China are forcing European manufacturers to reassess their long-term viability, raising concerns over deindustrialisation. Energy security is national security. A resilient industrial base requires stable, affordable, and homegrown energy sources to reduce dependence on external suppliers and geopolitical risks. The CID is the EU’s first holistic step toward addressing these challenges, but its success will depend on whether it provides the right conditions for industry to remain competitive while achieving its decarbonisation goals. To deliver on its promise, the CID must go beyond broad ambition and ensure that European industry has the energy, investment, and flexibility it needs to thrive. This means prioritising a technology-inclusive approach and cost competitiveness to prevent industrial stagnation and offshoring. Unlocking decarbonisation as a competitive advantage requires a well-executed CID, ensuring Europe remains a global leader in clean manufacturing.

A strong CID will require follow-up initiatives (both legislative and non-legislative) that support a diverse mix of clean energy solutions, including nuclear, geothermal, abated gas, long-duration storage, and hydrogen. Heat-based industrial decarbonisation must also be a priority, as industries like steel, chemicals, and fabricated metals require high-temperature processes that only nuclear, hydrogen, or geothermal can reliably provide in a clean way. Ensuring energy cost stability is also essential, as a diverse clean energy mix reduces price volatility compared to fossil fuel-based markets, giving industries—including energy-intensive industries (EIIs)—the predictability they need to remain competitive.

A Framework, not a Finished Plan - Why Implementation is Key

While the CID sets an ambitious vision for European industry, many of the critical policy details, funding mechanisms, and industrial incentives are still under development. The effectiveness of the CID will depend on how well future policy initiatives align with its goals. The Industrial Decarbonisation Accelerator Act, expected in Q4 2025, should define the financial and regulatory support available for industries deploying clean technologies. The Affordable Energy Action Plan, published in parallel to the CID, is also crucial in determining whether long-term contracts, power purchase agreements (PPAs), and other cost relief measures will be available to stabilise energy prices for industrial users.

Other key initiatives will also shape the CID’s success, including the 2026 Energy Taxation Guidance, which will influence financial incentives for industrial energy use, and the Public Procurement Framework revisions, scheduled for Q3–Q4 2026, which will determine how public sector demand supports the growth of clean industrial production. The CBAM revision process, which has begun with the Commission’s adoption of simplification proposals, is critical for ensuring the CBAM effectively prevents leakage while maintaining a level playing field.

The next few years will determine whether the CID can translate its ambitions into a competitive, sustainable industrial sector. These policies will define its success or failure, and CFE will push for policies that balance economic growth with credible paths to net-zero.

A New Industrial Paradigm – The CID and Competitiveness

To remain a global industrial and decarbonisation leader, Europe must align emissions reduction targets with industrial competitiveness. The CID presents an opportunity to reinforce Europe’s leadership in decarbonisation while preventing further deindustrialisation. However, it must directly address the challenges facing EIIs such as chemicals, steel, and automotive manufacturing, which rely on stable, affordable energy and heat. Without cost-competitive energy and regulatory certainty, these industries risk stagnation or relocation. If the CID is to succeed, it must ensure that Europe’s climate leadership drives, rather than undermines, industrial strength.

Figure 1. A technology-inclusive industrial strategy ensures Europe’s competitiveness by balancing clean energy deployment, industrial growth, and manufacturing strength.

Europe’s industries face three core risks that threaten their ability to remain competitive. High energy costs make EU production more expensive than in other markets, limiting growth and investment. Regulatory uncertainty and administrative burden slow down industrial decarbonisation projects, delaying the transition and adding financial risk. Meanwhile, intensifying global competition from subsidised markets such as the U.S. and China distorts trade conditions. The U.S. Inflation Reduction Act (IRA) provides direct and substantial support for clean industrial production, creating a more attractive business environment. China’s aggressive industrial policies and overproduction strategies, particularly in steel and clean energy manufacturing, undercut European industries by driving down global prices while increasing dependency on Chinese supply chains.

The CID is a step forward, but it lacks concrete mechanisms to mitigate these risks effectively. A technology-inclusive approach is essential to reducing energy price volatility, strengthening industrial resilience, and scaling diverse energy sources suited to different industrial needs. A one-dimensional reliance on intermittent renewables alone will leave industries vulnerable to price spikes and grid instability. Industrial resilience depends on ensuring access to stable, dispatchable energy, particularly for industries that require high-temperature heat. Without nuclear heat, hydrogen, and geothermal, industries such as steel and chemicals will struggle to decarbonise competitively. The CID must also allow industries to select cost-effective, regionally appropriate technologies rather than imposing rigid, sector-specific mandates that could limit innovation and drive up costs.

What the CID Gets Right

The Clean Industrial Deal lays a strong foundation for industrial decarbonisation by addressing three critical areas: expanding access to clean and affordable energy, strengthening lead markets for cleantech manufacturing, and mobilising public and private investment. While gaps remain, these elements provide a much-needed shift toward ensuring Europe's industrial competitiveness in a net-zero economy.

Clean, Abundant, and Affordable Energy

The CID acknowledges that industrial decarbonisation depends on clean, abundant, and cost-competitive energy. It sets an ambitious target of 32% electrification by 2030 and plans for an additional 100 GW of renewable energy capacity. Expanding PPAs for Small- and Medium-sized Enterprises (SMEs) and EIIs is a positive step, as it can help stabilise energy costs and improve access to clean power sources.

The CID also proposes state aid reforms to accelerate clean energy deployment, which could help industries transition to lower-carbon energy sources faster and maintain competitiveness. Grid infrastructure upgrades will be essential to ensure these new energy resources are efficiently integrated into Europe’s industrial base.

CFE agrees that the CID recognises the need for affordable clean energy and critical grid infrastructure upgrades. However, it is crucial that these reforms remain technology-inclusive, ensuring that nuclear, geothermal, abated gas, long-duration storage, and hydrogen play a role alongside wind and solar to provide a stable, dispatchable energy supply for industry.

Lead Markets for Cleantech Manufacturing

Strengthening Europe’s clean technology manufacturing base is a major focus of the CID, which aims to revitalise domestic production and reduce reliance on foreign supply chains. The deal proposes expanding non-price criteria in public procurement to favor clean technologies, ensuring that public sector investments help create stable demand for EU-made cleantech products.

The CID also proposes carbon intensity labeling for industrial products, starting with steel, which is a step toward improving market transparency and rewarding low-carbon production. Additionally, it promotes domestic manufacturing of clean technologies while limiting foreign participation in strategic sectors, aiming to secure supply chains and ensure that EU clean technology production remains globally competitive.

As Breakthrough Energy recently highlighted, Europe has led in clean technology innovation but has struggled to scale and commercialise industrial production at the pace of the U.S. and China. The CID is an important step toward correcting this imbalance by incentivising local production, scaling manufacturing, and ensuring clean technologies are deployed faster and at scale across Europe.

CFE agrees that strengthening the EU’s clean industrial base is critical for strategic autonomy and competitiveness. A strong industrial strategy is essential to retaining high-value manufacturing in Europe, preventing supply chain bottlenecks, and ensuring that cleantech deployment is not dependent on non-European producers.

Public and Private Investment to Accelerate the Transition

Industrial decarbonisation requires significant investment, and the CID attempts to bridge this funding gap by mobilising over 100 billion EUR to improve the business case for EU-made clean manufacturing. The Commission will propose an Industrial Decarbonisation Bank aiming for 100 billion EUR in funding, leveraging resources from the Innovation Fund, ETS revenues, and an expanded InvestEU framework.

Additionally, the CID highlights the necessity to unlock 480 billion EUR in annual investments across clean energy, industrial decarbonisation, and sustainable transport. Strengthening the role of the European Investment Bank (EIB) in de-risking industrial decarbonisation projects is another critical measure that could expand access to capital for large-scale clean technology deployments.

CFE agrees that greater public-private investment is needed to close the cleantech scale-up gap. However, ensuring that these funds are deployed efficiently and equitably across Member States will be essential to prevent market distortions and create a level playing field for European industrial decarbonisation.

The Glaring Gaps – What Needs to be fixed

While the CID lays a strong foundation and represents a much-needed directional change, critical gaps remain that must be addressed to ensure industrial competitiveness and long-term energy affordability. CFE identifies three key areas where the CID falls short.

The CID fails to fully support a technology-inclusive approach

The CID recognises the need for a broader clean energy mix, but its approach still does not fully ensure investment certainty and large-scale deployment for all clean technologies. While it acknowledges the role of nuclear, hydrogen, geothermal, and abated gas, much of its focus remains on intermittent renewables without equally prioritising the stable, dispatchable energy supply that industries require. Expanding technology-inclusive policies and funding mechanisms is essential to prevent energy supply volatility and ensure long-term competitiveness for European industry.

Industrial competitiveness depends on reliable and affordable power. Manufacturing sectors such as steel, cement, and chemicals require uninterrupted, high-load energy that cannot rely solely on variable renewables (one-dimensional energy strategy). High-temperature industrial processes on the other hand also need nuclear heat, hydrogen, and geothermal—solutions the CID largely overlooks. Without these, industries face energy supply volatility and higher costs, making long-term planning and investments more difficult.

Data from CFE’s Annual Decarbonisation Perspective (ADP) highlights that an effective industrial energy mix must balance renewables, nuclear, hydrogen, and other dispatchable solutions to ensure competitiveness on a decarbonisation pathway. The Industrial Decarbonisation Accelerator Act should explicitly designate these technologies as eligible solutions for industrial heat and power. PPAs should also be expanded to include all clean technologies to provide price stability for industries.

The Approach to Industrial Decarbonisation is Overly Rigid

Rather than enabling regional flexibility, the CID dictates sector-specific decarbonisation pathways, preventing Member States and industries from selecting the most effective solutions based on local energy resources and infrastructure.

A one-size-fits-all approach discourages innovation and cost efficiency. Industrial decarbonisation should reflect the diversity of energy resources across Europe. Some regions have strong offshore wind capacity, while others have nuclear infrastructure or viable hydrogen storage. Imposing a rigid, uniform approach limits investments and increases costs.

CFE’s ADP is using data on renewable resource availability provided by Evolved Energy Research. The data seen in Figure 2 shows that renewable resources vary across Europe, especially showing lower availability in Central and Eastern Europe (CEE), reinforcing the need for flexible industrial policy. The Industrial Decarbonisation Accelerator Act must ensure Member States can support all viable decarbonisation pathways, including nuclear heat, CCS, and hydrogen infrastructure.

Figure 2. A map showing the renewable resource availability for the EU27, including onshore wind (light blue), solar (yellow), and offshore wind (dark blue).

The CID’s Energy Cost Relief measures Should be Strengthened

The CID does not adequately address Europe’s high energy costs, particularly when compared to the long-term price stability mechanisms available in the U.S. and China. Lower taxes and levies are not enough—industries need fixed-price, long-term energy contracts to remain globally competitive.

European industries already face higher energy costs and price disparities exist across Member States. High, unpredictable energy costs are one of the biggest threats to European industry, especially EIIs. Countries like Germany, Belgium, Italy, and Sweden experience significantly different industrial electricity pricing, affecting where companies choose to invest. The EU needs to activate all available tools and work with Member States to put in place a framework that provides the certainty needed for industry and facilitates competitiveness.

The Affordable Energy Action Plan must establish a Clean Energy Contract Mechanism, offering 10- to 15-year fixed-price contracts for low-carbon electricity, including nuclear and geothermal. The EIB’s PPA counter-guarantee scheme should also be expanded beyond wind to support all clean energy technologies that provide stable electricity for industrial users.

Without more aggressive energy cost relief measures, Europe will struggle to keep its industrial base competitive in a rapidly shifting global economy.

Call to Action: The CID is Only the Start

The Clean Industrial Deal is a necessary step in Europe’s transition to a competitive, decarbonised industrial economy, but it remains a work in progress. While the CID provides an overarching framework, many of the key mechanisms needed to secure industrial competitiveness are still missing or underdeveloped. Without stronger policies to stabilise energy costs, increase technology flexibility, and support diverse decarbonisation pathways, the CID risks falling short of its potential.

CFE urges the European Commission and co-legislators to take decisive action to close the gaps and ensure that industrial decarbonisation strengthens, rather than weakens, Europe’s competitive position. This requires:

• Acknowledging that the CID’s energy strategy requires fully integrating nuclear, renewable and low-carbon hydrogen, and geothermal heat solutions into future policies, ensuring that industries have access to stable, dispatchable, and cost-effective energy.
• Pushing for flexible decarbonisation pathways rather than rigid sectoral mandates, allowing industries and Member States to choose the most effective solutions based on their unique resources and needs.
• Creating fixed-price contracts for industrial clean energy to prevent price volatility, providing long-term cost certainty for energy-intensive industries and avoiding competitive disadvantages compared to the U.S. and China.

The coming months will be critical for shaping CID’s implementation. CFE will actively engage with policymakers, industry leaders, and stakeholders to ensure that competitiveness through decarbonisation remains at the heart of Europe’s industrial strategy. The success of the CID will depend on how well it aligns industrial strategy with economic realities, and CFE will continue to advocate for a framework that delivers both climate ambition and industrial strength.