EU clean industrial deal targets lower costs, focus on Europe purchasing

LONDON (ICIS)–A new framework aimed at increasing the competitiveness of European industry is targeting lower energy costs and stronger purchase incentives for local and sustainable products, according to a leaked early draft of the measures.

• New legislation intended to reduce energy costs for industry
• Increased focus on purchasing local products
• No watering down of decarbonisation targets

A draft text of the European Commission’s Clean Industrial Deal sets out plans to strengthen the markets for sustainable products and provide greater assistance for heavy industry to cope with energy costs, rather than easing decarbonisation targets.

Details of the industrial deal are set to be released formally on 26 February

ENERGY
European industry has increasingly struggled to remain viable in the wake of surging energy costs on the back of the region’s shift away from Russian natural gas since 2022.

The Commission has discussed various options to mitigate this in recent weeks, including an energy price cap.

The draft deal text – which is incomplete and subject to change –  proposes that the European Investment Bank (EIB) backstop power purchase agreements for small and energy-intensive businesses. Modernising the bloc’s grid infrastructure is also a priority.

The EIB would counter-guarantee part of the PPAs taken on by businesses for long-term renewable energy purchases, to lower the cost of investing and provide guarantees allowing green power projects to move forward.

In a bid to push down energy prices in the short-term, the Commission is also pushing for member states to cut electricity taxes to the legal minimum thresholds for industrial players investing in decarbonisation.

The Commission is currently scrutinising the functioning of Europe’s gas markets through a task force set up this month.

EUROPE FOCUS
 “European preference criteria” are set to become a prominent factor in public and private procurement, according to the draft text, as well as new labelling for industrial products to more clearly delineate greener products from fossil-based ones.

The new measures could set out “minimum local content” requirements along with more robust sustainability criteria for public procurement, as well as exploring options for embedding similar “non-cost criteria” into product legislation.

CIRCULARITY, HYDROGEN
The Commission could be set to limit the export of waste raw materials deemed critical for circular production, and is expected to ease restrictions on movement of raw materials across the region in the Circular Economy Act, expected next year.

Policymakers are also looking to clarify rules on low-carbon hydrogen production, and are set to launch a third call for projects through the Hydrogen Bank, the auction house set up to incentivise projects and investment, in the third quarter 2025.

CBAM REFORMS, DECARBONISATION TARGETS
With a targeted package for the chemicals sector, which the draft text refers to as the “industry of industries”, expected towards the end of the year, the Commissions’ review of the proposed carbon border adjustment mechanism (CBAM) continues.

Intended to levy fees on the CO2 emissions of energy-intensive goods imports such as steel and fertilizers, the Commission is proposing to simplify the framework ahead of its roll-out next year, and reduce the administrative burden on businesses.

A review of the planned measures will be released in the second half of 2025, which will also see potential for CBAM to be extended to other downstream products.

Chemicals sector executives have largely opposed the prospect of CBAM being applied more widely to products from the sector.

While the draft clean industrial deal text prioritises reducing the cost burden of the energy transition, no move has been made to water down the overall carbon reduction targets in place in the region. The target remains to become a decarbonised economy by 2050, and cut emissions by 90% by 2040.

Focus article by Tom Brown.

Thumbnail photo: At the European Council, Brussels (Source: Shutterstock)