Clean Industry: the EU’s Newest Deal

In 2019, we got the Green Deal. This week, it’s the Clean Industrial Deal (CID). The European Commission presented this week its flagship initiative for this mandate to shore up flagging industrial competitiveness with global competitors. Introduced by the same Commission President who brought us the Green Deal, Ursula von der Leyen keeps decarbonisation as a key theme of her newest Deal (hence, clean) but it is clear a new priority is top of mind.

Climate change is no longer a key issue in public opinion- the economy is. That’s why the accompanying initiatives launched with the CID included an Action Plan for Affordable Energy (APAE, if you want an egregious Brussels acronym) and a legislative proposal to simplify sustainability reporting rules for businesses and EU investments. With so much in one day, it might be forgiven that you didn’t make it through everything. So today, we are digging into what you need to know.

Cleaning industry

The CID was published one year – nearly to the day – after the Antwerp Declaration, leaving little room to wonder what its political purpose entails. After over a thousand industrial players across Europe signed the aforementioned Declaration, including Eurelectric, the new Commission would have been hard pressed to turn a blind eye to their call for support with clean objectives.

Then, on the day of publication, President von der Leyen- alongside Executive Vice-Presidents Teresa Ribera and Stéphane Séjourné and Commissioner Wopke Hoekstra joined a high-level anniversary event of the Antwerp Declaration to celebrate the delivery of the CID in a timely manner. Eurelectric joined with our Vice President and CEO of Fortum , Markus Rauramo at the table, as well as our Secretary General, Kristian Ruby . So, now that we have it, here’s what it’s made of.

Inside the Deal

The Deal is made up of six pillars:

1. Access to affordable energy (with an action plan to support it on the same day)
2. Lead markets for clean supply and demand
3. Public and private investment
4. Secure access to materials and resources
5. Global markets and partnerships
6. Jobs and skills

Overall, the document reads well. As asked for throughout the changeover process, there is a big emphasis on implementing previously agreed-upon legislation from the last term, to maintain investor confidence and stay the course. Meanwhile, while not including an Electrification Action Plan until 2026, it does introduce an electrification key performance indicator (KPI) of 32% - a mere three percentage points lower than our initial call for a 35% electrification by 2030. More importantly for getting there, the CID also calls for a favourable taxation system for electrification by ending its unfair treatment compared to other energy carriers, as well as a proposed Industrial Decarbonisation Bank (that we interpret as an Electrification Bank) that will offer €100 billion in funding for industry that takes steps towards decarbonisation, including through direct electrification. It is quite clear that electrification remains at the heart of the Commission’s plans.

Nevertheless, some points require further attention. Some aspects leave the door open to sweeping market interventions. The approach to grid tariffs also seems like it could distort their purpose, and stringent requirements for public procurement may have a negative impact leading to bottlenecks in supply chains. Beyond that, there are also a lot of question marks raised. It remains short on details and specific measures to deliver on said objectives. The real impact of the CID will come when the legislative elements are dropped, so for now, we can only read into it so much.

Making energy affordable

More concretely, the Commission is getting to work on affordable energy immediately. The Action Plan for Affordable Energy proposes eight actions that can be taken straight away, with initiatives spanning across 2025, into 2026 and even up to 2027 in some cases. These eight actions include:

1. Making electricity bills more affordable
2. Bringing down the cost of electricity supply
3. Improving gas markets for fair energy prices
4. Delivering energy savings via improving energy efficiency
5. Completing the Energy Union
6. A tripartite contract for affordable energy?for Europe’s industry
7. Security of supply for price stability
8. Price crisis preparedness?

The Action Plan goes in a positive direction, with implementation of the electricity market design (EMD reform) being a top priority. It also looks at incentivising long-term contracts to provide greater price visibility, reducing permitting times for clean energy and grids, and doubles down on the internal energy market as the best way to take advantage of our clean energy potential and end reliance on fossil fuel imports.

A couple things we will be watching out for is any mention of the Iberian mechanism, where subsidies to thermal plants were the default option for lowering electricity prices during a crisis, which could do more harm than good to the internal market. Network tariff developments are also concerning here. As mentioned above, the proposal could actually fail to address local specificities and lead to worse, rather than better, outcomes ?for energy affordability.

Nonetheless, the Action Plan brings a lot of good measures to the table and we look forward to a busy 2025 and working towards more affordable, secure and reliable energy.

Simplifying sustainability and investments

A final mention before wrapping up, the Commission also came with some legislative proposals on Wednesday under an Omnibus package (actually, there were two, but since it’s a package, let’s use the singular). The two packages focused on reporting for sustainability and EU investment rules. Overall, the objective here is to simplify as much as possible, especially for small and medium enterprises (SMEs).

The logic goes that the Commission can remove a massive chunk of EU companies from reporting under regulations like the Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD) and the Carbon Border Adjustment Mechanism (CBAM) and still cover almost all emissions and sustainability concerns. Basically, cut red tape that does not serve much of a purpose. Meanwhile, investment rules for InvestEU are also simplified. These pieces of legislation, however, are much more complex and will need time before a sound opinion can be drawn.

Next up

From these three initiatives, there is a lot in front of us. We still miss, for example, a State aid framework that will support the projects needed to deliver on these objectives, which was originally expected to come on Wednesday as well. Meanwhile, the Action Plan references the pending proposal of the 2040 climate target which was also pulled out of the package on Wednesday at the last minute. These two should be coming very soon and a lot more legislation will follow in the coming months.

Indeed, the quiet period is over as the newest Deal makes inroads. Stay tuned as this will be a recurring topic for years to come.

This week's edition written by:

Nicholas A. Steinwand, Advisor - Policy Communications, Eurelectric

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