Clean Tech Manufacturing Aid – Will it boost local sustainable production?

A new industrial push from Brussels

On 2 July 2025, the European Commission presented the first implementation package of the Clean Industrial Deal. Behind it lies a clear political goal: Europe should not only set ambitious climate targets but also produce the clean technologies needed to achieve them. The new framework for state aid and investment incentives is intended to accelerate the development of local capacities for renewable energy, low-carbon manufacturing, and strategic materials – in an environment where global competition is fierce and time is short.

The link to CBAM and competitiveness

Although the Clean Industrial Deal goes far beyond the Carbon Border Adjustment Mechanism, the two are closely connected. CBAM levels the playing field at the border by pricing embedded emissions in imports. The Clean Industrial Deal addresses the other side: it aims to ensure that EU manufacturers have the means to invest, innovate, and meet the increasingly strict emissions requirements that CBAM, in conjunction with the EU Emissions Trading System, will enforce. For many companies, this means shifting supply chains towards low-emission – and thus cheaper – production, with inputs and processes designed to minimise resulting CBAM costs.

A look at state aid

The new state aid framework of the Clean Industrial Deal replaces temporary crisis instruments with a stable, long-term structure. It allows Member States to support energy-intensive industries, reduce electricity costs, and promote decarbonisation projects – in return for binding emissions reduction targets. This predictability can make it easier for companies to justify investments in local production lines or to source more from European, low-emission suppliers. For procurement, this could mean that low-carbon domestic alternatives become more price-competitive compared to imports, which will likely face higher CO₂ costs. Export leakage and local value creation One particularly controversial CBAM issue – export leakage – is also addressed in this package. The Commission plans a dedicated support instrument for EU producers competing in markets without comparable CO₂ pricing. If designed appropriately, this could strengthen local production capacities and retain entire value chains within the EU – from raw materials to finished products. For CBAM sectors, the combination of border measures and industrial support could mark a turning point: local sourcing would then not only be a compliance strategy but also a cost advantage.

Green industrial policy

With CBAM transitioning into full application from 2026, the emissions intensity of production inside and outside the EU will be decisive. The new state aid rules, tax recommendations, and energy reforms of the Clean Industrial Deal aim to create the conditions to meet the EU’s ambitious climate goals in a way that is compatible with industry. If successful, the European industry could gain a competitive edge, and investments in European manufacturing meeting the highest climate standards could increase.

Sensible subsidisation?

On the other hand, subsidies for more climate-friendly production in Europe are also viewed critically in some quarters. Ultimately, such measures could be seen as “stranded assets” – lost taxpayer investments. Even if industry in Europe becomes electrified, it would still face a competitive disadvantage compared to regions where renewable energy is cheaper to produce. These higher energy costs, whether from electricity or hydrogen, could ultimately require further subsidies to offset the competitive gap with green producers in, for example, Australia or South America – even after green production has already been subsidised. Outlook In the coming months, it will become clear whether the new measures actually lead to projects and capacity building. By the end of the year, the Commission is also expected to present proposals for expanding CBAM to downstream products, for anti-circumvention measures, and for the export support system. For companies, the intersection between industrial policy and the CO₂ border adjustment will become increasingly relevant – and strategic procurement decisions will in future depend not only on price and quality but also on how climate-friendly production is.

Support with planning

If you would like to know how the Clean Industrial Deal could affect your CBAM exposure, your supply chains, or your investment decisions, we are happy to support you with analysis and strategic alignment.