Balancing Green Ambitions and Industrial Growth: The European Union’s Clean Industrial Deal 

On 1 December, the newly confirmed European Commission (Commission) officially took office. Prior to this moment, throughout the election campaign and following her re-election, European Commission President Ursula von der Leyen expressed her strong commitment to delivering support long demanded by businesses across Europe to urgently step up efforts to improve European competitiveness. The challenge for President Von der Leyen and her team of Commissioners is finding a way to increase support in a way that is compatible with the environmental ambitions of its flagship European Green Deal.  

The Clean Industrial Deal (CID) is the Commission’s direct response to the concerns raised by companies and conservative politicians about the stagnation of Europe’s economy and the impression that it is lagging behind China and the United States. Additional criticism has been directed at von der Leyen’s green agenda, carried out under the flagship European Green Deal, which many saw as burdensome on industry and a reason for this lag.   

The Clean Industrial Deal: From Regulation to Implementation

Following the consolidation of the presence of conservative and far-right politicians after the June 2024 EU elections—which also reflects a broader change in European society—President von der Leyen had to strike a balance between the demand of mostly right-wing parties, which called for scaling back the green agenda, and the other moderate forces, which insisted on staying on course with the European Green Deal, to secure her re-election. The result was the CID, a pragmatic approach to the green transition, designed to decarbonize while supporting businesses to make up for rising energy costs, costly supply chains and sustainability requirements. First announced in July 2024, the CID is both a political communication exercise and a strategic vision aimed at achieving decarbonization and economic growth in Europe. 

One of the CID’s main aims is to address the urgent need to preserve economic prosperity and industrial growth in Europe. With the prospect of an unfriendly U.S. administration and dangerous dependencies on critical technologies and materials from third countries, achieving the Green Deal’s targets is a challenge for many sectors. While previous efforts have focused on increasing the availability of critical materials and affordable energy—for instance through faster permitting and investment in clean technologies (e.g., Net Zero Industry Act) —many large companies raised concerns about a Green Deal that lacks a robust industrial strategy. Specifically, the reporting burdens and red tape hampering the development of clean technologies essential for Europe’s transition, compared to other regions, prompted calls for more immediate action to make investments in Europe more appealing for companies. Facing the risk of businesses relocating, the Commission had to readjust its approach to be more business friendly. 

The CID will build on previous achievements while ensuring efficient and effective implementation without adding additional burdens. It will strengthen the business case for decarbonization and support the industry in scaling up and innovating. It hopes to create the right conditions for turning decarbonization into a source of growth and quality jobs, helping companies remain globally competitive in clean tech sectors and ensuring citizens benefit from the green transition.  

The CID’s vision is comprehensive, seeking to unify EU tools for prosperity, competitiveness, decarbonization, and social fairness, building synergies among them. Key measures will be taken to simplify administrative processes, establish frameworks to develop lead markets and mobilize private funding for the green transition.  

Expected to be released on 26 February, the CID notably will prioritize decarbonization, investment and stock up of clean technologies and incentivizing investment. The Commission aims to reduce energy costs, create clean trade strategic partnerships for securing critical raw materials, clean energy and clean technologies and adopt new measures to boost competitiveness. This will be achieved through new policy measures such as a Competitiveness Fund and Industrial Decarbonization Action Plan to help hard-to-abate sectors on their path to climate neutrality. Furthermore, the Deal will foster a growth-conducive regulatory framework, supporting innovation, scaling, manufacturing and services provision by reducing red tape and administrative burdens. These measures will be developed in close collaboration with industry stakeholders through Clean Transition Dialogues to ensure targeted solutions for each value chain.  

A Shifting Paradigm

European policymakers are finally listening to business concerns. The new Commission’s approach will focus on enabling companies to meet green targets without sacrificing their competitiveness. Many of the new measures are a direct response to the challenges businesses face when operating in Europe. 

However, reacting to global initiatives is not enough to make Europe more attractive from a business perspective. As demonstrated with the Net Zero Industry Act, clean technologies and industries in Europe require faster permitting, reduced administrative burdens and strong economic incentives to navigate the challenging and burdensome path towards decarbonization.  The CID signals the Commission’s intention to continue this approach, encouraging companies to invest in Europe.  

The shift in the Trump administration to higher tariffs on imported goods could benefit the European Commission’s vision by making Europe a more attractive investment destination, necessary to achieve green goals. However, the results will depend on the capacity, financial support and incentives provided by the EU to attract the necessary resources.  

Whether the Commission will manage to pull off this delicate balancing act will depend on the actual measures and content of the CID. What is certain is that the EU is shifting from green regulation to deregulation, putting business and companies to be front and center of the EU’s agenda for the next five years. This new approach represents a pivotal moment for Europe, one that will determine whether the continent remains a relevant and competitive place for companies to keep on doing business. Making sense of this shifting paradigm at the EU level, and leveraging a more business-friendly political context, remains paramount for companies seeking to retain their foothold in Europe.