Simplification or deregulation? Evaluating the EU’s Clean Industrial Deal and Action Plan for Affordable Energy

by Matti Gurreck, Postdoctoral Researcher at the University of Eastern Finland

Photo by Ellie Meh on Unsplash. 

The European Commission published its flagship policy package called the Clean Industrial Deal (CID) on 26 February 2025. In the run-up to the CID, environmental groups feared the new Commission’s plans might be a backlash for the environmental measures introduced under the European Green Deal (EGD) and the Fit for 55 package. This blogpost highlights key issues of the CID and discusses whether and to what degree the CID constitutes a step back from the sustainability ambitions of the EGD.  

Threat of deregulation – Antwerp Declaration, Political Guidelines, Draghi report  

Roughly speaking, the CID is to the current von-der-Leyen-II-Commission what the EGD was to the von-der-Leyen-I-Commission: a plan laying down the Commission’s priorities for the next 5 years. It sets the tone for the years to come and elaborates the priorities of the EU administration. It emerged in the context of the Antwerp Declaration, the Political Guidelines and the so-called Draghi report. The former is a statement issued by industry representatives calling for a “European industrial deal”, published almost exactly one year before the CID. Among its demands to the EU Commission are an “omnibus proposal to take corrective measures on all relevant existing EU regulations” (demand #1) and, overall, a “new spirit of law-making”, which avoids “that the Green Deal policy targets are followed by prescriptive and detailed implementing regulations” (demand #9). On the first point, the omnibus proposals, the Commission has already delivered, weakening rules on sustainability reporting.  

This was followed in July 2024 by von der Leyen’s Political Guidelines that echo a similar emphasis as the Antwerpen Declaration and focus primarily on competitiveness. While references to sustainability can be found throughout the document, only 2 of its 30 pages address ecological aspects directly under the heading “Sustaining our quality of life: food security, water and nature”. In it, there is no mention of the fact that the food system is the biggest driver of biodiversity loss. Instead, the section aims to please farmers, remaining vague on the necessity to protect the natural world and to implement the Kunming Montreal Global Biodiversity Framework. It speaks of safeguarding food security but omits to mention that biodiversity loss is one of the factors threatening food security.  

Similarly, the Draghi report is mostly about competitiveness and decarbonisation. The CID and the Action Plan on Affordable Energy explicitly refer to the Antwerp Declaration and the Draghi report, underlining that they respond to both documents. 

This development, together with the increase of conservative and right-wing MEPs following the 2024 European Parliament election and the delay of the Anti-Deforestation Regulation, is part of a deregulation trend at EU level, which prioritises short-term economic interest and views environmental regulation as a burden. 

Goals and content of the CID  

The CID aims to decarbonise the economy, boost the clean tech sector and reach the EU’s climate targets while preventing de-industrialisation. For this, the Commission wants to “simplify” some of the rules introduced under the EGD, accelerate the rollout of renewable energy, increase demand for clean products, lower energy prices, improve circularity of material, especially those critical for the transition, and enhance cooperation with third countries. The underlying logic is that industry is deemed essential for climate action because of its ability to foster the necessary innovation. What the text does not account for is that this relationship reciprocal: climate action is mandatory to maintain competitiveness. This is well exemplified for example, by low water levels in rivers following droughts and heatwaves which diminishes their suitability to cool nuclear power plants in France and for shipping of commercial goods in Germany.  

With a focus on energy-intensive industries and clean technology, competitiveness is at risk according to the Commission because of high energy costs, unfair global competition, and complex regulation. The actions proposed by the CID are structured into six business drivers across the entire industrial value chain: (1) affordable energy, (2) lead markets, (3) financing, (4) circularity and access to materials, (5) global markets and international partnerships and (6) skills. The CID wants to complement these business drivers with actions on “horizontal enablers” necessary for a competitive economy: cutting red tape, fully exploiting the scale of the Single Market, boosting digitalisation, accelerating the deployment of innovation, promoting quality jobs and better coordinating policies at EU and national level. 

The first business driver, affordable energy, is further detailed on in another communication called Action Plan for Affordable Energy, which was published on the same day as the CID. Two further communications on the automotive industry followed a week later. Similar publications are planned for the steel and chemicals industries. Each of these documents specifies issues mentioned in the CID and announces measures to be adopted in the future. The CID alone lists 40 actions to be taken, ranging from issuing guidance, proposing new legislation as well as changing existing legislation to institutional additions like the “Trans-Regional Circularity Hubs” or an “Industrial Decarbonisation Bank”.   

To finance energy transition projects and clean tech, the CID inter alia announced a “Clean Industrial Deal State Aid Framework” for Q2 2025. State aid, like several other provisions, are supposed to be “simplified”, allowing for a quicker approval of Member State measures. Although this is supposed to be achieved while avoiding market distortions, Member States face very different financial situations. In practice, this means that the majority of subsidies is paid by just two Member States, German and France, which try to match subsidies paid by the USA to attract businesses. This has already led to smaller Member States calling for stricter rules to maintain a level playing field. There is thus the danger of a global subsidy race that poorer Member States simply cannot engage in. 

Furthermore, it remains unclear what exactly the simplification of the state aid rules will entail. There is no mention of the ecological and social dimensions that Member State’s support needs to address. Without it, there is a risk of heavily subsidising energy-intensive industry that will not contribute sufficiently to EGD objectives.  

The CID also foresees amendments to the CBAM, based on a review of the instrument which will assess a possible extension of the scope of CBAM to additional EU ETS sectors and downstream products and including indirect emissions. While this sounds like strengthening the instrument, the changes will be made in the spirit of “simplification” and “reduction of the administrative burden”, which sparked fear it might, on the contrary, weaken the CBAM. That is especially so, because in the legislative procedure, once opened, the European Parliament and the Council might introduce more changes than originally envisioned by the Commission.  

The Action Plan for Affordable Energy 

The Action Plan for Affordable Energy outlines eight actions across four pillars: (1) lowering energy costs, (2) completing the Energy Union, (3) attracting investment and ensuring delivery, and (4) being ready for potential energy crises.   

On energy taxation, the Commission urges the Member States to adopt the revision of the Energy Taxation Directive, already proposed under the last Commission and the only piece of legislation not successfully adopted as part of the Fit for 55 package. Disagreements among Council Members revolved around the economic impact of new taxation rules which varies depending on a Member State’s energy mix and reliance on certain fuels. Some Member States feared their energy-intensive sectors could be placed in a competitive disadvantage by the amendment. Also, the proposed changes would cause some Member States to forgo significant tax revenues. How the Commission plans to convince the Council to unanimously agree on a revised tax Directive remains unclear in the CID (as a tax matter, the Directive requires unanimous decision by the Council, articles 113 and 192(2), first subparagraph, point (a) TFEU). Nevertheless, the current Directive is in great need of revision, as it is more than two decades old and not in line with the climate ambitions of the EGD, containing for example tax exemptions for jet fuels in article 14(1) point b). 

Regarding the acceleration of renewable energy deployment, the Commission announced a guidance as well as yet another revision of the current legal framework. Simplifying environmental assessments and shortening permitting procedures for renewables projects is supposed to benefit renewable energy, including grids and storage infrastructure. The CID wants to achieve this by introducing shorter deadlines and rules on tacit approvals for certain administrative decisions as well as one-stop shops for renewables developers. The proposal is supposed to be part of a “European Grid Package”, expected in Q1 2026. It is commendable that renewables remain one of the priority issues for the Commission and that it focusses on implementing the Renewable Energy Directive (RED) by issuing guidance on specific forms of renewable energy (like AgriPV) and on dedicated grid and storage areas, since Member State authorities often lack experience on these issues. Furthermore, the Action Plan rightly acknowledges the fact that national permitting authorities are often insufficiently staffed. However, sufficient human capital in the competent authorities is ultimately for the Member States to ensure, which is why the CID only calls on them to take action.   

Scepticism is warranted about the CID aims to maintain environmental safeguards while at the same time “simplifying” environmental assessments. The 2023 revision of the RED as well as the Emergency Regulation were already criticised for accelerating renewables deployment at the cost of nature protection. Given that renewable energy projects – in various degrees – entail negative impacts on nature, for example on habitats or by increasing the mortality risk on certain species, reducing environmental assessments will invariably be to the detriment of nature. Regrettably, the CID does not contain concrete solutions on how to mitigate the conflict between nature protection and renewables deployment but will probably favour the latter over the former.  

Also, and more generally, the rules on renewables deployment have changed several times in recent years, which included the introduction of short deadlines for permitting. It may therefore be more expedient to observe how effective the still new legislative framework will be in practice. At any rate, constant change to the law on renewable energy is certainly not conducive to legal certainty required by project developers and investors.  

The “European Grid Package” mentioned above will also include measures to strengthen trans-European energy networks, as regulated in the TEN-E Regulation, and to increase the number and the capacity of interconnectors. Placing grids high on the political agenda is to be welcomed as they face growing challenges with increasing shares of renewables in the system. Interconnectors are the physical preconditions of EU-wide electricity trade and have for a long time not received the required attention. Subject to further details, the Grid Package is therefore a positive element in the Action Plan for Affordable Energy.  

Energy efficiency is also mentioned in the plan, although it does not seem to be a particularly strong part of the package, leaving the full potential of energy efficiency untapped. The Commission aims to increase energy efficiency by improving access to capital and financial incentives for service providers focussing on energy efficiency solutions for businesses. The EIB Group’s programme for SMEs to enhance competitiveness, promote energy-efficient solutions, and strengthen climate resilience will be supported. Apart from that, consumers should be given access to more efficient appliances and products with longer lifetimes.  

Initial assessment: Shifting priorities 

Overall, the CID will probably not dismantle the EGD but might weaken its core objectives at a time that should be dedicated to implementing them. The climate goals are held up and the Commission wants to incentivise electrification with renewable energies. Encouragingly, the CID focuses on grids and flexibility and aims to support lead markets for clean products. At the same time, the Commission plans to conclude long term gas contracts with third countries. This could result in a lock-in and cast doubt on the notion that gas is only a temporary fuel for a transition period before being phased out. 

On financing the transition, the CID contains various ideas including using the Innovation Fund and introducing a Competitiveness Fund. The discussions about these Funds will have to be linked to the upcoming post-2027 Multiannual Financial Framework. Regarding state aid, the CID remains vague in terms of ecological conditionalities.  

The CID’s focus is very much on decarbonisation and reaching the climate targets for 2040 (90% GHG reduction) and 2050 (climate neutrality). At the same time, biodiversity and pollution as the other two environmental crises are almost non-existent in the documents. The latter is addressed only insofar as critical raw materials for the energy transition are concerned; “clean” primarily translates to carbon neutral. 

Even though one will have to wait for further details in the announced legislative proposals and other measures, it is now clear that the priorities have shifted: The flagship policy package’s narrative is less about a holistic view on the sustainable transformation of various aspects of society – as was the case with the EGD – but narrowly focussed on energy-intensive industries and decarbonisation. The Commission makes no secret of the fact that the CID is to a large extent about correcting the EGD as demanded by industries in the Antwerp Declaration, which is referenced directly in the CID as well as the Action Plan for Affordable Energy.  

This research is funded by the European Research Council (INTEL 101160605). Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or ERCEA. Neither the European Union nor the ERCEA can be held responsible for them. This research is also supported by the Research Council of Finland (361603).