Legal Alerts/29 Jul 2025

EU’s New State Aid Framework Enables Support for Clean Industry

The European Commission adopted a Clean Industrial Deal State Aid Framework (CISAF) on 25 June 2025 to support implementation of the goals set out in the Clean Industrial Deal (see our Legal Alert on the Deal). The framework outlines state aid rules to support the decarbonisation of industry and the deployment of clean energy technologies. It aims to enhance predictability and certainty for businesses, encouraging investment whilst avoiding distortions to competition and trade. The framework recognises considerable investment needs to achieve Clean Industrial Deal ambitions, requiring mobilisation of funds mainly from private sources but incentivised or complemented by public funds where necessary. Support from states can be offered through various instruments, such as direct grants, tax benefits, subsidised interest rates on new loans, or loan guarantees. The rules will apply until 31 December 2030.

The Framework Simplifies State Aid Rules Around Five Pillars:

the roll-out of renewable energy and low-carbon fuels, including blue and green hydrogen
temporary electricity price relief for energy-intensive industries
decarbonisation of existing production facilities
the development of clean tech manufacturing capacity in the EU, and
the de-risking of investments in clean energy, decarbonisation, clean tech, energy infrastructure projects and projects supporting the circular economy.

In this Legal Alert, we highlight key aspects of the state aid rules for clean industry.

Key Takeaways:

The CISAF aims to simplify state aid rules bettering the EU Member States’ possibilities to support green transition, industrial decarbonisation, and clean tech,
The CISAF aims to stimulate private investment, by providing a bridge to overcome the investment gap,
The CISAF provides a stable framework until the end of 2030. Other state aid rules for the energy sector and environmental protection for example continue to apply in parallel,
The CISAF state aid will not be granted to entities otherwise facing financial or economic issues. Aid must not result in relocation of production or other activity, and
The CISAF state aid can take various forms – grants, tax advantages, or financial instruments.

Key Highlights: Renewable Energy Roll-out

The framework aims to accelerate renewable energy deployment to reduce dependencies, accelerate decarbonisation and secure stable and affordable energy prices. Central to this vision set out in the Clean Industrial Deal is the Commission’s recognition of renewable fuels of non-biological origin (RFNBOs), particularly renewable hydrogen, as essential components for decarbonising the EU energy system.

The renewable energy support may be granted through bidding processes or through administrative procedures by Member States. Competitive bidding aid must reflect auction outcomes without exceeding 100% of eligible costs. Administrative aid is capped at 45% of eligible costs with 20 percentage point increases for small enterprises and 10 percentage point increases for medium-sized enterprises.

The third category regarding energy aid is non-fossil flexibility support. Eligible investments include building new flexible capacity, increasing flexibility or installed power of existing capacity, extending operational lifetimes of existing capacity, and converting flexible generation assets from fossil to non-fossil energy sources.

The new regulation also permits Member States to temporarily reduce electricity prices for energy-intensive industries. The aid is required to make investments that contribute to the green transition and help reduce energy system costs. Member States may grant reductions from the wholesale electricity price for a certain share of electricity consumption, irrespective of the source of electricity supply. The sectors eligible for the reduction include mining and quarrying, food and beverage processing, textile, wood, and paper industries, and chemical and heavy manufacturing industries.

Key Highlights: Aid for Decarbonisation of Industry

To receive state aid in the case of already decarbonised processes, energy consumption per unit must be reduced by at least 10%; for all other processes, the reduction must be at least 20%. Overall, projects must result in actual emission reductions and not simply shift emissions elsewhere.

For investments related to biofuels, hydrogen, and biomass fuels, Member States must ensure that the supported fuels comply with the sustainability and greenhouse gas reduction criteria set out in the Renewable Energy Directive II (RED II).

Key Highlights: Aid for Manufacturing Capacity in Clean Technologies

State aid may be granted to support investment projects that expand manufacturing capacity for key clean technologies, including solar, offshore wind, batteries, heat pumps, geothermal, hydrogen, biogas, carbon capture, utilisation and storage (CCUS), CO₂ transport, electricity grids, and nuclear technologies.

Eligible costs include all tangible and intangible investments necessary for producing or recovering the relevant goods, such as land, buildings, equipment, intellectual property, licences, and know-how. Intangible assets must meet specific conditions.

Key Highlight: Schemes to Support Specific Innovation Fund Projects

The Commission will consider compatible with the internal market aid measures supporting three categories of investments: production and storage of clean energy, reduction of greenhouse gas emissions from industrial activities, and investments creating additional manufacturing capacity for clean technology products. A fundamental requirement is that projects must have been successful in the Innovation Fund evaluation and awarded a ‘Sovereignty Seal’ referred to in Regulation establishing Strategic Technologies for Europe Platform (STEP), (EU) 2024/795. This section creates specific compatibility conditions that go beyond standard state aid provisions to support exceptional clean technology projects.

Member States can choose to incentivise private investors to invest in projects in energy infrastructure within the framework of a legal monopoly or run under a natural monopoly, or in projects supporting the circular economy. The structure aims to achieve risk and return incentives for private investors through mechanisms such as first-loss guarantees or equity investments with differentiated share classes where returns are allocated preferentially to private investors up to defined levels. Crucially, financial intermediaries must share investment risks by co-investing their own resources or receiving performance-linked remuneration to ensure alignment with Member State interests.

If you have any questions about how the framework might impact your business or require assistance in compliance, please feel free to contact the undersigned or your regular Borenius contact.