Legal development

Simplified State aid rules to spur the Clean Industrial Deal

By Donald Slater, Christophe Lemaire and Jessica Bracker

04 July 2025

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On 25 June 2025, the European Commission adopted its State aid Framework accompanying the Clean Industrial Deal (CISAF). The soft law document sets out how Member States can design State aid measures to support the objectives of the Clean Industrial Deal (CID).

What you need to know

The CISAF provides a wide-ranging and flexible toolkit for Member States to design State aid measures that accelerate renewable and low-carbon energy deployment, facilitate industrial decarbonisation, and boost clean technology manufacturing across the entire value chain. It expands support to all technologies contributing to the net-zero transition, including renewables, low-carbon fuels, and nuclear technologies.
The CISAF allows for a simplified and quicker assessment of State aid schemes in the relevant areas.
It replaces the Temporary Crisis and Transition Framework (TCTF) and will be in force until 31 December 2030, providing a stable planning horizon for Member States and businesses.
Other State aid communications (e.g. the Climate, Environmental protection and Energy Aid Guidelines) continue to apply in parallel and can be used by Member States for different and more complex measures.

State aid to support the Clean Industrial Deal

On 26 February 2025, the European Commission announced its CID initiative, which outlines a comprehensive roadmap for achieving a competitive and decarbonised EU industry. In its related communication, it identified financing as one key business driver for industrial growth and acknowledged the crucial role of public support in decarbonisation efforts.

The CISAF is an integral part of that initiative. It sets out how Member States can design State aid compliant measures to support the CID's objectives. More specifically, it allows Member States to set-up aid measures aimed at:

accelerating the rollout of renewable and low carbon energy;
facilitating industrial decarbonisation;
boosting manufacturing capacity in clean technologies;
de-risking private investments in the above areas but also in circular economy and energy infrastructure; and
temporarily supporting electricity costs for energy intensive users.

The main compatibility criteria for each type of measure are outlined in the Annex.

A wide-ranging and flexible toolkit for Member States

The CISAF builds on experience gained with the TCTF, a framework adopted to cope with the implications of the war in Ukraine and the US Inflation Reduction Act. On many aspects, it goes beyond the flexibility provided by the TCTF.

Its scope is broad and extends to:

all technologies contributing to the net-zero transition, including investments in renewables, low-carbon fuels (like low carbon hydrogen), and any solutions reducing greenhouse gas (GHG) emissions or energy use (even natural gas in exceptional cases). The CISAF now also allows support for manufacturing and value chains of all clean technologies covered by the Net Zero Industry Act (see our July 2024 update). This covers solar panels, wind turbines, batteries, heat-pumps, hydrogen technologies, sustainable biogas and biomethane technologies, equipment for carbon capture usage and storage (CCUS) and nuclear technologies. The inclusion of nuclear technologies marks a shift in EU State aid policy;
all industries investing in decarbonisation; and
aid to derisk private investments in the relevant areas, which is expected to unlock significant financing from private investors such as banks, insurance companies, business angels, pension funds and foundations.

The CISAF provides for higher aid ceilings compared with the TCTF, notably for aid for the manufacturing of clean tech or for hydrogen production and use.

Member States enjoy flexibility in designing their schemes. They can opt for investment aid and even operating aid in certain circumstances. They can also choose between different aid instruments (with some limits depending on the aid measure) and methods to set the aid amount.

A simplified and quicker assessment

In comparison to the Climate, Environmental protection and Energy Aid Guidelines (CEEAG), the CISAF streamlines and speeds up the assessment of State aid schemes by:

easing the need for a bidding process to allocate aid for less mature technologies (such as hydrogen);
removing the requirement for Member States to hold a public consultation on the competition impacts and proportionality of State aid for decarbonisation projects;
allowing a broader use of simplified methods to determine aid amounts;
providing target models and templates for certain types of aid; and
including safe harbours for evidencing compliance with certain requirements, e.g. regarding the minimum decarbonisation effects to be achieved.

The European Commission has committed to prioritise State aid to support the CID.

Safeguards to minimise competition distortions

The CISAF provides for several safeguards to minimise competition distortions, including:

mandatory competitive bidding processes for aid to mature technologies (such as wind or solar energy) and operating aid for low carbon fuels;
strict aid ceilings for aid not granted through a competitive tender;
a preferential treatment of aid in assisted areas and to SMEs;
claw back mechanisms; and
the set-up of decarbonisation schemes open to all sectors and technologies unless justified.

In addition, Member States must ensure that aid for decarbonisation does not displace investments into cleaner alternatives or lock in certain technologies.

Interactions with other instruments

Other State aid communications, such as the CEEAG, will apply in parallel and can be used for different and more complex measures. In particular, the following measures will need to be assessed under the CEEAG:

decarbonisation measures involving greenfield investment by new entrants, notably to review the impacts on competition;
aid for circular economy; and
aid for the development of energy infrastructure.

Member States can also rely on the General Block Exemption Regulation (GBER) to grant aid for investment in renewables or decarbonisation efforts without prior notification below certain monetary thresholds.

Aid for the generation of nuclear energy is not covered by the CEEAG or CISAF and must be reviewed individually by the European Commission. However, the European Commission has promised to provide a timely assessment of aid for nuclear projects, including small modular reactors, to ensure legal certainty.

Cumulation rules allow to combine aid under the CISAF with other State aid (e.g. IPCEI or R&D aid) and with EU Funding. The CISAF also provides facilitation for aid schemes supporting projects that have already been positively assessed under the EU Innovation Fund.

A longer term planning horizon

The CISAF applies from 25 June 2025 and replaces the TCTF. It will remain in force until 31 December 2030 to provide Member States and businesses with a longer investment planning horizon. The CISAF marks a shift from a crisis response framework to a longer term competitiveness agenda.

Conclusion

The CISAF sends a strong message to both Member States and businesses, highlighting significant investment opportunities across a wide range of industries and stakeholders. Companies with ongoing operations in Europe stand to have priority access to funding under the framework. In departure with previous communications, the CISAF expressly encourages Member States to incorporate European preference criteria when allocating aid.

The CISAF seeks to strike a delicate balance between promoting the decarbonisation of EU industries and preserving their competitiveness. This objective is reflected in several key changes from the draft CISAF published in March 2025, such as the temporary extension of support for energy-intensive users and the introduction of greater flexibility regarding eligible technologies.

Finally, the CISAF provides opportunities for companies to benefit throughout the entire value chain of clean technologies. For example, in the hydrogen sector, support may extend from electrolysers and storage solutions to hydrogen-ready direct reduced iron reactors. While the overlap between different types of rules introduces a degree of complexity (particularly regarding the cumulation of aid) this complexity also creates new opportunities to fund the full spectrum of key technologies essential for Europe’s green transition.

Annex: Overview of the main compatibility criteria for each category of aid

Aid to accelerate the rollout of clean energy

	ROLL OUT OF RENEWABLE ENERGY	LOW CARBON FUELS
Scope	Member States can set up schemes supporting investments in: (i) renewable energy, including solar energy, wind energy, biofuels, renewable fuels of non-biological origin (RFNBOs) such as green hydrogen; (ii) storage for renewable energy; and (iii) thermal and electricity storage.	Member States can set up schemes supporting investments in: (i) low-carbon fuels, including recycled carbon fuels, low-carbon hydrogen, and synthetic gaseous; (ii) projects combining low carbon fuels and RFNBOs; and (iii) storage of low carbon fuels. This possibility was introduced following the public consultation on the draft CISAF.
Form of aid	Member States can provide: (i) investment aid; and/or (ii) direct price support (i.e. operating aid). Member States can use different instruments, including feed-in premiums or two-way contracts for difference (CfD). CfD, with a maximum duration of 25 years, are mandatory for aid to produce electricity from renewables.
Proportionality	Both types of aid can be granted through a competitive bidding process or administratively. By derogation, a competitive bidding process is mandatory for aid to produce electricity from renewable sources (except for aid to demonstration projects and to small projects). Member States can finance up to 100% of the eligible costs when they a run a competitive bidding process. Investment aid granted administratively is limited to 45% of the investment costs (with a bonus available for SMEs).	Investment aid can be granted through a competitive bidding process or administratively. Member States can finance up to 100% of the investment costs when they a run a competitive bidding process. Otherwise, the aid intensity is limited to 20% of the investment costs (with bonus available for SMEs). Direct price support can only be granted following a competitive bidding process.
Safeguards to minimise distortions	Beneficiaries must be encouraged to operate efficiently and preserve market price signals. In particular, they must be (i) discouraged from offering their output below their marginal costs; and (ii) barred from receiving aid when the market value of production is negative.
Timing for funded projects	Supported renewable energy projects must be implemented within 48 months to ensure an effective acceleration effect (except for offshore wind, hydropower, and RFNBO-production plants). An effective system of penalties should be in place in case this deadline is not met.	There is no timing requirement except for storage projects.

The CISAF also sets out specific requirements for State aid for flexibility and capacity mechanisms, which may be necessary to ensure that decarbonised electricity systems remain secure and deliver affordable energy.

In particular, the CISAF defines ‘target model' capacity mechanisms, where Member States pay electricity providers to maintain standby capacity, which can qualify for fast-track clearance. Other designs will be assessed under the CEEAG.

Temporary support for electricity costs for energy intensive users

Scope and eligibility	Member States can provide support for electricity costs for energy intensive users, i.e. companies active in sectors that rely heavily on electricity and are particularly exposed to international trade. Only sectors which are at significant risk of relocation outside the EU, as defined in Annex 1 of the CEEAG, are eligible. This includes the steel, aluminium, glass, chemical and paper sectors. In return for receiving price support, companies must invest in decarbonisation.
Form of aid	Aid takes the form of a reduction in wholesale electricity price paid for a certain share of electricity consumption.
Proportionality	Aid can cover up to 50% of the yearly average wholesale market price for the beneficiary, but only for up to half of its annual electricity consumption. The reduced price cannot go below 50 EUR/MWh for the eligible consumption. Beneficiaries must invest at least 50% of the aid amount into decarbonisation measures to reduce electricity system costs.
Duration and timing for decarbonisation project	Aid can be provided to beneficiaries for a maximum duration of three years. Beneficiaries must in principle commence their investments in new or modernised assets within 48 months of receiving aid.

Aid for industrial decarbonisation

Scope	Member States can set-up schemes to support investments reducing GHG emissions or improving the energy efficiency of industrial activities. The material scope is broad: (i) all industries can be supported with a few listed exceptions (aid can even cover energy generation, storage and transport under specific requirements); and (ii) all technologies used for achieving decarbonisation are eligible. Potential technologies include electrification, hydrogen or the use of carbon capturing equipment. Projects relying on natural gas can also exceptionally be supported. Aid schemes should in principle cover all sectors and decarbonisation technologies, unless justified. A safe-harbour exists for schemes covering all installations within the scope of the EU Emissions Trading Directive. Aid must not finance an increase in the overall production capacity of the beneficiary.
Form of aid	Aid can take the form of direct grants, repayable advances, loans, guarantees or tax breaks.
Minimum decarbonisation or energy efficiency effects	To be eligible, the investment must either: (i) lead to a reduction in direct GHG emissions compared with the situation which would not take place without the aid and is consistent with the EU Climate Law targets (safe harbours are provided in the CISAF to prove this); or (ii) cut the energy consumption by at least 20% (and 10% for already decarbonised processes). More significant decarbonisation (70% reduction) or energy efficiency (40% reduction) effects must be demonstrated for projects relying on natural gas. Additional specific requirements apply for support for biofuels and hydrogen and for support for carbon capture products. Member State must demonstrate that indirect GHG emissions linked to the eligible projects do not offset direct GHG emissions' reductions achieved through the investment. Safe harbours exist, including for indirect emissions from hydrogen used in decarbonisation projects. Aid for decarbonisation must not displace investments into cleaner alternatives or lock in certain technologies. Natural gas can be used exceptionally if there is no alternative solution available and a clear plan to phase out natural gas by 2040.
Proportionality	Member States can choose between three alternative methods to set the maximum amount of aid, namely: (i) the aid intensity methodology; (ii) a funding gap analysis accompanied by a claw-back mechanism; or (iii) a competitive bidding process. For aid the intensity methodology, the maximum aid intensity depends on the decarbonisation technology used. The higher aid intensity (60%) is for investments enabling the use of hydrogen when at least 40% of the mix is renewable; Individual aid exceeding EUR 200 million or 10% of the budget of a scheme need to be notified separately to the European Commission.
Time for funded projects	The supported projects should be implemented within 60 months from the date of granting to ensure an effective acceleration effect. An effective system of penalties should be in place.

Aid to ensure sufficient manufacturing capacity in clean technologies

Scope	Member States can provide State aid for investment in sectors strategic to the net zero transition, namely: (i) production of all technologies covered by the Net-Zero Industry Act including, wind turbines, solar panels, batteries, heat pumps, geothermal power plans, electrolysers, hydrogen fuel cells, sustainable biogas and biomethane technologies, carbon capture equipment, nuclear technologies; (ii) production of main components used as direct input to produce the above equipment; and (iii) production or recovery of related critical raw materials necessary to produce the equipment and main components described above.
Type of measure	As was the case under the TCTF, Member States can: (i) set-up schemes to support the necessary investment in the above areas, or (ii) under strict conditions, provide ad hoc aid to companies to match the level of support offered in third countries for a particular project, to avoid such investments being diverted away from the EU (so called "matching aid"). The CISAF also allows for new tax incentives schemes in the form of accelerated depreciation of costs incurred for the acquisition of the equipment mentioned above.
	Investment aid schemes	Ad hoc matching aid
Main Criteria	The maximum amount of aid awarded under the scheme depends on the size of the company and the location of the investment. For example, large companies can receive 15-35% of their eligible investment costs, with direct grants capped at between EUR 150 million to EUR 300 million per project. Higher aid intensities (up to 55% of the eligible costs) will be available for aid to SMEs for investments in assisted areas. Beneficiaries must contribute at least 25% of eligible costs with their own resources or private financing.	The State aid would need to meet strict conditions to be approved, including: (i) the beneficiary must demonstrate that without the aid, the investment would not take place in the EEA; (ii) the investments must in principle take place in EEA areas that are less economically advantaged (so called "assisted areas") unless justified; (iii) the beneficiary should use state-of-the-art production technology; (iv) the aid amount must not exceed the lower of: (a) the amount the beneficiary could receive for a similar investment in a third country, or (b) the minimum needed to incentivise the investment in the EEA instead of a non-EEA jurisdiction; (v) a claw-back mechanism should be included in markets with an increased risk of future market volatility to avoid excess profits; and (vi) the aid must address an existing demand-supply gap within the EU.
	The aid cannot trigger relocation of investments within the EEA. Beneficiaries must commit to maintaining the investment in the area concerned for at least five years following completion of the project (or three years for SMEs).

Aid to de-risk private investments

Scope

Member States can set up schemes to derisk private investments in renewable energy, low-carbon fuels, industrial decarbonisation, clean tech manufacturing, certain energy infrastructure, and projects supporting the circular economy.

Form of aid

Aid can take the form of equity, loans, or guarantees provided to a dedicated fund or special purpose vehicle (SPV) which holds a portfolio of eligible projects.

The investments from the fund or SPV into eligible projects can take the form of newly issued equity, quasi-equity, loans and guarantees.

The aid scheme must be implemented by a financial intermediary, which will select the eligible projects and investors.

Proportionality

The duration of loans or guarantees should not exceed 20 years.

Nominal investments into individual projects cannot exceed EUR 250 million, and must not account for more than 25% of the fund's or SPV's total financing volume at closing.

Private investors in the portfolio should in principle be selected through a clear, transparent and non-discriminatory procedure. Otherwise, Member States should comply with strict conditions regarding the level of risks and the level of the premium to ensure proportionality of the aid.

Financial intermediaries should be remunerated on market terms, which will be presumed if they are selected through a clear, transparent and non-discriminatory procedure.

Authors: Róisín Dunlea, Trainee