Report: How the Clean Industrial Deal Can Benefit Central and Eastern Europe

Industrial Policy Ambitions in a Green European Framework

The European Commission aims to establish the CID as a cornerstone for achieving decarbonisation, thereby complementing the European Green Deal’s net-zero targets as well as innovation and competitiveness needs outlined in the Draghi report. Marzena Rogalska, Principal Adviser for Industrial Decarbonisation at DG CLIMA, emphasised that the CID would neither result in aimless industrial subsidies nor a change in ambition. Instead, it is designed to provide a simplified, predictable framework – a business proposition for investing in future-proof technologies.

This is not an attempt to put additional money to the industry that doesn’t do anything – this is a business proposition.

Marzena Rogalska, Principal Adviser for Industrial Decarbonisation, DG CLIMA

The CID is an overarching endeavour that will shape EU industrial policy for the next decade with its six pillars:affordable energy, stimulating demand for clean products, financing the clean transition, circularity and access to materials, acting globally, and promoting skills and quality jobs). To finance the transition, an Industrial Decarbonisation Bank will mobilise 100 billion euros in funding, with a pilot call for projects planned for 2025. Further amendments to InvestEU, and close collaboration with the European Investment Bank (EIB), aim to fund clean tech and innovation in the range of 50 billion euros. Finally, the Clean Industrial State Aid Framework (CISAF) will enable national financing, and Member States are encouraged to make use of existing mechanisms, like the National Energy and Climate Plans (NECPs), to fund their investments.

Central and Eastern Europe as the EU’s clean industrial hub

The CEE region faces significant challenges due to its heavy reliance on fossil fuels and energy-intensive industries, paired with limited financial resources and institutional barriers. At the same time, it has the opportunity to emerge as a regional hub for green industrial innovation, as Luciana Miu, Head of Clean Economy at think tank Energy Policy Group (EPG) laid out. Her research shows that the untapped potential of renewable energy, combined with a broad industrial base, provides fertile ground for regional clusters of clean energy and industry infrastructure. Key to leveraging this potential will be to develop national strategies, tailored to local strengths, taking a coordinated regional approach. This will require the use of existing EU funding mechanisms, ideally complemented with Technical Support programmes and fostering public-private partnerships.

The European Investment Bank’s latest Investment Report highlights high energy costs as a major obstacle for EU manufacturers, particularly to those in the CEE region – a barrier that will only increase in urgency once industrial electrification gains traction. These conditions demand attention and significant investment in energy and carbon infrastructure, such as hydrogen, carbon capture and storage (CCS) technologies, and industrial electrification, all of which are currently lagging behind.

As Fotios Kalantzis, Senior Economist and Climate Expert at EIB emphasised, another prerequisite for the CEE region leading in Europe’s clean industrial transition is the availability of skilled labour. Although the existing workforce cannot yet meet the upcoming demand, the region’s competitive labour costs combined with other strategic advantages, like renewable energy potential and opportunities for projects of common interest, such as CO2 networks, offer promising conditions.

To implement the CID in CEE, institutional capacity building will need to lay the groundwork for realising coordinated policies and tools, like carbon contracts for difference (CFD). Simultaneously, green financing frameworks (e.g. green bonds, sustainable finance taxonomies) and support from the European Investment Bank, will need to be combined into blended public and private finance tools. With sufficient coordination of stakeholders across countries, levels of governance, and the private sector, these opportunities may be leveraged to propel the region into a clean industrial hub and achieve the net zero targets laid out in the European Green Deal.