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The EU Clean Industrial Deal (CID): tax incentives and benefits

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EY Denmark

Multidisciplinary professional services organization.

28 Nov 2025
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Tax

The European Union’s new Clean Industrial Deal (CID) offers an opportunity for businesses willing to act early and position themselves ahead.

In brief
  • CID mobilizes €100B to boost clean tech, streamline state aid, and drive EU industrial decarbonization.
  • Member States expected to offer tax incentives: accelerated depreciation, clean-tech credits, and loss carryforward.
  • Early movers gain time-limited benefits, avoid stranded assets, and secure competitive advantage in green transition.

What is the Clean Industrial Deal?

The Clean Industrial Deal (CID) is the European Union’s strategic initiative aimed at aligning industrial decarbonization with enhanced competitiveness. It seeks to close innovation gaps, reduce dependency on external resources, and foster sustainable growth across European industries.

In practical terms, the CID supports the development of clean technologies through a combination of financial, regulatory and market-based measures. It mobilizes over €100 billion in funding, streamlines state aid approvals, and strengthens instruments like the Innovation Fund and InvestEU to accelerate investment in clean manufacturing. The CID also promotes demand for clean products by introducing sustainability criteria in public procurement, promotes affordable access to clean energy through targeted action plans, and integrates circular economy principles to reduce resource dependency and waste.

The role of state aid and the Clean Industrial Deal State Aid Framework (CISAF)

Normally, State aid within the European Union is strictly regulated to maintain fair competition among Member States. However, the European Commission has the authority to approve specific programs or establish frameworks that define acceptable measures. These frameworks allow Member States to implement targeted support, such as tax incentives or subsidies, in a more efficient and legally compliant manner.

The CISAF is one of those frameworks which is designed to streamline and accelerate support for initiatives focused on industrial decarbonization, clean technologies, and energy resilience. Building on lessons learned from the Temporary Crisis and Transition Framework, CISAF expands its scope to include renewable energy projects and the decarbonization of existing industrial facilities, enabling Member States to provide targeted aid more efficiently and with simplified approval procedures.

CISAF simplifies state aid approval in five key areas:

  • Supporting the expansion of renewable energy and low-carbon fuels
  • Providing temporary electricity price relief to energy-intensive users during the energy transition
  • Decarbonizing existing production facilities
  • Developing clean technology manufacturing capacity within the EU
  • Reducing investment risks in clean energy, decarbonization, clean tech, energy infrastructure and the circular economy

In practical terms, this means that Member States may adopt state aid Frameworks with streamlined approval procedures for the key areas outlined above. Consequently, it is expected that new national legislation will be introduced to offer state aid incentives, such as tax benefits and subsidies, to companies undertaking a green transition.

Tax incentives and national legislation

While the CID primarily focuses on state aid, it also paves the way for tax incentives as Member States integrate its recommendations into national law. Expected measures included in the recommendation issued by European Union to Member States include incentives to:

  • Accelerated depreciation and immediate expensing for clean-tech assets
  • Expenditure-based tax credits for clean investments
  • Refundable credits and loss carryforward provisions
  • Exclusion of fossil fuel investments from eligibility

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These incentives are designed to improve cash flow, lower capital costs, and align business activities with climate and competitiveness goals. Though one should keep in mind that fossil fuel investments are explicitly excluded, signaling a shift in public support toward clean technologies. This might also result in previous incentives no longer being available.

 

In light of the European Union’s recommendation, it is anticipated that Member States will introduce tax incentives and benefits to support companies undergoing a green transition. If your company is engaged in such efforts, it may be advisable to proactively reach out to policymakers in your Member State to encourage the implementation of this EU guidance. This can help guarantee your organization is well-positioned to benefit from any upcoming legislative developments.

 

Why early action matters

The CID is more than just another climate policy. It is the European Union’s roadmap for transforming industrial competitiveness through decarbonization. Companies that act early can benefit from time-limited incentives and avoid the risk of stranded assets as investments in fossil fuels lose value. Waiting may lead to missed opportunities or a competitive disadvantage as CID measures are gradually implemented into national legislation.

 

In summary, the Clean Industrial Deal presents a clear opportunity for businesses to invest in clean technologies and electrification, supporting both climate goals and long-term growth. Now is the time to review tax strategies and investment plans to stay ahead in a rapidly evolving industrial landscape.

 

If you believe the CID may affect your business or would like to explore how to benefit from new incentives, we encourage you to contact the EY team. We are ready to support your decision making and help identify opportunities aligned with your strategic goals.

 

Contact us

  • Detre Horváth, Executive Director, International Tax Advisory, Tax, tel: +45 2529 3507
  • Mia Rambøl, Manager, Nordic Quantitative Services, Tax, tel: +47 980 70 655
  • Dewald Claassen, Manager, International Tax Advisory, Tax, tel. +45 2529 6028

Summary 

The EU Clean Industrial Deal (CID) is a strategic initiative to accelerate industrial decarbonization and strengthen competitiveness. Backed by €100 billion, it promotes clean technologies through streamlined state aid and funding instruments. Member States are expected to introduce tax incentives such as accelerated depreciation, clean-tech credits, and loss carryforward provisions, while excluding fossil fuel investments. Acting early ensures access to time-limited benefits, reduces stranded asset risks, and positions businesses for long-term growth in a low-carbon economy. Companies should review tax strategies and engage policymakers to maximize opportunities under this transformative EU framework.

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EY logo
EY Denmark
Multidisciplinary professional services organization.
Related topics
Tax

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