EU Balances Decarbonization With Competitiveness

The feedback period for the proposed Industrial Accelerator Act (IAA) opened on March 11, 2026, and will remain open until May 28, 2026. The act aims to find a balance between accelerating the competitiveness of European Union (EU) industries and decarbonizing industrial processes to meet EU sustainability goals.

According to the Call for Evidence Impact Assessment (Ares(2025)3079152), energy-intensive industries (EII) account for 19% of EU greenhouse gas (GHG) emissions and employ 7.8 million people while providing economic benefits of €549 billion. As part of the Clean Industrial Deal (CID), the IAA addresses constraints including complex permitting procedures for decarbonization projects, high capital and operational costs for decarbonizing technologies, and a lack of demand for clean industrial products at current prices compared to conventional alternatives.

According to EU research, manufacturing in the EU is declining as a result of low investment levels, slow economic growth, and unfair international trade and competition, with strategic dependencies and supply chain risks posing a threat to the region's economic security. The objectives of the CID, therefore, depend on the ability to create a competitive and decarbonized industrial base in the EU.

Permitting Is a Challenge

The European Commission solicited evidence from stakeholders during an initial consultation period from April 15, 2025 to July 9, 2025, receiving 314 responses from business associations, companies, nongovernmental organizations, and citizens. The figure below shows the barriers respondents identified as impeding industrial decarbonization in the EU, as well as the permitting challenges respondents said were particularly challenging.

Respondents said that many of these challenges originate in discrepancies at the national level, which result in fragmented rules, inconsistent implementation, and different levels of administrative capacity. They noted that one-stop shops, binding timelines, tacit approvals, and digital systems would be effective solutions to many of these problems, and that geographic cluster permits would be helpful for reducing duplication, coordinating infrastructure, and accelerating project delivery.

The survey also revealed that demand is a barrier to decarbonization, and that downstream sectors and consumers are unwilling to pay a premium for low-carbon industrial products. Many respondents said that introducing voluntary labels that specify the carbon intensity of industrial products would help to overcome this challenge and create lead markets. They also said that creating a lead market for clean industrial products would need public procurement to play a significant role, with important differentiators including resilience, environmental sustainability, and EU content.

New Direction for EU Sustainability

The proposed IAA supports decarbonization by introducing “Made in EU” and low-carbon preferences in public procurement to support the adoption of clean industrial products, including net-zero technologies like batteries, solar energy technology, and heat pumps.

The IAA also proposes measures to address feedback about permitting challenges, including digitalized permitting procedures, a digital one-stop-shop, and tacit approval at the intermediate stage for energy-intensive decarbonization projects. It also creates “industrial acceleration areas” to promote area-wide permits and encourage the creation of clean manufacturing project clusters.

Perhaps as notable as the content of the act is the way it has evolved since its introduction in 2025 as part of the CID. It was originally called the Industrial Decarbonization Accelerator Act (IDAA). However, European Commission President Ursula von der Leyen dropped “Decarbonization” from the title to signify its emphasis on competitiveness and strategic independence.

According to professor and associate dean at the Copenhagen Business School Andreas Rasche, the proposed IAA shows that the EU's sustainability agenda is no longer simply about environmental interests but is also increasingly shaped by geopolitical considerations.

“Clean technologies such as batteries, hydrogen, and critical raw materials are now treated as strategic assets rather than just climate solutions,” said Rasche in a statement to 3E. “The emphasis on 'independence' reflects lessons from recent crises, notably energy dependence on Russia and supply chain vulnerabilities vis-à-vis China. As a result, decarbonization policy is being aligned with industrial policy and security objectives.”

Rasche noted that despite the reframing of sustainability goals within the context of geopolitical considerations, the EU is not abandoning sustainability. Instead, it is embedding sustainability concerns within a broader strategy of economic resilience and strategic autonomy.

“The IAA prioritizes domestic capacity, faster permitting, and state aid flexibility to ensure that Europe can both compete globally and reduce external dependencies,” said Rasche. “In that sense, sustainability follows a much more instrumental agenda and becomes a vehicle for power projection and risk management.”