European Clean Industrial Deal sets out significant implications for public procurement and state aid

As part of the European Commission’s broader strategy, public procurement can be an essential tool for encouraging clean and strategic investments and - if strategically designed to do so – can stimulate the development of lead markets.

To achieve this, the CID (24-page / 400KB PDF) introduces new criteria for strategic sectors, aiming to ensure that public procurement policies support the competitiveness of European industries. For instance, the Industrial Decarbonisation Accelerator Act will introduce sustainability, resilience, and “buy European” criteria. Prioritising non-price criteria in public tenders can drive demand for key industrial goods, such as low-carbon cement and green steel. However, while the Industrial Decarbonisation Accelerator Act will include life-cycle CO₂ performance standards, it neither assesses broader environmental impacts nor introduces mandatory independent labels on the carbon intensity of industry products.

The CID also promotes circularity, which involves reducing waste and extending the life of materials through recycling, reuse and sustainable production. This may mean that updates to public procurement policies are required, reducing dependencies on third country suppliers of raw materials.

Along with these changes, the Commission currently gathers comprehensive evidence, information and feedback on the performance of the European Directives in a public consultation to identify EU policy objectives and will revise the Public Procurement Framework in 2026. In addition to sustainability and resilience, the Commission contemplates European preference criteria in EU public procurement for strategic sectors. This once again underlines a new paradigm shift - buy European. As the EU is gearing up to respond to challenges that present a watershed moment, this is yet another means to further advance the EU’s strategic autonomy.

Furthermore, the CID introduces the Clean Industrial State Aid Framework (CISAF), providing a five-year planning horizon in a bid to create a stable investment environment that encourages long term commitments to clean technology and industrial decarbonisation. The Commission intends to propose the new framework in the second quarter of the year to facilitate and speed up the approval of state aid. Simplified and flexible rules will allow quick approval of state aid measures for decarbonisation. In addition, the Commission plans to update existing state aid rules, reviewing the General Block Exemption Regulation and speeding up the design of new important projects of common European interest. The CISAF is designed to align state measures with the objectives of industrial decarbonisation and clean technology manufacturing and facilitates public support for industrial decarbonisation through subsidies, tax incentives and financial instruments aimed at attracting private capital. This support is targeted at renewable energy deployment, flexibility mechanisms, and clean industrial processes. The framework sets out clear compatibility criteria to prevent excessive market distortion while aiming at accelerating renewable energy deployment.

While state aid regulations are designed to protect the level playing field within the EU, EU operators are increasingly competing with companies based in non-European jurisdictions where subsidies are granted generously and strategically. This is where the foreign subsidy regulation (FSR) comes into play, to ensure a level playing field with third-country operators. This instrument relies on certain concepts for assessing the impact of foreign subsidies on concentrations, participation in public procurement procedures and any other economic activities in the internal market. The Commission is committed to publishing official guidelines on the application of these key concepts by January 2026 - as mandated by the FSR- providing much-needed clarity. As a first step, the Commission recently launched targeted consultations on the guidelines and published a call for evidence.

Co-written by Steffen Bretthauer of Pinsent Masons.