COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework of measures for the acceleration of industrial capacity and decarbonisation in strategic sectors and amending Regulations (EU) 2018/1724, (EU) 2024/1735 and (EU) 2024/3110
Date: 2026-03-04
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: EU industrial policy, competitiveness, direct investment, foreign investment, industrial development, industrialisation, processing industry, production policy, reduction of gas emissions, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.3.2026  SWD(2026) 71 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT  Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing a framework of measures for the acceleration of industrial capacity and decarbonisation in strategic sectors and amending Regulations (EU) 2018/1724,    (EU) 2024/1735 and (EU) 2024/3110 {COM(2026) 100 final} - {SEC(2026) 70 final} - {SWD(2026) 70 final} - {SWD(2026) 72 final}  
 
 
Table of contents 

1 

2 

4.1 
4.2 

1.1 
1.2 

3.1 
3.2 
3.3 

Introduction: Political and legal context ........................................................................ 4 
Political context .......................................................................................................... 4 
Legal and policy context ............................................................................................ 5 
Problem definition ............................................................................................................ 6 
2.1  What is the problem? .................................................................................................. 6 
2.2  What are the sub-problems and their drivers? ............................................................ 8 
How likely is the problem to persist? ....................................................................... 19 
2.3 
3  Why should the EU act? ................................................................................................ 22 
Legal basis ................................................................................................................ 22 
Subsidiarity: Necessity of EU action ....................................................................... 22 
Subsidiarity: Added value of EU action ................................................................... 23 
4  Objectives: What is to be achieved? ............................................................................. 23 
General objective ...................................................................................................... 23 
Specific objectives .................................................................................................... 23 
5  What are the available policy options? ........................................................................ 24 
5.1  What is the baseline from which options are assessed? ........................................... 24 
Description of the policy measures .......................................................................... 26 
5.2 
Options discarded at an early stage .......................................................................... 28 
5.3 
6  What are the impacts of the policy options? ................................................................ 31 
POLICY OPTION 1 ................................................................................................. 31 
POLICY OPTION 2 ................................................................................................. 53 
POLICY OPTION 3 ................................................................................................. 62 
7  How do the options compare? ....................................................................................... 71 
Effectiveness ............................................................................................................ 71 
Efficiency ................................................................................................................. 72 
Coherence ................................................................................................................. 76 
Proportionality/Subsidiarity ..................................................................................... 77 
Preferred option ............................................................................................................. 79 
REFIT (simplification and improved efficiency) ..................................................... 79 
Application of the ‘one in, one out’ approach .......................................................... 80 
9  How will actual impacts be monitored and evaluated? .............................................. 80 
Annex 1: Procedural information ......................................................................................... 83 
Annex 2: Stakeholder consultation (Synopsis report) ........................................................ 94 
Annex 3: Who is affected and how? ................................................................................... 107 
Annex 4: Analytical method ................................................................................................ 121 

7.1 
7.2 
7.3 
7.4 

6.1 
6.2 
6.3 

8.1 
8.2 

8 

1 

 
 
Annex 5: Competitiveness check ......................................................................................... 150 
Annex 6: SME Check ........................................................................................................... 154 
Annex 7: Sectoral analyses .................................................................................................. 158 
Annex 8: Interplay with other legislation and policies and baseline scenario ................ 184 
Annex 9: Overview of policy measures .............................................................................. 204 
Annex 10: Extended information on the problem section ................................................ 226 
Annex 11: Extended information on the impacts (Section 6) ........................................... 240 
Annex 12: Development of a low-carbon product label for steel ..................................... 254 
Annex 13: Overview of third countries conditionalities for FDI ..................................... 274 
Annex 14: Extended information on the scenarios in the LEAD_VC cost absorption .. 276 
Annex 15: Sensitivity analysis: costs and benefits ............................................................. 282 
Annex 16: Net-Zero Technologies ....................................................................................... 290 

2 

 
 
Glossary 

Term or acronym 
B2B 
BESS 
BF-BOF 
CBAM 
CCS 
CPR 
CRMA 
DSO 
EIA 
EIIs 
EPBD 
ESPR 
ETS 
EU 
EVs 
FDI 
FID 
FTA 
GHG 
GPA 
GWP 
IAA 
IEA 
IED 
LCA 
LCOP 
MFF 
NZIA 
OEM 
PO 
PPA 
PV 
RRF 
SEA 
SME 
SO 
WTO 

Meaning or definition 
Business to business 
Battery Energy Storage System 
Blast Furnace – Basic Oxygen Furnace 
Carbon Border Adjustment Mechanism 
Carbon Capture and Storage 
Construction Products Regulation 
Critical Raw Materials Act 
Distribution System Operator 
Environmental Impact Assessment  
Energy Intensive Industries  
Energy Performance of Buildings Directive 
Ecodesign for Sustainable Products Regulation 
Emission Trading System 
European Union 
Electric Vehicles 
Foreign Direct Investment 
Final Investment Decision 
Free Trade Agreement 
Greenhouse Gases 
WTO Government Procurement Agreement 
Global Warming Potential 
Industrial Accelerator Act 
International Energy Agency 
Industrial and Livestock Rearing Emissions Directive 
Life-cycle assessment 
Levelised Cost of Production 
Multiannual Financial Framework 
Net Zero Industry Act 
Original Equipment Manufacturer 
Policy option 
Power Purchase Agreement 
Photovoltaic 
Recovery and Resilience Facility 
Strategic Environmental Assessment  
Small and Medium-sized Enterprises 
Specific Objective 
World Trade Organisation 

3 

 
 
 
 
 
1 

Introduction: Political and legal context 

1.1 

Political context  

The  European  Union  (EU)  manufacturing  sector  employed  around  30  million  persons  and 
generated  EUR  2.5  trillion  of value added  in  2023,  making it the  largest sector of the EU’s 
business  economy  for  its  contribution  to  employment  (18.7%)  and  value  added  (23.6%).1 
However, the EU’s share of global industry gross value added declined from 20.8% in 2000 to 
14.3% in  2024.2 Industrial  investment  in  the EU is lower than in  other regions.3 EU energy 
prices continue to be higher than our trade partners’ and are forecasted to remain so in coming 
years. Europe still faces commercialisation obstacles and regulatory hurdles.4 Furthermore, a 
major structural challenge for some EU industries5 is state-subsidised overcapacity at global 
level, which distorts global prices and international markets.  

Manufacturing  industries  account  for  about  26%  of  the  EU’s  total  greenhouse  gas  (GHG) 
emissions. Energy intensive industries (EIIs), on their own, represent  22% of the EU’s total 
GHG emissions or more than three quarters of all industrial emissions.6 For the purpose of this 
impact  assessment,  EIIs  include  the  following  industrial  sectors:  chemicals,  steel,  pulp  and 
paper, plastics, refineries, cement, non-ferrous metals, glass and ceramics, as first identified in 
the  European  Commission’s  Annual  Single  Market  Report  2021  and  consistently  used  in 
subsequent policy frameworks.7  

Decarbonisation and industrialisation are two sides of the same coin, as decarbonisation should 
be delivered with a strong and resilient European industrial base. Achieving the EU's climate 
neutrality  goal  without  negatively  affecting  industry’s  performance  depends  on  a  strong 
business case for decarbonisation. Without a healthy decarbonised industrial base, the EU will 
not  achieve  its  objectives  of  economic  security,  competitiveness  and  decarbonisation  as 
outlined in the Competitiveness Compass.8  
The global market for net-zero industry technologies9 is projected to nearly triple by 2035.10 
While deployment in the EU is progressing, the Union’s global market share is declining, and 
domestic  manufacturing  capacity  remains  limited.  Production  is  highly  concentrated,  with 
mainland  China  controlling  over  90%  of  solar  photovoltaic  (PV)  and  battery  manufacturing 
capacity, and more than 90% for battery anodes and solar wafers.11 Strengthening EU clean 
tech manufacturing is therefore essential.12  
The Antwerp Declaration13 calls for a European Industrial Deal to complement the EU Green 
Deal and safeguard quality jobs in Europe. The Declaration calls for urgent action to restore the 
business case for investments in Europe.  

1 Eurostat. Enterprises by detailed NACE Rev. 2 activity and special aggregates. 
2 Eurostat. Gross value added and income by main industry (NACE Rev.2 ). 
3 ERT (2022). European Competitiveness and Industry – Benchmarking Report 2022. 
4 Draghi, M. (2024). The future of European competitiveness: A competitiveness strategy for Europe (Part A), p.28 
5 Steel, aluminium and chemicals. 
6 Eurostat (2023). Air emissions accounts by NACE Rev. 2 activity. 
7 European Commission (2021). Commission Staff Working Document, Annual Single Market Report 2021, accompanying the 
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the 
Committee of the Regions: Updating the 2020 New Industrial Strategy: Building a stronger Single Market for Europe's recovery, 
COM(2021) 350 final, p.120. 
8 European Commission (2025). A Competitiveness Compass for the EU, COM(2025) 30 final, 29 January 2025.  
9 Net-zero technologies include solar technologies, onshore wind and offshore renewable, battery and energy storage, heat pumps, hydrogen 
technologies, electricity grid, and other technologies listed under Article 4 of the NZIA. 
10 IEA (2024). Energy Technology Perspectives 2024.  
11 IEA (2024). Energy Technology Perspectives 2024.  
12 European Commission (2025). Competitiveness Progress Report on Clean Energy Technologies, COM(2025) 74 final, 26 February 2025. 
13 The Antwerp Declaration for a European Industrial Deal webpage (2024). About the Antwerp Declaration.  

4 

 
 
 
Economic security has become a central pillar of the EU’s industrial policy since the adoption 
of  a  European  Economic  Security  Strategy.14  In  October  2023,  the  Commission  adopted  a 
Recommendation15  identifying  ten  critical  technology  areas  that  are  essential  for  Europe’s 
security and competitiveness. These technologies underpin the green and digital transitions but 
also expose the Union to strategic dependencies and supply chain risks.  
The European Commission presented in February 2025 the Clean Industrial Deal16 as Europe’s 
new  growth  strategy  to  accelerate  decarbonisation,  increase  competitiveness  and  ensure 
productivity  growth  for  European  industry.  On  the  financing  side,  this  included  the  Clean 
Industrial Deal State aid framework adopted in June 2025, an Industrial Decarbonisation Bank 
planned for 2026 and the European Competitiveness Fund. The Commission also presented an 
Action Plan for Affordable Energy to decrease energy costs across the EU.  
EU leaders adopted the Budapest declaration17 highlighting the urgent need and determination 
to  make  the  EU  more  competitive  through  a  new  European  competitiveness  deal.  In  March 
2025, 
to  strengthening  Europe’s 
competitiveness.18 The European Parliament Resolution on Energy Intensive Industries19 calls 
on the Commission to develop solutions for speeding up decarbonisation projects and for the 
creation of lead markets for clean and circular European products, via non-price criteria in EU 
public procurement in line with the EU’s international commitments. 

the  European  Council  reaffirmed 

its  commitment 

It  is  in  that  context  that  the  Clean  Industrial  Deal  announced  a  new  regulatory  initiative  to 
address  permitting  bottlenecks,  introduce  resilience  and  sustainability  criteria  to  create  lead 
markets  for  the  development  of  European  clean  and  resilient  industrial  technologies  and 
products and develop a label on the carbon intensity of industrial products, starting with steel. 
The  European  Steel  and  Metals  Action  Plan20  and  the  European  Chemicals  Industry  Action 
Plan21 reiterate the commitment to include resilience and sustainability criteria to support the 
demand for EU-made clean products. The Automotive Action Plan22 states that to boost the 
European production of key vehicle components, any public support benefitting the automotive 
industry will be made conditional on resilience and sustainability criteria to be proposed under 
this initiative. It also calls on it to address European content requirements on battery cells and 
components in EVs sold in the EU, in line with the Union’s international legal commitments. 
Based  on  these  previous  commitments,  the  2025  State  of  the  Union  Address  announced  a 
proposal of an Industrial Accelerator Act  (IAA) to boost demand for clean and Made in EU 
products in key strategic sectors and technologies. 

1.2 

Legal and policy context  

A range of EU policy and legal instruments govern how the manufacturing industry operates in 
the EU, covering areas such as GHG emission reductions for manufacturing sites in the EU, 
energy markets, energy efficiency, conditions to operate in the Single Market and compliance 
with environmental and climate legislation. In particular, the EU Emissions Trading System 

14  European Commission  (2023).  Joint  Communication to  the  European  Parliament,  the  European Council  and  the Council  on  “European 
Economic Security Strategy”. 
15  Commission  Recommendation  C(2023)  6689  identifies  ten  critical  technology  areas  for  the  EU’s  economic  security:  1)  Advanced 
semiconductors technologies; 2) Artificial intelligence technologies; 3) Quantum technologies; 4) Biotechnologies; 5) Advanced connectivity, 
navigation  and digital  technologies; 6)  Advanced  sensing technologies;  7)  Space  and propulsion  technologies;  8)  Energy  technologies; 9) 
Robotics and autonomous systems; and 10) Advanced materials, manufacturing and recycling technologies. 
16 European Commission (2025), The Clean Industrial Deal: A joint roadmap for competitiveness and decarbonisation, COM(2025) 85 final, 
26 February 2025.  
17 European Council (2024). Budapest Declaration on the New European Competitiveness Deal, adopted 8 November 2024. 
18 European Council Conclusions, March 2025.  
19 European Parliament (2025). Resolution on energy-intensive industries, 3 April 2025.  
20 European Commission (2025). A European Steel and Metals Action Plan, COM(2025) 125 final, 19 March 2025. 
21 European Commission (2025). A European Chemicals Industry Action Plan, COM 2025 530 final, 8 July 2025. 
22 European Commission (2025). Industrial Action Plan for the European automotive sector, COM(2025) 95 final, 5 March 2025. 

5 

 
 
 
(ETS)  Directive23  is  the  main  climate  policy  instrument  to  incentivise  GHG  emissions 
reduction. It provides the main price signal for industries to invest in decarbonisation, and the 
Commission  is  preparing  its  proposal  for  a  review  to  ensure  the  instrument  is  adjusted  to 
promote  cost-effective  emissions  reductions  in  line  with  the  climate  neutrality  target.  The 
Carbon Border Adjustment Mechanism (CBAM) is the instrument protecting some ETS sectors 
from the risk of carbon leakage, while ensuring that domestically produced and imported goods 
face  the  same  carbon  costs  in  the  internal  market.  A  comprehensive  review  of  CBAM, 
accompanied by an anti-circumvention strategy, has been adopted at the end of 2025. The Net 
Zero Industry Act (NZIA)24, as well as the Batteries Regulation25, also provide incentives for 
clean tech and resilient industrial manufacturing in the EU. Industrial decarbonisation is also 
supported by policies and legislation on the demand side, aiming at decarbonising downstream 
end-use sectors. This includes for instance recent legislation on the building and construction 
sectors, and aviation and waterborne transport or most notably the automotive package, with 
the revision of CO2 standards and the introduction of low-carbon steel credits. It also includes 
products  legislation, such as the Ecodesign  for Sustainable Products  (ESPR), which aims  at 
improving the environmental sustainability and circularity of products placed on the EU market. 
Permitting  and  access  to  energy  infrastructure  is  also  covered  by  other  recently  adopted 
Commission’s initiatives, namely the grids action plan, the electricity market design, the grid 
tariff  and  grid  anticipatory  investment  guidance  implementation,  the  Grids  package  on 
infrastructure  planning  and  permitting  and  the  Environmental  Omnibus,  to  simplify 
administrative  burden  in  environmental  legislation.  Annex  8  presents  the  list  of  relevant 
initiatives and a detailed explanation of how they relate to IAA.  

2  Problem definition 

2.1  What is the problem? 

The  overarching  problem  this  initiative  aims  to  address  is  to  support  the  EU  industry’s 
competitiveness and resilience in a context of increased global pressure, while accelerating the 
decarbonisation of its processes and products. The business case to invest in innovation and 
industrial decarbonisation in the EU needs to be improved, with particular focus on EIIs and 
clean tech manufacturing.  

Lengthy  and  complex  permitting  procedures  slow  down  projects,  while  limited  access  to 
affordable  energy,  infrastructure  and  key  materials  further  constrains  investment.  These 
bottlenecks undermine industrial competitiveness and delay the clean transition. 

Global pressures 

The  causes  for  the  industry’s  reduced  competitiveness  are  multiple,  and  many  depend  on 
external macroeconomic factors beyond the scope of this initiative.26 Energy inputs account for 
7% to 9% of the production value in EU EIIs, and although gas and electricity prices in the EU 

23 Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union and amending Council Directive 
96/61/EC. 
24 Regulation (EU) 2024/1735 of the European Parliament and of the Council of 13 June 2024 on establishing a framework of measures for 
strengthening Europe’s net-zero technology manufacturing ecosystem. 
25  Regulation  (EU)  2023/1542  of  the  European  Parliament  and  of  the  Council  of  12  July  2023  concerning  batteries  and  waste  batteries, 
amending Directive 2008/98/EC and Regulation (EU) 2019/1020 and repealing Directive 2006/66/EC. 
26 Such as such as demand slowdown, higher energy and feedstock supply costs in the EU than in certain trading partners, overcapacities and 
unfair trade policies by some third countries. The Draghi Report identifies several key factors contributing to the declining competitiveness of 
the  EU  industry  and  EIIs:  higher  energy  prices  and  emissions  costs  relative  to  global  competitors,  substantial  investment  needs  for 
decarbonisation, regulatory burdens, and an uneven playing field at the international level, exacerbated by limited market demand for greener 
products  and  net-zero  technologies  (Source:  Draghi,  M.  (2024).  The  future  of  European  competitiveness:  In‑depth  analysis  and 
recommendations  (Part B),  p.  97-100).  Similarly,  Letta´s  report  notes  that  EIIs  are  particularly  vulnerable  and  transitioning  them  to  clean 
energy is challenging due to cost uncertainties, capital barriers, and technology scale issues. 

6 

 
 
 
have dropped from their 2022 peaks, gas prices are still about five times higher than on other 
global markets and electricity prices are approximately twice as high. The forecasts for 2030 
indicate a continuation of Europe’s energy cost disadvantage.27  

Most  manufacturing  industries  operate  in  a  global  market  shaped  by  increasingly  distorted 
competition.  These  distortions  are  the  result  of  a  combination  of  state  subsidies,  global 
industrial overcapacity, tariff asymmetries, and the strategic deployment of foreign industrial 
policies that challenge Europe’s ability to remain competitive, while decarbonising. In the new 
world  order,  competitors  like  China  are  moving  faster  in  developing  their  clean  technology 
industries and supporting their competitiveness. In 2023, China accounted for 55% global steel 
production28, and above 60% for aluminium, solar PV, batteries, and electric vehicles (EVs).29  

Beyond competitiveness pressures, the erosion of EU industrial capacity also creates growing 
economic security vulnerabilities. Several industrial value chains meet the criteria of high-risk 
dependencies, including heavy reliance on a single dominant supplier, exposure to non-market 
overcapacity30,  and  the  increasing  use  of  export  restrictions  or  coercive  economic  practices. 
Such  dependencies  can  be  weaponised,  creating  systemic  risks  for  the  Single  Market  and 
undermining  the  Union’s  ability  to  secure  the  inputs  needed  for  clean  technologies,  critical 
infrastructure,  and  defence-related  manufacturing.  As  EU  production  shrinks  and  import 
reliance grows, the likelihood and impact of supply disruptions, price manipulation or arbitrary 
restrictions increase accordingly. 

Energy Intensive Industries in Europe: an industrial fabric at risk  
Over the past decade, the EU EIIs have reduced their GHG emissions by 35%31, while their 
emissions intensity decreased by 25% since 2000.32 In parallel, their competitiveness has been 
declining, more starkly since the energy crisis in 2021, as energy costs in the EU remain above 
those of many international competitors. Cost gaps with other world regions have widened and 
imports shares (in particular, for chemicals and metals) have increased.33  

Figure  1  below  illustrates  how  production  volumes  in  EIIs  have  substantially  declined, 
compared  to  production  volumes  in  other  manufacturing  sectors.  The  current  steel  capacity 
utilisation rate is of approximately 65%, while to be market competitive the sector would need 
to run at above 85% capacity.34 For the chemicals industry, production utilisation rates have 
stagnated at 74-75% range, significantly below the historical averages of 81.5%.35  

In  a  decade,  the  EU  trade  balance  for  EIIs  has  steadily  declined,  getting  close  to  deficit  in 
2022.36 While this is the case for most energy-intensive sectors, the trend was largely driven by 
basic metals with a 36% drop, and chemicals with an 8.1% drop in exports and 15% increase 
in imports, amongst others.37  

27 European electricity prices are expected to be up to twice as high as prices in the US by 2030. Electricity wholesale prices are forecasted to 
reach EUR 55-100/MWh and gas prices EUR 20- 40/MWh. Source: ERT (2024). Competitiveness of European Energy-Intensive Industries. 
28 Eurofer (2024). European Steel in Figures. 
29 IEA (2023). Clean energy supply chains vulnerabilities. 
30 European Commission, An enhanced methodology to monitor the EU’s strategic dependencies and vulnerabilities, Single Market Economics 
Paper, 18 April 2023, doi:10.2873/768035. 
31 European Commission, JRC internal calculation, based on EUROSTAT table “Air emissions accounts by NACE Rev. 2 activity” – see figure 
6 in Annex 7. 
32 Emission intensity defined as emissions per unit of value added. Source: OECD (2025), A comprehensive overview of the Energy Intensive 
Industries ecosystem,2025/09. 
33 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 95. 
34 European Commission (2025). Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions: A European Steel and Metals Action Plan, COM (2025) 125 final, 19 March 2025 
35 CEFIC (2025). The Competitiveness of the European Chemical Industry, January 2025.  
36 See figure 21 in Annex 10. 
37 OECD (2025). A comprehensive overview of the Energy Intensive Industries ecosystem, 2025/09. 

7 

 
 
 
Figure 1: production volume and confidence indicators for EIIs, internal European Commission analysis 

The Draghi report highlights that decarbonising industry requires a far-reaching transformation 
of assets and processes, which calls for substantial investment. The impact assessment for the 
2040 Climate Target Plan estimates the investment needs to transform the iron and steel sector 
at around EUR 80 billion between 2031 and 2040 and EUR 100 billion between 2031 and 2050, 
while for the four largest  EIIs together (chemicals, basic metals,  non-metallic minerals,  and 
pulp and paper industry) the investment needs are estimated at around EUR 287 billion  over 
2031-2040 and EUR 500 billion over 2031-2050.38,39   While decarbonisation technologies are 
often more mature and more cost competitive for non EII sectors, manufacturing companies 
still  face  significant  costs  alongside  administrative  hurdles,  regulatory  challenges  and  skills 
shortages  for  companies.  Today,  the  cost  difference  between  high  carbon  and  low-carbon 
technologies remain high, as it is explained under Sub-problem 1 and 3 and in more detail in 
Annex 7. 
Clean technologies also face competitiveness challenges and supply chain vulnerabilities.40 For 
instance, for solar PV modules, the EU relies almost entirely on imports from China. Lack of 
competitiveness is also visible in more downstream value chains. For instance, the European 
automotive  industry  has  witnessed  a  significant  reduction  in  profitability,  with  the  average 
profitability of European automotive suppliers dropping from 7.4% in 2017 to 5.1% in 2023.41 
See Annex 7 for further analysis of all relevant sectors. 

2.2  What are the sub-problems and their drivers? 

The main problem is the limited business case for EU industry, and EIIs in particular, to invest 
in decarbonisation in time to reach the EU’s climate targets while ensuring the competitiveness 
of EU energy intensive and clean tech industries in the process.  

2.2.1  Sub-problem 1: Limited demand for European low-carbon industrial products at 

current prices 

Limited demand for low-carbon industrial products is mainly due to the currently higher 
costs  of  these  products  against  more  carbon  intensive  alternatives.  Additionally,  business 
customers  often  lack  sufficient  incentives  and  face  difficulties  distinguishing  between  low-
emission  and  carbon  intensive  industrial  products,  due  to  the  absence  of  commonly  agreed, 
transparent and harmonised standards, labelling and definitions. These factors restrict market 

38 European Commission (2024).  Commission Staff Working Document: Impact Assessment Report (Part 3), accompanying the document 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions: Securing our future - Europe's 2040 climate target and path to climate neutrality by 2050, building a sustainable, 
just and prosperous society, COM(2024) 63 final, pp.164-167. 
39 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 99.  
40 European Commission (2025). Competitiveness Progress Report on Clean Energy Technologies, COM(2025) 74 final, 26 February 2025. 
41 McKinsey (2025). European automotive industry: What it takes to regain competitiveness, 10 March 2025. 

8 

  
 
 
 
entry  and  identification  of  low-carbon  industrial  products  and  hamper  business  to  business 
(B2B) transactions from complying with high climate mitigation ambition. 

2.2.1.1  Driver  1  (market  failure):  Challenges  in  distinguishing  low-carbon 

industrial products from high-carbon alternatives 

Although  many  industrial  production  facilities  closely  monitor  their  emissions,  there  is 
currently no harmonised carbon accounting methodology systematically applied for industrial 
products.42  This  is  due  to  several  reasons.  First,  current  environmental  and  GHG  reporting 
requirements  are  typically  registered  at  installation  level,  as  in  the  context  of  the  EU  ETS. 
Translating these installation-level emissions into emissions per product requires attributing the 
emissions from various production stages and possibly various installations (in or outside the 
EU) to a specific industrial product.43 Second, the complexity is further increased by factors 
such as the diversity of production technologies, the outsourcing of certain production steps, 
long  and  complex  supply  chains  and  the  varying  use  of  imported  heat  and  electricity  in 
production processes. Finally, different methodological approaches are used on the scope of 
emissions to be considered. Without sound verification mechanism in place, the level playing 
field among businesses cannot be guaranteed, greenwashing can proliferate, and the exercise 
may become an administrative burden, including for public authorities when dealing with green 
public procurement procedures.  

As a result, several initiatives have emerged to define what constitutes a “low-carbon” industrial 
product.  For  instance,  over  150  sustainability  standards  and  initiatives44  spanning  the  entire 
steel value chain aim to determine what  constitutes iron and steel with lower environmental 
impacts.  As  explained  in  the  baseline  (Section  5.1  and  Annex  8),  the  ESPR  and  the  CPR 
(Construction  Product  Regulation)  provide  a  regulatory  framework  to  introduce  information 
and/or performance requirements on the environmental or carbon footprint of products from a 
life-cycle  perspective.  This  initiative  will  complement  and  ensure  coherence  with  these 
frameworks45  while  enabling  more  targeted  deployment  of  carbon-intensity  information  for 
selected industrial products. 

2.2.1.2  Driver 2: Limited willingness to pay a premium for low-carbon industrial 

products 

While in some sectors, such as electricity production, the cost of low-carbon technologies is 
already lower than that of conventional fossil fuel-based alternatives, industrial sectors often 
continue to face significantly higher costs for producing low-carbon products, often due to lack 
of economies of scale.46 In the steel and cement sectors, estimates suggest that  procurement 
cost for low-carbon steel could range from around 33%% in a low-cost scenario to as much as 
70% in a high-cost scenario, compared to conventional technologies and considering current 
CO2 costs.47 

42 In this context, industrial products are considered intermediate industrial goods that are not used by end-consumers as such but require further 
transformation. 
43 While this process is relatively straightforward for standardised products such as electricity, it becomes much more complex for industrial 
goods with long and intricate production chains, such as plastics. As described in Annex 9, similar work is ongoing in the context of the CBAM 
methodology being developed for the definitive phase.  
44 JRC (2024). Draft preparatory study on iron and steel – ecodesign measures under the ESPR, p. 41. 
45 Some of these frameworks are mentioned in Annex 8: Interplay with other legislation and policies and baseline scenario 
46Mission Possible Partnership (MPP), E3G and the Industrial Transition Accelerator (ITA) (2025). Building the EU’s Clean Industrial Future: 
Unlocking Investment through Lead Markets. 
47 VUB Brussels School of Governance (2024).Public procurement of steel and cement for construction, assessing the potential of lead markets 
for green steel and cement in the EU. Note: Based on 2020 estimates, the cost gap is expected to narrow by 2030 due to technological maturation 
and higher CO₂ prices.  

9 

 
 
 
To  create  a  sound  business  case,  when  commercially  marketing  low-carbon  products, 
manufacturers will likely need to pass on these additional costs in the short to medium term 
through a "green premium" to potential buyers.48 However, the percentage of buyers willing to 
pay  a  premium  for  low-carbon  products  is  estimated  to  range  from  14%  in  the  aluminium 
market to 16% in steel.49 

In certain segments, the uptake of low-carbon products will likely develop at a faster pace, due 
to  EU  requirements.  For  instance,  the  revised  Energy  Performance  of  Buildings  Directive50 
(EPBD)  requires  Member  States  to  draw  up  national  roadmaps  on  the  introduction  of  limit 
values  on  the  life-cycle  Global  Warming  Potential  (GWP)  of  buildings.  In  addition,  the 
automotive sector appears more willing to accept higher premiums for low-carbon metals, as 
shown by a growing number of low-carbon steel supply agreements.51 One key driver is that 
automakers are subject to life-cycle CO2 emissions reporting obligations, increasing attention 
on the overall carbon footprint of a vehicle, including emissions from manufacturing. However, 
the extent to which these commitments will translate into actual demand remains uncertain.52 

According to the Public Consultation, 81% (253 out of 314) of respondents agree that downstream sectors and 
consumers lack the willingness to pay a premium for clean industrial products. This is backed by all participating 
EIIs, including steel (95%), aluminium (80%), cement (77%), ceramics (100%), chemicals (96%), glass (66%), 
fertilisers (87%), pulp & paper (100%) and metals & mining (100%), as well as by downstream sectors such as 
automotive (80%), batteries (75%) and construction (75%).  

Public procurement is a key driver for low-carbon demand for industrial materials and products. 
The  construction  sector  dominates  EU  public  procurement  involving  energy-intensive 
materials53, making it a critical lever for stimulating demand for low-carbon industrial products. 
However, despite this potential, market demand alone is often insufficient to support the scale-
up of low-carbon production required to offset  higher production costs. Furthermore, public 
procurement practices aimed to support the uptake of low-carbon materials remain limited at 
both EU and national levels. Key barriers include a lack of training and capacity, insufficient 
data availability, fear of litigation and legal complexities.54 Financial constraints may also be a 
barrier  to  support  the  higher  initial  costs  often  associated  with  low-carbon  products.  For 
instance, demand for low-carbon steel under green public procurement accounts for 2.1% of 
total steel demand.55 

Finally,  the  limited  willingness  to  pay  for  the  green  premium  depends  on  a  range  of  policy 
measures to bolster the business case for decarbonisation investments, optimizing net benefits. 
Importantly, the lion’s share of demand generated by lead markets measures will continue to 
originate from private sector uptake and procurement. 

2.2.2  Sub-problem 2: Supply chain vulnerabilities in strategic sectors 

Security  of  supply  is  a  precondition  for  sustainable  industrial  growth.  EU  manufacturing  is 
exposed to a risk of dependency for its most strategic industries. The production processes for 

48 Somers, J. (2022), Technologies to decarbonise the EU steel industry, Publications Office of the European Union, doi:10.2760/069150. 
49 McKinsey (2024). Materials ‘green’ premia: Trends and outlook to 2030.  
50 Directive (EU) 2024/1275 of the European Parliament and of the Council of 24 April 2024 on the energy performance of buildings 
51 BloombergNEF (2023). Green Steel Demand is Rising Faster Than Production Can Ramp Up. 
52 ICCT (2024). Which automakers are shifting to green steel? An analysis of steel supply chains and future commitments to fossil-free steel. 
53 Based on GROW calculations from WTO GPA publications and statistics on EU public procurement sourced from TED (Tenders Electronic 
Daily) contract award data and the Public Procurement Data Space (PPDS), filtered for procurement in construction-related CPV codes linked 
to energy-intensive construction  works. This  is  irrespective to  whether procurement  was low-carbon or  not.  In  2023, contracted value  for 
procurements above EU thresholds involving EIIs materials totalled EUR 189B over almost 12k contracts awarded and in 2024, this increased 
to EUR 214B over more than 13k contracts awarded 
54 Bellona Foundation (2024). Green public procurement of cement and steel in the EU -An overview of the state of play.  
55 EUROFER contribution. 

10 

 
 
 
certain  industrial  sectors  (mainly  clean  tech  and,  increasingly,  EIIs)  rely  heavily  on  third 
countries for their input materials and/or components, which puts these sectors at risk of supply 
chain  disruptions, limiting Europe’s potential to  decarbonise.  Industrial  decarbonisation will 
also depend on access to energy and raw materials, therefore the risk of disruption in these value 
chains  pose a  serious challenge to  the EU’s strategic autonomy and  clean energy transition. 
Looking ahead, Europe’s security and open strategic autonomy will depend increasingly on the 
ability to increase supply chain resilience, particularly in net-zero and digital technologies.56  

2.2.2.1  Driver  3:  European  industry  loss  of  competitiveness  due  to  fierce  global 

competition and value chain dependencies 

Energy-intensive industries  

A strong industrial base is essential for Europe’s economic resilience. However, sectors like 
steel, chemicals, aluminium, have been losing market shares in Europe due to several factors, 
including higher operating costs compared to foreign competitors, rising imports because of 
persistent global overcapacities.57 While both exports and imports for EIIs have increased by 
more than 25% compared to 2007, a striking difference appears when compared to 2015, where 
imports  rose  by  16.9%,  while  exports  increased  by  only  1.4%.58  For  instance,  the  EU 
dependency on aluminium imports has reached more than 50% of domestic demand in 2023.59 
Furthermore,  for  chemicals  and  plastics,  the  Commission’s  SCAN  monitoring  system60 
confirms  a  clear  pattern  of  loss  of  competitiveness  due  to  fierce  global  competition  and 
deepening value-chain dependencies. Out of roughly 780 products analysed, about one-third 
were identified as distressed, showing a price increase combined with a higher reliance on fewer 
suppliers between January–September 2025 and the 2022–2024 average.61 

The weakening of Europe’s industrial position is also visible in the investment pipeline, where 
many  announced  industrial  decarbonisation  projects  remain  stalled  before  final  investment 
decision. Despite an unprecedented wave of projects announcements in the past five years, the 
real pace of decarbonisation has slowed sharply since 2023. Analysis from the Commission’s 
Joint Research Centre (JRC) shows that almost half of all announced industrial projects remain 
unimplemented, and fewer than one in three has entered construction or operation.62  

56 COM(2025) 484 final – European Commission 2025 Strategic Foresight Report 
57 Just for steel, in 2024, global overcapacity was estimated to be more than four and a half times the EU’s yearly consumption (OECD, 96th 
Session of the Steel Committee: Statement by the Chair | OECD).  
58 OECD (2025). A comprehensive overview of the Energy Intensive Industries ecosystem. 
59 European Commission (2025). A European Steel and Metals Action Plan, COM(2025) 125 final, 19 March 2025. 
60 SCAN (Supply Chain Alert Notification) is an indicator-based mechanism to monitor the evolution of supply chains in the EU and identify 
their distress. It aims at contributing to a better risk assessment of supply chains, particularly in strategic areas, with the goal of detecting 
disruptions as early as possible to avoid potential adverse effects. 
61 A large share of the distressed products also falls within the highest Single-Point-of-Failure (SPOF) risk categories, meaning that global 
production is heavily concentrated in just a few countries. The top supplier for over 60% of these products is China, followed by the United 
States (15%) and India (8%). While the dataset captures only trade dynamics, these patterns are consistent with wider evidence of industrial 
contraction and growing import dependence observed in the sector. 
62 European Commission, JRC internal analysis based on Europe Media Monitor. 

11 

 
 
 
Figure 2: Announcements of decarbonised projects in the EII by start date, Commission analysis based on 
BloombergNEF, Decarbonizing Steel Project Database (1.0.5) 

Figure 2 confirms that, in the case of steel, most of the projects announced in 2023-2025, are 
still in the announced stage. Most concerning is the cancellation of projects announced during 
the  study  period  (2023-2025),  and  which  were  supposed  to  start  between  2024  and  2027 
(~10%).  

Cement,  chemicals,  and  refining  account  for  most  projects,  but  implementation  lags. 
Collectively, these projects represent over EUR 1.5 billion of announced investment. Achieving 
the  Union’s  climate  and  industrial  objectives  will  require  an  additional  EUR  480  billion  in 
annual investment63 in energy systems, industrial innovation, scale-up and transport compared 
to the previous decade. While the EU has mobilised significant resources through instruments 
such as the Innovation Fund and InvestEU, private investment remains below the level required 
to meet the 2030 and 2040 climate targets. 
When turning to steel64, Europe’s clean-steel transformation remains largely on paper. Out of 
roughly  250  European  decarbonisation  projects  since  2018,  about  68%  are  still  at  the 
announcement or concept stage, with no final investment decision yet taken. 

Batteries manufacturing 

A similar situation is visible in the batteries industry. In 2024, the EU imported around EUR 
28 billion worth of batteries, with EUR 22 billion coming from China alone65, while EU exports 
stood below EUR 11 billion.66 In 2024, China dominated global battery production, holding 
around 83% of the world’s capacity, well above their end-use demand.67 China’s market share 
on the upstream battery supply chain is even more significant.68  

While  European  battery  manufacturers  continue  to  scale  up  and  optimise  their  production 
processes, they face intense price competition from third-country producers, particularly China. 
The EU battery ecosystem  remains heavily  reliant  on critical  components and technological 
know-how  sourced  from  these  third  countries.  These  factors  have  led  to  the  cancellation  or 
delay in the EU of several battery projects, including 233 GWh of battery cells, 100 GWh of 
anode active materials, 513 GWh cathode active material, and 115 GWh of precursor active 

63 European Commission (2025), Clean Industrial Deal, COM/2025/85 final, 26 February 2025. 
64 BloombergNEF, Decarbonizing Steel Project Database (1.0.5), 2025. Commission analysis. More details in Annex 8. 
65 Bruegel, European Clean Tech Tracker. 
66 Ericher, M. et al. (2024). Les Themas de la DG. Deployment of electromobility: How to develop the European battery supply. 
67 BloombergNEF. 
68 By 2025, it is projected to control 87% of global battery cell production, 88% of Cathode Active Material (CAM), 95% of Anode Active 
Material (AAM), 89% of separators and over 90% of electrolyte production. Source: BloombergNEF. 

12 

 
 
 
 
materials as considered no longer competitive. Although the EU reached a battery cell installed 
capacity of around 205 GWh by the end of 2025 and has over 750 GWh in the pipeline69, these 
cancelations and delays show the competitiveness gap of the European industry. This gap is 
further  exacerbated  by  the  vulnerability  of  the  existing  EU  battery  industry  to  supply  chain 
disruptions due to export restrictions on key components and technologies. Additionally, the 
absence of a robust domestic value chain means EU  manufacturers may face a premium for 
depending on imports to sustain its battery sector, impacting both cost and reliability.  

PV manufacturing 

The European solar PV industry has been losing competitiveness due to several factors, mainly 
Chinese overcapacity and lower manufacturing costs and prices. Regarding overcapacity70, at 
least  80%  of  global  manufacturing  across  the  supply  chain  components  is  concentrated  in 
China, which makes them the dominant country in the global PV manufacturing market.71 72 
This  level  of  concentration  creates  structural  risks  for  the  EU’s  security  of  supply  of  PV 
systems: overcapacity in China drives prices down globally and exports are redirected to the 
EU following US import restrictions, discouraging investment in alternative production outside 
China, and reinforcing dependency on a single source. This dependence heightens exposure to 
potential  supply  disruptions,  trade  tensions  or  geopolitical  shocks,  and  raises  cybersecurity 
concerns risks in related to system equipment such as inverters.  

At  present,  the  EU  manufacturing  capacity  in  the  solar  PV  value  chain  amounts  to 
approximately 12 GW of PV modules, around 2 GW of PV cells, and less than 1 GW of PV 
ingots and wafers.73 Inverter manufacturing is still quite strong in the EU (over 82GWAC
74) but 
there is similar worrying pressure and trend as for the rest of the supply chain. 

Other  clean  technologies,  or  ‘net-zero  technologies’  (e.g.  wind,  electrolysers),  face  similar 
challenges, however the combination of high global overcapacities and high dependencies of 
the EU’s consumption on  one single source of supply is  particularly  acute for  solar PV and 
batteries.75 Therefore, the assessment report focuses primarily on these two technologies, while 
Annex 16 provides an in-depth analysis on additional net-zero technologies. 

Vehicle components 
Over  the  past  years,  the  European  automotive  industry  has  been  investing  heavily76  in  the 
development  of  cleaner  vehicles  and  innovative  components.  However,  based  on  JRC 
estimates, the EU content of cars produced in Europe has been slightly decreasing over time.  

At the European level, the production index for the European automotive component industry 
continues to fall at a steady pace (by an average of 11% in 2025 compared to 2021 production 
volumes),  as  does  vehicle  production  (compared  to  2023).  Despite  the  exceptional  customs 
tariffs introduced in 2024 on Chinese EVs, imports of Chinese vehicles continue to grow (+35% 
in volume in the first half of 2025 (+380% compared to 2021), compared to a 50% drop in EU 
exports to China), and they have reached a market share of 9.9% in July 2025 despite efforts to 
restore level  playing field  and to  safeguard the European automotive industry against unfair 
competition.  This  phenomenon  has  been  squeezing  the  volumes  and  margins  of  European 

69 European Battery Alliance. 
70 SolarPower Europe (2025). Reshoring Solar Manufacturing to Europe, figure 7. 
71 IEA (2024). Energy Technology Perspectives 2024. 
72 European Commission (2025). Competitiveness Progress Report on Clean Energy Technologies, COM(2025) 74 final, 26 February 2025. 
73 European Commission, : Summary - Net-Zero Technologies (NZT) Monitoring Dashboard - Power BI 
74 SolarPower Europe (2024), Inverters Explained 2.0: Strengthening Europe's Inverter Industry . 
75 European Commission (2025). Communication providing updated information under Regulation (EU) 2024/1735. OJ C 2025/3236. 
76 EUR 70 billion a year when considering the whole automotive supply-chain – vehicle manufacturers and suppliers, EUR 30 billion when 
considering only the automotive suppliers Automotive R&D investment, by world region, ACEA, 11 Sept 2024. 
Automotive suppliers in the EU – R&I vision on circularity, CLEPA, 11 September 2023. 

13 

 
 
 
manufacturers and  representing huge competition  for local  manufacturers.77 Furthermore,  as 
described in the Draghi report, even more than 10% of local EU production may be displaced 
in the following five years.78 

Lastly,  the  automotive  industry’s  vulnerability  to  external  supply  chain  disruptions  was 
displayed by recent announcements by the largest European automobile manufacturers trade 
association about the difficulty to secure chips for the automotive supply chain. Despite efforts 
to  diversify  supply  chains  following  the  semiconductor  shortage  in  the  past,  automotive 
companies  are  still  facing  vulnerabilities  to  external  shocks  when  it  comes  to  the  supply  of 
essential parts for their vehicles, which decreases the resilience of supply chains.  

2.2.2.2  Driver 4: A fragmented EU approach towards foreign investments 

The  EU’s  openness  to  foreign  direct  investment  (FDI)  is  enshrined  in  the  Treaty  on  the 
Functioning  of  the  EU  and  is  essential  to  ensure  the  Union’s  competitiveness  and  progress 
towards decarbonisation. Foreign investors can play a significant role in areas where Europe 
lags on innovative technologies and processes. However, FDIs do not necessarily imply that 
technology  transfer,  know-how  development,  job  creation/retention  and  value  chain 
integration,  are  realised  in  Europe  or  by  European  companies.  Europe’s  heavy  industry  is 
dependent on imported technologies and equipment in emerging low-carbon value chains such 
as hydrogen electrolysers, batteries, and solar PV.79 In many cases, investors choose to limit 
their European footprint to assembly or non-core operations, preserving strategic technologies 
and innovation activities abroad.80 while other investors choose to position high value added 
segments of the production chain, such as R&D, in the EU.81  
Unlike other countries such as the United States, Korea or Japan82, the EU does not consistently 
attach requirements on R&I or skills development. Most importantly, over the past decades, 
China has applied FDI conditionality by restricting market access in sectors such as automotive, 
solar, and wind, to joint ventures with Chinese partners, often under majority control by the 
Chinese partner, while requiring foreign companies to transfer technology, establish local R&I, 
source  components  locally  and  comply  with  data-localisation  and  security  reviews;  these 
conditions enabled Chinese firms to absorb foreign know-how, scale up domestic capabilities.83 
Foreign companies seemed to have been willing to accept China’s demanding FDI conditions 
because  the  market  itself  was  too  large  and  too  strategic  to  ignore.  In  addition,  many  firms 
feared  that  if  they  stayed  out,  rivals  would  step  in  and  gain  an  advantage,  so  they  chose  to 
comply  with  technology  transfer,  joint  venture,  and  localisation  requirements.  These  factors 
meant that, even though foreign companies may have been at higher risk of intellectual property 
loss, stringent FDI conditions were tolerated in the context of increasing global integration of 
production chains, and with China having a strong comparative advantage in the cost of labour. 

77 For example, the trade balance with China on passenger vehicles became negative in 2025 (EUR 1.2 billion in the first half of the year) and 
imports of automotive parts from China increased by around EUR 4 billion between 2021 and 2025 (+66%)  – compared with a decline in 
exports to China of around 50%. This is due to a 30-35% price differential between European and Chinese products. See: Made in Europe 
Local content policy for the European automotive industry. Gerpisa, April 2025. 
78 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 145.  
79 Mission Possible Partnership (MPP), E3G and the Industrial Transition Accelerator (ITA) (2025). Building the EU’s Clean Industrial Future: 
Unlocking Investment through Lead Markets. 
80 Damioli, G., Marin, G., & Zanfei, A. (2024). The effects of foreign entry on local innovation by entry mode. Research Policy, 53(2), 104807. 
https://doi.org/10.1016/j.respol.2024.104807. 
81 Coveri, A., Paglialunga, E. and Zanfei, A. (2024). Functional specialisation and upgrading in European regions: new insights from FDI data. 
WP-EMS #2024/01.  
82 SWD(2025) 11 - Key Performance Indicators (KPIs) - Overview of Resilience Measures by Selected Global Players accompanying the 2025 
Annual Single Market and Competitiveness Report and Annex 10 of this Impact Assessment. 
83 Jonathan E. Hillman, The Digital Silk Road: China’s Quest to Wire the World and Win the Future (New York: Harper Business, 2021). 

14 

 
 
 
By contrast, the EU approach remains largely project-by-project, sometimes dependent on EU 
and  national  funding  programmes.84  Member  States  currently  compete  to  attract  investors, 
leading  to  uncoordinated  and  uneven  requirements.  Competition  between  EU  countries  for 
attracting new assembly and material production investments is likely to intensify, as new EV 
entrants expand into Europe.85 This fragmented approach does not maximise benefits of foreign 
investment in the EU, as Member States compete individually to attract foreign investors with 
varying  conditions  and  incentives,  leading  to  uneven  requirements  on  technology  transfer, 
skills,  and  R&I  commitments.  As  a  result,  the  Union’s  overall  ability  to  leverage  foreign 
investment strategically is weakened. 

This lack of expertise leads to a strong dependency on imports of such batteries from a dominant 
foreign supplier, with this supplier (China) having a track-record of weaponizing dependencies. 
It  is  important  to  reduce  internal  market  risks  associated  to  this  dependency,  ensuring  that 
assembly  activities  of  foreign  investors  in  battery  production  in  the  EU  lead  to  knowledge 
spillovers  and  gradually  reduce  the  EU  dependency  on  foreign  know-how,  creating  the 
conditions for maintaining and reinforcing EU capabilities in locating the strategic parts of the 
battery value  chain  in  Europe,  with  the economic benefits  it brings.  In  addition,  multi-stage 
production  is  highly  sensitive  to  fixed-cost  thresholds  and  policy-driven  cost  differentials, 
meaning that without coordinated EU-level conditions, firms have strong incentives to keep the 
high-value stages abroad.86 Recent evidence confirms that upstream stages do not automatically 
localise: China retains a strong comparative advantage specifically in cells and modules, while 
European production remains competitive only in downstream assembly, the part creating least 
added  value.87  This  pattern  is  not  limited  to  batteries  but  applies  to  other  industries  where 
China’s dominant market position similarly heightens Europe’s strategic dependencies. 

In the Public Consultation, 53% (166 out of 314 respondents) view foreign direct investments as useful to bring 
in needed capital; 55% (172 out of 314) support applying conditions to align such investments with EU industrial 
& strategic interests. 

2.2.3  Sub-problem 3: Industrial decarbonisation technologies are not deployed at scale 

Many projects of the most promising technologies for decarbonising EIIs are not commercially 
deployed at the necessary scale, nor at the pace needed to meet the climate neutrality target. 
The long investment cycles for industry from R&I to deployment highlight the importance of 
policy predictability to reduce regulatory and financing risks.88 Furthermore, the availability 
and  economic  viability  of  these  technologies  vary  depending  on  the  specific  sector  and 
parameters such as the technology readiness level, the energy and raw materials needs, the CO2 
abatement potential and CO2 abatement costs. Many technologies, such as heat pumps or energy 
efficiency  solutions,  are  already  mature  and  able  to  help  reducing  costs,  while  improving 
performance. At the same time, they are not always available at scale. Electrifying industrial 
production  is  a  viable  solution  due  to  the  rapid  renewable  energy  deployment  but  requires 
process transformation and it is not always affordable nor fully available, because of the need 
to  improve  connections  and  increase  grid  capacity,  or  to  meet  the  specific  EIIs’  needs  to 
consume baseload power.  

84 Many (but not all) Member States screen FDI for possible security risks. This however is done only for some FDI, with conditions differing 
between Member States (such as regards the extent to which clean tech/EEI are covered), and only as regards risks to security and public order. 
85 CEPII (2024), “Will Chinese Auto Export Boom Transform into Local Production in Europe?”, CEPII Policy Brief No. 45, Paris. 
86 Head, K., Mayer, T., Melitz, M., Yang, C. (2025), “Industrial policies for multi-stage production: the battle for battery-powered vehicles”, 
CEPR / HMMY Working Paper. 
87 CEPII (2024), “Will Chinese Auto Export Boom Transform into Local Production in Europe?”, CEPII Policy Brief No. 45, Paris. 
88 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B). 

15 

 
 
 
In addition, decarbonising the sectors with so-called ‘hard-to-abate emissions’ (i.e. chemicals, 
basic metals, cement, and pulp and paper) requires significant investments. Emission-abatement 
technologies,  including  electrification,  EAF,  clean  hydrogen,  carbon  capture  and  storage 
(CCS), carbon capture and use (CCU), and raw material recycling require large capital costs 
(CAPEX). In addition, the operational costs (OPEX) are uncertain when technologies are not 
mature and often higher than those of traditional technologies, as long as electricity and low-
carbon fuel (e.g. clean hydrogen) prices remain high in Europe. These elements are an important 
factor determining the slow decarbonisation pace. Estimates suggest that by 2030, producing 
green steel (H2-DRI-EAF route) in Europe could cost around EUR 100/tonne of steel (17%) 
more than in the US or Saudi Arabia. This cost gap exceeds that observed today for conventional 
BF-BOF steel, reflecting Europe’s higher (clean) energy and hydrogen prices.89 Comparing all 
iron and steel technology pathways, estimates suggest that in 2024 the low-emission solution 
was 74% more costly  than the conventional routes, and 48% more costly than a new build basic 
oxygen furnaces (BOF) plant. Data suggest that by 2030 the costs will have fallen but will on 
average remain higher (66%) than for an existing BOF plant, and 42% to a newly built BOF 
plant.90 In the case of cement, techno-economic studies for theoretical cement plants estimate 
CO₂ abatement costs at approximately EUR 47.3–60.2/tCO₂ for oxy-fuel technologies and EUR 
77.4–129/tCO₂  for  post-combustion  capture.91  A  detailed  analysis  of  the  availability  and 
economic  viability  of  industrial  decarbonisation  technologies  and  their  cost  evolution  is 
presented in Annex 7. 

A large majority of respondents (85% - 266 out of 314) to the Public Consultation point to limited access to 
affordable  decarbonised  energy  and  high  operational  and  capital  costs  (n=260,  83%  and  n=251,  80%, 
respectively) as critical barriers. 

2.2.3.1  Driver  5:  Lengthy,  fragmented  and  uncertain  permitting  procedures  for 

decarbonisation projects 

Industrial  manufacturing  activities  can  have  significant  impacts  on  the  environment  beyond 
CO2 emissions (e.g., SOx, NOx, dust, dioxins, waste generation, water, resource consumption). 
EU and national  legislation have regulatory frameworks to  address  these  impacts.  Industrial 
plants  show compliance  with  the legislation via permits, processed  and granted by national, 
regional or local authorities. While permitting is not an exclusive trait of industries (including 
EIIs), industrial activities are a considerable source of pressure on the environment. As such, 
as mentioned below, the permit-granting process can be particularly cumbersome for them - the 
higher the environmental hazard, the more complex permitting can become. In the context of 
Europe’s  decarbonisation  transition,  where  the  investments  needed  are  extremely  large,  the 
complexity and duration of permitting processes can be an obstacle to investing in Europe and 
therefore impact its ability to decarbonise. Permitting process has been recognised as a major 
challenge for project development.92 

The evidence gathered via stakeholder consultations, as well as internal Commission analysis 
through the implementation of Union funding for industry showed unnecessarily lengthy and 
complex industrial permitting. See Annex 2 for more detail. The issues identified are common 
to  the  different  manufacturing  sectors,  however  industrial  projects  that  need  to  drastically 
change their processes in EIIs sectors face an extra layer of difficulty due to the innovative and 

89 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 99. 
90 BloombergNEF (2024). Numbers are averages and may vary due to the abundance of cheaper renewable energy. 
91 Marmier, A. (JRC) (2023). Decarbonisation options for the cement industry. 
92 2025 annual knowledge sharing report of the Innovation Fund: De-risking innovative low-carbon technologies. 

16 

 
 
 
 
 
impactful  nature  of  their  projects.  Almost  half  of  the  respondents  to  the  Innovation  Fund 
Sharing Report note that the novel nature of their operation does not fit well in the existing 
permitting  procedures.93  For  Innovation  Fund  projects,  the  time  required  for  granting  the 
permits after the applications were filed was on average 16.4 months. Almost 45% of projects 
estimated that their permit-granting processes would require from 12 to 48 months.94 More than 
half of the projects indicated that in the end they required more time than originally foreseen.95 

The  complexities  and  delays  stem  from  several  factors,  which  are  closely  related  to  the 
administrative setting of each Member State. The most important factors include the numerous 
authorities involved in the permit-granting process (5 to 10 different authorities can be involved 
for  a  single  project)96,  unclear  or  insufficient  details  on  the  necessary  information  to  be 
submitted,  lack  of  administrative  capacities  in  Member  States,  potential  inconsistencies 
between EU and national regulatory framework implementation, or low levels of investments 
by Member States in digitising permitting systems.  

Results from the Public Consultation show that permitting is seen as a major bottleneck (82% - 256 out of 314), 
with 69% (218 respondents) agreeing that challenges related to permitting are widespread and different (n=222, 
71%) across Member States. A fragmented regulatory landscape and complexity of the process (n=187, 60%) and 
multiple authorities involved in the permitting process (53%, of businesses and business associations) are flagged 
as main challenges. SMEs in particular (59% - 40 out of 68) point to a lack of administrative capacity. 65% of 
respondents to the Innovation Fund survey on permitting, ranked the permit-granting process among their top 
challenges.97 

2.2.3.2  Driver 6: Difficulty to access resources (e.g. inputs and funding) 

For  a  project  developer  to  proceed  with  a  specific  investment  project,  several  elements  are 
needed to make that commitment such as financing, and access to the energy grid.  

Industrial  decarbonisation  requires  substantial  investments  and  needs  to  attract  private 
investors. In the past six years, despite many announcements, less than one-third of industrial 
decarbonisation  projects  in  large  energy-intensive  sectors  have  reached  final  investment 
decisions, and almost half remain unimplemented (see Driver 3). 

A recurrent issue for decarbonising industrial facilities is securing a timely connection to the 
energy grid.98 Timely feedback is crucial from a business planning perspective, affecting the 
business  case  of  each  application  and  hence  overall  competitiveness.  However,  at  least  15 
Member States have experienced queuing problems, which slows down the clean transition and 
European  economic  growth.99  This  challenge  differs  between  Member  States,  connection 
levels, generation and demand side. In case of not meeting technical requirements or potential 
impacts on the security of the electricity grid due to insufficient capacity, grid connection may 

93 Permitting novel production processes is addressed to some extent at the EU level by the revised Industrial Emissions Directive, which 
contains specific permitting flexibilities for the implementation of 'deep industrial transformation’, where more time is granted for innovative 
installations to comply with permit conditions.  
94 27% of respondents indicated 12 to 24 months, 9% from 24 to 36 months and 9% from 36 to 48 months. 
95 Most of them (12 projects) required less than one additional year to have their permits granted. 8 projects used the same amount of time as 
they had estimated, and only a few projects (5) could save time in the permission process. Within the group of 28 projects, all biofuels and bio-
refineries projects (3) and chemicals projects (3) needed more time for the permitting process than anticipated. Fund projects participating in 
the survey were signed between late 2021 and late 2023 and results may therefore be skewed towards projects with shorter permitting periods. 
96 Innovation  Fund  survey on  permitting  showed that 51%  of  the  respondents  found the  high number of public authorities  involved in the 
permitting procedures as a challenge. 
97 2025 annual knowledge sharing report of the Innovation Fund.  
98 Almost half (47%) of the Innovation Fund survey respondents highlighted their energy connections as an issue.  
99 Study on network development planning, tariff structures and connection requests for electricity distribution grids, 2025,Publications Office 
of the EU, [forthcoming].  

17 

 
 
 
 
 
be refused. For example, in 2024 in Spain, 11 GW of connection requests coming from industry 
were rejected.  

Barriers  to  finance.  Multiple  funds  are  available  at  the  EU  level  (e.g.  the  Recovery  and 
Resilience Facility (RRF), InvestEU, the Innovation Fund, Horizon Europe, the Research Fund 
for  Coal  and  Steel,  the  Modernisation  Fund,  the  LIFE  programme,  and  the  Social  Climate 
Fund). Programmes like InvestEU have played an important role in mobilising private capital 
and  de-risking  investments  in  decarbonisation  projects.  However,  the  broader  EU  funding 
landscape remains complex to access and fragmented. Under directly EU managed funds, the 
Innovation Fund reinvests a portion of EU ETS revenues to support the decarbonisation efforts 
of the EIIs. However, applications meeting the funding criteria tend to exceed the number of 
projects funded by a considerable margin. At Member State level, only a limited amount of 
ETS revenues is dedicated to investment in decarbonisation.100 

Beyond grid access and access to finance, industries also face increasing difficulty in accessing 
critical and other raw materials at competitive prices and/or quantities. The rapid global race 
for  clean-tech  manufacturing  has  intensified  demand  for  both  primary  and  secondary  raw 
materials, many of which are diverted to third countries offering higher prices or fewer export 
restrictions. This challenge is compounded by third countries increasingly using export controls 
to  secure  domestic  supply  most  notably  and  recently  China101,  which  has  recently  added 
restrictions to exports which now also include rare earth elements and other inputs critical for 
magnet  and  clean-tech  production.  At  the  same  time,  Europe  faces  the  paradox  of  valuable 
secondary  raw  materials  such  as  metal  scrap  being  exported  to  third  countries  rather  than 
reprocessed domestically, reducing availability for EU clean-tech and industrial producers.102 
These developments heighten input cost volatility and strategic uncertainty for EU industries. 

Respondents from the Public Consultation also identified permitting times for grid access as around 24 – 120 
months, with the process sometimes taking much longer. Timeframes differ however by country and regions. 
Main issues identified, aside from lengthy timelines, were limited grid capacity, and legal timelines not being 
enforced or misaligned with reality on the ground. 

100  Draghi,  M.  (2024).  The  future  of  European  competitiveness:  In‑depth  analysis  and  recommendations  (Part B),  p.  100.  In  2023,  67% 
of revenue used domestically went to domains of energy supply, grids and storage (e.g. renewables, self-consumers), and public transport and 
active mobility (Use of auctioning revenues generated under the EU Emissions Trading System | European Environment Agency's home page). 
ETS investment is channelled to priority areas, such as renewable energy production, energy networks and interconnectors, energy efficiency 
and the just transition. 
101 China’s new export controls now require government approval for the export of magnets containing rare earths, and plans to add five more 
elements (holmium, erbium, thulium, europium, ytterbium) to its control list. Financial Times, 20 October.  
102  The  Commission  noted  declining  scrap  availability  in  the  EU  due  to  “scrap  leakage”  to  third  countries  and  has  activated  a  customs 
surveillance system for ferrous, aluminium and copper scrap to ensure sufficient access for EU industries. 

18 

 
 
 
 
2.3  How likely is the problem to persist? 

Figure 3: Problem tree 

The  need  to  decarbonise  industrial  manufacturing  and  to  improve  its  competitiveness  will 
remain  a  high  priority  for  the  EU  and  is  also  highlighted  in  the  2025  Strategic  Foresight 
Report103,  which  stresses  that  Europe’s  resilience  and  prosperity  depend  on  accelerating 
industrial transformation while safeguarding competitiveness and strategic autonomy.  

The EU ETS, including its planned review in 2026, provides incentives to decarbonise, but it 
will not be sufficient on its own to fully unlock the investments in low-carbon technologies. 
Investments are slowed down due to an ETS price not sufficiently high, and key barriers such 
as permitting bottlenecks and too high capital and operational costs. Today, the carbon price 
ranges  between  70-80  EUR/tonne,  while  studies  point  at  a  much  higher  price  to  make 
investments in low-carbon technologies commercially viable.104  

Over  time,  decarbonisation  technologies  like  clean  hydrogen,  electrification  of  high-
temperature processes or CC(U)S are expected to become more cost-effective105, especially as 
the  EU  ETS  tightens,  strengthening  the  incentive  to  decarbonise.  However,  in  the  short-to-
medium term, the pace of decarbonisation remains too slow, driven by factors such as financing 
gaps, lack of incentives, permitting delays, infrastructure deficits, slow technology adoption, 
and a shortage of skilled workers. The price signal alone will not be sufficient to address on its 
own all the above drivers. At the international level, competitors to EU EIIs are not subject to 
equivalent carbon pricing measures, making the risk of carbon and investment leakage likelier 
to materialise. The CBAM and its review should help alleviate some of these impacts, notably 
by addressing the risk of circumvention. However, until low-carbon technologies and products 
reach cost parity with conventional alternatives, the problem is likely to remain.  

Without additional policy measures to foster a competitive market for decarbonised industrial 
products  now,  the  EU  risks  losing  strategic  manufacturing  sectors  that  are  critical  for  its 
resilience and economic security. In other words, while emissions abatement might be achieved 
and  climate  targets  met,  these  may  result  from  reduced  industrial  output,  rather  than  more 

103 European Commission (2025). 2025 Strategic Foresight Report, COM(2025) 484 final. 
104 According to Agora Industry, by 2030, the average CO2 abatement costs of all steel breakthrough technologies expected to be commercially 
available will be well above EUR 86/tCO2. They range from EUR 111/ tCO2 (NG-DRI-EAF-CCS) to USD 171/tCO2 (100% H2-DRI-SMELT-
BOF). A CO2 price of EUR 86/tCO2, in isolation, would likely not be enough to make these technologies competitive. Source: Agora Industry, 
Wuppertal Institute and Lund University (2024): Low-carbon technologies for the global steel transformation, 2024. 
105 See Annex 7 – Overview of cost evolution of industrial decarbonisation technologies. 

19 

 
 
 
 
efficient technologies. This gap can be quantified by looking at the drivers of recent emissions 
trends. According to the Climate Action Progress Report 2025, the EIIs industrial production 
installations covered by the ETS reduced their GHG emissions year on year by 6.4% in 2022, 
7.5%  in  2023  and  0.8%  in  2024,  due  to  a  combination  of  a  reduced  output  and  efficiency 
gains.106 Zooming in on the specific iron and steel case, Figure 4 shows that over the past six 
years the emissions reduction was mainly driven by changes in the production activity level, 
rather than in emission intensity.107  

Figure 4: Iron and Steel: EU GHG Emissions drivers 2018-2024 (ktCO2), European Commission JRC analysis 

Past  trends  combined  with  recent  announcement  of  projects  being  stopped,  indicate  that 
strategic  sectors  could  face  further  decline,  ultimately  undermining  the  EU’s  long-term 
economic growth, technological innovation, and resilience. In strategic sectors, this could also 
lead to greater dependencies.  

On the demand side, only a limited share of industrial buyers is currently willing to pay a ‘green 
premium’ for energy-intensive materials. While some recent EU (product) policies address the 
environmental  or  energy  performance  of  the  product  or  building  in  scope,  they  do  not 
systematically look into the value chain, nor go as far as setting minimum requirements for the 
use  of  low-carbon  materials  in  such  products/  buildings.108  The  structural  disadvantages 
companies  face  in  Europe  (e.g.  higher  energy  prices  or  reliance  of  certain  raw  materials), 
combined  with  unfair  global  practices,  will  continue  to  put  Europe  at  a  systematic  risk  of 
overdependencies.  

On public procurement, auctions and public support schemes, the NZIA has recently introduced 
resilience  requirements  for  a  range  of  clean-tech  products.  While  this  will  decrease  the 
dependencies from a single third country of supply, it will not be sufficient for these industries 
to ramp up at sufficient scale to compete with already established foreign markets and global 
overcapacities. In fact, as regards solar PV systems and batteries, the risk exists that Chinese 
companies  would  be  able  to  supply  the  European  market  through  factories  built  outside  of 
China, in other Southeast Asian markets, and thereby circumventing the rules put in place by 
NZIA.  According  to  BloombergNEF,  investments  in  solar  PV  already  appear  to  be  shifting 

106 European Commission (2025), Climate Action Progress Report, p.94. 
107 Internal calculation based on JRC-IDEES and CETO 2024/ LMDI. The Log-Mean Divisia Index (LMDI) is a method used to decompose 
changes in an aggregate variable, like CO2 emissions, into the contributions of its constituent factors over time. Sectoral analysis in Annex 7. 
108 This is the case of the Construction Products Regulation (CPR), or the Ecodesign for Sustainable Products (ESPR), the End-Of-Life Vehicles 
and the EPBD. See more details in Annex 8. 

20 

 
 
 
 
away from China as domestic manufacturers are investing in factories abroad, also in response 
to  the  US  tariffs  and  imports  restrictions  on  China.109  When  it  comes  to  batteries,  Chinese 
companies have heavily invested in Indonesia and Morocco110, while markets such as India, 
Türkiye and Brazil are leveraging tariffs to attract Chinese investment.111  

The challenges facing the EU’s clean tech sectors are structurally embedded and unlikely to 
resolve  without  targeted  intervention.  Battery  and  PV  manufacturers  located  in  the  EU  are 
caught in a strategic squeeze: on one side, they face fierce price competition from third-country 
producers.  On  the  other  side,  these  same  countries  control  access  to  critical  upstream 
components and technologies, enabling them to restrict exports or inflate supply costs, further 
undermining the competitiveness of EU manufacturers.  

On vehicle components, data (as described in Annex 7 on sectoral analysis), show an increase 
of delocalisation of production in the past few years, which is likely to persist over time unless 
mitigated by policy measures, as EU suppliers continue to face unfair competition.  

The expected benefits of foreign investments depend on the business model and governance 
pursued by the investor for its European affiliates. Without conditions, EU firms may remain 
locked  into  high-cost  abatement  pathways  since  foreign  investors  face  little  obligation  or 
commercial incentive to locate their R&I, engineering, or advanced processes within the EU. 
A  clear  illustration  is  the  Tesla–CATL  partnership  in  the  United  States,  where  investment 
incentives were tied to local content, technology transfer and domestic battery supply chains. 
This has led to the localisation of advanced cell manufacturing and R&I activities in the U.S. 
In contrast, similar investments in Europe by the same actors have largely focused on assembly 
and  final  integration,  with  limited  technology  transfer  or  anchoring  of  critical  value  chain 
segments.  

Targeted improvements aimed at streamlining permitting procedures have been implemented 
for the deployment of specific sectors like energy infrastructure, renewable capacities, critical 
raw materials projects or net-zero technology manufacturing projects. In addition, the Industrial 
Emissions  Directive  (IED)  was  recently  amended  to  facilitate  environmental  permitting  of 
industrial  installations.  However,  no  current  initiative  addresses  the  entire  industrial 
manufacturing sector, nor the entire permit-granting process from start to finish. 

Consequences of the problems 

Regions that are currently home to EIIs face risks of further economic and social decline, with 
significant  regional  disparities  in  employment  and  prosperity  in  the  Single  Market.  This 
vulnerability  echoes  the  broader  megatrends  identified  in  the  2025  Strategic  Foresight 
Report112,  which  emphasises  the  growing  regional  and  social  disparities  as  a  key  test  for 
Europe’s resilience by 2040. 

EIIs,  batteries,  automotive  and  PV  industries  risk  losing  further  market  share,  technological 
leadership,  and  becoming  locked  into  deeper  strategic  dependencies.  This  would  directly 
undermine  the  EU’s  ability  to  deliver  on  the  “promote”  pillar  of  the  European  Economic 
Security  Strategy.113  Asymmetries  in  global  investment  conditions  place  EU  industry  at  a 

109 BloombergNEF.Clean Tech in the Time of Tariffs. 
110 Volta Foundation (2025). 2024 Battery Report. 
111 BloombergNEF. Clean Tech at Heart of Growing Tariff Storm.. 
112 European Commission (2025). 2025 Strategic Foresight Repor, COM(2025) 484 final. 
113 European Commission (2023).  Joint Communication to  the European Parliament,  the European Council and  the Council on “European 
Economic Security Strategy”.  

21 

 
 
 
structural  disadvantage  compared 
conditionalities and incentive frameworks that maximise spillovers.114  

to  global  competitors  who  benefit  from  strong 

For the EU, continued clean technologies dependency means that the domestic battery and PV 
production  will  remain  vulnerable  to  external  shocks,  price  manipulation,  and  supply 
disruptions. China’s recent export restrictions on key battery technologies, including lithium-
ion  battery  cells  and  packs,  key  production  equipment  and  technologies  linked  to  high-end 
batteries and graphite anodes, cathode material processes and lithium refining, signal a strategic 
shift toward consolidating its dominance and limiting foreign access to critical capabilities.115  

Without additional policy measures, EU PV modules dependency on China could rise to 98% 
of the value chain. According to the Solar Alliance, which has set the target of achieving 30 
GW manufacturing capacity along the value chain, if this goal is not met, Europe would miss 
out on creating more than 40 000 highly skilled jobs.116  

When  it  comes  to  the  automotive  industry,  the  cost  disadvantage  of  manufacturing  key 
automotive components in the EU is combined with increasing pressure from Chinese imports, 
the impact of tariffs on the US market and increasing tendencies for local content requirements 
in  other  jurisdictions117,  and  in  some  cases  the  technological  gap  vis-à-vis  non-EU 
manufacturers. Further competitiveness losses in the EU automotive industry may increase the 
risk  of  delocalisation  of  component  manufacturing  outside  the  EU,  possibly  contributing  to 
economic security risks. It is therefore critical to pursue the active reinforcement of cooperation 
with  other countries  to  strengthen the  resilience  of EU supply  chains.  In addition,  declining 
domestic  manufacturing  capacity  increases  the  risk  of  “cumulative  vulnerability”  across 
interconnected value chains, where disruptions in one critical input can cascade rapidly - from 
the component to the raw material - and impede the Union’s ability to maintain continuity of 
supply, manage emergencies and safeguard public order. This trend seems to be accelerating, 
and  as  a  short-term  impact  76  000  job  losses  have  already  been  announced  among  the 
automotive suppliers, and up to 50% of the production is at risk in the next five years.118  

3  Why should the EU act? 

3.1 

Legal basis 

The  initiative  intends  to  increase  decarbonised  and  resilient  industrial  production  in  the 
manufacturing  industry,  with  a  focus  on  energy-intensive  industrial  sectors  and  clean 
technologies. It intends to facilitate the harmonisation of the definitions of low-carbon industrial 
products, support European lead markets for the development, production and diffusion of clean 
tech  in  industry,  streamline  across  EU  Member  States  related  planning,  tendering  and 
permitting processes, as well as address the fragmented approach of EU Member States towards 
foreign  investments.  Article  114  (Single  Market)  of  the  Treaty  of  the  Functioning  of  the 
European Union (TFEU) is the appropriate legal basis. Article 173, on the other hand, is not 
considered an appropriate legal basis as it does not allow for harmonisation measures on the 
internal market, which remains the aim of measures included in IAA. Article 207 of the TFEU 
may be required depending on the specific measures proposed to address the fragmentation of 
foreign investments in EU Member States. 

114 Draghi, M. (2024). The future of European competitiveness: A competitiveness strategy for Europe (Part A), p.13 

115 China Issues New Rules on Exports of EV Batteries and Materials, Institute for Energy Research, and MOFCOM & GAC Announcement 
(2025) N. 58: Decision to Impose Export Controls on Items related to Lithium Batteries and Artificial-Graphite Anode Materials 
116 SolarPower Europe (2025). EU Solar Jobs Report 2025. 
117 More details (also related to local content requirements in public procurement procedures) in Annex 10, Subproblem 1, Driver 2: Limited 
willingness to pay a premium for low-carbon industrial products. 
118 CLEPA – Eurofund, Geripsa (2025).  

22 

 
 
 
 
3.2 

Subsidiarity: Necessity of EU action 

Industrial  decarbonisation,  as  well  as  competitiveness,  sustainable  prosperity,  industrial 
security and resilience are matters where EU action is needed. No single Member State alone 
is capable of effectively addressing industrial decarbonisation due to the integrated nature of 
the challenge. A harmonised EU-level approach is therefore necessary to avoid Single Market 
fragmentation and adequately address the urgency of the problems while protecting the level 
playing  field  as  well  as  addressing  administrative  bottlenecks  like  permitting.  Furthermore, 
climate change is a trans-boundary issue requiring international and EU action to effectively 
complement and reinforce regional, national and local action.  

3.3 

Subsidiarity: Added value of EU action 

While national measures may address parts of the challenge, they risk fragmenting the Single 
Market  and  undermining  collective  effectiveness.  Given  that  supply  chains  are  deeply 
integrated  across  Member  States,  a  coordinated  EU-level  approach  is  essential.  It  enables 
economies  of  scale  and  solutions  that  fit  the  scope  of  the  problem  and  helps  prevent 
inefficiencies and duplication. In line with this logic, each policy option (PO) focuses on areas 
where there is a demonstrable value added in acting at Union level due to the scale, speed and 
scope of the efforts needed.  

4  Objectives: What is to be achieved? 

4.1  General objective 

The general objective is to increase decarbonised and resilient industrial production in the 
EU  manufacturing  industry,  with  a  special  attention  on  EIIs  and  clean  technologies, 
considering their contribution to Europe’s competitiveness, economic security, and sustainable 
economic growth, in line with the Clean Industrial Deal’s objectives. Progress regarding the 
general  objective will be measured by monitoring the carbon intensity of EII production, as 
well  as  production  capacities  and  output  for  the  EU  in  EIIs,  certain  clean  tech  and  vehicle 
components. 

4.2 

Specific objectives 

This  overall  objective  is  broken  down  into  five  specific  objectives  (SOs),  related  to  the 
problems and drivers:  

1.  Facilitate differentiation for low-carbon industrial products to increase their value and 
marketability (SO1 addressing problem driver 1); this will be measured by an indicator 
on the availability of a low-carbon label for relevant industrial products, supported by a 
robust verification mechanism.  

2.  Boost  demand  for  European  low-carbon  products  and  clean  tech,  (SO2  linked  to 
problem drivers 2 and 3); measured by the share of EU and low-carbon production in 
EU consumption for relevant products,  

3.  Maximise  the  quality  and  benefits  of  foreign  investment  in  the  EU  (SO3  linked  to 
problem driver 4); measured by number of joint ventures for relevant sectors that create 
European added value, innovation and industrial resilience. 

4.  Speed-up and simplify permits for industrial decarbonisation (SO4 linked to problem 

driver 5); measured by the average permitting times  

5.  Increase investment projects in industrial areas (SO5) measured by the number of 

industrial Final Investment Decisions (FID) realised in relevant areas  

23 

 
 
Figure 5: Problem drivers and specific objectives 

5  What are the available policy options? 

5.1  What is the baseline from which options are assessed? 

The current baseline presents a structural imbalance in Europe’s industrial transition: emissions 
are  decreasing,  but  they  are  largely  driven  by  shrinking  production  rather  than  cleaner 
production methods taking hold. Figure 6 below illustrates past and potential future trends for 
the  EU  iron  and  steel  sector,  as  an  example.  Between  2005  and  2023,  CO₂  emissions  and 
production volumes have moved almost in parallel.119  

Figure 6: EU Iron and steel: production level and CO2 emissions (2023-2050) 

Looking  at  the emissions projections extrapolated on the historical  trends of production and 
emissions, although in reach, they will need to decline much faster to meet the EU 2030, 2040 
and  2050  climate  targets.  While  CO2  emissions  reductions  and  production  levels  remained 
relatively correlated so far, emissions will have to be reduced much faster in the next decade. 
The  EU  remains  firmly  committed  to  achieving  climate  neutrality  by  2050,  including  the 

119 Source data 2005-2023: JRC-IDEES, consistent with EUROSTAT data. Source projections 2024-2050: internal calculations and JRC CETO 
2025, developed with POTENCIA. 

24 

 
 
 
 
 
intermediate  target  of  a  90%  reduction  in  net  greenhouse  gas  emissions  by  2040.120  But  if 
decarbonisation  remains  at  today’s  pace  and  is  not  accelerated,  the  EU  will  still  be  able  to 
achieve its emissions reduction targets, thanks to the EU ETS, but such targets will be met by 
reducing  industrial  production,  as  recent  trends  have  shown.  Looking  at  the  iron  and  steel 
example, if the trend of industrial production between 2005 and 2023 persist, the production 
projection shows that the sector is expected to shrink by almost 60% by 2050 compared to the 
2023 baseline.  

In parallel to the EU ETS, the CBAM will gradually replace free allowances to prevent carbon 
leakage and ensure that imports reflect an equivalent carbon cost. Its implementation from 2026 
is expected to support the competitiveness of EU producers that invest in cleaner technologies. 
The  2025  CBAM  review  is  also  expected  to  tighten  the  system,  but  its  impact  cannot  be 
quantified at this stage. The baseline therefore assumes continued ETS-driven decarbonisation 
reinforced by a progressively more stringent CBAM regime, though with residual uncertainty 
regarding its effectiveness. Annex 8 presents the details of the baseline scenario, and includes 
the analysis like the above for aluminium, cement, and chemicals. 

While  industry  is  willing  to  invest  in  decarbonisation,  and  has  taken  important  initial  steps, 
concrete decisions risk not materialising fast enough to reduce emissions at the pace required 
to  be  on  track  to  meet  the  EU  climate  targets.  This  is  substantiated  by  clean  projects 
announcements as reviewed in Driver 3.  

Looking at each specific objective, the baseline scenario would result in no common definition, 
methodologies or minimum threshold for low-carbon industrial products. Furthermore, while 
existing public procurement rules establish how to buy, they fall short of addressing what to 
buy in terms of low-carbon criteria. Current green public procurement practices remain largely 
voluntary, sectoral, fragmented, and inconsistently applied across Member States.  Voluntary 
resilience criteria are even less considered in the current procurement procedures, as they are a 
recent concept that will only become mandatory  for some products from 30 December 2025 
under  the  NZIA.  Additionally,  in  the  NZIA,  resilience  criteria  refer  to  components,  not 
specifically to the energy-intensive materials used. As such, the viability and competitiveness 
of European projects across the entire upstream value chain will continue to be undermined by 
the economic pressures outlined above and the lack of investments in innovation, resulting in a 
widened technological gap vis-à-vis a non-EU manufacturer.  

The International Energy Agency (IEA) indicates that China’s predominant role in global solar 
PV production will remain largely  unchanged until  2035, with  only  a slight  decrease as PV 
manufacturing facilities in other regions begin to materialize.121 While promoting resilience and 
diversification,  the  NZIA  does  not  ensure  sufficient  support  for  scaling  up  EU-based  solar 
manufacturing. Its rules allow PV modules to qualify as “compliant” even if all components are 
sourced  from  Southeast  Asia,  where  Chinese  Tier  1  firms  already  operate  large  hubs.  As  a 
result, a product with no European-made content can still meet the NZIA criteria and undercut 
EU producers in price-sensitive auctions.  

In  the  EU  battery  ecosystem,  manufacturing  capacities  for  battery  cells  and  other  key 
components remain largely dominated by foreign companies. Currently, South Korean firms 
account for 82% of the installed battery cell production capacity, while European companies 
represent  only  around  8%.  However,  ongoing  investments  are  set  to  significantly  boost 
European production by 2030, with their share expected to rise to approximately 25% based on 

120 European Commission (2025). The Clean Industrial Deal: A joint roadmap for competitiveness and decarbonisation, COM(2025) 85 final, 
26 February 2025. 
121 IEA (2024), Energy Technologies Perspectives 2024. 

25 

 
 
 
industry announcements. Despite this growth, Asian players, pushed by Chinese investments in 
the sector, will continue to lead, holding a combined 54% share of installed capacity. Notably, 
Chinese companies are projected to become the most dominant, with a 34% share, while joint 
ventures between European and Chinese firms are expected to contribute a further 7% to the 
total installed capacity. When it comes to key battery components, Chinese firms are expected 
to lead cathode active material production by 2030 with 44% of installed capacity, followed by 
the EU with 32% and South Korea with 19%. For anode active materials the projections are 
more diversified in terms of ownership with the installed capacity coming from companies from 
Australia and New Zealand (28%), followed by Europe (23%) and China (20%).122 

While  the  efficiency  of  the  permit  granting  procedures  for  some  decarbonisation  projects  is 
expected to improve, most manufacturing industries are not covered under existing frameworks 
and  can  continue  to  face  complex  and  lengthy  permitting  procedures.  The  proposal  for 
Simplification  of  administrative  burdens  in  environmental  legislation123  is  expected  to 
streamline environmental assessments, but the overall permitting process from start to finish, 
beyond environmental permits (such as construction, operational and safety, land use or zoning 
permits) remains an untargeted field for simplification for the industrial manufacturing. While 
the  grids  package  will  tackle  grid  planning  to  remove  bottlenecks,  the  difficulty  to  de-risk 
investments  and  access  funding  would  remain,  with  Member  States  struggling  to  identify 
relevant projects to focus their efforts on better framework conditions.  

Against  this  baseline,  the  competitiveness  and  decarbonisation  of  Europe’s  manufacturing 
industries,  notably  EIIs  and  some  clean  energy  technologies,  is  unlikely  to  improve  in  the 
coming years without further action. The Commission’s JRC has estimated that for each 1% 
loss of final demand in EIIs in the EU, the potential impacts would be the loss of 28 000 jobs, 
EUR 2  billion in  value  added and  EUR  6.4 billion in  turnover.124  The EU’s  share in  global 
manufacturing  value  added  has  already  declined  steadily  over  the  past  decade,  while  new 
investments increasingly flow to regions offering lower energy prices, faster permitting, and 
stronger industrial incentives. This erosion of industrial capacity risks turning Europe into a net 
importer  of  both  clean  and  conventional  industrial  products,  with  strategic  implications  for 
economic security and the resilience of its value chains. 

5.2  Description of the policy measures  

Table 1 summarises the main policy measures, which are further explained in Annex 9.  

Table 1: Main policy measures 
Specific 
objectives 
(SO1)  

Measures considered  

LAB  1  -  Development  of  a  low-carbon 
product label for all EIIs  
LAB  2  -  Development  of  a  low-carbon 
product label for steel  

Policy design elements 

Focussed on principles 

(SO2)125 

LEAD_EII 1 - Low-carbon requirements on 
EIIs products used in public procurement and 
support  schemes  in  selected  downstream 
sectors  

LAB  2.1  -  Determination  GHG-intensity  and  system 
boundaries  
LAB 2.2 - Classification  
LAB 2.3 - Ensuring data quality  
Scope: EIIs (i.e. steel, cement and aluminium) outputs 
used in automotive and construction sectors  
Low-carbon: minimum percentage (%) of low-carbon 
steel in automotive and construction  

122 European Battery Alliance and industry announcements. 
123 COM(2025) 981 final 
124 CARMEN is a linear model, where a 10% decrease/increase in global final demand would yield a result 10 times worse/better than the 
baseline. To facilitate understanding, a 1% reduction is used as a reference point, providing a more manageable and comparable outcome. See 
Annex 4 Section 2.4 for the original values on impact on global final demand.  
125 A detailed overview of all LEAD measures including scope considerations and targets definition for specific objective 2 can be found in 
Annex 9 

26 

 
 
 
LEAD_EII 2 – Low-carbon and Made in EU 
requirements on EII products used in public 
procurement and support schemes in selected 
downstream sectors 
LEAD_EII 3 – Low-carbon and made in EU 
requirements  for EII products placed on the 
market in selected downstream sectors 
LEAD_BAT 1 – Made in EU requirements in 
batteries  for  public  procurement,  auctions, 
and public support schemes 
LEAD_BAT 2 – Made in EU requirements in 
batteries placed on the market 
LEAD_SOL 1 – Made in EU requirements in 
solar  PV  systems  for  public  procurement, 
auctions, and public support schemes 
LEAD_SOL 2 – Made in EU requirements in 
solar PV systems placed on the market 
LEAD_VC 1 – Made in EU requirements for 
vehicle 
public 
components 
procurements126 and support schemes 
LEAD_VC 2 – Made in EU requirements for 
vehicle components placed on the market 

for 

(SO3) 

INV  1  –  Guidance  on  voluntary  FDIs 
conditionalities 

INV 2 – Mandatory FDI conditionalities EU-
wide 

%  of  low-carbon  cement  used  in  vehicles  and 
construction projects  
Made  in  EU:  minimum  percentage  (%)  of  materials 
produced  in  the  EU  in  vehicles  and  construction 
projects should be made in EU  
Target: see table 3 below 

in  EU:  minimum  number  of 

Scope: Batteries  
Made 
the  main 
components of the battery end-product manufactured 
in the EU 
Target: see table 3 below 
Scope: solar PV systems 
Made  in  EU:  minimum  number  of  main  specific 
components  of  the  PV  end-product  manufactured  in 
the EU 
Target: see table 3 below 
Scope:  Electric  vehicle127  components  (excluding 
batteries) 
Made  in  EU:  minimum  share  (%)  of  EU-made 
components  over 
in  value, 
excluding batteries.128 
Target: see table 3 below 
Scope: Battery supply chain and other critical supply 
chains.  
Conditionalities129: 
a. Ownership and structural requirements AND/OR 
b.  Value  added  production  (EU  sourced  inputs,  EU-
based staff recruitment) AND/OR 
c.  Technological  advancements  (e.g.  equipment 
ownership, intellectual property) 

total  components, 

(SO4) 

PERM 1 – One project-one digital procedure  Scope:  all  industrial  manufacturing  sectors  (NACE 
code C) 
•  One project-one digital procedure for all permits, 

including relevant environmental assessments  

PERM  2  –  One  project  –one  digital 
procedure, and special focus on EIIs 

•  Fully digitalised process 
•  Standardised data sets130 
•  Technical assistance 
Scope: PERM 1 and, for EIIs, 
•  Mirroring basic NZIA permitting provisions for 

all (Single point of contact, time limits)  
• 
“Overriding Public Interest” presumption 
•  Regulatory  sandboxes  for  Renewable  fuels  of 

PERM 3 – Dedicated measures for industrial 
manufacturing clusters 

non-biological origin (RFNBO) 
•  Tacit approval at intermediate stage  
Scope: PERM 2 and in addition, for industrial areas: 
•  Tacit approval for all manufacturing industries in 

areas 

126 The definition of public procurement used here includes procedures that concern 1) contracts for the purchase, lease, rent or hire-purchase 
of vehicles and 2) the public service contracts having as their subject matter the provision of services that imply the usage of vehicles. To avoid 
distortions, vehicles first registered on the Union territory before the entry into force of the measure should be deemed to  comply with the 
requirement until a certain date. 
127 In the present document, ICE includes mild hybrids, and EVs include battery electric, plug-in hybrid and fuel-cell electric vehicles. However, 
the model used to assess the impact of the measures does not include the FCEVs due to the current statistical irrelevance. When referring to 
vehicles, the definition includes passenger cars, light commercial vehicles, buses and lorries. 
128  Vehicle components are valued at ex-works  prices.  The  methodology used in  this  Impact  Assessment  to determine  the targets  may be 
subjected to fine-tuning based on further development and additional information that may become available over time. 
129  The list of  incomplete but possible conditionalities considered  for  the  legislative initiative  is  presented  in  Annex 9,  while  examples of 
conditionalities applied by third countries are provided in Annex 13. 
130 Mandating the storage/depository and re-use of data in electronic forms for interoperability purposes. 

27 

 
 
 
•  Priority  assessment  by  Distribution  System 
Operators  of  connection  requests  to  energy 
infrastructure in acceleration areas 

•  Environmental Impact Assessment derogation  
•  Emission exemptions for construction phase for 

CCS related projects 

(SO5) 

AREA  1  -  Recommend  Member  States  to 
facilitate  public  funding  for  projects  in 
industrial areas  
AREA  2  -  Member  States  to  designate 
industrial areas and facilitate access to public 
funding  
AREA  3 
to  designate 
industrial  areas  according  to  the  selection 
criteria and giving the projects priority access 
to funds 

-  Commission 

Criteria definition based on:  
•  Economic security potential 
•  Decarbonisation  potential,  including  links  with 

steel label 

•  Deployment  potential,  including  employment 

and skills considerations  

Structure of the policy options  

The POs are structured from a low degree of intervention (PO1) to a high degree of intervention 
on  the  measures  proposed  (PO3).  Intervention  should  be  understood  in  the  context  of  each 
specific objective, e.g.: for permitting or the low-carbon label, each PO becomes increasingly 
more prescriptive in the requirements imposed on companies or Member States. In the case of 
FDI, the measures become more stringent due to their being binding, and for lead markets, the 
measures increasingly cover more and more market segments (from public procurement only 
to all products put on the market) either for low-carbon or for made in EU requirements. 

Table 2: Policy options to be assessed 
Specific objectives 

SO1- Low-carbon label 

SO2 – Lead markets 

     EIIs 

     Batteries 

     Solar PV 

     Vehicle Components 

PO1 

LAB 1 

PO2 

PO3 

LAB 2 

LEAD_EII 1  LEAD_EII 2 

LEAD_EII 3 

LEAD_BAT 1 

LEAD_SOL 1 

LEAD_VC 1 

LEAD_BAT 2 

LEAD_SOL 2 

LEAD_VC 2 

SO3 – Foreign Direct Investment conditionalities 

INV 1 

INV 2 

SO4 - Speed-up and simplify permit-granting procedures  
SO5- Facilitate investment decisions in decarbonisation 
projects  

PERM 1 

PERM 2 

PERM 3 

AREA 1 

AREA 2 

5.3  Options discarded at an early stage 

AREA 3 (SO5) would mandate the Commission to define industrial areas using the selection 
criteria and providing projects in these areas with preferential access to funding. This measure 
is discarded at an early stage as this would require amending other pieces of legislation, most 
notable the ETS  Directive for the Innovation Fund, where a revision is  already foreseen for 
2026. IAA is not the right vehicle to conduct such amendments. 

28 

 
 
 
 
 
Table 3: Overview of LEAD measures under SO2 
Measures  

Design elements131 

Requirement 

Market segment 

Scope & target 

LEAD_EII 1  Low-carbon: minimum percentage (%) of 
low-carbon materials used in construction 
and automotive 

• 
• 

Public procurement 
Public support schemes 

LEAD_EII 2   Low-carbon: minimum percentage (%) of 
low-carbon materials used in construction 
and automotive 
Made in EU: a minimum percentage (%) 
of  materials  produced  in  the  EU  used  in 
construction and automotive  

LEAD_EII 3   Low-carbon: minimum percentage (%) of 
low-carbon materials used in construction 
and automotive 

Made in EU: a minimum percentage (%) 
of  materials  produced  in  the  EU  used  in 
construction and automotive 

LEAD_BAT 1  Made 

in  EU:  minimum  four  main 
components in EV batteries and three main 
components  in  battery  energy  storage 
systems (BESS)  

LEAD_BAT 2 

LEAD_SOL 1  Made  in  EU:  minimum  number  of  main 

specific components in solar PV systems 

LEAD_SOL 2 

LEAD_VC 1 

• 
• 

Public procurement 
Public support schemes 

•  All products placed on the market 
in automotive and construction  

Public procurement 
Public support schemes 

• 
• 
•  Auctions 

•  All batteries placed on the market 

Public procurement 
Public support schemes 

• 
• 
•  Auctions 
•  All solar PV systems placed on the 

market 
Public procurement136 

• 

Steel: 25% in 2030 

• 
•  Cement (concrete132): 5% in 2030 
•  Aluminium: 25% in 2030 
•  Other EIIs: to be determined at later stage 
•  Low-carbon and made in EU Steel: 25% in 2030 
•  Low-carbon and made in EU Cement (concrete133): 5% in 2030 
•  Low-carbon and made in EU Aluminium: 25% in 2030 
•  Other EIIs: to be determined at later stage in delegated acts 

• 
Low-carbon Steel: 25% in 2030 
Low-carbon Cement (concrete134): 5% in 2030 
• 
• 
Low-carbon Aluminium: 25% in 2030 
•  Made in EU Steel: 85% from entry into force 
•  Made in EU Aluminium: 70% from entry into force 
•  Made in EU Cement: 95% from entry into force 
• 

EVs: Mandatory Made in EU requirements of at least four components at one year after 
entry into force, including the battery cell, increasing to 6 components after three years 
of entry into force, including the BMS and the CAM. 

•  BESS: Mandatory Made in EU requirements of at least three components at one year after 
entry into force, including the battery pack and the BMS; increasing to 6 components 
after three years of entry into force, including the battery cell and the CAM. 
PV inverter and at least two additional main specific components one year after entry into 
force. PV inverter and at least three additional main specific components three years after 
entry into force. 

• 

131 EU content will be designed in line with the Union’s international commitments. Requirements will be of a temporary nature, include periodic review clauses, and feature safeguards in case of insufficient competition 
or supply constraints, ensuring proportionality and policy coherence. These elements are integral to all options considered. 
132 For the objective of lead markets in the construction sector, the requirement may be established at the level of concrete, as the carbon impact of energy intensive materials depends heavily on the specific design and 
material mix.  
133 Ibid.  
134 Ibid.  
136 The definition of public procurement used here includes: 1) procedures that concerns contracts for the purchase, lease, rent or hire-purchase of vehicles; 2) procedures that concern the public service contracts having 
as their subject matter the provision of services that imply the usage of vehicles. To avoid distortions, vehicles first registered on the Union territory before the entry into force of the measure should be deemed to comply 
with the requirement until a certain date. 

29 

 
 
 
 
 
 
 
LEAD_VC 2 

Made in EU: minimum share in value (%) 
total 
of  EU-made  components  over 
components, excluding batteries.135 

Public support schemes 

• 
•  All vehicles placed on the market 

• 

EVs137: 70% at one year after entry into force (2027) and 75% by 2030 

135 Vehicle components are valued at ex-works prices. 
137 In the present document, ICE includes mild hybrids, and EVs include battery electric, plug-in hybrid and fuel-cell EVs. However, the model used to assess the impact of the measures does not include the FCEVs due 
to the current statistical irrelevance. When referring to vehicles, the definition includes passenger cars, light commercial vehicles, buses and lorries. 

30 

 
 
6  What are the impacts of the policy options? 

The impacts of the different POs are assessed below taking into account the results of the public 
consultation and based on internal analysis and external studies. Overall, the initiative is not 
expected  to  have  an  impact  on  fundamental  rights.  All  measures  that  include  or  imply 
information sharing or reporting should be implemented in line with the principle of digital by 
default. 

6.1 

POLICY OPTION 1 

6.1.1  Economic impacts 

6.1.1.1 

Impact on companies 

LAB  1  -  Regarding  the  differentiation  of  low-carbon  industrial  products  from 
conventional  ones,  PO1  develops  a  label  on  the  carbon  intensity  of  all  energy  intensive 
industrial  products.  It  would  have  a  demand-pull  effect,  encouraging  energy-intensive 
companies to invest in low-carbon production processes.  

The label allows companies to gain a competitive edge by accessing new markets which require 
the use of such label, specifically those to be created under SO2 – Lead markets. This means 
the  label  can  be  used  as  a  compliance  instrument  to  meet  the  environmental  requirements 
foreseen by public procurement rules or public incentives schemes, as analysed under SO2, 
measures LEAD_EII 1, 2 and 3. An EU wide label would also mean easier access to green 
finance or Environmental, Social and Governance (ESG)-linked loans. 

61% (191 out of 314 respondents) to the Public Consultation support the introduction of an EU voluntary carbon 
intensity label, especially for its potential to boost transparency (n=195, 62%), differentiation (n=187, 60%), and 
uptake of green products (n=160, 51%). 

Companies that wish to certify their products would incur costs related to monitoring, reporting 
and  verifying,  and  certifying  carbon  emissions.  Therefore,  complementary  monitoring, 
reporting  and  verification  is  needed.  For  products  where  process  emissions  represent  the 
majority of the carbon footprint, these should be limited as companies are already obliged to 
do so under the EU ETS. Likewise, if the companies that wish to  certify their products  are 
importers, they would have to face similar costs as those faced under the CBAM monitoring, 
reporting and verification. 

At the same time, the administrative costs of setting up specific product-labels covering all EIIs 
would be substantial and would increase significantly the complexity of implementation for 
regulators. Given the heterogeneity and complexity of EIIs and their value chains, a very wide 
range of product labels could be envisaged. For instance, today under the EU ETS there are 54 
product benchmarks, used to determine how many emission allowances installations receive 
for  free.  At  least  as  many  product  labels  would  need  to  be  developed,  creating  important 
administrative  burden.  These  costs  relate,  amongst  others,  to  producing  and  maintaining  a 
third-party verified carbon footprint certification system.  

LEAD_EII 1 introduces low-carbon requirements for EIIs materials used in construction 
and automotive in public procurement and public support schemes. This measure provides 
increased security for EIIs to commit decarbonisation investments. The potential of low-carbon 
demand creation depends on the downstream sectors where the requirements would apply, and 
the role public procurement and public support schemes play in those markets.  

31 

 
In  the  cement  industry,  public  procurement  represents  approximately  31%  of  the  overall 
European cement market.138 This significant share underscores the public sector’s leverage in 
securing the offtake of low-carbon cement in construction and infrastructure, driving broader 
market  transformation  within  the  cement  industry.  In  the  steel  industry,  however,  public 
procurement, represents a smaller portion of the overall European steel market, accounting for 
around  11%  of  apparent  steel  consumption  in  the  EU.139  Aluminium  is  also  used  in  public 
procurement and it is a light-weight material whose demand is increasing, primarily driven by 
automotive, building and construction and packaging. More concretely, considering the high 
shares of vehicles benefitting from public support schemes in the EU market, and the expected 
increase in aluminium shares in the future140, measures targeting public support schemes would 
be key to unlock low-carbon aluminium demand. Lead markets measure provides a clear and 
predictable  demand  signal  for  low-carbon  materials  used  in  publicly  funded  projects.  Steel 
producers would be able to deliver certified low-carbon steel to industrial consumers that will 
benefit from more advantageous conditions to public tenders, and therefore an early market 
advantage during their decarbonisation. 

The automotive sector is expected to play a significant role in driving demand for low-carbon 
steel and aluminium, particularly  due to lightweighting needs for  electrification in vehicles. 
However,  public  procurement  is  not  a  huge  market  for  the  automotive  sector,  compared  to 
buildings and infrastructure. Of the approximately 15 million passenger cars registered in the 
EU in 2018, only 0.5% to 3.5% were procured for public sector fleets.141 Therefore, measures 
targeting  the  public  sector  alone  are  likely  to  have  a  limited  impact  on  driving  low-carbon 
demand  for  steel  and  aluminium.  The  situation  is  different  regarding  public  incentives  and 
support schemes in the Member States, where according to internal Commission analysis 70% 
of  the  automotive  market  benefits  of  some  sort  of  support  schemes  across  the  EU.  Only 
corporate vehicles registrations make up around 60% of car registrations in the EU.142 

Introducing  targets  for  the  use  of  low-carbon  materials  in  the  construction  and  automotive 
sector  would  allow  the  steel  and  aluminium  sectors  to  gain  a  green  premium,  which  will 
partially be passed on into the price of final products (see Section 6.1.1.2). As a result, the steel 
and aluminium sectors could see an improvement of their sector’s value added. The benefits 
could reach EUR 686 million for the three EIIs (steel and aluminium EUR 241 million – 
0.35%, cement EUR 445 million or 0.65%) combined throughout the EU, in 2030 compared 
to the baseline year.143  

This  predictability  of  future  demand  for  low-carbon  materials  can  help  absorb  part  of  the 
investment’s costs from the low-carbon technologies and has a high potential to further push 
investment decisions towards decarbonisation. As a matter of example, in the EU steel sector, 
there  are  currently  at  least  29  announced  steel  decarbonisation  projects,  with  a  combined 
potential capacity of additional 41 Mtonnes of low-carbon steel per year by 2030, that have not 
yet reached the final investment stage. To that end, the proposed lead market measures, based 

138 Bellona Foundation (2024). Green Public Procurement of cement and steel in the EU: An overview of the state of play. 
139  VUB Brussels  School of  Governance  (2024).  Public procurement of  steel  and cement  for  construction,  assessing the potential of lead 
markets for green steel and cement in the EU.  
Bellona Foundation (2024). Green Public Procurement of cement and steel in the EU: An overview of the state of play. 
140 European Aluminium (2023). Aluminium Content in Passenger Vehicles (Europe) - Assessment 2022 and Outlook 2026, 2030.  
141 JRC (2022). Revision of the EU Green Public Procurement Criteria for Road Transport. 
142 European Commission (2025). Communication from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of the Regions Decarbonise Corporate Fleets, COM(2025)96 Final, 5 March 2025 
143 Impacts are measured during 2025-2030. These figures result from a simulation of the FIDELIO model, when prices in the automotive and 
construction sectors are shocked by 0.225% and 0.4499 % respectively, and the resulting general equilibrium effects of higher prices on final 
demand, incomes and value added are computed. 

32 

 
 
on the current project pipeline, could unlock up to EUR 15.5 billion in investments144 covering 
approximately 15% of the sector’s EUR 100 billion total investment need by 2050, as estimated 
in the impact assessment forthe 2040 Climate Target Impact Assessment. 145, 146 

Results from the Public Consultation show that here is widespread support (n=280, 89%) for stimulating demand 
for clean industrial products, including through public procurement (n=259, 82%)  and  voluntary EU labelling 
(n=191, 61%).  

As part of the targeted stakeholder consultation (EIIs), out of the 62 total replies, 90% agreed that measures to 
stimulate demand for low-carbon industrial products are essential to drive decarbonisation.  Only 4 respondents 
(6%) disagreed.147 

In  the  non-ferrous  metals  sector,  all  5 respondents  raised serious  concerns  about  substitution  risks.  In price-
sensitive markets (automotive, packaging, construction), there is potential for users to switch from low-carbon 
aluminium  or  copper  to  cheaper,  higher-emission  alternatives  like  steel  or  plastic.  Steel  stakeholders 
acknowledged conditional substitution risks. Of 18 responses, 4 state risks are low due to functional superiority 
of materials in many applications. 

LEAD_BAT  1  introduces  made  in  EU  requirements  for  four  main  components  in  EV 
batteries and three main components in Battery energy storage systems (BESS) for public 
procurement, auctions, and public support schemes starting one year after the entry into 
force of the legislation.  These requirements would  increase after three years into  entry into 
force. These targets are not limited in time but remain, like all other requirements, subject to a 
review clause, and will promote the use of EU machinery and equipment when possible.  

Made  in  EU  requirements  will  help  ensure  that  existing  manufacturing  capacities  for  key 
battery  components  are  fully  utilized,  while  supporting  the  successful  implementation  of 
projects under construction and those that have been announced or put on hold. The EU battery 
ecosystem currently has a project pipeline, including expansions, projects under construction, 
and announced projects, totalling 775 GWh of battery cells, 874 GWh of CAM, 478 GWh of 
anode active materials (AAM), 663 GWh of separators, and 205 GWh of electrolytes. These 
figures  exclude  projects  currently  on  hold.  For  battery  cells,  approximately  134  GWh  of 
announced capacity is on hold, with an additional 100 GWh having been fully cancelled. In the 
case of CAM, cancellations total 513 GWh, while for AAM, around 100 GWh of capacity has 
either been paused or cancelled.148  

By leveraging the size of the European market alongside support schemes, with European EV 
purchase subsidies totalling between EUR 14 billion and EUR 17 billion annually from 2021 
to 2024149, Made in EU requirements will help strengthen the EU battery industry by ensuring 
that value creation takes place within the EU and by reducing strategic dependencies across the 
supply  chain.  This  will  level  the  playing  field  against  heavily  subsidised  battery  industries 
operating both overseas and in Europe, where some foreign companies maintain key stages of 
the value chain and the technological know-how in their home countries.  

Additionally, Made in EU requirements will protect the European battery industry from the 
disruptive impact of Chinese export restrictions on critical battery technologies and materials. 

144 Estimate based on data from BloombergNEF’s Steel Decarbonization Project Database 1.0.5. The cumulative figures of 41 Mtpa of low-
carbon steel capacity and the associated EUR 15.5. billion in investments represent only projects whose output meets the indicative IAA’s 
carbon intensity label classes of performance (Class A-C).  
145 European Commission (2024)., Commission Staff Working Document: Impact Assessment Report (Part 3), accompanying the document 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions: Securing our future - Europe's 2040 climate target and path to climate neutrality by 2050, building a sustainable, 
just and prosperous society, COM(2024) 63 final, pp.164-167. 
146 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 99.  
147 One from the ceramics sector, one from the non-ferrous metals and two from other sectors. 
148 European Battery Alliance and BloombergNEF. 
149 MIT CEEPR. Global Clean Investment Monitor: Government Support for Electric Vehicles and Batteries. Data represents the EU-27 and 
the United Kingdom. – The value has been exchanged from USD to EUR.  

33 

 
 
By anchoring more stages of the battery value chain within Europe, this measure will not only 
reduce the battery industry’s exposure to geopolitical risks but also ensure that public support 
translates into industrial resilience and long-term competitiveness. The impact of Made in EU 
requirements  also  extends  to  the  extraction  and  processing  of  critical  raw  materials,  where 
creating strong and predictable demand is essential to de-risk investments.150  

In public procurement and auctions, EVs are only marginally affected, except for urban buses, 
thus the impact will be limited to around 3.5% of the total EV demand151, whereas BESS have 
a bigger exposure due to its growing reliance on public auctions, which in 2024 accounted for 
5% of the total BESS deployment.152 The proposed phased approach to introducing Made in 
EU requirements in BESS would help mitigate the impact on prices while enabling the EU to 
gradually build up its domestic value chain.  

Based on the analysis on  batteries for EVs in Annex 4, section 2.2, Made in EU requirements 
in public support schemes may raise passenger EV costs  between EUR 360-900 in 2030, which 
could affect affordability and competitiveness in cost-sensitive markets. In 2024, all Member 
States had some type of tax benefit or purchase incentive for EVs153, however this will slow 
down  as  EV  uptake  keeps  growing.  A  phased  implementation  starting  with  Made  in  EU 
requirements for batteries of four components for EVs, including the battery cell, at entry into 
force,  plus  the  support  schemes  themselves  would  help  absorb  the  impact.  According  to 
industry announcements and demand estimates154, battery cell installed capacity in 2025 could 
meet around 90% of the EV battery demand. While actual production falls short of installed 
capacity, a significant share of EVs on the EU market  are already powered by battery cells 
manufactured  within  Europe,  indicating  that  the  cost  impact  of  local  production  is  already 
being absorbed to a large extent by the market. 

LEAD_SOL 1 introduces  Made in  EU requirements  for three main specific components in 
solar PV, starting one year after entry into force, and four main specific components three years 
after entry into force, in public procurement, auctions, and support schemes.  

Made in EU requirements will ensure the retention of existing manufacturing capacities for 
solar  PV  modules  and  inverters,  while  enabling  the  scaling-up  of  further  components  and 
supporting  the  implementation  of  both  the  current  project  pipeline  and  projects  under 
construction or announced. The component related targets have been set taking into account 
the assessed project pipeline and thus introducing a Made in the EU requirement one year after 
the entry into force of the IAA would be feasible (see Annex 9 for detailed assessment).  

The impact of this measure would be to reduce the investment risks and improve market access 
for  EU-based  solar  manufacturers.  Companies  willing  to  participate  in  tenders  will  have  to 
localise manufacturing or partner with EU suppliers, hence supporting industry growth and job 
creation.  This  should  therefore  facilitate  manufacturing  projects  reach  final  investment 
decision.155 Scaling up the industry here will also ensure investments also in innovation and 
research in Europe. At least 12 GW of manufacturing capacity is on hold and at least 4 GW is 
shut down due to insecure and unstable business case for manufacturing PV in the EU at the 
moment.  Despite  the  existing  challenges,  a  strong  project  pipeline  exists which,  if  realised, 
could increase the manufacturing capacity by 2030 for ingot from less than 1 GW today to 20 

150 The first list of EU strategic raw materials projects is expected to make a significant contribution to the EU’s demand for raw materials 
needed for the batteries supply chain.  
151 European Commission internal calculation 
152 Statista. 
153 ACEA (2024). Electric cars: Tax benefits and incentives (2024). 
154 European Battery Alliance. 
155 See Annex 11 for projected EU supply chain developments as a consequence of NZIA implementation and IAA measures. 

34 

 
 
GW, for wafers from less than 1 GW to over 30 GW, cells from 2 GW to over 30 GW, modules 
from 8 GW to over 40 GW, and inverters from around 80 GW to more than 100 GW.156  

LEAD_VC 1 – The impact  of LEAD_VC is  assessing based on  a model  developed by the 
Commission’s  JRC  (For  further  information  about  the  methodology  and  assumptions,  see: 
Annex 4). As vehicle manufacturers will have the incentive to comply with the target to have 
potential access to public subsidies, the model projects an increase in EU vehicle component 
suppliers’ sales to the manufacturers of EUR 6.5 billion in 2027 and by EUR 6.9 billion in 
2030  when  aggregating  the  sales  in  all  three  vehicle  segments.157  Following  the  sensitivity 
analysis carried out in Annex 15, the cross-region elasticity (i.e. substitution between EU- and 
non-EU-made EVs) is the parameter that affects mostly the results for EU EV manufacturers, 
vehicle  component  suppliers,  and  the  value  added  generated.  However,  the  values  do  not 
significantly affect the outcome of the policy's economic effects. 

INV 1 – Voluntary FDI conditions would create only limited and uneven effects: companies 
in Member States that apply the guidance may face modest requirements, while those investing 
elsewhere would see no change at all. While such measures could send a positive market signal, 
they would not prevent a ‘race to the bottom’ across the Single Market. 

However, the voluntary approach does not fix the core problems. Companies can simply avoid 
any obligations by choosing more permissive Member States, and even implementing Member 
States may pick and choose individual conditions, creating further fragmentation. This enables 
regulatory arbitrage and is likely to preserve superficial or assembly-only investment models, 
and  fails  to  secure  technology  retention,  local  value-added  or  meaningful  supply-chain 
integration—leaving strategic vulnerabilities essentially unchanged.  

PERM  1  -  Streamlining  permitting  for  decarbonisation  projects  in  manufacturing 
industries would accelerate the authorisation of such projects and speed up the development 
of  economies  of  scale  for  new  generation  of  low-carbon  manufacturing.  However,  these 
investments also depend on factors beyond the permitting framework, making quantification 
difficult. 

A joint, mandatory, digitally integrated assessment of the entire permit-granting process would 
reduce the administrative burden compared to fragmented procedures, thus lowering costs (e.g. 
environmental  assessment  costs158)  and  saving  time  and  money  for  companies.  The 
introduction of e-permitting whenever missing could introduce cost-savings from 80 million 
(for a third of all industrial manufacturing) to EUR 240 million for all manufacturing industries 
in the EU, through the digitalisation of 5 permit-granting procedures.159 See Annex 4 Section 
2.1 and Annex 15 for more information on the calculations.  

Cross-border businesses could further benefit from the Single Digital Gateway (SDG)160, notably reducing time 
and money dedicated to gather information or completing administrative procedures. 64% of respondents to the 
Public Consultation (114 out of 179) agree that a fully digitalised permitting process is a relevant measure for 
accelerating  permitting  for  industrial  decarbonisation  projects.  Additionally,  61%  (108  out  of  178)  support 

156 European Commission – internal analysis. Summary - Net-Zero Technologies (NZT) Monitoring Dashboard - Power BI 
157 In the HDV segment, the impact is difficult to assess due to the unavailability of data and the limitations of the applied model when it 
comes  to  estimating  the  current  share  of  EU  content  in  this  vehicle  segment.  For  this  reason,  the  same  assumptions  are  taken  as  for  the 
passenger cars for the sake of this Impact Assessment. Given that anecdotal evidence suggests a higher market share for EU vehicle component 
manufacturers, it is expected that the costs estimated for the HDV sector represent the higher bounds of potential impacts.  
158 As a single assessment report would be prepared. 
159 A study on business procedures carried out to underpin the Single Digital Gateway impact assessment concluded that for 9 procedures, the 
cost savings for all EU businesses - if e-procedures were introduced where missing - would be in the order of  
 of EUR 6.5 billion. For more information on how the estimate of EUR 240 million was derived, see Annex 4. 
160 The Single Digital Gateway is a one-stop-shop for citizens and companies who want to work, study or do business in another EU country 
that provides (i) access to reliable information, (ii) online procedures and (iii) assistance services. By drastically reducing the administrative 
burden  and  improving  the  European  business  environment,  it  is  key  to  the  smooth  functioning  of  the  Single  Market;  Regulation  (EU) 
2018/1724  of  the  European  Parliament  and  of  the  Council  of  2  October  2018  establishing  a  single  digital  gateway  to  provide  access  to 
information, to procedures and to assistance and problem-solving services and amending Regulation (EU) No 1024/2012. 

35 

 
 
improved administrative cooperation through digital tools as a relevant approach. Further identified measures for 
speeding up permitting for industrial decarbonisation were single points of contact (83%, 136 out of 163), time 
limits for the permit granting process (88%, 149 out of 170), joint environmental assessment when required under 
multiple legal acts (76%, 133 out of 176) and tacit approval for certain administrative decisions (83%, 144 out of 
138)). 

AREA  1  -  Regarding  the  definition  of  criteria  for  industrial  areas,  the  measures  would 
recommend Member States to make use of the criteria defined in the IAA to focus on which 
projects to support under their national schemes. As this would be only a recommendation to 
Member  States,  it  can  be  assumed  that  the  effect  on  companies  is  likely  to  be  limited  and 
potentially fragmented across the EU Single market, with some limited support for projects 
and industrial sectors with strategic importance for the EU.  

6.1.1.2 

Impact on downstream sectors  

LEAD_EII 1 will have an impact on the cost of procuring low-carbon materials, as well as an 
impact on the final product pricing across the automotive and construction sectors.  

Automotive sector 

A 25% low carbon steel target would lead to a price increase for a midsize passenger vehicle 
of 0.125% increase in the average price of a vehicle161, resulting in a EUR 46.67 price increase 
per  passenger  vehicle  and  EUR  186.4  for  heavy-duty  vehicles.  The  results  for  low-carbon 
aluminium present similarly low impacts in the price of a vehicle with only a 0.1% increase162, 
or EUR 22.6, bringing the total cost per passenger vehicle at 0.225% increase for both the 
low-carbon steel and aluminium. The overall impact per passenger (light duty) vehicle would 
total to EUR 69.27.  

As  a  result  of  the  modelling  exercise,  the  value  added  of  the  automotive  sector  would  be 
affected in a limited way, with losses of EUR 291 million for the entire sector. These losses 
are a consequence of the higher final vehicle price driven by the newly imposed green premium 
and the consequent decrease in the consumption of automotive and construction sectors. 

 See Annex 4 Section 2.2 for more details on cost calculation. Following the sensitivity analysis 
for the corporate fleets expected in 2030, the costs could range from EUR 179.6 million up to 
EUR 417.13 million derived from uncertainties linked to the future cost of low-carbon steel, 
notably on the technology routes used to decarbonise. See Annex 15 for more information.  

Besides the premium linked to the use of low-carbon steel, vehicle manufacturers may need to 
adjust  their  supply  chains  to  source  the  materials,  which  can  lead  to  additional  costs  and 
logistical  challenges.  The  effects  of  the  supply  chain  adjustments  will  depend  on  the 
verification rules in place to comply with the requirements. In the case of steel, the approach 
established under the label on the carbon intensity (SO1) is based on third party verified data 
and on ensuring physical traceability.  

Construction sector  

Different  estimates  indicate  that  the  premium  associated  with  low-carbon  steel  in  the 
construction  sector  can  account  for  0.25%  of  total  building  costs,  with  some  variations 
depending on the type of project.163 In the case of low-carbon aluminium, in the absence of 

161 JRC (2024). Draft preparatory study on iron and steel – ecodesign measures under the ESPR. See Annex 4 for more details. 
162 T&E (2025). Reducing the carbon footprint of aluminium in cars: why and how?, 
163 JRC (2024). Draft preparatory study on iron and steel – ecodesign measures under the ESPR; Global Efficiency Intelligence, TransitionAsia 
and Solutions for Our Climate (SFOC) (2024). Green Steel Economics.  

36 

 
 
 
construction sector specific estimates, the 0.1% price increase164 is also used. Similarly, as far 
as cement is concerned, estimates on the impact of using low-carbon cement or concrete on 
the final price of a house or construction project range would be of 0.10% for a 5% low-carbon 
cement target.165 Setting a 25% target for both low-carbon steel and aluminium, as well as a 
5% target for low-carbon cement in public procurement is estimated to lead to a combined cost 
increase of less than 0.45% for a construction project. The construction sector would face a 
loss in value added of EUR 691 million by 2030, due to the requirements to source a share of 
low-carbon steel, aluminium and cement. 

Since the value of public support schemes available across Europe in the construction sector is 
not available, the full impact of the costs for this market segment cannot be provided at this 
stage. The impact of this proposed measure for the entire construction sector are reflected in 
Section 6.3.1.2. See Annex 4, Section 2.2, for cost calculation. 

It  is  also  important  to  recall  that  the  cost  premium  of  producing  low-carbon  materials  is 
expected to decline over time as related technologies mature, are being deployed at large scale 
and demand for low-carbon materials moves from niche, lead markets to larger scale markets. 
At  the  same  time,  conventional  carbon-intensive  production  methods  will  become  more 
expensive as CO2 prices  rise, narrowing the cost  gap between conventional  and low-carbon 
materials. See Annex 7 for more details on the projected cost evolution of clean technologies.  

In the context of the targeted stakeholder consultation, industry also reported marginal downstream cost effects 
from using low-carbon materials. This view was supported by 77% of the steel respondents.166 All 7 respondents 
from the cement industry agreed that low-carbon cement can be deployed with minimal or no material impact on 
the total construction costs. 

Administrative costs 

For steel, the label on the carbon intensity foreseen under LAB 2 would provide a reliable tool 
for participants in the tender to demonstrate compliance with low-carbon requirements for the 
material  used  in  the  automotive  or  construction  projects.  For  cement,  the  standardisation 
request under the revised CPR has recently been adopted with a deadline for CEN of June 2027 
to  deliver  the  first  new  harmonised  standards.167  Under  these  harmonised  standards,  CE 
marking will require the declaration of the GHG emissions in the declaration of performance 
and  conformity  and  in  a  label  on  the  packaging.  This  will  offer  a  reliable  basis  for  public 
authorities to ensure compliance with the relevant policy measure. Accordingly, this would add 
limited administrative burden compared to the baseline.  

LEAD_BAT 1 – Introducing Made in EU requirements for batteries will have a twofold impact 
on downstream sectors. First, it will lead to higher prices compared to low-cost battery imports 
with short term risks of delaying the energy transition. However, this must be considered in 
light of the EU’s existing battery production capacity, which reached approximately EUR 24 
billion  in  2023168,  with  exports  exceeding  EUR  11  billion  in  both  2023  and  2024169, 
demonstrating an already strong industrial base. Second, since foreign-made EVs and BESS 
are unlikely to meet the Made in EU thresholds for batteries, EU-made downstream products 
will  benefit  from  the  access  to  public  support  schemes,  procurement,  and  auctions.  Even  if 
foreign producers attempt to comply, their costs are likely to be higher due to logistics and 

164 T&E (2025). Reducing the carbon footprint of aluminium in cars: why and how. 
165 Agora Industry (2024). Creating markets for climate-friendly basic materials. Potentials and policy options, p. 13.  
Bellona Foundation (2018). Building with Low Carbon Cement is Affordable, ,. 
166 Respondents include companies from the steel value chain, trade association and think tanks 
167 COMMISSION IMPLEMENTING DECISION of 28.7.2025 on a standardisation request to the European Committee for Standardisation 
as regards cement, lime and other hydraulic binders in support of Regulation (EU) 2024/3110 of the European Parliament and of the Council. 
168 Ericher, M. et al. (2024). Les Themas de la DG. Deployment of electromobility: How to develop the European battery supply. 
169 Bruegel Clean Tech Tracker and Eurostat. 

37 

 
 
 
limited integration of EU components, further reinforcing the competitiveness of an EU based 
battery downstream sectors. 

In 2024, the price increase for manufacturing the same battery product in the EU using local 
battery cells, CAM and AAM, compared to importing these components from China, ranged 
between EUR 16-30 per kWh depending on the maturity of the manufacturing company (see 
Annex 9). For example, looking at the impact on EVs, for an average passenger EV equipped 
with a 68-kWh battery pack, the estimated price increase in 2024 would range between EUR 
653 and EUR 1 632. This corresponds to approximately 1.4% to 3.5% of the average retail 
price of an electric vehicle in Europe.170 

Ongoing  cost  reductions  in  battery  packs  and  cells  are  expected  to  gradually  reduce  the 
battery’s  share  of  total  EV  and  BESS  costs,  thereby  diminishing  the  overall  cost  impact  of 
Made in EU requirements on the downstream sectors. Global average lithium-ion battery pack 
prices fell by 20% between 2023 and 2024, and by a total of 86% from  2013 to 2024. The 
learning  rate  for  batteries  is  estimated  at  18%  at  the  pack  level  and  24%  at  the  cell  level, 
meaning costs typically decline by 18% and 24% respectively each time cumulative production 
doubles.171 This suggests a continued and potentially accelerated decline in battery prices. Pack 
costs are projected to fall from EUR 98.9/kWh in 2024 to EUR 59.3/kWh by 2030 and EUR 
46.4/kWh by 2035 (i.e., a 53% reduction). Similarly, cell prices are expected to drop from EUR 
67/kWh in 2024 to EUR 36.9/kWh by 2030 and EUR 27.5/kWh by 2035 (i.e., a 59% reduction) 
while maintaining a typical cell-to-pack cost ratio of approximately 60:40 (see Annex 4 Section 
2).172 

LEAD_SOL  1  -  Introducing  Made  in  EU  requirements  criteria  in  public  procurement, 
auctions, and public support schemes for solar PV might result in a short-term cost premium173, 
as  EU-made  modules  currently  have  higher  production  costs  than  imported  ones.  European 
panels  with  three  components  manufactured  in  Europe  (which  would  be  NZIA  compliant) 
would  cost  around  19  €ct/Wp,  while  minimum  sustainable  price  for  production  in  China  is 
estimated at 15.9 €ct/Wp174, despite Chinese panels currently being sold at levels of 8.7 €ct/Wp 
in Europe. Once Chinese products hit a sustainable level again175 the price difference between 
the Made in the EU module and an imported one will not be that disproportionate. At current 
levels  of  8.7  €ct/Wp  the  price  difference  between  Chinese  products  and  NZIA-compliant 
products   would impact the Levelized Cost of Energy (LCOE) by 0.75 €ct/kWh equal to  an 
increase of 14.5%176 at the level of the specific auction. Please see Annex 4 section 2.2. for 
further calculations. This means that profit margins of utilities could be negatively impacted, 
with  electricity  prices  for  end  consumers  potentially  increasing  only  very  marginally  as  (i) 
Made in EU requirements would be applied only to a share of the auctions; (ii) gas power plants 
would remain the marginal source to set the electricity price most of the hours. Further, at end-
consumer level, slight price increases can be accommodated by other means, such as levies and 
taxes. According to stakeholder input, the NZIA resilience requirements, applicable as of 30 
December 2025 and foreseen to be implemented under the Fer X scheme in Italy, could lead to 

170 European Alternative Fuels Observatory. Electric vehicle model statistics. 
171 BloombergNEF (2024). 2024 Lithium-ion Battery Price Survey.  
172 BloombergNEF (2024). 2024 Lithium-ion Battery Price Survey. 
173 Bruegel (2024), Smarter European Union industrial policy for solar panels, Policy Brief , 08 February 2024. 
174 SolarPower Europe (2025). New study reveals path to reshore solar manufacturing in Europe. 
175 As currently Tier 1 Chinese manufacturers suffer vast annual losses in 2024 and 2025: Chinese PV Industry Brief: Top solar module makers 
report H1 losses – pv magazine International 
176 SolarPower Europe (2025). Reshoring Solar Manufacturing to Europe. 

38 

 
 
an  increase  of  approximately  15%  in  the  auction-level  LCOE,  but  only  around  1%  at  the 
corresponding electricity price level.  

Overall, applying Made in EU requirements under LEAD_SOL 1 is estimated to generate the 
following additional cumulative costs by 2030 compared to the Baseline: approximately EUR 
60 million in public procurement, EUR 580 million in auctions, and EUR 240 million in public 
support schemes. These costs reflect the price difference between PV modules manufactured 
in  the EU using a mix of EU and Chinese components (IAA compliant), and the  minimum 
sustainable PV module price in China177 for fully Chinese-made modules. If Chinese solar costs 
would remain closer to today’s price, these costs could be higher. The costs for downstream 
industrial  and  household  consumers  resulting  from  higher  electricity  prices  could  not  be 
calculated with the models used for this impact assessment.  

Nevertheless, this cost premium would be reduced over time as EU manufacturers ramp up and 
as the cost of solar PVs, and therefore the share of their cost within a PV installation (household 
or  utility-scale)  decreases.  Large‑scale  solar  parks  may  see  bid  prices  rise  as  EU‑content 
requirements take effect. However, the baseline scenario of NZIA’s indicative benchmark of 
manufacturing capacity across net zero technologies to reach at least 40% of the EU’s annual 
deployment  needs  by  2030  will  improve  market  predictability.  Rooftop  and  commercial 
installers who buy panels in  small  lots could  see retail  module prices climb  and potentially 
dampening  uptake.  However,  since  the  module  typically  accounts  for  25-30%178  of  total 
installation  costs,  the  impact  on  final  consumer  prices  would  remain  limited  and  could  be 
further mitigated through smart auction and procurement design to create different incentives 
and flexibility. 

In  relation  to  cybersecurity,  Made  in  EU  requirements  for  inverters  can  boost  local 
manufacturing and improve cybersecurity by keeping control of key technologies in Europe. 
This reduces risks from foreign cyber threats and protects energy infrastructure, making the 
EU safer and more resilient. 

Regarding the energy transition in the EU, the potential impact of Made in EU requirements in 
solar PV could lead to higher costs in the short term but will be beneficial in the mid to long-
term. First, the requirements will significantly reduce Europe’s heavy import  dependence—
especially  on  China—thereby  lowering  risks  of  supply  disruptions  and  enhancing  solar  PV 
rollout  reliability,  critical  for  achieving  renewable  targets.  Second,  they  will  trigger  large 
investments  in  new  manufacturing  capacity,  technology,  and  skills;  and  3)  it  will  ensure 
availability of the main specific components, in particular inverters, with high sustainability 
and  quality  standards  that  enable  more  resilient  deployment,  supporting  grid  stability  and 
climate goals. Over time, this will make Europe a more energy secure space. 

In the absence of Made in EU requirements, Europe’s heavy reliance on China controlling over 
90% of global solar photovoltaic (PV) manufacturing capacity across the whole value chain 
exposes the EU to significant risks. Negative actions by China—such as export restrictions, 
tariffs, or supply chain disruptions—could create severe supply shortages, resulting in delayed 
solar project installations and increased costs due to price spikes. These possible disruptions 
would likely slow down Europe’s renewable energy deployment, delay the achievement of the 
EU climate targets for 2030 and 2050, and, consequently, increase dependence on fossil fuels 
or  less  sustainable  alternatives.  Moreover,  this  dependency  weakens  Europe’s  strategic 
autonomy  in  clean  energy  technologies,  making  the  continent  vulnerable  to  geopolitical 
tensions. Building a resilient EU manufacturing ecosystem through EU content requirements 

177 Ibid. 
178 SolarPower Europe (2025). Global Market Outlook for Solar Power 2025-2029. 

39 

 
 
is therefore essential to safeguard energy security and ensure a stable, affordable, and timely 
solar PV deployment. 

Concerning the impact of the Made in EU requirements on the affordability of energy, this is 
likely  to  be  limited.  In  the  EU  electricity  market’s  marginal  pricing  model,  the  price  is 
determined  by  the  most  expensive  energy  source  needed  to  meet  demand  which  typically 
includes fossil fuels such as coal, oil, and natural gas due to their higher operational and fuel 
costs.  In  June  2025,  solar  energy  was  the  main  source  of  electricity  generated  in  the  EU 
(22%).179  Since  the  price  formation  is  dominated  by  the  most  expensive  energy  source,  a 
greater solar share tends to lower average prices when solar is generating because it displaces 
fossil fuel generation. Buying made in EU solar PV may lead to power producers passing on 
the cost to consumers but in a modest increase. This impact is expected to be small and much 
less volatile compared to the larger fluctuating cost related to fossil fuel consumption and CO2 
ETS pricing.  

An example of how lead markets measures proved successful in the long run can be the feed-
in tariffs models used by member States to support renewables deployment. In the past, Europe 
benefited from spillover effects of feed-in tariff policies like Germanys Renewable Energy Law 
(EEG).  While  the  policy  initially  contributed  to  higher  electricity  prices  for  consumers,  it 
ultimately  generated  net  benefits  by  driving  down  costs  for  renewable  technologies  and 
accelerated large scale deployment. The guaranteed premium enabled the derisking of future 
investments,  which  led  to  a  wide  adoption  of  renewable  energy  projects  as  well  as  rapid 
expansions.180 

LEAD_VC 1 - Given the estimated current level of 70% Made in EU in the EVs, the measure 
would not lead to any further compliance costs for EU EV manufacturers in 2027. As the target 
is increased to 75% by 2030, the measure would represent a cost increase of EUR 1.9 billion 
for  EU  EV  manufacturers,  which  would  be  offset  by  the  increase  of  sales.  EU  EV 
manufacturers  are  expected  to  benefit  from  a  sales  increase  of  EUR  13.9  billion  across  all 
vehicle segments in 2027 and EUR 9 billion in 2030. The increase in sales is presumed to offset 
the cost increase for passenger cars and LCVs, however, not for HDVs. It is important to note 
that the numbers presented here are aggregated from all vehicle segments, and the measure 
would impact each of them to a different extent. As previously noted, for the HDV sector, due 
to the limitations of the model, the same assumptions are applied as for passenger vehicles. 
However, as the Made in EU in HDV is likely to be higher than the assumed requirements, the 
measure may result in zero cost implications for EU HDV manufacturers, while preserving the 
positive effect on sales. Finally, the measure is projected to lead to the generation of EUR 5.5 
billion Global Value Added (GVA) in 2027 and EUR 4.5 billion in 2030 when assessing the 
impact, taking into account only the first tier of the value chain. When considering the entire 
value  chain,  the  value  added  generated  from  the  necessary  intermediate  inputs  for  EVs  the 
value added can reach EUR 10.5 billion in 2027 and EUR 9.7 billion in  2030. Following a 
sensitivity  analysis  (See  Annex  15  for  more  information),  the  cross-region  elasticity  is  the 
parameter  that  most  affects  the  results  for  EU  EV  manufacturers,  and  the  value  added 
generated. However, the sensitivity analysis shows the robustness of the results, with values 
falling within a small range and not significantly affecting the policy's economic effects. 

179 Eurostat (2025). Solar: main source of EU electricity in June with 22%. 
180 The Federal Ministry for Economic Affairs and Energy (Bundesministerium für Wirtschaft und Energie) webpage (2017). Fragen und 
Antworten zum Erneuerbare-Energien-Gesetz 2017. 

40 

 
 
 
INV 1 – The impact of conditions on investment would depend on the extent to which Member 
States take up the voluntary guidance. In the short term, the effects are likely to be limited, as 
companies  would  not  be  legally  required  to  adapt  their  sourcing  or  production  models.  In 
Member States that do apply the guidance, some investors may be encouraged to increasing 
EU  sourcing  of  components,  materials  or  services,  potentially  creating  spillovers  through 
knowledge  transfer  and  collaboration  with  EU-based  firms.  However,  because  the 
implementation of the guidance is voluntary and Member States may apply the guidance only 
partially, these positive effects would be uneven across the Union, with benefits concentrated 
in  those  countries  that  actively  promote  and  monitor  such  conditionalities.  In  practice,  the 
fragmented  uptake  would  limit  the  overall  capacity  of  the  initiative  to  strengthen  EU-wide 
industrial ecosystems.  

6.1.1.3 

Impact on SMEs 

LEAD_EII 1 – SMEs may have less capacity than larger firms to absorb temporary increases 
in material costs or to pass them on to customers, which could put pressure on their margins in 
the short term. However, these effects are expected to be limited, as the cost increase linked to 
low-carbon  material  requirements  remain  modest  and  as  low-carbon  products  gradually 
become more available and price differentials narrow. 

LEAD_BAT 1 would directly support SMEs by boosting demand for locally produced battery 
packs,  cells,  components,  and  advanced  materials.  This  would  not  only  strengthen  existing 
suppliers but also create market opportunities for emerging businesses in a nascent and growing 
strategic industry. As the European battery ecosystem expands, SMEs will be better positioned 
to scale, innovate, and integrate into regional and global value chains. Since this measure does 
not target private transactions, the impacts on the SMEs part of the road transport ecosystem 
using vehicles are expected to be limited. 

LEAD_SOL 1 will help channel public demand towards domestically built modules, which 
are  predominantly  produced  by  SMEs  in  Europe,  catalysing  the  creation  of  additional 
manufacturing and installation roles. While a temporary slowdown in solar panel installations 
by SMEs may occur, the negative impact is expected to be limited and manageable, as Europe’s 
commitment to ambitious PV deployment targets remains firm and unchanged. In the mid to 
long term, these targets will continue to drive strong demand for installation services, ensuring 
SMEs can recover quickly and benefit from a sustained, growing market for solar deployment. 

INV 1 will have very limited effect on SMEs as the conditionalities would apply primarily to 
large foreign investors rather than smaller domestic firms and be limited to large investments. 
Where Member States choose to implement the guidance, SMEs located in those regions may 
benefit indirectly if inbound investors increase local sourcing or collaboration, but these effects 
would be uneven and dependent on national uptake. Given the voluntary nature of the measure 
and the fragmented application across the Union, broader SME participation in strengthened 
industrial ecosystems would remain uncertain and geographically constrained. 

PERM 1 - The digitalisation of the permit-granting process with the Single Digital Gateway 
would benefit SMEs active on their domestic (national) market by gaining an easier access to 
other Member States for permit-granting submission.  

LEAD_VC 1 is expected to affect those EU based SMEs positively that are Tier 2 and Tier 3 
suppliers  of  the  industry  due  to  the  increased  demand  for  vehicle  components  sourced 
locally. In quantitative terms, the impact on SMEs is covered under the impact on consumers 
section,  as  they  are  included  in  the  definition  of  consumers,  alongside  private  citizens.  As 
Light, Medium, Heavy Commercial Vehicles, and Buses fall within the scope of the measure, 

41 

 
the effects described above for consumers in these vehicle segments, have to be assumed as 
impacting SMEs that typically purchase and operate these vehicles. 

6.1.1.4 

Impact on citizens and consumers 

LAB 1 – As explained under the economic impacts, this option would add complexity to the 
implementation  of  the  existing  framework  and  might  create  unnecessary  confusion  among 
consumers/businesses with a very wide range of labels on all EIIs. 

LEAD_EII 1 - Low-carbon requirements are applied to the steel and aluminium used in end-
products (such as passenger cars) supported by public schemes. Therefore, the financial burden 
would mainly fall on Member States, if they decide to absorb the price increase, rather than on 
final consumers.  

As  outlined  in  Section  6.1.1.2,  the  minor  economic  losses  observed  through  the  general 
equilibrium model point at a decrease in the consumption of automotive (EUR 84.4 million) 
and construction (EUR 59.4 million) goods, driven by the low-carbon cost increase, as one of 
the reasons for the value-added decrease of these downstream sectors.  

For a wider consideration on cost estimates, the sensitivity analysis for the range of potential 
costs derived from low-carbon steel can present the following for passenger cars: EUR 91.7 
million – EUR 212.87 million. See Annex 15 for more information.  

However,  access  to  public  schemes  would  be  reduced  to  consumers  willing  to  purchase  a 
product  containing  low-carbon  content.  While  no  assumption  can  be  taken  on  the  level  of 
public  funding,  public  incentives  in  these  products  are  already  widely  present  in  society  as 
explained above. Only for internal combustion engine vehicles, a recent study estimated that 
subsidies  for  corporate  vehicles  alone  amounted  to  EUR  42  billion  in  2023.181  Cost 
implications on the final products  in  automotive  and construction182 are outlined in  Section 
6.1.1.2. 

LEAD_BAT 1 - As outlined in Section 6.1.1.2, consumers would be affected by the possible 
price increases. However, since these are tied to public support schemes, the effect on final 
prices would be less pronounced and more gradually absorbed. By 2030, the adjustment costs 
for consumers will range between EUR 292-730 million (average EUR 511 million) for private 
consumers and EUR 0.9-2.2 billion (average EUR 1.55 billion) for corporate consumers (see 
Annex 4 Section 2). Given that EV subsidies have exceeded EUR 16 billion annually from 
2021 to 2024183, these subsidies have the potential to financially compensate the income effect 
of the impact on the final consumers.  

LEAD_SOL  1  would  likely  bring  a  near‑term  cost  uptick.  As  mentioned  above,  even  a 
moderate increase in EU module prices would result in a system cost increase of only around 
5-15%,  depending  on  the  configuration  and  market  conditions,  to  be  weighed  against  the 
broader  benefits  of  resilient,  locally  based  manufacturing  and  reduced  dependency  on 
imports.184  Directing  part  of  publicly  backed  demand  toward  European  products  would 
diversify supply and build (economic) security.185 As the measures target public procurement, 
auctions and public support schemes consumers would not be directly impacted by the price 

181 ERM, T&E (2024). Company car fossil fuel subsidies in Europe. 
182 Data on the percentage of the market potentially covered by public subsidies in construction was not available, therefore PO1 only counts 
with costs on public procurement for Member States.  
183 MIT CEEPR. Global Clean Investment Monitor: Government Support for Electric Vehicles and Batteries. Data covers the EU and the UK. 
184 European Solar Industry Alliance. Net Zero Industry Act: Positions on the Implementation for Photovoltaic Technologies, by Fraunhofer 
Institute for Solar Energy Systems ISE. 
185 SolarPower Europe (2024). New Report: Growth of EU solar jobs stagnates as rooftop market slows; European Commission webpage 
(2025). Solar energy. 

42 

 
 
increase and especially under the public support schemes, consumer purchases of EU made PV 
systems would be financially rewarded.  

LEAD_VC 1 is estimated to have two different effects: As EV passenger cars become more 
expensive from non-EU manufacturers, and ICE vehicles, being not affected by the measure, 
could  benefit  from  a  relative  price  advantage  (prior  application  of  the  bonus  schemes  or 
subsidies) over EVs, there may be a partial product substitution of EVs with ICEs. However, 
as  EV  passenger  cars  produced  by  EU  manufacturers  will  benefit  from  a  relative  price 
advantage following the reduction of price originating from the reallocated subsidies, this may 
lead consumers to prefer EV passenger cars produced by EU manufacturers (which increase 
their  sales)  over  non-EU  EV  passenger  cars  (which  reduce  their  sales).  The  latter  effect 
crucially depends on the bonus schemes and conditional to the assumptions taken in this impact 
assessment  and  Annex  14  presents  a  counterfactual  analysis  on  the  potential  price  impacts 
when changing the amount of public subsidy allocated to EU EV manufacturers.  

In quantitative terms, when we look at the impacts in 2027, the average price increase (from 
both the potential reduction of price for EU manufacturers and price disadvantage for non-EU 
manufacturers), there would be an overall price increase of 0.4% for passenger cars, 0.5% for 
HDVs and there could be a reduction of 0.7% for LCVs. Looking at the impact in 2030, the 
price increase for passenger car rises to 1.2%, to 0.4% for LCVs and 1.2% for HDVs. As buyers 
of  LCVs  and  HDVs  are  mostly  economic  operators,  the  impact  qualifies  as  impact  on  the 
downstream. Following the sensitivity analysis carried out in Annex 15, demand elasticity is 
the parameter that has the strongest impact on the results. However, it shows values falling 
within a small range and not significantly affecting the policy's economic effects. 

INV  1  –  For  citizens  and  consumers,  the  effects  would  be  limited  in  the  short  term,  as  the 
measure’s voluntary nature means it would not immediately alter market prices or consumer 
costs.  Where  Member  States  do  implement  the  guidance  and  attract  additional  investment, 
some localised benefits (such as job creation or opportunities linked to industrial activity) may 
occur, but these would be uneven and dependent on national uptake. Overall, the voluntary and 
fragmented  application  limits  the  likelihood  of  consistent  or  EU-wide  improvements  for 
citizens and consumers. 

6.1.1.5 

Impact on competitiveness 

LEAD_EII 1 - EU producers of low-carbon materials would initially benefit from a first-mover 
advantage.  However,  many  non-EU  regions  have  also  rapidly  expanded  their  low-carbon 
production capacity and are well-positioned to compete on carbon-related requirements. As an 
example, according to Strategic Perspectives, China is expected to produce 105 Mtonnes of 
recycled steel by 2030186, positioning it to supply nearly half of the EU’s potential low-carbon 
steel demand, subject to the limits imposed by the forthcoming Regulation addressing global 
overcapacity.187 Any potential disadvantages for firms still relying on high-emission routes are 
expected  to  be  temporary,  as  the  gradual  increase  in  low-carbon  production  reduces  cost 
differentials  across  the  sector.  At  the  same  time,  the  measure  will  create  a  more  stable  and 
predictable  domestic  market  for  European  producers,  allowing  them  to  secure  long-term 
contracts for low-carbon materials in public works and supported sectors. This internal market 
stimulus  is  expected  to  offset  any  small  decline  in  export  volumes,  reinforcing  industrial 
utilisation and accelerating investment recovery. In addition, by slightly increasing domestic 
output and reducing exposure to highly concentrated foreign supply chains in the supported 

186 Strategic Perspectives (2025). Lead markets: driving net-zero industries made in Europe. 
187 European Commission (2025). Proposal for a Regulation of the European Parliament and of the Council addressing the negative trade-
related effects of global overcapacity on the Union steel market. COM(2025) 726 final. 

43 

 
 
segments,  the measure provides  a modest economic-security gain,  lowering vulnerability to 
sudden price shifts, coercive practices or export restrictions from dominant suppliers. 

Compared to the baseline, EU-based EIIs – especially the frontrunners – are expected to benefit 
from the low-carbon requirement, however their competitive position would still remain at risk, 
primarily  due  to  higher  operational  costs  in  the  EU  compared  to  other  global  regions.188 
Furthermore, as some sectors, such as steel, are significant exporters, their competitiveness on 
the global market might be affected to some extent, since customers in third countries may not 
face the same low-carbon requirements and might not be willing to pay for the green premium. 
However,  requirements  under  this  measure  only  apply  to  public  procurement,  and  do  not 
require a 100% shift to low-carbon production in 2030, giving producers flexibility to gradually 
adapt and ramp up the low-carbon production.  

Looking  at  the  competitiveness  of  downstream  customers,  low-carbon  requirements  would 
apply  indistinctively  to  all  vehicle  manufacturers  that  operate  in  the  Single  Market  (both 
domestic  and  foreign)  that  intend  to  participate  in  public  support  schemes  or  procurement. 
Therefore, the proposed measures will in principle preserve the level-playing field. However, 
given the significant share of vehicle registrations supported by public support schemes, it is 
reasonable  to  expect  that  introducing  low-carbon  steel  and  aluminium  requirements  as  a 
condition for accessing such support would strongly incentivise vehicle manufacturers to adopt 
low-carbon materials across a significant part (if not the entirety) of their product portfolio, 
particularly for models intended for the EU market. At the same time, there is a risk of losing 
competitiveness on third countries markets, especially if no similar low-carbon policies apply.  

Consequently, the absence of similar requirements in other world regions may put – in the short 
term  –  EU  vehicle  manufacturers  in  a  condition  of  relative  cost  disadvantage  and  possible 
relocation of EU industry. Moreover, the risk of capacity constraints in the low-carbon steel 
and aluminium supply-chain should not be neglected: the moderate low-carbon ambition tabled 
under this measure is therefore based on the existing pipeline of projects, to prevent that risk. 
Besides, as low-carbon production scales up, premiums are projected to decline, reducing the 
competitiveness  gap.  In  the  medium  term,  the  expansion  of  EU  low-carbon  capacity  and 
declining  green  premiums  are  expected  to  strengthen  the  overall  competitiveness  of  the 
European  industrial  base,  enabling  it  to  compete  globally  on  both  cost  and  sustainability 
performance. 

LEAD_BAT 1 / LEAD_SOL 1– Such measures would clearly benefit the situation of EU-
based batteries and solar industry, creating the conditions to reinforce their competitiveness. In 
the  case  of  solar  PV,  introducing  Made  in  EU  requirements  for  only  a  subset  of  the  main 
components can limit the production cost difference with fully Chinese PV systems, since some 
components can be sourced in third countries. For example, producing a PV system with three 
EU-made components, including the module and cell, while relying on Chinese polysilicon, 
ingots,  and  wafers,  would  reduce  the  average  cost  to  19 €c/Watt-peak  for  a  compliant  PV 
system under LEAD_SOL 1. Under LEAD_BAT 1, EU based battery manufacturers would 
benefit  from  an  increased  demand  for  EU  made  batteries  through  public  procurement  and 
public  auctions,  while  also  reducing  the  cost  gap  with  battery  imports  which  will  cease  to 
receive public subsidies. These competitiveness gains also translate into a modest improvement 
in  economic  security,  as  a  larger  share  of  Europe’s  demand  would  be  met  by  domestic 
production rather than from highly concentrated foreign supply chains, reducing vulnerability 
to  external  price  shocks,  export  restrictions  or  other  coercive  practices  affecting  strategic 
inputs.  When  increasing  the  cost  of  power  generation  technologies,  this  may  also  have  a 

188 See Section 2. This is partly because EIIs outside the EU generally face less ambitious decarbonisation targets and, therefore, require lower 
levels of investment. 

44 

 
 
moderate impact on clean energy deployment in the short term, and indirectly on the cost of 
electricity. However, electricity prices remain very largely determined by other components, 
such as the marginal source (usually gas). 

LEAD_VC  1  –  The  measures  would  create  a  stable  lead  market  in  the  EU  for  European 
component manufacturers, leading to a stronger business case for manufacturing in the EU and 
providing European suppliers with  greater scale  and industrial  capacities  to  compete on the 
global markets. The EU local requirement for EVs could gradually increase the reshoring of 
the global value chain and increase the EU production capacity to meet the new requirements. 
This  gradual  increase  in  domestic  component  production  also  brings  a  small  but  relevant 
economic security benefit, as reduced dependence on extra-EU suppliers in highly concentrated 
segments of the EV value chain lowers exposure to supply disruptions, price manipulation and 
other external shocks. 

The competitiveness effects on EU car manufacturers are also positive. On the EU market for 
EVs,  EU  car  manufacturers  could  benefit  from  the  policy  as  it  creates  a  positive  price 
differential vis-à-vis non-EU car manufacturers. The measure also reduces foreign competition, 
as  the  Made  in  EU  requirements  are  likely  to  be  more  difficult  to  meet  for  non-EU  car 
manufacturers as the initial level of Made in EU in their EVs is lower and they will likely not 
be eligible for subsidies. The effect will depend on the capacity of non-EU car manufacturers 
to absorb the non-eligibility of subsidies.  

On the non-EU market for EVs, EU car manufacturers would not be impacted as they only 
need to  comply on the domestic market  and  can  differentiate their production based on the 
destination market of each product. This assessment does not focus on potential action taken 
by trade partners in response, which are described below. 

INV 1 would have limited impact on the competitiveness of EU industries in scope, as any 
effect depends on whether Member States choose to apply the guidance. Where implemented, 
voluntary conditions may encourage some investors to embed more activities locally, which 
could support specific value-chain segments. However, these effects would be uneven, modest 
in scale, and constrained by the ability of investors to avoid such conditions entirely by locating 
in more permissive Member States. 

PERM 1 - Implementing the SDG will reduce the cost of doing business in the Single Market, 
administrative  frictions,  obstacles  and  therefore  improve  the  overall  competitiveness  of 
businesses by facilitating cross-border administrative operations.  

6.1.1.1 

Impact on competition 

LEAD_EII 1 - Low-carbon requirements would apply uniformly to all participants in public 
procurement  procedures  and  beneficiaries  of  public  support  schemes,  ensuring  that 
manufacturers  of  energy-intensive  materials  and  downstream  producers  compete  on  equal 
terms. As such, the measure is not expected to distort competition among market participants 
that meet the low-carbon requirements, as long as strong and reliable verification mechanisms 
are in place. 

LEAD_BAT 1 / LEAD_SOL 1 Introducing Made in EU requirements is likely to reduce the 
overall  pool  of  competitors  for  the  segments  targeted  in  this  PO.  As  the  number  of  EU 
businesses  active  in  PV  manufacturing  is  currently  limited  (approximately  150)189,  such 

189 SolarPower Europe webpage. EU Solar Manufacturing Map. 

45 

 
 
 
 
requirements may initially lead to a concentration of the market among a smaller number of 
players. However, as investments in the European manufacturing landscape are expected to 
increase,  new  players  (including  through  FDI)  are  likely  to  enter  the  market.  Competition 
would, in this scenario, be limited to manufacturers with production located in Europe, who, 
to be competitive, would be expected to build up GW-scale capacities. This would result in 
fewer but larger players, rather than many small ones. Nevertheless, competition among these 
manufacturers is expected to ensure competitive pricing. Another key consequence is that this 
PO would ensure that Europe can at least partly rely on domestic technologies and jobs, which 
is essential to achieving climate objectives while reducing the risks associated with external 
dependencies. 

LEAD_VC 1 – The effects of the policy on total sales and consumer welfare depend on the 
level of market competition on both the supplier and final producer sides. There is a certain 
risk of captive market  for vehicle components, however, it is considered  unlikely  given the 
dependence of suppliers from vehicle manufacturers. Regarding the EV producers, the EU EV 
car manufacturers will have a competitive advantage with respect to non-EU car manufacturers. 
However, if the EV market is very competitive, non-EU EV car manufacturers will absorb a 
share of their price increase to not pass through the full price increase to EU final consumers. 
As there are no market entry barriers, and given the overcapacity of supply in China, non-EU 
EV  manufacturers  are  likely  to  compensate  with  aggressive  discounts,  hence  competition 
would remain.  

INV 1 - Attracting FDI is important to strengthen innovation and competition in the Single 
Market.  Since  the  measure  is  voluntary,  implementation  may  remain  highly  uneven  across 
Member States. Restrictive measures under conditionalities (a) and (b) may limit companies’ 
freedom in supply chain choices. Where applied, certain conditions could marginally influence 
investors’  operational  choices,  but  these  effects  would  be  limited  and  geographically 
concentrated. The ability of investors to choose Member States applying fewer conditions (or 
none  at  all)  would  encourage  regulatory  arbitrage  and  sustain  divergent  competitive 
environments across the Union, rather than ensuring a level playing field. 

6.1.1.2 

Impact on international trade 

LEAD_EII 1 is expected to shift trade flows only modestly, increasing trade with producers 
of low-carbon materials while reducing demand for high-carbon alternatives. Low-carbon steel 
and low-carbon aluminium or, to a lesser extent, cement produced in non-EU countries would 
likely be redirected to the EU, to meet such requirements in public procurement and support 
schemes. While cement trade at the borders of the EU increased since the 2008 crisis, volumes 
traded remain marginal with the EU cement industry remaining a net exporter.  

LEAD_BAT 1 / LEAD_SOL 1 / LEAD_VC 1 would likely reduce the import of solar PV 
cells and modules, batteries and their key components and vehicle components from non-EU 
countries,  particularly  from  the  single  most  dominant  supplier,  China,  but  also,  from  other 
partner countries.  

The trade balance for solar products could thus improve for the EU. The requirements could 
encourage  FDI  into  the  EU's  manufacturing  sector  as  companies  look  to  set  up  operations 
within  the  region.  This  reconfiguration  could  impact  the  geography  and  logistics  of  global 
solar,  battery  and  vehicle  component  supply  chains,  as  global  suppliers  adapt  their  supply 
chains to comply with EU requirements. It would also boost the EU’s environmental ambition 
by reinforcing key supply chains for clean energy and mobility transitions.  

46 

 
LEAD_VC 1, introducing a minimum share of Made in EU requirements for EVs sold in the 
Union, as a condition to access public procurements and subsidies, presents an opportunity to 
accelerate  localisation,  increase  EU  resilience,  and  reduce  vulnerability  to  potential  export 
restrictions or geopolitical leverage from dominant suppliers and level playing field, taking into 
account local content requirements applied on other markets. This could have an indirect effect 
on international trade, however, given the attractiveness of the single market and the global 
nature  of  most  vehicles  manufacturers,  foreign  producers  would  have  a  strong  incentive  to 
adapt, either by reconfiguring supply chains or by investing in local production to meet the 
requirement (also thanks to FDI conditionalities, if applied by the Member States under INV 
1). The measure is  tied to  legitimate policy objectives such as security of supply, ability to 
decarbonise, as well as cybersecurity concerns linked to connected vehicle systems.  

INV 1 - As the measure remains voluntary, its impact on international trade would be limited, 
as  companies  would  not  be  obliged  at  EU  level  to  localise  production  or  adjust  sourcing 
patterns. In Member States that decide to apply the guidance, some investors may marginally 
increase  EU-based  activities,  but  these  effects  would  remain  partial  and  uneven.  Because 
uptake is optional, any trade effects would be small and geographically concentrated, with no 
meaningful substitution of imports across the Single Market.  

Although the overall impact may remain contained, there is a risk that certain partners could 
introduce reciprocal or retaliatory conditions affecting EU investors. At the same time, given 
the non-binding nature of INV 1, significant reactions from trading partners are unlikely, as 
conditions would only apply where individual Member States choose to implement them. Any 
external response would therefore be limited and directed at specific national regimes rather 
than the EU as a whole. 

In the specific case of China, some temporary adjustment in investment behaviour could occur. 
Chinese  companies  with  strong  state  backing  or  strategic  technology  interests  may  initially 
hesitate to  invest under tighter localisation or value-added conditions.  However, analyses190 
show that many Chinese industrial groups have progressively adapted to similar requirements 
when market access is sufficiently attractive. For instance, Chinese manufacturers in the battery 
and  electric  vehicle  sectors  have  already  expanded  their  use  of  European  suppliers  and 
partnerships  in  order  to  comply  with  local  content  expectations.  Therefore,  while  stricter 
conditionalities  could  shift  a  few  planned  projects  to  third  countries  with  lighter  rules  (e.g. 
Türkiye  or  Morocco),  well-designed  measures  are  likely  to  enhance  the  overall  quality  of 
Chinese FDI by anchoring more R&I, jobs and supply-chain activity within the EU rather than 
deterring investment altogether. 

6.1.1.3 

Impact on Member States  

Financial implications 

LEAD_EII 1 – The cost implications of low-carbon requirements in additional public spending 
would be limited since the cost of steel and cement account for less than 1% of total public 
procurement expenditures across the EU, according to 2019 data.191 Setting a 25% target for 
low-carbon steel and aluminium used in automotive, building and construction projects, as well 
as a 5% target for low-carbon cement in public procurement, could generate an additional cost 
for public authorities, assuming that they are passed on to consumers, and public authorities 

190 MERICS (2025). Chinese investment rebounds despite growing frictions – Chinese FDI in Europe: 2024 Update; Bruegel (2025). A smart 
European strategy for electric vehicle investment from China. 
191 VUB Brussels  School of  Governance  (2024).  Public  procurement  of  steel  and cement  for  construction,  assessing  the potential of  lead 
markets for green steel and cement in the EU.. 

47 

 
 
decide to cover them as the providers of the financial support for the schemes.192 Furthermore, 
a portion of public budgets could continue to offset some of the costs for consumers outlined 
in Sections 6.1.1.2 and 6.1.1.4 by incorporating them into public support schemes. For instance, 
in 2024, the EU has spent approximately €17 billion in subsidies to promote the purchase of 
electric vehicles.193 At the moment, there is public support to buy EVs for corporate purchases 
in  all  Member  States  and  for  consumers  in  19  Member  States.194  In  return,  this  investment 
could help stimulate job creation and foster the development of clean industries, the scale of 
the benefits  depending  on whether low-carbon materials  are produced within  the  EU rather 
than imported from non-EU countries.  

At the same time, the increase in the price of end-goods publicly purchased or supported can 
result in governments deciding to spend less for such goods. This could result in reduction of 
consumption from governments of EUR 373 million in the construction sector, and 120 million 
in the automotive sector.  

For a wider consideration on cost estimates, the sensitivity analysis for potential costs derived 
from low-carbon steel and cement/concrete used in construction show that costs can vary from 
EUR  339.7  million  to  EUR  2  billion.  For  a  wider  consideration  on  cost  estimates  for 
automotive, notably public fleets,  the sensitivity  analysis for the  low-carbon steel  costs can 
range from EUR 14.04 million – EUR 32.59 million. See Annex 15 for more information.  

LEAD_BAT  1  –  Made  in  EU  requirements  for  batteries  are  anticipated  to  impact 
approximately 3.5% of the European EV fleet through private procurement and around 5% of 
BESS deployment via public auctions. Consequently, the total adjustment costs are estimated 
to range from EUR 132 million to EUR 331 million for EVs (average EUR 231.5 million) and 
EUR 26 million to EUR 66 million (average EUR 44 million) for BESS in 2030 (See Annex 4 
Section 2). 

LEAD_SOL  1  –  Due  to  the  public  procurement  and  public  support  schemes  provisions 
requiring the purchase of EU Made products, the costs faced by public authorities and Member 
States will increase. However, public procurement is estimated to cover only around 3% of the 
solar market, auctions around 19% and public support schemes only 12%. In turn, Member 
States  will  benefit  from  several  positive  consequences  in  having  increased  manufacturing 
capacity in Europe, jobs creation and contributing to the achievement of European climate and 
energy targets through reduced emissions through transportation costs. It would also mean that 
the trade balance with Asia (with over EUR 4.5 billion in additional annual import costs) would 
be reduced and more wealth retained in Europe as well as job creation (more than 40 000 highly 
qualified  jobs  in  manufacturing,  equipment  supply,  and  related  industries)  and  halting 
foregoing tax revenues of over EUR 1 billion per year. If demand for EU-produced PV systems 
increases, this could temporarily result in a slight slowing down of deployment in the public-
sector  for  the  solar  PV  segment  during  the  adjustment  period.  However,  it  is  important  to 
recognise that a significant portion of solar capacity deployment in the EU still depends on 
public  support  mechanisms,  even  when  the  installations  are  carried  out  by  private  entities. 
Consequently, a short-term  price increase would likely  translate into higher public financial 
support requirements to meet the EU’s renewable energy targets. Made in EU criteria could 

192 The estimates are based on the following study: VUB Brussels School of Governance (2024). “Public procurement of steel and cement for 
construction, assessing the potential of lead markets for green steel and cement in the EU”. Low-carbon steel and cement are defined in the 
referenced study as reducing emissions by at least 80% compared to current production methods.  
193 MIT CEEPR. Global Clean Investment Monitor: Government Support for Electric Vehicles and Batteries, Data represents the EU and the 
United Kingdom.  
194ACEA (2025). Electric cars: Tax benefits and incentives (2025). 

48 

 
 
initially pose procurement challenges for some Member States, requiring potential adjustments 
to national plans to meet renewable energy targets. 

Under  LEAD_VC  1,  as  observed  above,  public  support  schemes  currently  used  in  the 
automotive  industry  will  mitigate  the  potential  adverse  effects  of  LEAD_VC. (See: 
Assumptions) To reach this positive objective, as laid down in the assumptions, it is important 
that  Member  States  re-distribute  (at  least,  partially)  the  public  subsidies  that  are  no  longer 
accessible to non-compliant manufacturers, meaning that the Member States would keep the 
volumes  allocated  to  finance  the  strengthening  of  the  EU  industrial  value  chain.  Since  the 
assumptions are based on already existing schemes, the cost of public subsidies used for this 
Impact Assessment will not represent an increase in cost for Member States. Indeed, estimates 
indicate a saving budget for Member States of EUR 2.7 billion per year from 2027 to 2030, 
with a net present value of EUR 10.3 billion.195 

Administrative burden 

LEAD_EII 1 - Public authorities can encounter increased administrative burden in ensuring 
compliance  with 
low-carbon  requirements  for  energy-intensive  materials.  Effective 
implementation  depends  on  the  availability  of  reliable  and  transparent  standards,  emissions 
accounting methodologies, and certification systems as well as guidance for Member States. 

LEAD_BAT  1  would  increase  the  administrative  burden  on  Member  States  to  ensure 
compliance  with  the  requirement.  Rather  than  using  a  detailed  value-based  approach 
calculation, fixed component percentages would help lessen the administrative burden. 

INV 1 - As the measure is voluntary, Member States would face no obligation to adapt their 
national  frameworks  or  establish  new  implementation  mechanisms.  Administrative  impacts 
arise only where a Member State chooses to apply the guidance, in which case the additional 
burden  would  remain  limited  with  respect  to  additional  administrative  costs  for  national 
authorities. In fact, the Commission’s Evaluation of the FDI Screening Regulation found only 
a ‘minimal financial burden’ for Member States.196 

PERM 1 - Digitalising the permitting process would streamline transactions between public 
administrations and users, resulting in time savings for both parties. Moreover, the economic 
benefits  for  public  authorities  are  greatest  when  digitalisation  is  implemented  swiftly  and 
covers a substantial number of transactions.197 The biggest beneficiary of these savings would 
be municipalities, as they normally carry the biggest burden in the permit-granting process.  

The type of costs initially incurred by public administrations would be investment costs during 
the development and implementation phase, which can also include transitional costs from the 
paper/offline  to  the  digitalised  process.  In  addition,  additional  operational  costs  for  the 
management  of  the  tool  are  also  expected.  A  reorganisation  of  the  administration  in  some 
Member States may be required and can be costly in the short term. In turn, this measure can 
avoid  duplication  of  efforts,  notably  at  the  various  stages  of  environmental  assessments. 
Similar  digitalisation  processes  show  net  benefits  for  all  relevant  administrative  authorities 
(local, regional and national), even after the upfront cost of implementation for the first year.198 
An upfront cost of EUR 16 000 to EUR 400 000 to digitalise a procedure, depending on whether 

195 The estimates for the net present value assume a 2% intertemporal discount rate. 
196 European Commission, Commission Staff Working Document – Evaluation of Regulation (EU) 2019/452 establishing a framework for the 
screening of foreign direct investments into the Union, SWD(2024) 23 final. 
197 See Study on eGovernment and the Reduction of Administrative Burden, estimating that  following the Danish Mandatory Digital Self-
service approach was expected to produce annual savings for government for around EUR 6.5 billion at EU 28 level by 2017, while the United 
Kingdom Digital Government Strategy was estimated at around EUR 10 billion of annual savings. 
198 See Study on eGovernment and the Reduction of Administrative Burden, estimating that following the Danish Mandatory Digital Self-
service approach was expected to produce annual savings for government for around EUR 6.5 billion at EU 28 level by 2017, while the United 
Kingdom Digital Government Strategy was estimated at around EUR 10 billion of annual savings. 

49 

 
 
it’s a local or other type of procedures can be considered in this context. Estimates based on 
digitalisation  of  procedures  can  show  savings  up  to  EUR  1.3  billion  per  year  for  EU 
governments in efficiency savings.199 See Annex 4 for more information. However, accurate 
estimates are hard to  quantify  precisely, as  they depend on the level  of digitalisation of  the 
relevant procedures, their complexity or number of relevant procedures.  

A  small  additional  administrative  cost  can  be  expected  when  updating  the  Single  Digital 
Gateway system to streamline the accessibility of information for cross-border users, updating 
the system to include the permit-granting process for manufacturing industries with a sectoral 
approach of EUR 20 000 per section for the Commission and up to EUR 40 000 for Member 
States, per section as well. For more information on aggregate cost calculations for the Single 
Digital Gateway amendments, see Annex 4 Section 2.1. 

The introduction of technical assistance for innovative projects will have positive impacts for 
the  national  authorities’  staff.  Training  on  the  most  relevant  innovative  technologies  will 
facilitate  the  treatment  of  permits  and  reduce  the  need  to  contact  the  project  promoter  for 
additional clarifications. In this context, the role of INCITE is particularly relevant.  

6.1.2  Social impacts 

LEAD_EII  1  –  The  creation  of  new  demand  for  low-carbon  materials  is  expected  to  spur 
investments  in  decarbonisation  technologies.  Analysis  by  think  tank  Strategic  Perspectives 
estimates that introducing low-carbon requirements200 for steel  in public procurement could 
preserve  approximately  4  500  additional  jobs  in  the  steel  sector  by  2030  compared  to  the 
baseline scenario.201 

LEAD_BAT  1  -  Made  in  EU  requirements  can  play  a  critical  role  in  safeguarding  and 
expanding employment across the European battery value chain. By creating stronger demand 
for locally produced  components,  Made in EU  requirements can help  increase investments, 
secure existing jobs and stimulate further employment across upstream and downstream the 
battery value chain. The current battery project pipeline is expected to create 170 000 jobs by 
2030.202  In  the  battery  cell  sector  alone,  currently  announced  gigafactories  are  expected  to 
create up to 128 000 jobs. However around 85 000 of these jobs are considered to be at high or 
medium risk.203 LEAD_BAT 1 would help derisk these jobs, which currently amount to around 
66% of the total jobs in the pipeline. 

LEAD_SOL  1  could  deliver  a  substantial  boost  to  employment.  According  to  InnoEnergy, 
manufacturing 30 GW of solar panels annually in Europe alone would require 20 000 trained 
operators and technicians204, underscoring the need for dedicated workforce development. In 
this context, Made in EU requirements would also help secure employment pathways for the 
growing number of skilled workers, including the 100 000 individuals the EU Solar Academy 

199 Estimates based on digitalisation of procedures in the Netherlands, following a stakeholder consultation on the single digital gateway. 
These figures could be an overestimation, since costs and savings depend largely on the type of administrative procedure to be digitalised, the 
number of transactions/uses per procedure, amongst others. EUR-Lex - 52017SC0213 - EN - EUR-Lex 
200 Defined in the referenced study as a maximum carbon intensity of 0.7 tonnes of CO2e/tonne of steel for flat products and of 0.35 tonnes of 
CO2e/tonne of steel for long products in 2030. 
201 Strategic Perspectives (2025). Lead markets: driving net-zero industries made in Europe. Estimate from dataset used in report’s underlying 
analysis. 
202 European Battery Alliance 
203 T&E (2025). Europe’s automotive industry at a crossroads.  
204 InnoEnergy, European Solar Academy. 

50 

 
 
aims to upskill in solar PV by 2027, ensuring that training efforts are matched with long-term 
industrial job opportunities.205  

LEAD_VC 1 could stop, and possibly reverse, the trend of progressive job losses which has 
been materialising over the past years in the EU’s vehicle components supply chain.206 From 
this perspective, the minor vehicle price increases described above in the impact on consumers 
section, should be seen as irrelevant compared to the preservation of hundreds of thousands of 
high-quality jobs and a strong industrial base in the Union. Furthermore, the measure could 
create additional financial capacities for suppliers to be reinvested in future technologies.  

INV 1 - As the measure is voluntary, social impacts would be limited and depend entirely on 
whether Member States choose to apply the guidance. Where implemented, some projects may 
generate additional employment or higher-quality jobs linked to localised activities, but these 
effects would be uneven and confined to specific regions. In Member States that do not adopt 
the  guidance,  no  material  social  impact  would  occur,  resulting  in  an  overall  limited  and 
fragmented effect on EU employment and working conditions. 

6.1.3  Environmental impacts 

Introducing EU-wide labels for low-carbon energy intensive industrial products, as proposed 
in LAB 1, can improve the understanding of what constitute energy intensive products with 
lower  environmental  impact.  However,  the  impact  of  an  EU  voluntary  low-carbon  product 
label  depends  on  its  ability  to  effectively  stimulate  demand  for  low-carbon  products.  This 
requires  the  label  to  provide  buyers  with  credible  information  about  the  GHG  emissions 
associated with the product. At the same time, its impact also depends on the ability of low-
carbon  producers  to  differentiate  their  products  from  conventional  alternatives  and  to 
strengthen the business case for low-carbon production. 

The environmental impact of the different design elements for the low-carbon product label 
will depend on the scope of GHG emission information provided by the label and on its ability 
to ensure comparability across products as well as  attractiveness and accessibility of such a 
label  for  different  market  players/products  (e.g.  non-EU  manufactured  products).  These 
specific aspects are assessed for steel under PO2 and PO3. Regarding other EIIs, it is expected 
that ongoing efforts to present the environmental performance of construction products would 
lead to lower environmental impact choices. For other sectors, ongoing initiatives, such as the 
upcoming ESPR delegated act on aluminium, could ensure a broad coverage of emissions and 
solid comparability, therefore providing strong incentives for decarbonisation.  

LEAD_EII 1 is expected to provide a clear demand signal for low-carbon materials, thereby 
encouraging investment and accelerating decarbonisation efforts. With a 25% target for low-
carbon  steel  in  automotive  and  construction,  emission  reductions  would  amount  to 
approximately  3.37  Mtonnes  CO₂  in  2030  alone.207  Based  on  the  5%  low-carbon  target 
proposed for cement in 2030, the potential savings could reach 0.69 Mtonnes CO₂ for that year. 
Correspondingly, the 25% low-carbon target for aluminium could save 0.22 Mtonnes CO₂ in 
the year 2030. Combined, the potential savings for steel, cement and aluminium could reach 
4.28 Mtonnes CO2 in 2030.208 These emissions savings amount to EUR 428 million (from EUR 

205 According to Fraunhofer, at full GW-scale production, each GW of solar PV manufacturing capacity is estimated to generate around 1 065 
direct full-time jobs, including approximately 70 in polysilicon, 75 in ingot production, 75 in wafering, 200 in cell manufacturing, 85 in solar 
glass, 200 in module assembly, and 360 in inverter production. This would result in an additional 1 598 of indirect jobs, bringing the total 
employment impact to roughly 2 663 jobs per GW. In terms of the policy segments assessed in the impact assessment, this corresponds to an 
estimated 5 193 jobs created by the public procurement provisions, 32 888 jobs by auctions, and 20 771 jobs by public support schemes. 
206 In 2024 alone, automotive suppliers announced that 54 000 jobs will be cut, with most of these in the next two to five years. Source: CLEPA 
(2025). Job losses escalate as demand stays below expectations. 
207 Calculations explained in Annex 4 Section 2.3. 
208 Calculations explained in Annex 4 Section 2.3. 

51 

 
 
256 million to EUR 809 million depending on the cost of carbon used). See Annex 4 Section 
2.3 and Annex 15 for monetisation calculations in ranges following the sensitivity analysis. 

LEAD_BAT 1 - Under the Batteries Regulation, batteries manufactured in the EU must meet 
strict  environmental  standards  throughout  their  life  cycle,  covering  carbon  footprint, 
responsible sourcing of raw materials, durability, safety, and high  rates of collection, reuse, 
and recycling. Based on the 2023 EU grid, a battery manufactured in the EU would imply on 
average a 25% CO2 emissions reduction compared to a Chinese manufactured battery using 
the  average  Chinese  grid.209  These  CO2  reductions  also  apply  across  the  upstream  value 
chain.210 Localizing the production of battery cells and cathode active materials, including its 
precursor material, under PO1, rather than relying on imported Chinese products, could reduce 
CO₂ emissions by an estimated 25.6 Mtonnes overall in 2030 alone. These emissions savings 
amount to EUR 2.56 billion (EUR 1.5 billion- 4.8 billion), see Annex 4 Section 2.3 and Annex 
15 for monetisation calculations.211  

LEAD_SOL 1 - Due to the provisions of the NZIA on environmental sustainability, PV system 
production  in  Europe  is  expected  to  meet  certain  environmental  standards  across  the  entire 
value chain. While the NZIA criteria set an important standard for all products, promoting EU 
PV  manufacturing  can  result  in  further  positive  environmental  impacts  through  reduced 
logistics emissions, stronger regulatory frameworks, and more sustainable production practices 
overall. This in turn will facilitate meeting Europe’ emission reduction targets. According to 
the  JRC,  PV  modules  manufactured  in  Europe  consistently  demonstrate  lower  lifecycle 
emissions than those produced in more carbon-intensive electricity systems. This is primarily 
due to  Europe’s  cleaner  energy mix during manufacturing,  which is  the dominant  driver of 
global warming potential (GWP), as well as the use of materials from low-carbon supply chains 
and more advanced recycling practices.  

LEAD_BAT and LEAD_SOL 1 provisions may also risk having an impact on the pace of 
deployment of clean energy solutions, and therefore on overall emissions, which could not be 
quantified in the context of this Impact Assessment . However, the fact that these provisions 
are limited to publicly supported products attenuates this risk. 

PERM  1  -  Streamlining  provisions  for  permitting,  notably  through  joint  or  coordinated 
environmental  assessments,  as  provided  by  environmental  law,  will  reduce  administrative 
inefficiencies by identifying potential inconsistencies and in turn increase the quality of the 
assessments.  Moreover,  introducing  a  set  of  standardised  data  sets,  notably  on  submissions 
linked to environmental permits will enable their re-utilisation in other areas like environmental 
reporting. Being able to re-use the original and most environmentally sound information will 
benefit  the  quality  of  other  assessments.  Furthermore,  the  EU  manufacturing  industry 
represents 22.5% of the EU total GHG emissions.212 Streamlining permitting procedures will 
accelerate the implementation of decarbonisation projects, therefore leading to an accelerated 
pace of GHG savings.  

LEAD_VC 1 - In Scenario 1, global greenhouse gas emissions from vehicle manufacturing 
decrease by 0.5 Mtonnes CO2e in 2027 and by 0.6 Mtonnes in 2030 due to shifts in production; 
they further decline by 0.1 Mtonnes due to reductions in international transport associated with 
EU  imports.  These  emissions  savings  amount  to  EUR  70  million  (EUR 42  million  -132.30 

209 T&E (2024). An Industrial blueprint for batteries in Europe. 
210 EU CAM production achieves a 12% reduction in CO2 emissions, while battery materials such as lithium hydroxide, nickel sulphate, and 
manganese sulphate see reductions of up to 71%. 
211 T&E (2024). An Industrial blueprint for batteries in Europe. 
212 Eurostat. Quarterly greenhouse gas emissions in the EU. 

52 

 
 
million), see Annex 4 Section 2.3 for monetisation calculations and Annex 15 for sensitivity 
analysis on the ranges. 

In sum, the environmental effects remain limited and are very similar across LEAD_VC 1 and 
LEAD_VC 2. 

6.2 

POLICY OPTION 2 

LEAD_BAT 1 / LEAD_SOL 1 / LEAD_VC 1 – the proposed policy measures under PO2 are 
the same as under PO1, and the impacts have been assessed under PO1. 

6.2.1 

Economic impacts 

6.2.1.1 

Impact on companies 

LAB 2 would introduce a label on the carbon intensity of steel only, covering emissions up 
to  the  hot-rolling  production  step  (see  more  in  Annex  12).  The  impact  on  steel  companies 
would be overall positive, providing a reliable EU-wide methodology to calculate embedded 
emissions and support the creation of lead markets. Steel companies would be encouraged to 
certify their production with the label as it would provide a clear identifier for producers using 
low-carbon  processes  and  therefore  positively  impact  their  ability  to  monetise  their  green 
premium towards potential customers. The classification system combined with the shape of 
the sliding scale, a clear presentation of the embedded emissions and the share of steel scrap, 
provides  a  fair  treatment  for  all  producers,  acknowledging  the  decarbonisation  effort.  See 
Annex 12  for  extended  description of the design elements  under LAB 2  and their potential 
impacts. While the use of LAB 2 for steel is voluntary by design and therefore no additional 
costs  are  imposed  on  companies,  the  administrative  costs  have  been  estimated  in  a  yearly 
approximate cost of EUR 6 700 per steel site213, which could offset the administrative costs 
from using several other labels in the market for different products, to just one.  

LEAD_EII 2 introduces made in EU requirements in addition to the low-carbon requirements 
for steel, cement and aluminium used in the automotive and construction projects, purchased 
through public procurement or public support schemes.  

The  impacts  of  low-carbon  requirements  for  steel,  cement  and  aluminium  in  public 
procurement and incentives have been addressed under PO1, where the benefits in terms of 
value  added  could  reach  EUR  686  million  for  the  three  EIIs  combined,  as  a  result  of  the 
requirements (see Section 6.1.1.1.). Introducing Made in EU requirements will ensure that a 
share of the demand for low-carbon energy intensive industrial products is met by domestic 
production, instead of imports from third countries. The Made in EU requirements, however, 
are  unlikely  to  create  further  economic  benefits  for  the  EII  sectors.  In  the  absence  of  well-
established  low-carbon  supply  chains  for  their  materials,  and  assuming  traditional  supply 
chains are maintained, the proposed level of targets is lower than the share of EU’s domestic 
demand for these materials  (in  automotive and transport) that is  currently met by European 
production.214 Overall, it will help safeguard security of supply, guaranteeing a share of secure, 
low-carbon  demand  for  domestic  producers,  and  improve  the  resilience  of  low-carbon 

213 The low-carbon steel label costs for businesses can be estimated using the cost structure from ResponsibleSteel. This estimate took the 
average between costs for normal and large companies 
214 EU production is still able to cover between 80 and 90% of the EU’s domestic demand of steel and about 45% of the EU’s domestic demand 
of aluminium. COM(2025) 125 final 

53 

 
 
 
production  of  steel,  aluminium  and  cement  in  their  transition  process  where  international 
competition and pressures will remain. 

Furthermore, such predictability of demand for low-carbon steel can help absorb part of the 
investment’s costs from the low-carbon technologies, potentially pushing investment decisions 
towards decarbonisation. In the EU steel sector, there are currently at least 29 announced steel 
decarbonisation projects, with a combined potential capacity of additional 41 Mtonnes of low-
carbon steel per year by 2030, that have not yet reached the final investment stage.215 To that 
end, the proposed lead market measures, based on the current project pipeline, could unlock up 
to EUR 15.5 billion in investments216 covering approximately 15% of the sector’s EUR 100 
billion  total  investment  need  by  2050,  as  estimated  in  the  impact  assessment  for  the  2040 
climate target. . 217, 218   

In contrast to the baseline scenario, where export-led overcapacity in third countries leads to 
artificially  low  prices  (notably  for  steel)  and  causes  EU  job  losses  and  plant  closures, 
introducing  Made  in  EU  low-carbon  requirements  will  help  safeguard  security,  redirect 
demand  towards  domestic,  cleaner  producers,  and  improve  the  resilience  and  transition  of 
sectors like steel or aluminium that have lost market share over the past decade.  

According  to  the  targeted  stakeholder  consultation,  support  for  stimulating demand  for  EU-made  industrial 
products was broadly shared among respondents (86%; 53 out of 62 respondents). Support was widespread among 
sectors.219 SMEs also strongly supported lead markets for EU-made industrial products, i.e. micro businesses 
(6 of 7; 86%), small businesses (6 of 7; 86%) and medium-sized businesses (5 of 6; 83%). 

INV 2 - FDI conditions would be mandatory and applied consistently across the EU, resulting 
in more stringent requirements on companies in scope. Conditionalities such as value-added 
production and staffing requirements could increase costs by limiting options for raw materials, 
components  or  labour,  while  ownership,  joint-venture  and  EU-content  requirements  would 
have the strongest  operational  and strategic impact. The benefits  outlined in  PO1 would be 
amplified,  as  consistent  application  would  close  loopholes,  preventing  investors  from 
bypassing requirements by selecting investment locations with weaker or no conditionalities. 
For  companies  investing  in  or  producing  “strategic  reinforcement”  technologies,  all  core 
conditions  would  apply,  creating  a  more  rigid  obligation  set;  for  companies  developing  or 
manufacturing “other emerging key strategic sectors”, the requirement to comply with only a 
minimum  subset  of  conditions  would  provide  greater  flexibility  when  adapting  business 
models.  In  the  short  term,  this  may  temporarily  deter  some  investments  in  the  EU  for  the 
concerned  sectors,  particularly  those  relying  on  imported  intermediate  goods  or  a  global 
staffing  model.  However,  OECD  evidence  shows  that  performance-based,  transparent 
obligations (e.g. EU sourcing shares, local R&I, technology commitments) are compatible with 
sustained inflows.220 Over the medium to long run, companies adapting to these obligations are 
expected  to  embed  more  R&I  and  technology  in  their  EU  operations,  making  investments 
“stickier”  and  more  resilient.  International  experience  suggests  that  such  measures  can 

215 Estimate based on BloombergNEF’s Steel Decarbonization Project Database 1.0.5. The cumulative figures of 41 Mtpa of low-carbon steel 
capacity and the associated EUR 15.5. billion in investments represent only projects whose output meets the indicative IAA’s carbon intensity 
label classes of performance (Class A-C). 
216 Ibid. 
217 European Commission (2024)., Commission Staff Working Document: Impact Assessment Report (Part 3), accompanying the document 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions: Securing our future - Europe's 2040 climate target and path to climate neutrality by 2050, building a sustainable, 
just and prosperous society, COM(2024) 63 final, pp.164-167. 
218 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 99.  
219 All respondents from glass (4), pulp & paper (1) and ceramics (3) agreed. Among respondents from the iron & steel sector, 16 out of 18 
agreed, while support was also strong among non-ferrous metals (4 out of 5) and cement (6 out of 7). The chemical showed lower agreement 
(2 out of 4). 
220 Mistura, F. and C. Roulet (2019). The determinants of Foreign Direct Investment: Do statutory restrictions matter?, OECD Working Papers 
on International Investment, No. 2019/01, OECD Publishing, Paris, https://doi.org/10.1787/641507ce-en. 

54 

 
 
strengthen  strategic  value  creation  without  deterring  investment,  provided  they  are 
implemented carefully (see Annex 13). 

PERM 2 has the objective to streamline and/or increase business certainty over the permitting 
process.  In  this  context,  energy  intensive  companies’  decarbonisation  projects  eligible  for 
measures like a One stop shop (Single point of contact) or the permitting timelines could largely 
benefit  from  an  improved  efficiency  for  their  businesses  as  outlined  in  the  findings  of  the 
Innovation  Fund  knowledge  sharing  report  from  2025.221  The  measures  would  reduce  the 
number of authorities to contact (which can in some cases reach 10), increase certainty over 
the timeline for the project from extreme cases lasting more than two years, and be reduced to 
a maximum of 18 months. Projects could also benefit from tacit approval, subject to conditions, 
on certain intermediary steps of their permitting process, which could help with the sequencing 
of permits and further incentivise public authorities to deliver timely feedback. 

Moreover,  while  not  speeding  up  the  environmental  assessment  itself,  the  presumption  of 
overriding  public  interest  could  streamline  the  final  stages  of  permit  approval  and  increase 
business  certainty.  Additionally,  enabling  the  testing  of  innovative  technologies  under  the 
regulatory  sandboxes  for  limited  periods  of  time,  regarding  the  production  technologies  for 
renewable and low-carbon hydrogen, will facilitate the testing of new generation technologies. 
Regulatory  learning,  as  one  of  the  main  outcomes  of  regulatory  sandboxes  would  enable 
authorities to improve the regulatory environment for upcoming technologies, and as a result 
improve their permitting framework.  

AREA 2 - The designation by Member States of industrial areas with investment projects that 
comply with the criteria presented in this option would allow for selected projects complying 
with the specified IAA criteria to increase visibility and facilitate their access to finance. This 
would include easier access to public funding at EU and national level, without prejudice to 
State aid rules, as well as increased visibility vis-à-vis private investors. 

6.2.1.2 

Impact on downstream sectors 

LEAD_EII 2 - The impacts of low-carbon requirements for steel, aluminium and cement 
used for the end user of the materials, namely automotive and construction projects in public 
procurement and support schemes, have been addressed under PO1 (Section 6.1.1.2 estimates 
implications for the downstream sectors of about EUR 291 million loss of GVA for automotive 
and EUR 691 million loss of GVA for construction).  

Combining such low-carbon with Made in EU requirements in public procurement and public 
support schemes is expected to induce no further adjustment costs for the construction sector 
and automotive manufacturers. In fact, assuming current supply/ demand ratio is maintained, a 
high share of the steel and aluminium currently used in European vehicles and construction is 
already sourced from European production.222 Made in EU requirements will mostly act as a 
in 
to  make  sure 
safeguard  mechanism, 
decarbonisation, benefit from a secure and guaranteed demand share. 

that  domestic  producers,  when 

investing 

It  should  be  noted  that  according  to  the  modelling  exercise,  the  definition  of  Made  in  EU 
assumed  that  demand  is  to  be  met  by  EU  Member  States  and  EEA,  and  therefore  does  not 
consider any imports which can alleviate the impacts to downstream sectors. 

221 European Commission (2025). 2025 Annual knowledge sharing report of the Innovation Fund. 
222 EU production is still able to cover between 80 and 90% of the EU’s domestic demand of steel and about 45% of the EU’s domestic demand 
of aluminium. COM(2025) 125 final 

55 

 
 
Construction: Over 30% of the EU’s steel demand comes from the construction sector, while 
for cement, construction represents 98% of the demand. As noted in the introduction of low-
carbon  requirements  in  PO1,  the  cost  increase  for  final  products  would  be  relatively  small, 
since steel, aluminium and cement represent a fraction of the final product costs of, e.g. vehicles 
or infrastructure projects. Available estimates, as outlined in Section 6.1.1.2 confirm that, even 
combining  the  impact  of  low-carbon  material  requirements  across  several  energy-intensive 
materials would have a moderate effect on the final cost of vehicles and construction projects, 
and therefore moderate impact in the sector’s value added.  

Administrative costs 

Administrative costs for  ensuring conformity with  the Made in  EU measures  could  entail a 
higher impact than those observed in PO1, due to the need to enforce the Made in EU. More 
concretely,  applicable  measures  could  have  significant 
the  aggregated 
administrative costs for the construction sector, due to its size, in the EU to show compliance 
with the measures. To minimise these impacts, an exemption could be considered for micro 
and small companies as they are not expected to fundamentally impact lead market provisions 
due to the size of their projects. 

impacts  on 

For most firms, these costs represent a minor fraction of total project expenses and are unlikely 
to  affect  investment  or  procurement  decisions.  Over  time,  the  establishment  of  harmonised 
certification  procedures  and  greater  supplier  familiarity  with  EU-origin  rules  should  reduce 
administrative burdens and improve efficiency. The measure thus provides downstream actors 
with more stable and predictable sourcing conditions, while incentivising closer collaboration 
with EU-based suppliers.  

INV 2 - Regarding the FDI conditionalities, the voluntary approach assessed in PO1 would, 
under PO2, become mandatory EU-wide for the batteries segment and for the other strategic 
technologies in scope. In the short term, downstream sectors could face moderate cost increases 
if suppliers pass through compliance costs, particularly in batteries and other market segments 
where EU production capacity is not yet fully scaled. These transitional costs are expected to 
be contained if conditionalities are phased in gradually. As under PO1, the conditions with the 
strongest  downstream  impact  are  ownership,  joint-venture  and  EU-content  requirements,  as 
these conditions shape suppliers’ sourcing strategies, cost structures and localisation decisions. 
Mandatory  application  across  the  Single  Market  would  substantially  strengthen  EU  value 
chains by encouraging more embedded upstream activities, accelerating technology and know-
how transfers and improving the availability of EU-based suppliers - resulting in more tangible 
competitiveness gains for downstream sectors.  

Conditionalities  linked  to  value-added  production,  supply-chain  security  or  technology 
retention could raise the price of certain inputs, especially in the short term as local value chains 
adjust to the new demand created by the new FDI projects. Nevertheless, a more predictable 
and  harmonised  investment  environment  could  lead  to  higher  benefits  for  the  industries  in 
scope  than  the  operational  costs  of  mandatory  investment  conditionalities.  For  downstream 
sectors,  the  uniform  EU  framework  reduces  fragmentation,  levels  the  playing  field  across 
Member  States  and  enhances  long-term  supply-chain  stability.  Above  all,  they  would 
contribute to harmonise the approach within the Single Market, thereby increasing the benefits 
across  EU  Member  States.  Experience  from  other  regions  suggests  that  comparable  FDI 
measures  can  reinforce  industrial  linkages  and  supply  chain  resilience  without  harming 
investment flows (see Annex 13). 

56 

 
6.2.1.3 

Impact on SMEs 

LAB 2 - SMEs in the steel value chain are expected to benefit from the low-carbon steel label 
obtained by large manufacturers, as it will promote and enhance market differentiation of low-
carbon products across the supply chain. This, in turn, can provide SMEs a competitive edge 
by meeting the demand for low-carbon products, and accessing new markets which require the 
use of such label as a compliance instrument. 

LEAD_EII  2  will  directly  benefit  EU  SMEs  in  the  steel,  aluminium,  cement,  vehicle 
component  manufacturers,  as  well  as  solar  and  battery  manufacturers  by  creating  more 
predictable demand for their European products. These requirements will not only strengthen 
existing  manufacturers  but  also  open  new  market  opportunities  for  emerging  businesses, 
especially  within the growing  battery ecosystem. As these industries expand, SMEs will be 
better  positioned  to  scale  their  operations  and  integrate  into  global  value  chains.  As  under 
option PO1, SMEs in selected downstream sectors are expected to be less able than larger firms 
to  pass  on to  consumers or to  absorb the extra costs. Even if limited, the cost  increase will 
likely negatively impact their ability to export products.  

It  may  also  be  costly  and  time  consuming  for  SMEs  to  demonstrate  compliance  with  low-
carbon  and made in  EU  requirements.  This burden could  be eased through tailored support 
measures (such as clear guidelines, digital tools, and dedicated helpdesk) specifically for SMEs 
as well as by extending the validity periods of relevant certificates. Furthermore, in the case of 
the construction sector, small and micro companies (99% of construction companies) will be 
allowed to  demonstrate  compliance  with  the requirements  via self-declaration, reducing the 
administrative burden. 

INV 2 - Mandatory conditionalities are expected to systematically increase opportunities for 
SMEs as suppliers to foreign investors. Because conditionalities apply across all key strategic 
sectors, the resulting localisation of R&I, manufacturing and procurement activities is likely to 
broaden  SME  entry  points  in  multiple  value  chains  rather  than  in  isolated  segments.  This 
integration may require SMEs to meet higher quality and certification standards, potentially 
creating  compliance  costs  and  working-capital  needs.  Some  SMEs  may  also  need  to  scale 
production  capacity  or  upgrade  processes  to  meet  the  requirements  of  foreign  investors 
adapting  to  the  mandatory  regime.  Complementary  support  (e.g.  supplier  development 
programmes,  technical  assistance)  will  be  critical  to  ensure  SMEs  can  capture  these 
opportunities. In the medium  run, SMEs  are expected to  benefit from  more predictable and 
stable demand, enhanced technological capabilities, and greater participation in global value 
chains.  The  uniform  EU-wide  application  of  conditionalities  also  reduces  fragmentation, 
ensuring that SME opportunities are not limited to specific Member States, as would be the 
case under a voluntary regime. 

6.2.1.4 

Impact on citizens and consumers 

LAB 2 - The impact on citizens and final consumers of a label on the carbon intensity of steel 
would be marginal or indirect since steel is a business-to-business traded product between steel 
manufacturers and other companies, rather than to individual consumers. However, indirectly 
and through the supply chain, the info on the label could be transferred to consumers to inform 
about the carbon footprint of the material used in the final good.  

LEAD_EII 2 - The impacts are broadly similar to those described under PO1, and driven by 
the low-carbon measures, rather than Made in EU requirements. As noted in Section 6.2.1.2, 

57 

 
the introduction of Made in EU measures  would not necessarily add any extra costs for the 
final consumers, other than the low-carbon premium.  

PERM 2’s measures related to the presumption of overriding public interest might generate 
additional resistance by local communities affected by such projects, which can be mitigated 
by maintaining dialogue with local population. Similarly, strict deadlines for permit granting 
would need to be achieved while ensuring proper consultation to prevent the risks of litigation. 

INV 2 - Consumers may face small, visible price increases in the short term (e.g. for EVs) as 
firms adapt supply chains to meet EU sourcing or staffing obligations. These transitional effects 
are expected to be modest and outweighed by longer-term benefits. Citizens will benefit from 
more  secure  access  to  critical  products  (like  batteries  and  EVs),  higher-quality  jobs  located 
within  the  EU,  and  better  protection  against  supply  disruptions.  Over  time,  conditionalities 
should  also  contribute  to  faster  decarbonisation,  supporting  the  EU’s  climate  goals  and 
strengthening public trust that the green transition delivers local value and industrial capacity. 

6.2.1.5 

Impact on competitiveness 

LEAD_EII 2 is not expected to have an impact on trade flows compared to PO1, considering 
that  the  Made  in  EU  targets  introduced  fall  within  existing  shares  of  EU  demand  met  by 
domestic supply in the automotive and construction sectors. In fact, the made in EU measure 
would enhance competitiveness by securing  a minimum low-carbon domestic demand, which 
is particularly important in a context where the decarbonisation of these industries  can widen 
the cost gap with third country imports. Temporary administrative and certification costs linked 
to verifying Made in EU are expected to decline over time as procedures become standardised, 
strengthening predictability and supply-chain  resilience.223 Additionally, the combination of 
low-carbon  and  made  in  EU  requirements  will  ensure  demand  is  met  internally  rather  than 
through third country imports. Some of the costs may also be underestimated, as the modelling 
assumptions  do  not  reflect  potential  changes  in  trade  flows  deriving  from  the  Made  in  EU 
requirements while switching to low-carbon alternatives. As such, it is assumed that the supply 
chain structure and flows for the automotive and construction sectors would remain the same 
through the transition. It is possible however to  consider that supply chain dynamics would 
result in downstream sectors preferring to source outside of the EU while shifting to low-carbon 
alternatives. 

Automotive: Considerations under PO1 are also valid under PO2. The Made in EU requirement 
introduced under PO2 is set to generate a positive impact on the competitiveness of domestic 
vehicle  manufacturers  that  already  source  most  of  their  steel  inputs  locally  (see  Section 
6.2.1.3).  

INV  2  -  Mandatory  conditionalities  would  strengthen  EU  competitiveness  by  ensuring  that 
inward  FDI  systematically  contributes  to  local  value  creation,  innovation,  and  industrial 
ecosystems.  In  the  short  run,  compliance  costs  could  erode  margins  for  some  investors. 
However,  consistent  EU-wide  rules  eliminate  loopholes,  closing  opportunities  for  firms  to 
bypass requirements and helping to level the playing field for both EU and foreign companies. 
Over time, the resulting knowledge transfer, technology retention and innovation spillovers are 
expected to reinforce EU technological leadership across the batteries and other key strategic 
sectors concerned, rather than in isolated value chains. 

223 This assessment is consistent with the modelling framework used in COM(2025) 780 final, applying the same behavioural parameters and 
elasticity assumptions. More detailed results and the full calculation methodology are presented in Annex 11. 

58 

 
 
6.2.1.6 

Impact on competition 

LEAD_EII 2 - As the low-carbon and made in EU targets are set in order to accommodate for 
existing and future EU low-carbon production while also considering the reasonable absorption 
of price increases in downstream sectors, the measure is not expected to distort competition 
among market actors that comply with these requirements. However, for products subject to 
Made in EU requirements for security or environmental reasons, competition would be limited 
to  manufacturers  located  within  the  EU,  thereby  excluding  non-EU  producers  up  to  the 
minimum content and narrowing the pool of eligible suppliers.  

INV  2  could  further  safeguard  the  Single  Market  from  disruptions  caused  by  foreign 
investments  and  promote  more  effective  competition,  due  to  its  mandatory  nature.  By 
introducing  harmonised  conditions  for  investments  in  scope,  the  level  playing  field  in  the 
Single  Market  would  be  enhanced  and  give  investors  a  single,  predictable  rulebook.  This 
uniformity ensures fairer competition between investors, regardless of entry location. Practices 
in  other  jurisdictions  demonstrate  that  well-designed  FDI  conditions  can  enhance  fair 
competition and prevent market distortions linked to state-backed investors (see Annex 13).  

6.2.1.7 

Impact on international trade 

LEAD_EII 2 is not expected to have an additional impact on trade flows compared to PO1, 
considering  that  the  Made  in  EU  targets  introduced  fall  within  existing  shares  of  domestic 
supply in the automotive and construction sectors.  

The EU’s cement industry is structurally domestic, with exports representing less than 3% of 
production  and  imports  even  smaller.  Transport  costs  and  product  bulk  make  long-distance 
trade  uneconomical.  Even  under  a  5%  low-carbon  requirement,  no  material  effect  on  trade 
flows  or  competitiveness  is  expected.  Intra-EU  trade  flows  of  steel,  aluminium  and  cement 
would increase due to the requirements in other EU countries to buy more Made in the EU 
steel, aluminium, and cement products. 

INV 2 - Compared with PO1, the mandatory nature of INV 2 could generate stronger short-
term  adjustments  in  trade  and  FDI  flows,  particularly  where  localisation  or  EU-content 
obligations alter sourcing patterns, but these effects would remain concentrated in the sectors 
covered. Its application must remain consistent with the EU’s international commitments on 
investment liberalisation. In most FTAs, the EU has already granted extensive market access 
and national treatment in non-services sectors, except for a few sensitive activities. As a result, 
FDI from these partner countries (representing most EU inflows) would be exempt, limiting 
overall coverage. The measure would thus primarily apply to strategic investments from non-
FTA countries where economic security risks are highest. However, both GATS and TFEU 
provisions  allow  restrictions  on  capital  movements  only  under  narrowly  interpreted  public 
policy or security exceptions, leaving limited room for measures justified purely on economic 
or industrial grounds. 

6.2.1.8 

Impact on Member States  

LAB  2  would  increase  the  administrative  burden  for  Member  States,  depending  on  the 
additional data requirements, accounting, reporting and verification system. However, as the 
label on steel will be built on existing EU ETS and CBAM verification rules, the burden on 
national authorities is expected to be limited, and even more so compared to LAB 1.  

LEAD_EII  2  -  The  financial  burden  on  Member  States  of  introducing  low-carbon 
requirements for steel, aluminium and cement used in automotive and construction projects in 

59 

 
public procurement and incentives schemes has been assessed under PO1. Adding a Made in 
EU  requirement  will  likely  not  lead  to  additional  adjustment  costs.  However,  it  is  likely  to 
increase the administrative burden since public administrations would be required to establish 
systems  for  monitoring,  verification,  and  enforcement  of  compliance.  This  will  involve 
building  on  existing  EU-level  verification  mechanisms  or  building  new  ones  in  case  not  in 
place  yet.  Effective  implementation  depends  on  the  availability  of  reliable  and  transparent 
standards, emissions accounting methodologies, and certification systems as well as guidance 
for Member States. 

To  support  effective  implementation,  Member  States  will  need  to  designate  a  competent 
authority  to  oversee  the  implementation  process  and  ensure  monitoring,  verification  and 
enforcement. For steel, the introduction of a label on the carbon intensity of steel (LAB 2) will 
provide a reliable tool for certification. It will also have to ensure that the certification system 
in place is properly enforced and monitored for fraud risk. Similarly, in the construction sector, 
for harmonised construction products the compliance with low-carbon requirements will have 
to  be  certified  by  a  Declaration  of  Performance  and  Conformity,  under  the  procedure 
established in the context of the Construction Production Regulation.  

INV  2  -  For  Member  States,  mandatory  EU-wide  conditionalities  would  bring  higher 
administrative responsibilities for those Member States that currently do not screen incoming 
FDI. This will entail capacity-building and generate efficiencies by reducing fragmentation. 
Uniform  conditionalities  strengthen  the  consistency  of  the  Single  Market  and  reduce  the 
administrative burden of divergent national practices, while ensuring that all Member States 
benefit from spillovers rather than competing against each other. Lessons from other economies 
show that coordinated frameworks for FDI screening can strengthen national capacities while 
preserving overall attractiveness to investors (see Annex 13). 

PERM 2 - Impacts linked to the “One project, one digital process” have already been outlined 
for PO1. Measures related to timeframes are expected to shorten procedures and would require 
additional administrative resources when the reason for delays is the lack of capacity. Still, the 
proposed  time  limits  for  decision-making  are  based  on  timeframes  that  are  often  already 
achieved  and  aim  mainly  to  increase  the  predictability  of  the  process  for  the  most  extreme 
cases. In addition, time limits can provide incentives to public authorities to consolidate internal 
processes.  

Tacit approval measures for intermediary steps of the permit granting process would not be 
applicable for Member States in  which this option is  not allowed by their  legal system.  No 
additional impact would be expected in those countries. This measure is in part introduced to 
facilitate the achievement of the time limits by streamlining sequential characteristics of certain 
permit-granting processes in other Member States. Some training for relevant authorities could 
be expected to fully incorporate the tacit approval into the permitting process. 

AREA 2 - Member States would need to provide the necessary resources to conduct the process 
to designate areas with relevant projects. Given that the Commission will provide them with 
guidance on how to do so, and that each Member State only assigns a limited number of such 
projects,  the  additional  impacts  on  Member  State  administrations  should  be  limited. 
Additionally, Member States will be able to draw on their experiences with Strategic Projects 
under the NZIA, where already decarbonisation projects have been designated as strategic. 

60 

 
6.2.2 

Social impacts 

6.2.2.1  Impact on employment 

LEAD_EII 2 would help boost European employment in EIIs. According to research by think 
tank  Strategic  Perspectives,  implementing  a  100%  substitution  of  low-carbon  and  made  in 
Europe  requirements224  for  steel  could  result  in  a  21%  increase  in  employment  in  the  steel 
sector by the year 2030 compared to a baseline scenario without such policies in place.225  

INV 2 - Impacts described under PO1 remain valid for PO2 and are expected to contribute to 
an increase in employment and the creation of quality jobs. Mandatory measures would more 
effectively  prevent  companies  from  circumventing  staffing  requirements  by  removing  the 
possibility  for  investors  to  choose  Member  States  without  such  obligations,  thereby  better 
safeguarding  the  homogeneity  of  the  Single  Market.  The  implementation  of  these 
conditionalities  would  build  on  existing  FDI  screening  structures  in  Member  States,  with 
designated authorities ensuring that employment and training commitments are met. This may 
require  some  procedural  adjustments  where  Member  States  currently  apply  limited  or  no 
staffing-related conditions.  

6.2.3 

Environmental impacts 

LAB  2  would  support  the  decarbonisation  of  the  steel  industry,  which  is  one  of  the  most 
emission-intensive industrial sectors, representing almost 20% of the industrial GHG emissions 
in the EU. In fact, the introduction of an EU-wide label based on reliable and verified data and 
a uniform methodology  can improve the understanding of what  constitutes steel with lower 
carbon footprint impact. The exact impact would depend on three key parameters:  

1.  The scope of the GHG emission information provided by the label. 

2.  The label’s ability to ensure comparability across products and producers. 

3.  The attractiveness and use of the voluntary label by companies.  

As explained in more detail in Annex 12, up to 78% of GHG emissions (in case of primary 
steel, up to 60% in case of secondary) can be covered by a label relying on direct industrial 
GHG emissions covered by EU ETS as well as indirect emissions from electricity, heat and 
hydrogen  use.  Besides,  the  comparability  across  products  and  producers  can  be  effectively 
ensured by integrating classes of performance in the label, based on clear quantitative GHG-
intensity  thresholds.  To  maximise  the  comparability  of  diverse  production  pathways,  the 
performance class thresholds could be adjusted in line with the amount of scrap used. Multiple 
types  of  information,  in  addition  to  indicating  a  performance  class  under  the  classification 
system, could be added, such as the actual GHG emission intensity or the amount of recycled 
content used in the product. It must be noted that during stakeholder consultations, the use of 
a  sliding  scale  for  differentiating  the  performance  classes  or  of  an  alternative  classification 
method not as a function of scrap was highly debated with no clear preference or compromise 
solution within industry.  

LEAD_EII 2 – could have a bigger environmental impact than PO1, as mandating made in EU 
requirements could lower transport emissions associated with imports. These are however not 
quantified  in  the  calculation  on  reduction  of  GHG  emissions,  since  they  would  require  a 

224 Defined in the study as a maximum carbon intensity of 0.7 tonnes of CO2e/tonne of steel for flat products and of 0.35 tonnes of CO2e/tonne 
of steel for long products in 2030. 
225 Strategic Perspectives (2025). Lead markets: driving net-zero industries made in Europe. Estimate from dataset used in report’s underlying 
analysis. 

61 

 
 
comparison  between  the  domestic  and  imported  material  under  an  established  low-carbon 
methodology. 

PERM 2 - The designation of a one-stop-shop and streamlining of different assessments could 
prove  to  have  a  positive  impact  on  the  environment,  as  it  enables  a  more  comprehensive 
information base for decision-making. Moreover, by providing a set time limit of 18 months 
for decarbonisation of energy intensive industrial projects, the EU could gain up to 30 months 
of decreased emissions from industrial projects on the most extreme cases, thus speeding up 
GHG emission reductions.226  

The  use  of  the  overriding  public  interest  (OPI)  provisions  is  allowed  under  the  current 
environmental legislative framework. This provision does not prevent the need for planning 
and assessing environmental effects under relevant legislation (Water Framework Directive, 
Habitats Directive,) and therefore does not necessarily accelerate the speed of the assessments. 
It will provide however the most favourable procedure available in Member States’ planning 
and  permit-granting  procedures,  while  requiring  that  all  other  conditions  are  also  met. 
Overriding public interest  considerations enable  projects  to  go ahead upon some conditions 
even in case of a negative assessment for the project, so certain environmental impacts can be 
expected. However, any authorisation under the overriding public interest considerations must 
provide adequate compensation measures to offset environmental adverse effects, as provided 
in relevant legislation. Finally, regulatory sandboxes would be accompanied by a framework 
setting  the  necessary  limitations  to  prevent  any  unintended  environmental  consequences. 
Sandboxes would always be limited in time and scope, as well as accompanied by appropriate 
mitigation measures. 

6.3 

POLICY OPTION 3 

6.3.1 

Economic impacts 

6.3.1.1 

Impact on companies  

LEAD_EII  3  -  extends low-carbon  and  Made  in  EU  requirements  to  the  steel,  cement  and 
aluminium used in all vehicles and construction products placed on the market.  

Extending requirements to all products in the automotive and construction sectors would drive 
the broader market transformation needed for systemic decarbonisation of EIIs, particularly in 
steel, where public procurement covers only a limited share of total consumption. By creating 
large-volume and predictable demand, these measures would send long-term market signals 
necessary to unlock investment in low-carbon technologies.  

This  predictability  of  future  demand  for  low-carbon  steel  can  help  absorb  part  of  the 
investment’s costs from the low-carbon technologies and has a high potential to further push 
investment  decisions  towards  decarbonisation.  In  the  EU  steel  sector,  there  are  currently  at 
least  29  announced  steel  decarbonisation  projects,  with  a  combined  potential  capacity  of 
additional 41 Mtonnes of low-carbon steel per year by 2030, that have not yet reached the final 
investment stage. To that end, the proposed lead market measures, based on the current project 
pipeline, could unlock up to EUR 15.5 billion in investments227 covering approximately 15% 

226 EIIs account for approximately 22% of the European Union's total greenhouse gas (GHG) emissions. Time gained through a more efficient 
permitting process will help to decrease the 22% and achieve wider climate targets earlier. 
227 Estimate based on data from BloombergNEF’s Steel Decarbonization Project Database 1.0.5. The cumulative figures of 41 Mtpa of low-
carbon steel capacity and the associated EUR 15.5. billion in investments represent only projects whose output meets the indicative IAA’s 
carbon intensity label classes of performance (Class A-C). 

62 

 
 
of  the  sector’s  EUR  100  billion  total  investment  need  by  2050,  as  estimated  in  the  impact 
assessment for the 2040 climate target. 228, 229   

Furthermore, export-driven overcapacity in third countries today leads to artificially low prices 
(notably  for  steel)  and  causes  EU  job  losses  and  plant  closures.  Therefore,  this  measure 
introduces higher Made in EU requirements (targets of 85% for steel, 95% for cement and 
70% for aluminium) to help safeguard security, redirect demand towards domestic producers, 
and improve the resilience of sectors like steel or aluminium that have lost market share over 
the past decade.209 There are two opposing effects of introducing Made in EU requirements. 
The first is the reduction in the production of cement, steel or aluminium due to the downstream 
sectors facing higher costs and reducing their demand for domestic production. Secondly, the 
cement, steel and aluminium industries will experience an increase in demand stemming from 
the Made in EU requirements as these would lead to replacing imports from non-EU countries 
by domestic production. Overall, the second effect is greater than the first and translates into 
higher value added for these sectors.  

Energy  intensive  sectors  (cement,  aluminium  and  steel)  would  benefit  from  higher  targets 
under LEAD_EII 3, in a similar way as in LEAD_EII 2 but with a higher positive impact. In 
particular,  for  the  EU  cement  industry,  such  benefits  would  represent  3.09%  (EUR  2  079 
million)  of  its  total  sectoral  value  added,  while  for  the  European  steel  and  aluminium 
companies, it would account for 4.32% (EUR 2 883 million) of its total sectoral value added. 
In both cases, the results refer to the period 2025-2030, compared to a baseline scenario without 
IAA measures. 

Similarly to LEAD_EII 2, the benefits stemming from the increase in the demand for steel, 
cement and aluminium due to the Made in EU requirements overcompensate the reductions in 
the  demand  for  steel,  cement  and  aluminium  from  downstream  sectors  facing  higher  costs. 
Moreover,  the  benefits  are  greater  since  the  Made  in  EU  requirements  are  extended  to  all 
products in the automotive and construction markets (not only public procurement and support 
schemes markets).  

When comparing LEAD_EII 3 and LEAD_EII 2, the FIDELIO model shows that the public 
market is an important driver of impacts of the proposed policy measures. This is particularly 
relevant for the steel and aluminium sectors, where public procurement and public subsidies 
for automotive causes up to 73.84% of the total estimated positive impacts in both sectors in 
the period 2025-2030.230 

In  addition  to  the  existing  climate  policies,  introducing  low-carbon  requirements  will  help 
creating demand and accelerating investments, while Made in EU requirements would secure 
domestic  market  share  for  strategic  materials,  providing  greater  certainty  for  investment 
decisions, compared to the baseline. Redirecting demand to EU-based producers would also 
improve capacity utilisation - particularly in sectors that have seen notable declines between 
2000 and 2021, such as cement, aluminium, and integrated steelmaking.  

LEAD_BAT 2 / LEAD _SOL 2 - Expanding Made in EU requirements to all products in scope 
(i.e.  steel,  cement  and  aluminium  in  automotive  and  construction;  batteries  and  solar  PV) 
placed on the market would increase demand for EU produced energy intensive materials, EU 
manufactured batteries and solar, with greater certainty for domestic investments.  

228 European Commission (2024)., Commission Staff Working Document: Impact Assessment Report (Part 3), accompanying the document 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions: Securing our future - Europe's 2040 climate target and path to climate neutrality by 2050, building a sustainable, 
just and prosperous society, COM(2024) 63 final, pp.164-167. 
229 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 99.  
230 According to European Commission estimates based on FIDELIO model (Rocchi, P. et al. 2025). 

63 

 
 
Looking  ahead,  Europe  is  not  expected  to  meet  its  internal  battery  demand  with  domestic 
production  only  until  2030.231  Therefore,  the  introduction  of  Made  in  EU  requirements  to 
products placed on the market had to take account of the time needed to reach operational status 
and reach full-scale production for battery investment.  

The current EU solar manufacturing capacity, mainly in critical components (e.g., wafers, cells, 
inverters),  does  not  yet  have  sufficient  scale  to  meet  overall  demand.  As  the  non-public 
segment of the solar PV market  accounts for around 65%232  of the EU market,  introducing 
mandatory minimum Made in EU requirements had to be carefully designed to avoid creating 
pressure on the EU supply chain.  

In conclusion, extending even partial Made in EU requirements to all products placed on the 
market at this stage carries some risks for the solar and battery industries, including potential 
market  distortions, 
legal  uncertainties.  While  such 
requirements could play a role in the future, their near-term application may generate more 
challenges than benefits unless carefully phased and supported by complementary measures. 

implementation  challenges,  and 

PERM  3  contains  PERM  2  and  therefore  the  same  expected  impacts.  On  top  of  this,  it  is 
expected  to  further  facilitate  the  deployment  of  decarbonised  projects  in  specific  areas 
dedicated to industrial activity. The identification of geographical areas of industrial activity 
will promote industrial symbiosis and offer opportunities for collaboration between industries. 
Most  notably,  by  being  able  to  settle  their  projects  in  key  areas  of  energy  demand  in  the 
Member States, industry’s connection request to  future energy infrastructure would  become 
easier  through  the  local  synergies  between  generation  and  supply  of  electricity,  potentially 
allowing for more efficient grid use and priority treatment for connection requests. 

Considering  the  electricity  grid  congestion  issues  and  the  lack  of  a  hydrogen  or  CO2 
infrastructure, favouring a clustering approach is expected to attract industrial investments as 
it may allow for faster grid connection. Subjecting the entire plan designating the industrial 
clusters  to  environmental  assessments  can  contribute  to  streamlining  subsequent  permitting 
steps. 

Based on the Public Consultation, 67% (210 out of 314 respondents) support industrial clustering as a solution 
to streamlining and improving the efficiency of the permit granting process.  

LEAD_VC 2 – The same assumptions apply as in LEAD_VC 1 (the increasing cost of EVs 
for EU car manufacturers is projected to be the same). However, in LEAD_VC 2, 100% of EVs 
put on the EU market will be affected.  

As vehicle manufacturers will have the incentive to comply with the target to have access to 
public subsidies, the model predicts an increase in EU vehicle component suppliers’ sales to 
the  manufacturers  of  EUR  7.83  billion  in  2027  and  by  EUR  8.2  billion  in  2030  when 
aggregating the sales in all three vehicle segments. 

6.3.1.2 

Impact on downstream sectors 

LAB 2 would have same impacts as described under PO2. 

231 Based on industry announcements, the EU is expected to reach an installed battery cell manufacturing capacity of 892 GWh by 2030, 
matching an estimated internal demand of 890 GWh. 
232 Solar Power Europe input and Commission calculation. 

64 

 
 
 
LEAD_EII 3 - extending low-carbon and made in EU requirements to all products placed 
on  the  market  will  amplify  the  impacts  described  under  PO1/PO2  for  the  construction  and 
automotive sectors. 

On the production side of the economy, the construction sector would see losses of their value-
added  reaching  EUR  2.2  billion,  while  the  automotive  industry  would  see  more  moderate 
losses,  of  EUR  396  million.  On  the  expenditure  side,  this  translates  into  a  reduction  in 
consumption  amounting  to  564  million  in  the  construction  sector  and  240  million  in  the 
automotive industry. These losses are a direct response to higher final good prices driven by 
the newly imposed green premium, and are partly driven by a decrease in the consumption of 
products  of  the  automotive  and  construction  sectors.233  More  information  on  consumption 
patterns  can  be  found  in  Section  6.3.1.3  and  6.3.1.7,  while  further  breakdown  of  cost 
calculation can be found in Annex 4 Section 2.2.  

Expanding Made in EU requirements to higher targets (85% for steel, 95% for cement and 70% 
for aluminium) and larger scope (i.e. to include all vehicles and construction projects placed 
on the market) would broadens the impact. The measure would cover a large share of industrial 
steel use and require a minimum EU-origin content in products placed on the EU market.  

However, downstream industries are expected to absorb these costs gradually through process 
optimisation and local sourcing efficiencies. In addition, greater reliance on EU-based suppliers 
will reduce exposure to import disruptions and long shipping lead times. For construction and 
automotive  sectors,  this  stability  translates  into  improved  delivery  reliability  and  long-term 
cost predictability, offsetting short-term compliance expenses.  

For the automotive industry, LEAD_EII 3 would determine the application of a minimum 
Made  in  EU  requirement  to  the  steel  and  aluminium  used  in  the  production  of  all  vehicles 
placed  on  the  EU  market.  In  2024,  28%  of  all  vehicles  registered  in  the  EU  market  were 
imported from extra-EU countries.234 Those imported vehicles would also need to source from 
EU  countries  their  steel  and  aluminium  up  to  the  minimum  share  required.  While  this  is 
expected to translate into higher demand for EU EIIs producers, it would  increase costs for 
automotive  manufacturers.  In  terms  of  value  added,  the  impacts  of  introducing  the  policy 
measures  foreseen  under  LEAD_EII  3  would  have  considerably  less  important  effects  (in 
relative  terms)  on  the  automotive  sector  than  in  construction,  even  when  combining  them 
across several energy-intensive materials. Specifically, this impact would represent an EU27 
average of -0.80 % (or EUR 6 651 million for 2030) of the EU automotive sector’s value added 
for 2025-2030, with respect to a baseline scenario without IAA measures.235  

Introducing a minimum Made in EU requirement for cement used in the construction sector 
would reduce the EU construction sector’s value added by an EU27 average of -1.69 % (EUR 
13 996 million) for 2025-2030 with respect to a baseline where no IAA measures are applied.236  

The overall negative impact primarily arises from the fact that downstream sectors—those with 
a  larger  economic  contribution  to  the  EU  GDP  than  the  cement,  steel,  and  aluminium 
industries—face increased costs due to increased Made in EU requirements. 

There are however disparities across the cement-related products and across Member States. 
The EU has been consistently a net exporter of cement, while it relied on imports to meet its 

233 Figures result from a simulation of the FIDELIO model, when prices in the automotive and construction sectors are shocked by 0.225% 
and  0.4499  %  respectively,  and  the  resulting  general  equilibrium  effects  of  higher  prices  on  final  demand,  incomes  and  value  added  are 
computed. 
234 S&P Mobility. 
235 According to European Commission estimates based on FIDELIO model (Rocchi, P. et al. 2025). 
236 Ibid. 

65 

 
 
demand in clinker before the financial crisis and again in 2021.237 In addition, Member States 
where there is a higher cross-border trade with third countries due to geographical proximity 
would be more affected. This is the case for Southern European regions, exposed to trading 
with Northern Africa, and Eastern European regions. It should be noted that in the modelling 
exercise, the relevant demand was only met by EU Member States supply and EEA countries, 
meaning that it does not consider any potential third country imports which could alleviate the 
impacts to downstream sectors assessed.  

Measures applicable to the construction sector could have significant impacts on the aggregated 
administrative costs for relevant companies in the EU to show compliance with the measures. 
To minimise these impacts, an exemption could be considered for micro and small companies 
as they are not expected to fundamentally impact lead market provisions due to the size of their 
projects. 

LEAD_BAT 2 / LEAD _SOL 2 - Unlike measures limited to public procurement or public 
support, this approach would affect the whole market. Higher battery prices would impact the 
affordability and uptake of EVs and BESS, potentially slowing down their deployment. This, 
in turn, may also affect demand for EU-made batteries, influencing the pace of new investments 
in  battery  manufacturing.  Ensuring  cost  competitiveness  alongside  scaling  up  production 
capacity will therefore be key to sustaining demand growth and strengthening the investment 
case  for  EU  battery  manufacturing.  Additionally,  ensuring  adequate  supply  would  be  a 
challenge.  Current  EU  battery  production  capacity  does  not  match  projected  demand,  as 
outlined in the previous Section. This measure would require a timely scale-up to prevent the 
gap from driving up prices and delaying project timelines.  

As regards solar, the proposed measure could negatively impact downstream sectors involved 
in  solar deployment.  Increased regulatory complexity and increased investment  costs in  the 
short-term could slow down the development of utility-scale solar farms, with implications for 
project developers, engineering firms, equipment suppliers, and grid operators. While this may 
initially affect project pipelines, it can also encourage more resilient supply chains and greater 
transparency  in  the  market.  Buyers,  particularly  in  offtake  agreements  or  PPAs,  may  face 
increased due diligence obligations to certify compliance. 

LEAD_VC 2 – Similarly to LEAD_VC 1, given the estimated current level of 70% Made in 
EU in the EVs, the measure would not lead to any further costs for EU EV manufacturers in 
2027 to comply. As the target is increased to 75% by 2030, the measure would represent a cost 
increase of EUR  2.36  billion for EU EV manufacturers, which on the other hand would be 
offset  by  the  increase  of  sales.  EU  EV  manufacturers  are  expected  to  benefit  from  a  sales 
increase of EUR 16.7 billion across all vehicle segments in 2027 and EUR 10.7 billion in 2030. 
The  increase  in  sales  is  presumed  to  offset  the  cost  increase  for  passenger  cars  and  LCVs, 
however, not for HDVs. Finally, LEAD_VC 2 is projected to lead to the generation of EUR 
6.6 billion Global Value Added (GVA) in 2027 and EUR 5.4 billion in 2030 when assessing 
the impact, taking into account only the first tier of the value chain. The positive impacts can 
also be perceived throughout the value chain for intermediate inputs, reaching this time higher 
benefits, EUR 12.6 billion in 2027, and EUR 11.5 billion in 2030 in value added.  

6.3.1.3 

Impact on citizens and consumers 

LEAD_EII 3 would have a much higher impact on consumers in terms of facing cost increase, 
as the associated ‘green premium’ is likely to be passed on to consumers via higher final good 
prices (until cost parity is reached). However, as outlined before, the low-carbon cost increase 

237 Marmier, A. (JRC) (2023). Decarbonisation options for the cement industry. 

66 

 
 
per passenger vehicle for including a 25% target for both low-carbon steel and aluminium is 
considered minimal, EUR 69.27.  

However,  these  cost  increases  are  projected  to  result  in  a  reduction  of  consumption  from 
household consumers of EUR 191 million in the construction sector, and 120 million in the 
automotive sector.  

Introducing  requirements  for  low-carbon  steel,  aluminium  and  cement  in  the  construction 
sector at large would have a higher impact on costs, due to the cumulation of the three materials 
used  for  construction.  Nonetheless  these  costs  remain  limited,  at  0.45%  compared  to  its 
traditional alternatives. Similarly, public subsidies for renovations could  offset part of  these 
costs. 

PO3 raises the Made in EU targets for steel to 85%, aluminium to 70% and cement to 95%, 
going  beyond  existing  sourcing  levels  from  EU  domestic  suppliers  for  automotive  and 
construction.  Citizens  and  consumers  will  see  further  cost  increases  from  the  obligation  to 
source  European  energy  intensive  industrial  products,  as  automakers  and  construction 
companies would pass on the higher cost premium in the final selling price. 

LEAD_BAT  2  /  LEAD_SOL  2  would  lead  to  higher  prices  for  downstream  products,  as 
described under PO1. As regards batteries, this could hinder the adoption of EVs and jeopardise 
the EU’s clean mobility objectives. For BESS projects, the increase in prices and the possible 
lack of supply could stop the momentum of the sector. As regards solar, citizens and consumers 
may  face  higher  energy  costs  and  reduced  access  to  affordable  solar  solutions.  Stricter 
obligations on installers or product specifications could drive up the price of residential solar 
systems,  discouraging  adoption by  households.  In turn, it risks slowing  down the uptake of 
clean energy at the local level and limiting the benefits of lower electricity bills and energy 
independence for citizens. 

LEAD_VC 2 - The same assumptions apply as for LEAD_VC 1. In quantitative terms, when 
we look at the impacts in 2027, the average price increase (from both the potential reduction 
of price for EU manufacturers and price disadvantage for non-EU manufacturers), there would 
be an overall price increase of 0.5% for passenger cars, 0.1% for HDVs and there could be a 
reduction of 0.8% for LCVs. Looking at the impact in 2030, the price increase for passenger 
car rises to 1.4%, to 0.5% for LCVs and 1.3% for HDVs.  

6.3.1.4 

Impact on competitiveness 

LEAD_EII 3 - Given that a high share of the steel and aluminium used in vehicles produced 
in the EU is already sourced locally, the introduction of a higher Made in EU requirement in 
all products placed on the market is not expected to generate a significant impact on the global 
competitiveness of the EU vehicle manufacturers, at least in the short term. However, in the 
longer  term,  the  Made  in  EU  requirement  could  result  in  a  limited  capacity  by  EU  vehicle 
manufacturers  to  find  the  required  quality  steel  and  aluminium  from  non-EU  countries  if 
domestic EII production is geared towards the specific needs of the EU market.  However, a 
higher share of EU demand served by domestic steel, aluminium and cement producers under 
PO3  is  expected  to  deliver  a  notable  economic  security  gain,  as  reduced  reliance  on 
concentrated  third-country  suppliers  lowers  exposure  to  price  manipulation,  supply 
interruptions  and  coercive  practices,  thereby  strengthening  the  resilience  of  the  entire 
construction and automotive value chain. 

Under LEAD_EII 3, the stronger Made in EU requirement would result in a domestic steel 
price increase, producing a more visible but still contained effect on downstream industries. 
The measure would not  materially affect investment or competitiveness in construction and 

67 

 
automotive  sectors  but  would  significantly  reinforce  the  position  of  EU  steel  producers  by 
redirecting  part  of  export-oriented  output  to  domestic  projects.  Total  production  would 
increase, improving utilisation of low-carbon capacity and supporting  investment in cleaner 
technologies.  As  certification  systems  mature  and  compliance  processes  become  more 
efficient,  the  temporary  cost  impact  should  diminish,  consolidating  a  more  resilient  and 
competitive  EU  steel  base.  Once  low-carbon  technologies  reach  maturity  and  scale,  the 
competitiveness gap is expected to close. 

The EU’s cement industry is structurally domestic, with exports representing less than 3% of 
production  and  imports  even  smaller.  Transport  costs  and  product  bulk  make  long-distance 
trade uneconomical. 

In  aggregate  terms,  JRC  estimations  show  that  Made  in  EU  requirements  for  steel  and 
aluminium in construction, and automotive might trigger negative value-added impacts in the 
EU economy of -0.13%, over the period 2025-2030 (or EUR 15 202 million), and with respect 
to a baseline where no IAA measures are applied.  

LEAD_VC 2 – would have the same effect as described in PO1. 

6.3.1.5 

Impact on competition 

LEAD_EII  3  introduces  Made in  EU requirements  for EIIs used in  products  placed on the 
market  (in  selected  downstream  markets),  likely  reducing  eligible  supplies  for  downstream 
sectors such as automotive, thereby restricting competition and limiting market access.  

LEAD_BAT  2  would limit  access  to  the  European  market  for  manufacturers  and  suppliers 
located  outside  the  EU,  strongly  reducing  competition.  Such  measures  would  disadvantage 
companies  located  overseas  and  restrict,  proportionally  to  the  level  of  the  Made  in  EU 
obligation, supplier diversity for the downstream users of batteries (i.e. automotive OEMs and 
BESS producers). 

Regarding LEAD_SOL 2, unlike public procurement, which can be monitored through clear 
compliance frameworks, private market transactions are highly fragmented and decentralised, 
making enforcement challenging.  

LEAD_VC 2 The reduced competitive pressure for both the suppliers of vehicle components 
and vehicle manufacturers that was described for LEAD_VC 1 is to be assumed also under 
LEAD_VC 2, with a higher effect under the latter measure. Overall, minimum Made in EU 
requirements imposed on all products put on the market (in selected downstream sectors) would 
distort  competition  by  artificially  favouring  EU-made  products  over  others,  irrespective  of 
market  price,  quality  or  existing  contractual  relationships,  depending  on  the  sectors.  This 
potential detrimental effect might be exacerbated in sectors where EU production capacity is 
more limited, even if for those sectors the level of the content obligations is also lowered. 

6.3.1.6 

Impact on international trade 

LEAD_EII  3  –  PO2  impacts  remain  relevant  but  are  amplified,  as  the  introduction  of 
strengthened Made in EU requirements would have a more pronounced impact on international 
steel and aluminium trade. This change represents an adjustment of EU trade flows, as part of 
export-oriented  output  is  likely  to  be  redirected  to  domestic  consumption.  However,  the 
measure does not reduce total production capacity; rather, it reallocates supply to the internal 
market. The EU’s cement industry is structurally domestic, with exports representing less than 
3%  of  production  and  imports  even  smaller.  Transport  costs  and  product  bulk  make  long-

68 

 
 
distance trade uneconomical. Even under a 5% low-carbon requirement, no material effect on 
trade flows or competitiveness is expected.  

Extra-EU  economies  would  benefit  from  positive  value-added  gains  in  construction  and 
automotive from an Made in EU requirement238 for steel and aluminium. These downstream 
sectors would possibly  benefit from  the increased availability of domestically produced  EII 
inputs that previously were exported to the EU, which would result in lower prices for their 
inputs.  

LEAD_BAT 2 - Making market access conditional on Made in EU in batteries would directly 
affect imports from major global suppliers, particularly in Asia. The difficulty lies in WTO 
non-discrimination  rules,  as  imported  and  EU-produced  batteries  are  “like  products”  and  a 
content condition  would likely  be contested. At the same time, Europe’s attractiveness  as  a 
fast-growing  market  means  suppliers  would  have  strong  incentives  to  comply,  either  by 
adapting  sourcing  or  investing  in  EU  production  facilities.  This  creates  an  opportunity  to 
accelerate localisation and reduce dependency on external supply. To strengthen the case, the 
measure would need to be tightly framed around essential security and resilience arguments, 
supported by evidence of risks such as export restrictions. Even if challenged, it could succeed 
in re-anchoring part of the battery value chain in Europe, though the political costs of trade 
disputes would need to be managed. 

LEAD_SOL 2 - Applying Made in EU conditions would have significant trade consequences, 
as the EU is  highly dependent  on imports, especially  from  Asia. WTO  panels  have  already 
struck  down  comparable  local  content  schemes  in  solar.  The  risk  of  legal  and  political 
retaliation  is  therefore  high.  Nonetheless,  the  scale  of  EU  demand  makes  the  market  too 
important  for  global  players  to  ignore.  A  requirement  could  trigger  investment  in  EU 
manufacturing and create new industrial opportunities, provided it is carefully designed and 
linked to legitimate policy objectives such as climate security and resilience. There is therefore 
a trade-off: the measure could be transformative for EU industrial capacity but would almost 
certainly provoke partner pushback. Managing this would require complementary diplomacy 
and perhaps transitional measures to avoid abrupt disruption of supply. 

LEAD_VC 2 - extending the Made in EU requirements to all EVs placed on the market in the 
Union would have a much more direct and wide-ranging effect on international trade.  

6.3.1.7 

Impact on Member States  

LEAD_EII  3  -  introduces  low-carbon  and  made  in  EU  requirements  for  EIIs  for  products 
placed on the market, which will place additional responsibilities on Member States, as they 
would  be  required  to  establish  systems  for  monitoring,  verification,  and  enforcement  of 
compliance.  This  will  involve  building  on  existing  EU-level  verification  mechanisms  or 
building new ones in case not in place yet.  

PERM 3 - Relevant impacts on Member States have already been assessed under PO1 and 
PO2.  Increased  administrative  support  needs  from  relevant  national  authorities  could  be 
expected  in  the  assessment  and  designation  of  potential  clusters  at  Member  State  level 
including setting up relevant procedures across diverse public sector competencies, in view of 
the  priority  assessment  to  grant  the  infrastructure  connection  and  the  environmental 
assessments of clusters’ plans. 

238 EU content is defined as EU Member States and EEA countries . Moreover, the JRC results are modelled for construction and automotive, 
two sectors in total, which could have an impact on overall results.  

69 

 
 
LEAD_VC 2 – Similarly to LEAD_VC 1, as observed above public support schemes currently 
used  in  the  automotive  industry  will  mitigate  the  adverse  effects  of  LEAD_VC.  Since  the 
assumptions are based on already existing schemes, the cost of public subsidies used for this 
Impact Assessment will not represent an increase in cost for Member States. 

6.3.2 

Social impacts 

LEAD_EII  3  -  Made  in  EU  measures  would  generate  employment  in  the  energy  intensive 
sectors, notably 4 272 jobs in cement, and 3 762 in the steel and aluminium sectors combined, 
resulting from the increase in value added. In other words, the employment benefits are directly 
correlated to the increase in value for the covered sectors. At the same time, decreased value 
added in downstream sectors could lead to negative impacts on employment for those sectors 
but could not be quantified at this stage. 

LEAD_BAT 2 - As discussed under LEAD_BAT 1,  Made in EU requirements would help 
anchor the 170 000 jobs expected to be created by the current battery project pipeline by 2030. 
However, this measure would not only safeguard those jobs, but it would also stimulate further 
employment across the value chain as additional production capacity would be needed to meet 
internal demand. 

LEAD_VC 2 – as noted in LEAD_VC 1, the measure could stop the trend of progressive job 
losses which has been materialising over the past years in the EU’s vehicle components supply 
chain. Furthermore, the measure could create additional financial capacities for suppliers to be 
reinvested in future technologies. 

6.3.3 

Environmental impacts 

LAB 2 would have same impacts as described under PO2. 

LEAD_EII 3 is expected to further contribute to the reduction of CO2 emissions from steel and 
cement since the provisions would impact the entire automotive and construction sectors. Low-
carbon steel would account for emissions saving of 10.26 Mtonnes CO2, low-carbon cement 
for 2.22 Mtonnes CO2 and aluminium 1.1 Mtonnes CO2. In total, LEAD_EII 3 would contribute 
to the reduction of 13.58 Mtonnes CO2 emissions. These emissions savings can be valued at 
EUR 1.358 billion (EUR 814.88 million – 2.566 billion) for 2030, see Annex 4 Section 2.3 for 
monetisation calculations and Annex 15 for the emission ranges and monetisation. 

It also introduces a wider scope for Made in EU requirements, which, on the one hand, would 
increase  environmental  performance  as  EU  producers  tend  to  outperform  international 
competitors  in  terms  of  emissions  performance.239  On  the  other  hand,  it  may  limit  market 
competition,  which  could  result  in  lowering  the  incentive  to  innovate  and  hence  further 
decarbonise.  

LEAD_BAT  2  -  Localizing  the  production  of  battery  cells  and  cathode  active  materials, 
including its precursor material, under PO3 to meet the whole EU demand rather than relying 
on imported Chinese products, could reduce CO₂ emissions by an estimated 34.17 Mtonnes by 
2030. These emissions savings have a value of EUR 3.4 billion (EUR 2 billion -6.4 billion), 
see Annex 4 Section 2.3 for monetisation calculations and Annex 15 for the sensitivity analysis. 
This does not account any potential slowdown of EV and BESS uptake, which would in turn 
have a negative environmental impact. 

239 European EIIs have already decreased their GHG (greenhouse gas) emissions by almost 40% between 1990 and 2017, which is why Europe 
has  a  lower  emissions  intensity  than  the  rest  of  the  world  for  many  sectors.  Source:  ERT  (2024).  Competitiveness  of  European  Energy-
Intensive Industries, pp. 7 and 38. For a detailed analysis on the GHG intensity of EU steel and its trading partners, see JRC129297. 

70 

 
 
PERM  3  increases  climate  benefits  by  further  accelerating  the  decarbonisation  projects 
through faster deployment, potentially accelerated grid connection as a result of clustering and 
through  easier  implementation  in  clusters  areas,  notably  in  their  GHG  performance.  It  also 
introduces a single environmental assessment for the industrial clusters’ plans. To mitigate to 
the  maximum  any  individual  impacts  by  the  projects,  the  plan  would  accompany  the 
designation of such areas with the relevant mitigation and/or compensatory measures for the 
industrial activities planned. This would ensure that any potential environmental impact is kept 
to a minimum. However, a derogation from individual environmental impact assessments will 
result  in  a  less  efficient  identification  of  environmental  impacts  associated  with  industrial 
activities in identified clusters. Hence, mitigation or compensatory measures are expected to 
be more challenging to implement at an adequate and sufficient level. Permitting under the IED 
would  remain  at  the  installation  level  within  clusters.  The  possibility  to  derogate  from  the 
temporary emissions occurring during the construction phase of a project with CCS would have 
negative impacts on the environment, for instance in terms of nitrogen emissions. The initial 
negative  impact  on  the  environment  from  this  derogation  should  be  considered  against  the 
climate improvements brought by the projects in the process of the decarbonisation of sectors 
with hard to abate emissions . The identification of these industrial clusters can contribute to 
wider decarbonisation efforts as regard to infrastructure planning. Easily identifiable points of 
considerable energy demand could speed up the deployment of future energy infrastructure, 
necessary for their decarbonisation efforts.  

LEAD_VC 2 - In Scenario 1, global greenhouse gas emissions from vehicle manufacturing 
decrease by 0.9 Mtonnes CO2e in 2027 and by 0.7 Mtonnes in 2030 due to shifts in production; 
they further decline by 0.1 - 0.2 Mtonnes due to reductions in international transport associated 
with  EU imports.  These  emissions savings  represent  a benefit  of EUR 90 million (EUR  54 
million - 170 million), see Annex 4 Section 2.3 for monetisation calculations and Annex 15 for 
the sensitivity analysis. In sum, the environmental effects remain limited and are very similar 
across LEAD_VC 1 and LEAD_VC 2. 

7  How do the options compare? 

7.1 

Effectiveness 

The assessment of effectiveness looks at the extent to which the general and specific objectives 
(SO) of the intervention, as described in Section 4, are met. 

SO1: Facilitate differentiation for low-carbon industrial products to increase their value 
and marketability: PO1 would be more effective than PO2 as it would develop low-carbon 
labels for all outputs of EIIs. This would increase transparency and help manufacturers of low-
carbon  industrial  products  in  distinguishing  their  offerings  from  conventional  alternatives, 
contributing to lead markets creation and, ultimately, the general objective of supporting the 
decarbonisation of EIIs. However, this would only be the case in the long term once labels have 
been properly established and the attractiveness and use of such labels confirmed. 

SO2: Boost demand for European low-carbon products and clean tech: PO2 is likely to be 
the most effective in meeting the objective of creating lead markets for European low-carbon 
industrial products and European clean technologies as well as vehicle components for EVs, as 
it would introduce low-carbon and Made in EU requirements in those market segments where 
the benefits would be the highest. By spurring demand, it would also contribute to attracting 
new investments in EIIs, batteries, solar PV and automotive components. PO3, could also be 
effective,  as  long  as  introducing  EU  requirements  for  products  placed  on  the  market  are 
sufficiently  progressive  to  address  implementation  challenges  for  the  sectors  considered, 

71 

 
especially for ‘nascent industries’ like batteries and solar PVs, where European manufacturers 
lack sufficient scale to ramp up production to meet the projected demand increase in the short 
to  medium  term.  PO3  would  also  be  challenging  in  terms  of  enforcement,  affecting  the 
effectiveness of the measure.  

By  creating  more  predictable  demand,  PO2  will  help  absorb  some  of  the  investments  costs 
from  the  low-carbon  technologies,  unlocking  stalled  and  creating  market  signal  for  new 
investments in the sectors covered. The Made in EU and low-carbon requirements will create 
a pull effect in the market that will increase the share of domestic demand to be covered by 
cleaner and European production, establishing certainty for investments decisions. It facilitates 
the  reduction  of  the  green  premium  through  strategic  green  public  procurement,  creating  a 
market signal to trigger private capital, which remain the main driver behind investments. As 
described  in  the  Section  6,  under  impact  on  companies,  the  lead  market  measures  on  low-
carbon steel could accelerate final investment decisions, unlocking up to EUR 15.5 billion240 
in investments, contributing to reduce the investment gap.  

SO3: Maximise the quality and benefits of foreign investment within the Single Market: 
Compared to PO1, PO2 is expected to deliver significantly greater effectiveness. Under PO2, 
all Member States would apply uniform, mandatory provisions, while the voluntary approach 
in  PO1  would  not  ensure  convergence,  leaving  scope  for  divergent  national  practices  and 
competition based on lighter conditions. In both cases, the industries in scope are expected to 
cover batteries and possibly certain EIIs.  

SO4:  Speed-up  and  simplify  permits  for  industrial  decarbonisation:  PO2  and  PO3 
introduce additional and targeted measures to facilitate and speed up the business case (e.g. 
planning security and de-risking investments) of decarbonisation projects for EIIs, while PO1 
only contains digitalisation and streamlining measures for all manufacturing industries. PO3 
would be the most effective option since it includes measures from PO1 and PO2 and combines 
them  with  a  clustering  approach  to  reap  benefits  from  a  geographical  concentration  of 
industries,  notably  in  terms  of  energy  infrastructure  synergies  and  rippled  down  indirect 
benefits for infrastructure design.  

SO5: Increase investment projects in industrial areas: PO2 would be more effective than 
PO1  in  facilitating  access  to  funding  and  accelerate  investment  decisions  for  industrial 
decarbonisation projects across the EU due to its binding nature.  

7.2 

Efficiency 

Efficiency  refers  to  the  ‘extent  to  which  objectives  can  be  achieved  for  a  given  cost  (cost 
effectiveness).  Efficiency  also  assesses  to  which  extent  options  contribute  to  administrative 
and process efficiency (reaching objectives with the least administrative burden). The analysis 
below does not quantify the long-term benefits associated with economic security.  

240 Estimated based on data from BloombergNEF’s Steel Decarbonization Project Database 1.0.5. The  potential investment value of EUR 
15.5. billion represents only projects whose output meets the indicative IAA’s carbon intensity label classes of performance (Class A-C).  

72 

 
 
 
 
Summary of costs and benefits of policy options for 2030, compared to the baseline (in million EUR)241 

Difference to the baseline 

EUR in millions 

PO1 

PO2 

PO3 

One Off 

Recurring 

One Off 

Recurring 

One Off 

Recurring 

Costs and benefits 
Member States 
Adjustment costs 
Administrative costs 
Administrative savings 
EU Commission 
Administrative costs 
Citizens 
Adjustment costs 
Administrative costs 
Businesses 
Adjustment costs* 
Administrative costs 
Administrative savings 
Increase in GVA/VA 
Other benefits 
GHG emission reduction 
savings 
Increase in jobs (not 
monetised) 
Total costs 
Total benefits 
Net benefits 

€0.00 
€0.00 
€0.00 

€0.80 

€0.00 
€0.00 

€0.00 
€0.00 
€240.00 
€0.00 

€821.09 
€5.62 
€1,300.00 

€0.00 
€0.00 
€0.00 

€821.09 
€8.92 
€1,300.00 

€0.00 
€0.00 
€0.00 

€0.13 

€0.41 

€0.18 

€0.41 

€1,442.47 
€0.00 

€3,782.05 
€0.70 
€0.00 
€10,386.92 

€0.00 
€0.00 

€0.00 
€0.12 
€240.00 
€0.00 

€1,442.47 
€0.00 

€3,782.05 
€1.16 
€0.00 
€10,386.92 

€0.00 
€0.00 

€0.00 
€0.12 
€240.00 
€0.00 

€860.78 
€8.92 
€1,300.00 

€0.19 

€4,337.96 
€0.00 

 €27,498.35 
€5.76 
€0.00 
€18,299.67 

€0.00 

€3.058,23 

€0.00 

€3.058,23 

€0.00 

€4.865,13 

€0.80 
€240.00 
€239.20 

143.852 
€6,052.06 
€14,745.15 
€8,693.08 

€0.53 
€240.00 
€239.47 

148.352 
€6,055.88 
€14,745.15 
€8,689.27 

€0.53 
€240.00 
€239.47 

€270.629 
 €32,711.96 
€24,464.80 
 -€8,247.16 

241 Explanations and the breakdown of the calculations are detailed Annex 4. 

73 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
[* A quantification of benefits derived from Made in EU provisions for solar and batteries sectors was not possible. Moreover, 
adjustment costs on foreign direct investment conditionalities were not possible either. Therefore, a comparison of costs and 
benefits is only partially reflected. LEAD_EII costs/benefits are reflected for 2030 compared to baseline year.  

** PO1 and PO2 only reflect impacts on the shares of the market covered by public procurement in construction (LEAD_EII_1 
and 2, in the absence of data of public schemes.] 

SO1: PO2 would be more efficient than PO1 as it would start by developing a label for one EII 
industry first, steel. Compared to other EIIs, steel is a relatively homogenous product, meaning 
the  administrative  costs  of  establishing  an  accounting  methodology  and  ensure  its 
implementation  would be simpler, meeting the objective of supporting  lead market  policies 
faster, via a less burdensome process. Furthermore, by reusing most of the information that are 
collected  through  the  EU  ETS  and  CBAM,  it  would  alleviate  the  administrative  burden  of 
reporting for both companies and authorities. Key differences between the individual options 
to design a low-carbon product steel label are presented in Annex 12.  

SO2: PO3 has been assessed as more costly to society at large (including Member States and 
European consumers) than PO1 and PO2 to meet the objectives of creating lead markets for 
EIIs. Costs under PO3 remain larger than PO1 and PO2 (which are similar) in particular in 
relation  to  the ambitious  Made in  EU provisions for steel,  cement and aluminium and their 
impacts  on  downstream  sectors.  Based  on  policy  and  regulatory  developments,  such  as  the 
newly proposed trade measure for the EU steel sector, the level of ambition of the Made in EU 
provisions could be adjusted to fit new market realities. Conversely, it is not possible to fully 
quantify the positive externalities associated with long-term economic security benefits linked 
to the promotion of resilient European supply chains in strategic EII industries introduced in 
PO2 and PO3, notably in relation to external shocks. Overall, PO1 and PO2 result in similar 
net  benefits.  Some  of  the  costs  may  also  be  underestimated  under  PO2,  as  the  modelling 
assumptions  do  not  reflect  potential  changes  in  trade  flows  deriving  from  the  Made  in  EU 
requirements,  given  the  assumed  constant  supply  chain  structure  for  the  automotive  and 
construction sectors (in absence of low-carbon supply chains). It is possible to consider that 
supply chain dynamics would result in downstream sectors preferring to source outside of the 
EU  while  shifting  to  low-carbon  alternatives.  However,  PO2  introduces  a  stronger  positive 
externality of economic security mentioned before. Such benefits include, but are not limited, 
to  job  creation/retentions  and  more  economic  and  social  stability  overall.  Moreover,  no 
quantification  was  possible  on  the  benefits  from  Made  in  EU  considerations  for  solar  and 
battery manufacturing supply chains. Therefore, a full comparison between costs and benefits 
between the different POs and sectors included is not possible for all measures. In addition, 
PO2 will reduce the risks of supply chain disruptions and exposure to high-risk dependencies, 
or of third countries restricting imports of critical materials, leading to a more predictable and 
stable economic and social environment. While these effects cannot be reliably quantified, they 
constitute a real and material benefit of policy intervention.  

Predictability, access to inputs and strong supply chains are essential for the well-functioning 
and  competitiveness  of  EU’s  manufacturing  industry.  PO3  affects  the  entirety  of  the 
automotive and construction sectors both in terms of low-carbon and Made in EU requirements. 
The  cumulative  impacts  of  these  measures  will  make  PO3  more  costly,  with  additional 
challenges  on  how  to  pass  on  these  extra  costs  for  downstream  sectors.  Similarly,  for  EIIs, 
solar, batteries, and vehicle components, PO2 leads to fewer costs for the downstream industry 
than PO3 and therefore impacts less on final consumers or public authorities. PO1, on the other 
hand, would have the least adjustment and administrative costs. Benefits increase as the level 
of ambition increases in the policy options.  

74 

 
SO3:  PO1  is  expected  to  cost  less  than  a  mandatory  approach  (PO2),  due  to  lower 
administrative  burden,  as  some  Member  States  might  decide  not  to  adopt  the  guidance  on 
conditionalities. At the same time, gains (spillovers) are limited and uneven, leading to a low 
benefit-to-cost ratio overall. However, PO2 will have more impact in addressing the prevailing 
issues,  as  Member  States  will  be  required  to  enforce  mandatory  provisions  more  strictly, 
leading to higher market harmonisation. Accordingly, PO2 is expected to be more efficient in 
the medium- to long-term as systemic spillovers materialise, boosting resilience, innovation, 
and security of supply. 

SO4: PO3 combines the previous permitting provisions introduced under PO1 and PO2, adding 
benefits  for  industrial  clusters.  However,  the  benefits  from  industrial  clusters  can  only 
materialise if a prior mapping  and designation of a geographical  area by  the Member State 
(with an additional mobilisation of resources) has taken place. All POs will lead to efficiency 
gains  from  the  one  project,  one  digital  process  measure,  present  under  each  option.  Digital 
improvements paired with data interoperability will increase data re-use for other reporting or 
permitting  activities  and  potentially  reduce  unnecessary  duplications  in  the  permit  granting 
process. PO2 would capitalise as much as possible on the existing NZIA provisions to meet the 
objective  of  facilitating  permitting  processes 
the  decarbonisation  of 
manufacturing industries in Europe with special focus on EIIs. 

to  accelerate 

SO5:  PO1  would  minimise  administrative  burden,  as  it  merely  recommends  using  defined 
criteria for public support, leaving their application to Member States’ discretion. PO2 would 
require Member States to use these criteria to identify synergies with existing and future public 
funding opportunities, to facilitate access to funding for industrial projects in industrial areas. 
While  this  approach  may  entail  higher  administrative  costs,  it  offers  greater  benefits  by 
accelerating decarbonisation in targeted industries.  

Impact on various stakeholders depending on the Policy Options: 

Downstream sector - Automotive:  

Cumulative  adjustment  costs  from  LEAD  market  measures  (LEAD_EII  2,  LEAD_VC  1, 
LEAD_BAT 1) increase with each Policy Option, and are estimated at EUR 4.4 billion in PO1, 
EUR 4.4 billion in PO2, and EUR 14 billion in PO3, with most costs passed on to Member 
States and citizens as final consumers. The largest cost increases will affect the price of EVs, 
as per the “Cost increase per type of vehicle” table in Annex 4, Section 2.2 - which are often 
subsidized. However, subsidies limited to EU-made vehicles and reduced access for non-EU 
manufacturers to procurement and support schemes can improve EU competitiveness and keep 
consumer price impacts manageable.  

Furthermore, EU-made EVs are expected to increase their market share, generating about EUR 
1.9 billion in additional value added in PO1 & 2, and EUR 2.25 in PO3 due to domestic content 
requirements for vehicle components, aiding the competitiveness of the sector and the green 
transition. Administrative costs remain low at about EUR 1 176 per company per year, and 
since most OEMs are large firms, the burden on SMEs is minimal. 

Downstream sector - Construction:  

Cumulative LEAD_EII costs also increase with each Policy Option and are estimated at EUR 
691 million in PO1 and PO2, and EUR 16 billion in PO3. While the exact building price impact 
cannot  be  calculated,  Member  States  and  citizens  are  expected  to  absorb  the  costs,  with 

75 

 
building  prices  projected  to  rise  about  0.45%  from  low-carbon  provisions  under  PO2. 
Administrative costs are minimal at about EUR 882 per large and medium company per year. 

Downstream sector – Electricity utilities:  

The electricity utilities sector is anticipated to experience rising costs for solar PVs and BESS 
storage due to lead market provisions, as detailed in Annex 4, Section 2.2, on the cumulative 
costs of the electricity sector. However, these costs are expected to have minimal impacts on 
electricity prices, as detailed in Section 6.1.1. 

Member States:  

Public administrations are expected to incur EUR 2.43 billion in additional administrative and 
adjustment costs in PO1, EUR 2.44 billion in PO2 and EUR 2.48 billion in PO3. However, 
permitting savings of EUR 1.3 billion reduce net costs to EUR 1.14 billion in PO1, EUR 1.14 
billion in PO2 and EUR 1.18 billion in PO3, as per Annex 4, Section 2.2. With subsidy budgets 
freed up, these increases are considered manageable for national and local authorities. 

Citizens:  

Citizens will face higher vehicle and construction prices as shown in Annex 4,  Section 2.2, 
though vehicle cost increases may be partly offset as explained in the automotive section. 

7.3 

Coherence 

In terms of overall coherence, the options are all seeking to reinforce the EU’s ability to meet 
the Clean Industrial Deal’s objectives. Moreover, in terms of internal coherence, the options 
are built in a way that actions introduced to meet one specific objective, should not come at the 
expense of another specific objective.  

SO1: PO2 would be the most coherent with existing policies and strategies, such as the Steel 
and Metals Action Plan, as well as the Clean Industrial Deal  which calls for an accelerated 
procedure  to  create  a  voluntary  label  for  low-carbon  steel.  Coherence  with  other  existing 
regulatory frameworks, namely ESPR is guaranteed by the complementarity by design of the 
two initiatives, with a logic of building blocks. Once the steel label under IAA is stabilised, it 
would  be  possible  to  complement  it  through  the  ESPR  approach  and  enlarge  the  scope  of 
products and emissions covered. Both will also benefit from the ongoing streamlining exercise 
on carbon accounting methodologies.  

SO2: All POs would meet the objectives without unduly undermining the EU renewable energy 
target,  even  if  PO3  could  have  the  greatest  impact,  as  public  intervention  may  not  be  in  a 
position to smoothen the short-term impacts. Regarding EU requirements for batteries and solar 
PV, the gap analysis of this assessment demonstrates that the existing  EU provisions under 
NZIA will not likely be sufficient to achieve the objective of creating European lead markets 
for  clean  technologies.  Additional  EU  requirements,  designed  to  complement  or  amend  as 
relevant  existing  NZIA  provisions,  can  better  contribute  to  creating  those  European  lead 
markets  that  in  turn  support  the  EU’s  economic  security  of  battery,  solar  technologies  and 
automotive components. PO2 is coherent with the objectives set down in the Industrial Action 
Plan for the European Automotive Sector with respect to batteries and components. Similarly, 
for EIIs, the lead market measures would complement existing product policies, providing a 
targeted further demand-side incentive to decarbonise these industries, in line with buildings’ 
legislation notably. For steel in particular however, the new legislative instrument to address 

76 

 
global  steel  overcapacities,  points,  if  adopted  by  co-legislators,  to  a  possible  risk  of 
incoherence,  with  the  blanket  measures  on  Made  in  EU  provisions  for  public  support. 
Exemptions to WTO principles and FTAs should be invoked to justify the introduction of Made 
in EU requirements in public procurement and support schemes, which might be more difficult 
to justify if applied to all products (e.g. batteries, solar PV systems, vehicle components and 
steel/aluminium/cement  in  automotive  and  construction)  put  on  the  EU  market  (PO3)  or 
without considerations for environmental performance.  

SO3:  On  conditionalities  for  FDI,  voluntary  measures  (PO1)  have  fewer  interlinkages  with 
existing frameworks and could be interpreted in addition to prevailing legislation. It would be 
coherent  with  historic  EU  openness  to  FDI  but  in  current  times,  but  it  would  undermine 
coherence  of  the  Single  Market,  leading  to  fragmentation:  divergent  application  between 
Member  States  can  create  distortions  and  unequal  benefits.  Introducing  mandatory 
conditionalities (PO2) to further harmonise the Single Market would be complementary to the 
existing  FDI  legal  framework  as  it  would  focus  on  specific  strategic  industries  only  (e.g. 
batteries and possibly certain EIIs) and would be based on thresholds on the investment value, 
to  limit  the  risk  of  overlaps.  Mandatory  requirements  would  be  fully  coherent  with  the 
European Economic Security Strategy242: proactively strengthening Europe’s competitiveness, 
resilience and technological leadership, while protection is strengthened against risks. Finally, 
conditioning  FDI  in  the  manufacturing  sector  would  risk  going  against  the  investment 
liberalisation commitments on market  access  and national  treatment  the  EU has undertaken 
under  some  of  its  FTAs  and  relevant  FTA  partners  would  thus  need  to  be  exempted  from 
investment conditions in these areas to maintain coherence. 

SO4: All options would include a measure targeting permitting for all manufacturing industries 
based  on  digitalisation  of  a  unified  permitting  process,  while  building  on  sector  specific 
legislation,  including  the  upcoming  Environmental  permitting  initiative  (Environmental 
Omnibus)  which  will  focus  on  environmental  assessment  specific  items.  For  instance,  PO2 
complements the NZIA permitting provisions for EIIs and ensures a consistent approach in this 
regard  by  providing  a  level  playing  field.  Moreover,  the  overall  level  of  coherence  with 
environmental  legislation  in  PO2  and  PO3  will  be  affected  by  any  possible  legislation  on 
environmental  simplification  (omnibus),  currently  under  preparation,  which  may  require 
adjustments  to  the  specific  measures  under  the  preferred  PO  presented  in  this  impact 
assessment. PO3 could also partially overlap with the upcoming grid energy package, which 
aims at addressing grid infrastructure bottlenecks Finally, coherence will need to be ensured 
with the permitting reflections under preparation as part of the Environment omnibus, which 
are however not subject to an impact assessment.  

SO5: Projects in industrial areas could tap into existing priority projects or areas under other 
EU legislation, such as the CRMA and the NZIA. However, care will be required to address 
the  risk  of  confusion  in  the  multiplication  of  labelling  and  in  managing  expectations  by 
promotors on the benefits of being identified as priority projects.  

7.4 

Proportionality/Subsidiarity 

Regarding the proportionality of the measures to achieve the objectives of the initiative, the 
three POs follow a logic of increased level of intervention.  

PO1  establishes  minimum  provisions  for  market  intervention  (SO2,  SO4),  often  relying  on 
voluntary aspects of the measures for Member States (SO3, SO5).  

242 European Commission (2023). Joint Communication to the European Parliament, the European Council and the Council on “European 
Economic Security Strategy”, JOIN(2023) 20 Final. 

77 

 
 
PO2 introduces a medium level of intervention, which increases the obligations on Member 
States and market operators. SO2 introduces made in EU requirements for low-carbon steel, 
aluminium and cement used in the construction and transport sector in public procurement and 
public support schemes, which are proportionate to the expected level of low-carbon capacities, 
based  on  current  investment  project  pipelines.  While  the  requirements  are  mandatory,  they 
cover only a partial share of sourcing low-carbon materials and are gradually introduced only 
for  products  to  be  purchased  thanks  to  public  financing.  This  provides  member  States  and 
business  with  some  flexibility  and  adjustment  time,  to  allow  production  ramp  up  and, 
ultimately, lowering the green premium. It also ensures that public money is spent to support 
the  objective  of  EU  industrial  resilience  and  decarbonisation.  PO2  corresponds  to  the  most 
proportionate approach, considering market realities and calibrated against the sectors’ ability 
to fully scale up production for low-carbon steel, cement and aluminium, as well as domestic 
clean tech. 

PO3 establishes the highest level of intervention in the market, increasing the obligation not 
only  on  the  Member  States  but  also  more  substantially  on  market  operators,  especially 
downstream  sectors  that  will  have  to  comply  with  the  mandatory  minimum  Made  in  EU 
requirements.  Regarding  SO4,  requirements  on  permitting  in  PO2  and  PO3  increasingly 
impose further obligations on Member States to streamline processes and time management. 
At  the  same  time,  they  would  both  provide  further  discretion  to  Member  States  regarding 
permit-granting  and  the  application  of  environmental  legislation,  which  would  make  the 
options overall proportionate to the objectives. 

Table 5: Summary comparison of the options 
Impacts 

Effectiveness 
SO1 
SO2  
SO3 
SO4 
SO5 
Efficiency 
SO1  
SO2 
SO3 
SO4 

SO5 
Coherence 
SO1 
SO2 
SO3 
SO4 
SO5 
Subsidiarity and proportionality 
SO1 
SO2 
SO3 
SO4 
SO5 
Summary comparison of options243 

PO1 
+ 
 ++ 
+ 
+ 
+ 
+ 
++ 
++ + 
+++ 
+ 
++ 

+ 
++ 
++ 
+++ 
+ 
+ 
+ 
++ 
++ 
++ 
+ 
+ 
++ 
+ 

PO2 
++ 

+++ 

++ 

+++ 

+++ 

+++ 

+++ 

++ 

++ 

+++ 

+++ 

++ 

+++ 

+ 

+++ 

++ 

++ 

++ 

++ 

+++ 

++ 

+++ 

+++ 

++ 

++ 

PO3 
++ 

++ 

+++ 

+ 

 - 

++ 

++ 

+ 

++ 

++ 

+ 

++ 

++ 

243 Increase sustainable and resilient industrial production in the industrial manufacturing with a special attention on EII sectors in the EU by 
supporting decarbonisation investments. 

78 

 
 
8  Preferred option 

Following the analysis of the impacts of each PO, as well as their ability to meet the general 
and  specific  objectives  in  the  most  effective  and  efficient  manner  while  respecting 
proportionality, coherence and subsidiarity, this impact assessment considers that PO2 would 
be the preferred option. In that balance, PO2 would facilitate business and trigger investment 
decisions  in  the  EU  by  streamlining  permit  procedures  for  the  entire  manufacturing  sector, 
boosting demand for decarbonised materials and clean tech products in strategic value chains, 
and  ensure  an  investment  framework  that  protects  against  unfair  global  competition  and 
support value-added creation in  the EU. PO1 and PO3 present  a similar  impact  in  terms  of 
proportionality/subsidiarity, however PO2 stands out with a more positive impact in terms of 
proportionality when introducing Made in EU in policy measures for public procurement and 
public  support  only.  Regarding  coherence,  PO2  again  presents  a  bigger  positive  impact, 
followed by PO3 and PO1. For SO2 however, coherence with the latest legislative proposals 
as well as with the EU’s international commitments would be better ensured by a combination 
of PO1 and PO2, potentially associating made in EU requirements for relevant EIIs with low-
carbon ones.  

PO2  offers  a  good  balance  between  effectiveness  and  efficiency.  Although  it  demands 
resources  from  Member  States  and  affects  downstream  sectors,  it  remains  efficient  for 
addressing  the  problem  drivers,  in  particular  when  taking  account  of  economic  security 
considerations.  PO3  would  be  more  effective  in  achieving  the  objectives,  but  its  possible 
efficiency is hampered by potential impacts on downstream sectors and consumers, and by the 
challenge in quantifying the positive externalities associated with supply security.  

While PO2 results in similar net benefits as PO1, PO2 will provide further long term benefits, 
increasing  the  EU  economic  security  and  resilience  as  the  Union  advances  in  its  transition 
towards  climate  neutrality,  notably  of  the  energy  intensive  industries.  These  benefits  are 
however difficult to quantify and thus are not reflected in the costs and benefits analysis under 
Section  7.2.  Economic  security  translates,  amongst  others,  into  businesses  and  public 
authorities operating  in  a  predictable  economic  environment,  with  reduced  risks  of  supply 
chain shortages and disruptions, or of third countries restricting access to input materials for 
key strategic sectors. This would ultimately result in reduced economic and social instability. 
For citizens, this means stable access to resources, creation and retention of industry jobs, stable 
incomes, thereby contributing to social cohesion.  

PO3 is assessed as more effective to meet the SO4 (permitting). However, it would require 
additional  resources  and  support  for  the  mapping  and  identification  of  cluster  areas.  These 
additional resources could be overshadowed by the positive gains (efficiency offered by the 
industrial  clusters  to  attract  new  investments).  PO3  also  presents  some  overlaps  with  other 
environment or energy initiatives and as such PO2 may offer a slightly more balanced choice, 
with  detailed specific measures to  be considered at  a later stage pending the environmental 
omnibus outcome.  

8.1 

REFIT (simplification and improved efficiency) 

The preferred policy option will aim at simplifying conditions for manufacturing industry in 
general,  and  EIIs  in  particular,  to  decarbonise  and  operate  in  Europe  whilst  maintaining 
environmental protection through facilitation of permitting processes. This is particularly the 
case  thanks  to  the  proposed  measure  to  speed-up  and  streamline  permitting  provisions  for 
businesses investing in decarbonisation delivering a lower regulatory burden.  

79 

 
 
 
For the FDI conditionalities, the uniform application of the conditions across the EU would 
largely  prevent  forum  shopping  and  race  to  the  bottom  in  attracting  investments,  while 
harmonising and simplifying the business conditions. 

The changes to existing legislation that this initiative would provide are limited to the NZIA 
and the measures are designed to consist in targeted amendments to existing provisions. This 
will reduce unnecessary regulatory costs and achieve a high degree of simplification in that a 
legally clear adjustment to reach the underlying policy objectives is made as early as possible, 
hence avoiding later changes and the related adjustment costs. Moreover, adjustments will be 
made  as  much  as  possible  in  line  with  the  existing  provisions  of  the  NZIA,  reducing 
unnecessary regulatory cost through relying on the existing basic concepts of NZIA.  

8.2 

Application of the ‘one in, one out’ approach 

The initiative is in the scope of the “one in, one out” approach. The one–off administrative 
costs for businesses that would result directly with this initiative are limited and relate to: 

-  The one-off FDI notification cost would amount to EUR 117 600 annualised at EUR 

0.01 million per year.  

The recurring administrative costs for businesses that would result directly with this initiative 
are limited and relate to: 

-  Demonstrating  compliance  with  low-carbon  and  EU  requirements  for  relevant 
downstream sectors would amount to EUR 1.16 million recurring administrative costs. 

The  administrative  cost  savings  for  businesses  that  would  result  directly  with  this  initiative 
relate to:  

-  Cost  savings of EUR 240 million  for all manufacturing industries in  the  EU for the 
digitalisation  of  5  permit-granting  procedures,  annualised  at  EUR  28.14  million  per 
year.  

Overall, the initiative would  result in  EUR 26.97   million  yearly administrative savings for 
businesses.  

The initiative does not foresee any administrative cost applicable to citizens.  

The adjustment costs that would result directly with this initiative amount to:  

-  EUR 3 782 million for businesses. 

-  EUR 1 442 million for citizens. 

A  more  detailed  elaboration  (the  specific  split  of  FTEs  by  lead  market  provision)  of  all 
calculations in this Section can be found in Annex 4. 

9  How will actual impacts be monitored and evaluated? 

The  Commission  will  carry  out  an  evaluation  of  the  effectiveness,  efficiency,  coherence, 
proportionality and subsidiarity of this legislative initiative and present a report on the main 
findings  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social 
Committee, and the Committee of the Regions four to six years after the date of application of 
the legislative act.  

This review mechanism is similar to the review mechanisms included in  other Commission 
initiatives, such as the CRMA or the NZIA. The Commission and Member States will regularly 
monitor  the  application  of  the  legal  act,  in  particular  the  effectiveness  of  the  measures  to 
increase competitiveness and invest in decarbonisation by the European industry.  

80 

 
In  addition,  the  success  of  the  initiative  would  be  measured  in  terms  of  increased 
competitiveness  and  resilience  (which  is  not  easily  measurable  by  a  single  indicator  but 
relevant aspects, such as the share of EU manufacturing industry in total EU gross value added 
can be used as proxies), or in terms of the scale (in terms of amount of financial value) and 
speed (in terms of permitting timelines) of decarbonisation investments by the EU industry. 
Concretely, the following indicators to determine the initiative’s success could be developed 
as follows: 

Table 6: Monitoring table of key performance indicators 
Specific Objective  Indicator measured every 

second year 

General objective  Manufacturing industry as % 

General objective 
(decarbonisation) 

of EU total GVA 
Carbon emissions/tonnes of 
EU EII production 

Tonnes CO2eq / 
tonnes of 
production  

Unit of 
measurement 
% 

Data source 

Target 

Eurostat 

Eurostat 

20% by 2030 
(Aspirational target) 
Reduction in line with 
climate targets 

General objective 
(resilience) 

EII Production volumes 
trends (steel, cement and 
aluminium) 

Output in each 
sector 

JRC 

Increase from 2025 
values 

General objective 
(resilience) 

General objective 
(resilience) 

SO1 

SO1 

SO2 

SO2 

SO3 

SO3 

SO4 

SO4 

SO5 

% Mtonnes or 
GW (as relevant) 

% 

Yes/no 

Value of EU domestic 
production /value of EU 
consumption of EII materials 
(steel, cement and 
aluminium) 
Share of domestic production 
and/or capacities out of total 
EU demand in selected clean 
tech sectors (batteries, solar 
PV) 
Availability of a low-carbon 
label for relevant products 
that is supported by a robust 
verification mechanism 
Number of companies who 
applied for the label 
Share of low-carbon steel 
and cement out of total sold 
on EU markets for 
automotive and construction 
Value of EU domestic 
production for selected 
vehicle components / value 
of EU consumption of 
selected vehicle components 
Inward FDI transactions of 
relevant sectors/businesses 
Number of joint ventures on 
batteries  
Average permitting time   Months 

%  

% 

Number 

Number 

Number 

% 

Share of digitalised 
permitting procedures out of 
all permitting procedures for 
industrial manufacturing 
Industrial FIDs realised in 
the EU for industrial 

Eurostat/ JRC 

Increase by 2029 

Data providers for 
internal 
Commission 
analysis  

Increased capacities as 
mentioned in Anne x 9 

European 
Commission 

Label available by 
2029  

Label certifier  

 Stakeholder 
reporting  

11 (large) companies 
by site by 2030 
As mentioned in Table 
3 in Section 5.2 

JRC’s internal 
methodology  

Stable domestic 
demand while reducing 
the import from 3rd 
countries. 

Eurostat and Orbis  Stable transactions as 

year of entry into force 

Stakeholder survey   

Member States 
Survey 
Single Digital 
Gateway 

Total of 18 months 

Aspirational target of 
75% by 2030 

Number 

Member States 

81 

 
 
Specific Objective  Indicator measured every 

second year 
manufacturing projects in 
relevant areas 

Unit of 
measurement 

Data source 

Target 

82 

 
 
 
Annex 1: Procedural information 

1.  Lead DG, Decide Planning/CWP references 

The Industrial Accelerator Act is part of the 2025 Commission Work Programme under the 
Commission’s priority ‘Simplifying rules and effective implementation’. The lead DG for this 
initiative is the DG for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW). 
The Directorate in  charge is  Directorate  I  – Decarbonisation, Mobility, Raw Materials. The 
initiative is encoded in Decide Planning with the reference PLAN/2024/2611.  

2.  Organisation and timing 

The  Secretariat-General  set  up  the  Inter-service  Steering  Group  to  assist  in  preparing  the 
initiative in the first quarter of 2025. There have been three interservice steering group (ISSG) 
meetings (in March, May and August) and four rounds of written consultations. The last ISSG 
consultation meeting took place on 20 August 2025. Following the Board’s negative opinion, 
a fifth round of written consultation on the revised text was held. 

The Call for Evidence and Public Consultation for this initiative were published on 15 April 
and were open to feedback from all stakeholders for a period of twelve weeks, until 8 July. The 
timing for adoption of the new act by the Commission is the fourth quarter of 2025.  

3.  Consultation of the RSB 

An  upstream  meeting  with  the  Regulatory  Scrutiny  Board  took  place  on  23  May  2025.  A 
meeting with the Regulatory Scrutiny Board to discuss the draft impact assessment took place 
on  24  September  2025.  The  Board  issued  a  negative  opinion  on  26  September  2025.  The 
recommendations of the Board were addressed in the revised impact assessment as follows: 

RSB recommendations: 

How they were addressed: 

(B) Summary of findings 

The Board notes the additional information provided 
in advance of the meeting and commitments to make 
changes  to  the  report.  However,  the  Board  gives  a 
negative  opinion,  because  the  report  contains  the 
following significant shortcomings: 

(1) The report does not sufficiently analyse how the 
problem  would  evolve  over  time  and  does  not 
demonstrate to what extent this initiative is needed. 

See below under C.1 

(2) The report lacks an analysis of the market drivers 
and  contribution  of  various  drivers  to  the  identified 
problems.  An  assessment  of  the  availability  of 
industrial  decarbonisation 
economically  viable 
technologies is missing. 

See below under C.2 

(3)  The  objectives  are  not  defined  in  a  S.M.A.R.T 
manner. 

See below under C.3 

83 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSB recommendations: 

How they were addressed: 

(4)  The  report  does  not  provide  a  sufficient 
assessment of the impacts of the proposed measures, 
including  on  the  resilience  of  the  manufacturing 
industry  in  the  EU  and  on  the  foreign  direct 
investments.  

See below under C.5 

(5) The report lacks an analysis of the total costs, their 
pass through, and the impacts on downstream sectors. 

See below under C.6 

(C) What to improve 

resilience  of  EU  manufacturing 

(1) A dynamic baseline regarding the decarbonisation 
industry, 
and 
including energy intensive and clean tech, should be 
developed  to  make  it  clear  how  the  problem  would 
evolve without the proposed policy action.  

As  the  EU  Emissions  Trading  System  is  there  to 
provide  incentives  to  decarbonise  and  CBAM  is 
intended  to  protect  against  carbon  leakage  and 
establish  the  level  playing  the  report  should  better 
explain  the  magnitude  of  the  slow  decarbonisation 
problem and to what extent an ‘acceleration’ is needed 
to meet the EU’s climate goals.  

report 

should 

identify 

The 
resulting 
decarbonisation speed gap as well as gaps related to 
the resilience of manufacturing industry in the EU that 
need  to  be  addressed  by  the  additional  policy 
measures. 

the 

risk 

existing 

continuing 

The dynamic baseline has been  improved in Section 
5.1 showing that, without further action, EU industry 
would 
i.e. 
decarbonising more by reducing industrial production 
than  by  using  more  efficient  technologies,  which 
would  decouple  emissions  from  production.  This  is 
illustrated in Section 5.1, Figure 9, which shows past 
and future trends for iron and steel, while the analysis 
for other EIIs is presented in Annex 8. 

trends, 

in 

The magnitude of the slow decarbonisation problem 
is described under Driver 3, where the analysis shows 
that 
the  past  six  years  many  announced 
decarbonisation  projects  have  been  cancelled  or 
remain  stalled  before  final  investment  decision  (See 
Figure 2, 3 and 4). Similarly, Sub-problem 3 describes 
to what extent the cost and availability of low-carbon 
industrial  technologies,  as  well  as  other  barriers 
(Driver 5 and 6) are important factors determining the 
slow decarbonisation pace.  

A  more  comprehensive  description  of  the  EU 
Emissions Trading System as well of the CBAM and 
its  forthcoming  review  is  included  in  the  baseline 
description.  

The  decarbonisation  speed  gap  is  identified  by 
looking  at  the  causes  of  recent  emissions  trends 
(Figure 7, Section 2.3). They show that over the past 
six years the emissions reduction was mainly driven 
by changes in the production activity level, rather than 
in  emission  intensity.  This  is  further  elaborated  in 
Annex  7.  The  resilience  gap  is  described  by  the  re-
drafted  Sub-problem  2,  showing  supply  chain 
vulnerabilities (see number of cancellation or delay in 

84 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSB recommendations: 

How they were addressed: 

(2) The report needs to identify all the problem drivers 
and  to  further  investigate  the  causal  links  and 
contribution to the identified problem.  

The  report  should  analyse  more 
the 
availability  and  economic  viability  of  industrial 
decarbonisation technologies.  

in-depth 

A more detailed analysis is also needed regarding the 
demand for low-carbon alternatives including related 
price elasticities and substitutability.  

the  EU  of  several battery  and  solar  PV  projects),  as 
well as in the Section 2.3. 

The correlation between the problems identified and 
their  corresponding  drivers  have  been  modified  to 
better reflect their connection to the limited business 
case for EU industry. Notably, how resilience plays a 
role  in  the  competitiveness  of  European  companies, 
with the introduction of a new  Sub-problem 2 about 
‘Supply chain vulnerabilities in strategic  sectors and 
the related causes explained in Drivers 3 and 4. 

of 

the 

availability 

Regarding 
industrial 
decarbonisation  technologies  and  demand  for  low-
carbon alternatives, the analysis has been deepened by 
showing the heterogeneity of these technologies and 
their economic viability depending on factors such as 
the  technology  readiness  level,  the  energy  and  raw 
materials  needs,  the  CO2  abatement  costs.  This  is 
illustrated under Sub-problem 3, as well as further in 
details  in  Annex  7,  where  an  overview  of  the  cost 
evolution  of  the  main  industrial  decarbonisation 
pathways,  as  well  as  total  investments  needs,  for 
aluminium,  cement,  chemicals,  steel  and  pulp  and 
paper is provided. 

to 

illustrate 

Regarding  the  demand  for  low-carbon  alternatives, 
Annex 10 (Sub-problem 1, Driver 2) now contains an 
overview  of  existing  green  public  procurement 
practices 
initiatives.  No 
information regarding the price elasticity of demand 
for  the  relevant  low-carbon  products  could  be 
determined.  Therefore,  we  have  assumed  full  cost 
pass-on  when  analysing  the  impacts  of  the  policy 
options to final consumers.  

similar 

The  problem  driver  related  to  permitting  should  be 
clarified  regarding  the  specificities  and  differences 
compared with other sectors.  

The analysis of drivers related to foreign investments 
and  difficulty  to  de-risk  investments  should  be 
deepened  and  go  beyond  the  regulatory  and  public 
funding aspects. 

The analysis for the problem drivers has been revised 
to reflect the Board’s comments as follows: 

-  Driver  4  on  foreign  investments  has  been 
improved  by  bringing  in  concrete  evidence 
from  current  practices  in  Europe  vis-à-vis 
other  regions  in  the  world,  and  data  that 
reflects the technological knowledge gap for 
batteries, and the impacts this has on wider 
socioeconomic benefits. Further information 
has been added in the Annex 13. 

85 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSB recommendations: 

How they were addressed: 

improved 

-  Driver 5 linked to permitting procedures has 
the 
by 
been 
complexities  of  permitting  for  industrial 
sectors, 
manufacturing  vis-à-vis  other 
especially  with 
their 
environmental impacts. 

clarifying 

regards 

to 

-  Driver  6  linked  to  investments  has  been 
widened  to  reflect  larger  struggles  beyond 
public funding, to highlight other bottlenecks 
take  final 
for  projects 
investment  decisions,  such  as  access  to 
energy 
infrastructure  or  other  essential 
inputs, while taking account of other ongoing 
initiatives 

invest  and 

to 

(3)  The  report  should  establish  how  the  success 
regarding the general objective will look like and how 
it will be assessed including the timeframe.  

Based  on  the  improved  analysis  of  problem  drivers, 
the  specific  objectives  should  be  revised  to  better 
reflect how they contribute to the general objective.  

The  specific  objectives  should  be  formulated  in 
S.M.A.R.T. terms to allow for an improved analysis 
of  the  impact  of  options  and  for  monitoring  the 
progress on attaining the objectives. 

(4)  The  measures  considered  should  reflect  the 
improved  analysis  of  the  problem  and  problem 
drivers.  

The  selection  of  measures  should  be  based  on 
available evidence regarding the short and medium to 
long-term benefits of public intervention, in particular 
evidence  how  such  interventions  can  cause  the 
development  of  lead  markets,  including  how  CO2 
content requirements could affect demand patterns as 
well as innovation in the industry.  

The general objective has been revised to ensure it can 
be  measured.  Specifically,  it  will  be  measured  by 
monitoring the carbon intensity of EII production, as 
well as production capacities and output for the EU in 
EIIs, certain clean tech and vehicle components. The 
general objective will also be assessed in combination 
with indicators for the specific objectives.  

Specific objectives in Section 4 have been aligned to 
individual  problem  drivers,  and  reformulated  and 
clearly linked to indicators that measure the extent to 
which success has been achieved. Those indicators are 
included in Section 9 as well. 

The specific objectives are now formulated in a more 
S.M.A.R.T  manner,  notably 
the 
measurability. 

improved  on 

The  policy  measures  are  now  better  aligned  to  the 
revised  analysis  of  sub-problem  and  drivers.  The 
vulnerability  of  certain  strategic  sectors  and  their 
supply  chains  is  now  explained  by  two  specific 
drivers:  the  fragmented  EU  approach  to  foreign 
investments,  and  the  loss  of  competitiveness  due  to 
fierce global competition.  

While  the  intervention  logic  and  structure  of  the 
different policy options have remained the same, the 
impact  of  the  measures,  including  the  level  and 
duration of the targets for the lead markets provisions, 
has  been  revised  reflecting  additional  evidence  and 
improved quantification of impacts for each measure. 
The intention of a review clause has also been added, 
making  it  clear  that  such  measures  on  lead  markets 
could be of a temporary nature. 

The  selection  of  measures  should  also  better  reflect 
related costs. 

The link between each measure and the estimated cost 
has been better presented and clarified throughout the 
text, as well as substantiated further with aggregated 

86 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSB recommendations: 

How they were addressed: 

(5)  The  analysis  of  the  impacts  of  the  proposed 
measures and combined impacts of options should be 
strengthened  including  by  quantifying  overall  costs 
and benefits to the extent possible.  

The report should establish a single appraisal period 
on which basis all costs and benefits are calculated.  

When it comes to the benefits, the analysis should be 
reinforced  based  on  quantitative  modelling 
to 
demonstrate to what extent it can be expected that the 
initiative will address any identified gaps in terms of 
speed  of  decarbonisation  and  contribute  to  EU 
economic security.  

The  results  of  modelling  including  the  impact  on 
capital costs (CAPEX), operational costs (OPEX) and 
international  competitiveness  should  be  subject  to 
sensitivity  analysis  and  robustness  of  the  projection 
should be clearly acknowledged.  

based 

The analysis of the expected impact on FDI should be 
improved 
quantitative  modelling 
distinguishing  more  clearly  between  the  expected 
impacts in the short versus the medium to long run, 
taking into account the interplay of various measures. 

on 

sectors 

including 

(6) The calculations of costs and their pass through to 
downstream 
to  businesses, 
consumers and public administration for each policy 
option  needs  to  be  strengthened  based  on  the 
clarification of the scope of the envisaged measures 
(i.e.  public 
specific 
downstream sectors rather than all products put on the 
European  market)  and  transparent  assumptions  used 
for the calculations.  

support/procurement  and 

costs for the policy measures at hand. Impacts are also 
aligned to their targets when relevant, notably the lead 
market measures.  

Individual  costs  and  benefits  for  measures  linked  to 
every  specific  objective  have  been  included  under 
Annex  4,  to  reflect  all  calculations  relevant  for  the 
final table on costs and benefits reflected  in  Section 
7.2.  

The chosen appraisal period is the year 2030 for the 
quantitative  aspects,  even  if  impacts  could  be  of  a 
longer nature. When relevant, qualitative elements are 
added regarding the long-term perspective.  

The  analysis  of  the  impacts  for  the  Made  in  EU 
provisions  for  Energy  intensive  industries  has  been 
strengthened  with  a  revised  modelling  exercise, 
adjusted  to  the  Made  in  EU  targets  described  in  the 
impact assessment. A more accurate representation of 
the  impacts  can  be  found  in  Sections  6.2  and  6.3, 
including  comparison  of  impacts  for  the  year  2030. 
to  facilitate  comparisons, 
On 
quantitative  impacts  (costs  and  benefits)  have  been 
presented for the year 2030, while adding qualitative 
impacts for the longer-term perspective. 

last  point, 

this 

The  limitations  inherent  to  the  modelling  have  been 
better outlined in Annex 4, which also includes a more 
thorough  description  of 
the  broader  analytical 
approach followed in the different parts of the impact 
assessment. 
Some  expected  benefits,  notably  in  terms  of  greater 
EU economic security, cannot be quantified with the 
modelling tools available for this impact assessment.  

The foreign direct investment measures’ analysis has 
been  strengthened  by  a  comparison  with  existing 
similar practices in other regions of the world, notably 
to  address  the  possible  impacts  in  terms  of  similar 
approaches that have been successfully implemented 
in  major  economies,  demonstrating 
that  such 
measures  can  enhance  strategic  value  without 
deterring investment. See Annex 13.  

The calculations of costs for each policy option have 
been  improved  based  upon  available  data,  and  the 
assumptions  are  more  clearly  and  transparently 
reflected  in  Annex 4.  The pass-through  effects have 
been  emphasized,  following  the  assumption  of  full 
pass through to customers and public administrations, 
wherever relevant. 

87 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSB recommendations: 

How they were addressed: 

In  addition,  it  should  be  better  explained  how  the 
possible inflationary effects were taken into account 
when  considering  the  scope  and  parameters  of  the 
policy measures.  

The  inflationary  effects  were  also  briefly  explained, 
notably  when  presenting  where  relevant  impacts  on 
final products’ prices.  

The assessment of cost and benefits should allow to 
analyse and compare the effectiveness and efficiency 
of the options. 

(7)  The  simplification  and  burden 
reduction 
dimension  of  this  initiative  needs  to  be  better 
analysed.  

The tables in annex 3 need to be revised to provide a 
clearer  representation  of  the  overall  costs  and 
benefits.  

The estimates of the administrative costs need to be 
revised  to  ensure  a  credible  calculation  of  the  net 
administrative burdens. 

The assessment of costs and benefits for each policy 
option  was  conducted  for  the  year  2030,  while  the 
Efficiency Section 7.1 now has a summary of all costs 
and  benefits  of  the  longer-term  perspective  for  the 
different policy options. Annex 4 has individual tables 
per type of cost or benefit, for all relevant SOs, with 
the calculations used to reach the final summary Table 
of Section 7.1. 

The administrative burden reduction was emphasised 
in  the  one-in  one-out  table  in  Annex  3,  showing 
overall  administrative  savings  for  businesses,  in 
particular  from  the  permitting  provisions.  Overall 
administrative benefits derived from the digitalisation 
of  permitting  provisions  has  been  adjusted,  after 
reconsideration  of  the  expected  benefits  from  the 
Once  Only  Technical  System  for  the  permitting 
processes.  

Table I on the overview of benefits  in Annex 3 was 
updated to reflect the appraisal period for 2030, where 
possible. Table II on the overview of costs was broken 
down  by  policy  measure,  and  the  quantification  of 
costs was further expanded upon.  

The methodology Section of Annex 4 has been further 
developed, to transparently reflect the cost and benefit 
analysis  of  the  different  policy  measures  assessed. 
Annex  4  now  includes  all  relevant  assumptions  and 
calculations  necessary  to  understand  the  cost  and 
benefit  analysis.  The  one-in  one-out  table  was 
significantly  revamped,  including  the  calculation  on 
the  net  administrative  burdens,  by  focusing  more 
specifically on the expected impacts for the targeted 
stakeholder groups. 

The  revised  impact  assessment  was  resubmitted,  and  the  Board  issued  a  second  opinion 
(positive with recommendations) on 20 November 2025. In its opinion, the Board made further 
recommendations for improvement that were addressed as follows: 

RSB recommendations: 

How they were addressed: 

(B) Summary of findings 

The  Board  notes  the  improvements  to  the  revised 
report  responding  to  the  Board’s  previous  opinion. 

88 

 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSB recommendations: 

How they were addressed: 

the 

However, 
report  still  contains  significant 
shortcomings. The Board gives a positive opinion with 
reservations  because  it  expects  the  lead  Service  to 
rectify the following aspects:  

(1) The report does not sufficiently assess the expected 
impacts  regarding  the  general  objective  to  increase 
decarbonised  and  resilient  industrial  production  in 
EIIs.  The 
security 
implications is not sufficiently analysed. 

interplay  with 

economic 

See below under C.1 and C.2 

(2) The report is not clear to what extent the demand 
side  measures  are  expected 
the 
consequences of identified problems. 

to  address 

See below under C.1 

(3)  The  limitations  related  to  the  modelling  are  not 
sufficiently reflected; cost benefit calculations as well 
as impacts on consumers and the downstream sectors 
are not sufficiently robust. 

(C) What to improve 

(1) The report should model how the demand for EU 
low-carbon  products  and  clean  tech  industries  is 
expected to increase thanks to the initiative and how 
the  increased  demand  will  enable  investments  in  the 
sectors  covered  by  the  scope  of  the  initiative.  In 
addition, the expected investment increase  should  be 
put  into  perspective  with  the  investments  needed  to 
reach the decarbonisation goals. 

See below under C.3 and C.6 

from 

costs 

investments 

The  analysis  has  been  strengthened  by  better 
explaining  in  Section  7,  under  the  comparison  of 
options, that made in EU and low-carbon requirements 
will create a pull effect in the market by guaranteeing 
that a larger share of European demand is met by EU 
and low-carbon  industrial  products and  technologies. 
While a new quantitative analysis was not possible due 
to the modelling limitation, additional explanations on 
how  the  increased  demand  will  help  absorb  some  of 
low-carbon 
the 
technologies  has  been  added  under  Section  7.1  on 
Effectiveness.  Concerning 
the 
expected 
the  overall 
investments needs to reach the decarbonisation goals, 
a new quantitative analysis has been conducted in the 
impacts  Section  (under  PO1  and  PO2,  ‘Impact  on 
companies’), which outlines the potential impact of the 
initiative on reducing the decarbonisation investment 
gap in the steel sector.  The lead market measures on 
low-carbon  steel  could  accelerate  final  investment 
decisions,  unlocking  up  to  EUR  15.5  billion  in 
investments  (or  about  15%  of  the  sector’s  estimated 
investment need by 2040) 

the 
increase  and 

link  between 

investment 

the 

(2) The report should demonstrate how the industries 
in  the  scope  of  the  initiative  are  expected  to  evolve 
when the initiative will be implemented, in particular 
in terms of the size of the sector (production capacities 
and output) and the share of the EU demand covered 
by EU production. The report should provide a more 
detailed analysis of economic security implications. 

The  evolution  of  the  industries  in  scope  has  been 
further  described  in  Section  2.1,  2.3,  and  Sections  6 
and 7. Specifically for batteries and solar PV, new data 
have  been  highlighted  on  how  EU  production 
capacities are expected to ramp up, based on existing 
projects  pipelines.  This  can  be  found  in  Section  6, 
under  impact  on  companies.  Regarding  economic 
security,  for  each  policy  option,  the  competitiveness 
analysis  now  includes  explicit  economic  security 
effects. However, the quantified cost–benefit analysis 

89 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RSB recommendations: 

How they were addressed: 

(3)  The  costs  and  benefits  should  be,  to  the  extent 
possible,  monetised,  discounted  and  aggregated  for 
each  of  the  options  for  the  whole  appraisal  period, 
which should be clearly established. In case a phased 
approach  is  envisaged,  it  should  be  captured  by  the 
modelling.  The  assessment  of  costs  and  benefits 
should allow to analyse and compare the effectiveness 
and  efficiency  of  the  options.  The  report  should 
i.e.  a 
provide  a  clear  distributional  analysis, 
distribution of the aggregated costs and benefits to the 
main groups of stakeholders. 

(4) The newly added summary of estimated costs and 
benefits  in 2030 (Table 4)  provides  for  an  important 
difference in net benefits of the preferred policy option 
2 (negative net benefit) and policy option 1 (positive 
net  benefit).  The  report  should  justify  why  a  less 
efficient option has been selected as the preferred one; 
this should be reflected also in the executive summary. 
The analysis should also build on an improved analysis 
of proportionality, in particular related to the scope of 
low-carbon content (all products placed on the market 
vs. products purchased thanks to public financing). 

does not capture a central dimension of the problem, 
namely the reduction in the risk of supply disruptions 
and exposure to high-risk dependencies. These effects 
constitute  a  real  and  material  benefit  of  policy 
intervention but cannot be reliably quantified for any 
of  the  policy  options.  As  a  result,  interpreting  the 
numerical comparison of costs and benefits in isolation 
could be misleading. Section 7 therefore clarifies that, 
while  PO1  appears  less  costly  in  purely  quantified 
terms, this assessment excludes long-term economic-
security  benefits  that  are  intrinsic  to  the  policy 
objective. By contrast, PO2 delivers a clear increase in 
economic  security  by  strengthening  EU  industrial 
capacity and reduce strategic dependencies. 

The  costs  and  benefits  have  been  updated  and 
aggregated in the overview table present at the end of 
Annex 4, as well as in Section 7.2. A new zoom-in box 
has been added to Section 7.2, showing the aggregated 
costs  and  benefits  for  the  main  stakeholders’  groups 
(including  downstream  sectors,  citizens  and  Member 
States). This can also be found in detail in Annex 4.  

It was not possible to calculate the yearly costs for each 
policy option, therefore the analysis for the year 2030 
was maintained.  

Following an adjustment to the policy option design, 
the  overall  costs  and  benefits  result  in  similar  net 
benefits  between  PO1  and  PO2.  These  result  from 
lowering the Made in EU targets, to align them with 
the  low-carbon  targets.  In  the  absence  of  established 
low-carbon  supply  chains  for  cement,  steel  and 
aluminium,  the  analysis  is  based  on  the  traditional 
supply  chains  for  these  materials,  where  today 
domestic EU materials producers are able to meet high 
shares  of  the  demand  for  materials  by  the  European 
automotive  and  construction  sector.  As  a  result,  no 
increase in costs from Made in EU can be incorporated 
to PO2.  

The  justification  for  selecting  an  equally  efficient 
option has been added in Section 8, where the reasons 
for  the  preferred  Policy  Option  have  been  further 
expanded upon, showing how the long-term economic 
security benefits will mitigate the initial negative net 
benefit  for  2030.  This  is  also  further  reflected  in 
Section  7.2,  under  Efficiency  considerations.  This  is 
now reflected in the executive summary as well.  
Additionally, the breakdown of costs  associated with 
low-carbon  content  requirements,  divided  by  public 
procurement, support schemes, and products placed on 
the market, is detailed in Annex 4,  Section 2.2. This 
provides  a  better  reflection  of  the  impacts  of  each 

90 

 
 
 
 
RSB recommendations: 

How they were addressed: 

policy  option  as  the  requirements  extend  to  a  larger 
share of the market. 

The proportionality analysis has been improved under 
Section  7.4  explaining  that  starting  with  low-carbon 
requirements  for  all  products  placed  on  the  market 
could have substantial impact on downstream sectors, 
with  risks  of  imposing  high  costs  or  incentivising 
material substitution. Therefore, a more gradual option 
could be considered  for the legal drafting, where  the 
low-carbon requirements could initially be introduced 
on a reduced application scope. 

This incoherence has been addressed in the main text, 
as  well  as  in  Annex  3  and  4,  where  the  data  was 
aligned.  

The  main  text  in  the  relevant  impact  sections  and 
Annex 4 is now nuanced with the characteristics of the 
modelling  exercises,  and  how  the  results  should  be 
framed.  Further  limitations  on  the  calculations  are 
outlined  as  well  in  the  relevant  impact  sections  and 
Annex  4,  such  is  the  case  for  digitalisation  of 
permitting, where in the absence of permitting-specific 
analysis,  certain  assumptions  need  to  be  drawn  to 
provide estimations for the benefits.  

A  new  Annex  15  has  been  developed.  It  introduces 
potential  ranges  of  cost  impacts,  where  uncertainties 
over the price differentials could influence the choice 
of Policy Options. It presents a sensitivity analysis for 
some key parameters in the lead market measures: 

(5)  The  incoherence  of  the  adjustment  costs  for 
business, as reported in the new summary Table 4 on 
the one hand, and in the one-in one-out section of the 
main report and in annex 4 on the other hand needs to 
be resolved. 

to 

related 

the  modelling  and 

significant  uncertainties 

(6)  Both  in  the  main  text  and  the  annexes,  the 
limitations 
the 
calculations as well as their robustness should be better 
reflected  including  in  the  comparison  of  options. 
Where 
regarding  key 
estimates  are  identified  the  report  should  provide  a 
corresponding 
In  case  a 
sensitivity  analysis. 
quantification  and  monetisation  of  benefits  is  not 
possible  the  report  should  provide  a  substantiated 
estimate to present the order of magnitude of expected 
benefits. 

to 

other 

low-carbon,  prices 

•  Low-carbon  measures  for  EIIs  provide  cost 
ranges, considering the uncertainty related to 
definitions  of 
for 
decarbonised  energy,  decarbonisation  costs 
and 
these 
variables.  Due 
uncertainties,  the  low-carbon  steel  target 
would  trigger  a  price  increase  ranging  from 
0.075%  to  0.175%  in  the  final  price  of  the 
vehicle. The combination of low-carbon steel 
and  cement  would  be  projected  to  increase 
between  0.08%  to  0.45%  the  final  prices  of 
construction projects. 
provides 
in 

when 
manufactured 
the  EU  with  a  cost 
differential  ranging  from  a  26%  to  50% 
increase. 

•  Batteries 

variables 

•  Solar  presents  a  more  conservative  estimate 
of a low deployment scenario in 2030.  
•  Vehicle  components  present  a  sensitivity 
analysis  on  the  set  of  elasticity  parameters 
governing consumer behaviour. 

91 

 
 
 
 
RSB recommendations: 

How they were addressed: 

Additionally,  some  of  the  benefits  present  a  wider 
range of potential scenarios: 

Environmental benefits also present the low (60 EUR 
tCO2eq) to high (EUR 189 per tCO2eq ) value used for 
2030 to give an estimation of the monetisation range.  

savings 

also  present 

Administrative 
a  more 
conservative estimate, with the assumption that only a 
third  of  the  manufacturing  industries  can  carry  out 
their  transformation  process  by  2030  (and  therefore 
undergo a new permitting process). 

Elements of the  sensitivity analysis have  been cross-
referenced in the main report under Section 6.  

(7)  The  report  should  provide  an  analysis  of  the 
cumulative effects of costs increases (low-carbon, EU-
made,  energy,  etc.)  on  consumers  and  downstream 
sectors and their competitiveness. It should also better 
analyse the potential impact that this can have for the 
energy transition in the EU as well as the impacts on 
the affordability of energy. 

The  cumulative  effects  of  the  cost  increases  were 
further shown in Annex 4 and Section 7.2, where the 
competitiveness  of  the  downstream  sectors  was 
addressed.  Furthermore,  the  potential  implications  of 
the  proposed  policy  instruments  on  the  energy 
transition, as well as the affordability of energy, have 
been addressed in Section 6.1.1. 

(8) Regarding permitting for EIIs coherence shall be 
assured  with  other  measures  and  initiatives  on 
permitting.  The  impact  on  costs  for  administrations 
through  the  digitalisation  of  permitting  should  be 
better substantiated. 

for 

including 

(9) Regarding the FDI conditionalities (measure INV 
2)  the  report  should  specify  what  methodology,  and 
criteria  will  be  used 
strategic 
technologies or EIIs into the scope of mandatory FDI 
conditionalities. In addition, the report should provide 
more  detail on the related safeguards, including how 
proportionality of the conditionalities will be ensured 
and  how  the  speed  of  phasing  in  the  conditionalities 
will be determined. 

(10) The report (as well as SME Check) should further 
clarify mitigation measures, in particular on micro and 
small enterprises in the construction sector. 

Coherence with the Environmental Omnibus initiative 
on permitting is highlighted in the baseline, as well as 
in Section 7 for coherence.  
Moreover, estimates on the costs of digitalisation, even 
if outweighed by the benefits, are outlined in Section 
6.1. Substantiated ranges are presented per procedure, 
depending on the type of processes at hand. A revised 
is 
estimate  of  cost  savings  for  administrations 
presented, with the limitations that these figures entail, 
notably  that  they  are  extracted  from  assessments  on 
different  types  of  business  processes,  not  necessarily 
linked to permitting.  

This  has  been  addressed  in  Annex  9  ‘Overview  of 
policy  measures’,  under  SO3,  INV  2  measure,  by 
explaining  that  the  Commission’s  critical  technology 
assessment methodology will be applied to identify the 
sectors  in  scope,  that  a  coherent,  uniform  and 
proportionate set of conditions will apply to inbound 
investors  in  these  designated  sectors,  and  that  the 
degree  of  obligation  differs  between  strategic 
reinforcement technologies on the one hand and other 
emerging key strategic technologies on the other hand. 

The  mitigation  measures  for  SMEs,  in  particular  the 
reduction  of  the  administrative  burden  for  those 
operating  in  the  construction  sector,  have  been 
addressed  in  Annex  6,  the  SME  Check,  as  well  as 
cross-referenced in Section 6 of the report.  

92 

 
 
 
 
 
 
4.  Evidence, sources and quality 

Evidence and data that were used in this Impact Assessment included:  

a.  Academic studies and literature on challenges faced by EIIs and clean technologies 
and  possible  policy  measures,  as  well  as  existing  position  papers  and  other 
documents drawn up by relevant stakeholders. 

b.  Newspaper articles and press materials. The references are cited in the main text of 

the report as appropriate.  

c.  Internal studies and modelling exercises of Commission services, and notably of 

the JRC.  

The Impact Assessment further relies on the information received from consultation activities 
as detailed in the synopsis report contained in Annex 2 of this Impact Assessment. 

93 

 
 
 
 
Annex 2: Stakeholder consultation (Synopsis report) 
In the context of the Impact Assessment on the Industrial Accelerator Act, several consultation 
activities were conducted between April and July 2025. The purpose of the consultations was 
to collect evidence and views from a broad range of stakeholders, giving them an opportunity 
to provide relevant data and information on the problems and potential solutions in support of 
the decarbonation and competitiveness of industry, with a clear focus on energy intensive and 
clean tech industries. This Annex presents the results of the consultation activities carried out. 
The consultation activities included:  

-  A Call for Evidence, published for feedback from 15 April 2025 to 08 July 2025 
-  A  public  consultation  published  in  the  “Have  your  say”  portal,  open  to  the  public, 
containing  multiple  choice  and  open  questions,  running  in  parallel  with  the  Call  for 
Evidence. 

-  A targeted consultation published in the “Have your say” portal, open for associations 

and companies from the energy intensive sectors 

-  A  reality  check  workshop,  open  only  to  companies  from  energy  intensive  sectors, 

including the possibility to submit position papers afterwards 

-  A reality check workshop, open only to steel companies, on EU low-carbon product 
label  for  steel,  including  a  survey  and  the  possibility  to  submit  position  papers 
afterwards 

-  A  reality  check  workshop,  open  only  to  Member  States,  including  the  possibility  to 

submit position papers afterwards. 

-  A targeted consultation following the Automotive Action Plan to gather insights from 
the battery ecosystem and downstream sectors on the potential impact of EU content 
requirements for batteries. 

1.  Overview of the participants 

For all stakeholder activities, the main stakeholder groups addressed were: 

•  National authorities of the Member States responsible for industrial policy, permitting 

procedures and public procurement 

•  Non-Governmental Organisations representing civil society 
•  Associations representing industry, businesses and professionals 
•  Businesses, including SMEs 
•  EU citizens 
•  Think-tanks 
•  Other 

The  public  consultation  received  314  answers.  The  responses  came  mainly  from  business 
associations  (n=129,  41%),  followed  by  companies  (n=120,  38%),  non-governmental 
organisations, EU citizens, public authorities (n=11, 3%), trade unions, academic institutions, 
environmental organisations and other stakeholders (n=15, 5%). 133 stakeholders attached a 
policy paper to their answers. Most respondents came from Belgium (29%, n=91), followed by 
Germany (13%, n=42), France (10%, n=32), Spain (6%, n=20), Netherlands (6%, n=18), Italy 
(5%, n=17), and Finland (4%, n=13), with responses from other Member States as well as non-
Member States.  

Significant participation  came from industrial  respondents (n=249, 79%), broken down into 
the following sectors: chemicals (n=24, 7.6%), steel (n=21, 6.7%), fuels (n=16, 5.1%), metals 
and  mining  (n=11,  3.5%)  ,  cement  (n=8,  2.5%),  fertilizers  and  agriculture  (n=8,  2.5%), 
aluminium (n=5, 1.6%), pulp & paper (n=5, 1.6%), ceramics (n=4, 1.3%), glass (n=6, 1.9%) 

94 

 
 
 
and lime sector (n=1, 0.3%), as well as downstream sectors such as energy (n=57, 18.1%) - 
including electricity (21 answers), clean tech (n=15), gas & oil (n=7), hydrogen (n=5), heat 
(n=4), solar (n=2), wind (n=2) and geothermal (n=1) -, waste management and recycling (n=11, 
3.5%), construction (n=8, 2.5%), automotive (n=5, 1.6%), batteries and storage (n=4, 1.3%), 
and other (n=55, 17.5%).  

Figure 7: participation in the open public consultation by type of organisation 

Figure 8: participation in the OPC by sector 

For  the  targeted  consultation,  62  answers  were  received,  mainly  coming  from  business 
associations/companies/business  organisations  (49  responses;  79%),  followed  by  non-
governmental  organisations  (8  responses;  13%),  and  other  stakeholders  (5  responses;  8%). 
Only 4 out of 62 responses (6%) came from SMEs. Among these, 2 respondents were from the 
cement industry, 1 from the steel sector, and 1 from the construction industry. 23 stakeholders 
submitted a policy paper following the targeted consultation, including the workshops. Replies 
came from various sectors, with the iron and steel sector contributing the most responses (17 
replies, 34%), followed by cement (6 replies, 12%), non-ferrous metals (5 replies, 8%), glass 
and  chemicals  (4  replies  each,  6%),  and  ceramics  (3  replies,  5%).  Only  1  reply  (2%)  was 
received from the pulp and paper sector. An additional 9 respondents (18%) selected “other”. 

95 

 
 
 
 
Figure 9: participation in the TC by type of organisation 

Figure 10: participation in the TC by sector 

The reality check with energy intensive companies gathered around 40 participants, from 27 
companies  across  sectors  such  as  steel,  chemicals,  cement,  glass,  refining,  aluminium, 
fertilizers, paper, and lime. The reality check with steel companies on EU low-carbon product 
label  for steel  gathered  34 participants from  26 European steel  companies and associations. 
Lastly,  the  reality  check  with  Member  States  brought  together  46  participants  across  17 
Member States.  

For  the  targeted  consultation  on  EU  content  requirements  for  batteries,  63  responses  were 
received, primarily from companies (56 responses; 89%), followed by business associations 
and  industry  groups  (3  responses;  5%),  civil  society  organisations  and  NGOs  (2  responses; 
3%), and other stakeholders (2 responses; 3%). Among these, 15 respondents (24%) identified 
as part of the downstream sectors, including automotive and battery energy storage systems. 
Sectoral representation was diverse, with many stakeholders active across multiple segments 
of the battery value chain. The most frequent mentions were in battery pack and recycling (each 
37%), followed by battery cell and critical raw materials (each 29%), and battery management 
systems (26%). Other notable sectors included cathode active materials (23%), anode active 
materials (18%), and various chemicals (11%) and machinery (8%) components. 

96 

 
 
 
 
 
2.  Public consultation 

2.1 Public Consultation Survey 

Overview 
The  public  consultation  survey  included  questions  on  barriers  to  industrial  decarbonisation, 
permitting  for  industrial  decarbonisation  projects,  identifying  and  promoting  priority 
decarbonisation projects, the creation and protection of European lead markets for low-carbon 
and EU made products, and foreign direct investments for decarbonisation.  

Barriers to industrial decarbonisation 

Industrial  stakeholders  identified  several  key  barriers  to  decarbonisation.  The  most  widely 
acknowledged challenge was lack of sufficient access to affordable and decarbonised energy – 
266 (85%) out of 314 respondents, followed by unfair international competition from non-EU 
countries  (n=250,  80%),  decarbonisation  technologies  not  yet  being  widely  available  or 
deployed  at  scale  (n=198,  63%),  high  operational  costs  (n=260,  83%),  high  capital  costs 
(n=251,  80%)  and  high  carbon  abatement  costs  (n=251,  80%)  Permitting  complexity  and 
duration  was  perceived  as  a  major  obstacle  by  256  respondents  (82%).  Furthermore,  146 
respondents  (46%)  agreed  that  SMEs  face  greater  decarbonisation  barriers  than  larger 
companies, of which, 52% (91 out of 176) were SME respondents.  

Streamlining and speeding-up permitting procedures 

Stakeholders identified the permitting process as a major bottleneck to advancing industrial 
decarbonisation in the EU. Among all identified issues, the fragmented regulatory landscape 
and  complexity  of  the  process  stood  out  as  the  most  significant  (n=187,  60%).  Of  the  314 
stakeholders surveyed, 218 (69%) agreed that permitting challenges are widespread across 
Member States. Furthermore, 222 respondents (71%) agreed that permitting challenges differ 
between  Member  States,  highlighting  fragmentation  and  national-level  variation  in 
implementation.  A  large  majority—266  out  of  314  respondents  (85%)—agreed  that 
decarbonising  energy-intensive  industries  requires  addressing  significant  cross-border 
challenges. 

Based on the responses, the most reported permitting length across Member States falls 
within the range of 12 to 24 months. Grid access timelines vary by sector, with durations 
ranging from 15 months (pulp & paper, ceramics, lime) to 24 months in automotive. Energy 
and  cement  sectors  face  long  waits  of  80  to  100  and  40  to  80  months,  respectively,  while 
construction, waste management, and fertilisers often experience delays of 60 months or more.  

When asked about the reasonable maximum timeframe for an industrial decarbonisation 
project between submission of the permit application to the permit being granted was identified 
by 56 (18%) respondents as 12 months, followed by 53 (17%) suggesting 6 months. Other 65% 
of respondents did not provide an answer. Respondents pointed to Environmental Permits (158 
respondents, 50%), Building or Construction Permits (n=78, 25%), Grid Connection Permits 
(n=45, 14%) and Health & Safety Permits (n=33, 11%) as the main types of permits relevant 
to industrial decarbonisation projects.  

Permitting  at  the  geographical  cluster  level  received  support  from  210  respondents  (67%) 
while  the  use  of data  repositories  and  spaces  to  improve  permitting  processes  by  re-using 
relevant  datasets  was  supported  by  196  respondents  (62%).  Simplifying  EU  legislation  to 
facilitate industrial permitting also received strong endorsement (n=258, 82%). 

97 

 
From  the  received  answers,  several  preferred  measures  for  speeding  up  the  permitting 
processes were identified: single points of contact (136 out of 174 answers), time limits for the 
permit-granting process (n=149, 81%), time limits for the environmental impact assessment 
(n=144, 79%), joint environmental assessment when required under multiple legal acts (n=133, 
76%),  tacit  approvals  for  certain  administrative  decisions  (n=144,  83%),  overriding  public 
interest status when it exists in national law (n=108, 62%), fully digitalised processes (n=114, 
64%), and improved administrative cooperation via digital tools (n=114, 64%). 

Identifying and promoting priority projects 

The  majority  of  respondents  agreed  that  limited  access  to  private  funding  (194  out  of  314, 
62%), public funding (n=245, 78%), and transition finance (n=196, 62%) is a major barrier 
to industrial decarbonisation. 

On  risks  associated  with  investing  in  industrial  decarbonisation  projects,  market 
uncertainty  was  identified  as  the  top  risk  (269,  86%),  followed  by  regulatory  uncertainty 
(n=260, 83%) and financial risk (n=243, 77%).  

63% of respondents (197 out of 314) supported the introduction of a category of priority 
industrial  decarbonisation  projects,  with  targeted  benefits.  The  preferred  criteria  for 
identifying priority projects were contribution to industrial decarbonisation (n=100, 32%), to 
strategic  value  chains  (n=64,  20%),  to  industrial  electrification  (n=9,  16%),  economic 
importance (n=43, 14%) and expected increased demand for outputs (n=28, 9%). 

When looking at  the  benefits(s) strategic projects should receive, 117  (37%) agreed  with 
faster permit-granting procedures, 113 (36%) with priority status for administrative procedures, 
113 (36%) with better access to funding. 

Creation and protection of European lead markets for low-carbon products 

The vast majority - 280 (89%) out of 314 respondents - believed that measures to stimulate 
demand  for  clean  industrial  products  are  essential  to  drive  industrial  decarbonisation, 
backed  by  all  industries.  This  was  further  supported  by  the  lack  of  willingness  among 
downstream  sectors  and  consumers  to  pay  a  premium  for  clean  industrial  products  (n=253, 
81%).  When  looking  at  the  downstream  sectors  supporting  the  uptake  of  clean  energy-
intensive materials, the most important ones included construction and infrastructure (n=218, 
70%),  automotive  (n=196,  62%),  clean  energy  technologies  (n=186,  60%),  electrical  and 
electronic equipment (n=136, 43%), defence (n=92, 30%) machinery (n=40, 13%), and other 
(n=72, 22%). 

Most respondents—259 out of 314 (82%)—agreed that public procurement is a significant 
driver  for  lead  markets  for  European  and  clean  industrial  products.  Additionally,  246 
respondents (78%) believe that public procurement is too heavily focused on price rather than 
on non-price criteria.  

Non-price criteria identified for public procurement to help create lead markets included: 
resilience (n=53, 17%); environmental sustainability (n=53, 17%); EU content (n=44, 14%); 
employment and social requirements (n=22, 7%); and cybersecurity (n=10, 3%). 

EU label on carbon intensity of industrial products 
A majority of respondents (191 out of 314, 61%)244 agreed that introducing an EU voluntary 
label on the carbon intensity of industrial products would support the uptake of sustainable 
industrial products and the creation of lead markets. However, respondents were more sceptical 
about the label’s potential to curb the proliferation of labels and ensure a harmonised approach, 

244 42 (13%) are neutral, 32 (10%) slightly disagree, 17 (5%) strongly disagree, 17 (5%) do not know and 17 (5%) did not respond 

98 

 
 
with only 129 respondents (41%) in agreement. Concerns about administrative and compliance 
costs were limited, as only 100 respondents (32%) believed that introducing a voluntary label 
would impose significant costs. On the added value of an EU label on carbon intensity of 
industrial  products,  respondents  saw  benefits  in  terms  of  increased  transparency  (n=195, 
62%), comparability and market differentiation (n=187, 60%), and market uptake of greener 
products (n=160, 51%), while fewer agreed on its role in improving access to green finance 
(n=136, 43%) or compliance with regulatory requirements (n=108, 35%).  

Foreign Direct Investments 

The majority of respondents (166 out of 314, 63%), out of which, the majority (136) being 
business associations and businesses - agreed that foreign direct investments are valuable for 
bringing capital into Europe that is otherwise unavailable within the EU, to increase industrial 
decarbonisation investments. Additionally, 147 respondents (47%) believed such investments 
are beneficial for transferring know-how on products or processes currently not available in the 
EU. A further 118 respondents  (38%) saw value  in  these investments  for enhancing  supply 
security  for  EU  customers  by  localising  production  closer  to  demand.  Only  12  respondents 
(4%)  considered  foreign  direct  investment  to  play  no  role  in  advancing  industrial 
decarbonisation investments. 

172  (55%)  out  of  314  respondents  found  it  useful  to  impose  conditions  on  foreign  direct 
investment from an internal market perspective. Further opinions on these conditions showed 
that 79% (102 out of 129) agreed on the requirement to perform research, development, and 
innovation activities in the EU, 74% (93 out of 126) found the requirement to perform value-
added production in the EU (rather than mere assembly of imported components) useful, 73% 
(92 out of 126) of respondents find the requirement to form a joint venture with a European 
partner and/or restrict foreign ownership percentages useful, 71% (91 out of 126) found the 
requirement to source equipment and inputs in the EU useful, 70% (88 out of 126) agreed on 
the  requirement  to  hire  and  train  EU  citizens  as  staff,  67%  (84  out  of  126)  supported  the 
requirement to transfer intellectual property rights and know-how to the EU investment and/or 
grant  irrevocable  licenses,  50%  (64  out  of  128)  supported  the  requirement  to  supply  EU 
customers, and 39% (50 out of 126) supported the requirement to appoint EU citizens to key 
management positions. 

2.2 Industry Position Papers 

Overview 

As part of the Open Public Consultation, 142 policy papers were submitted, across a wide range 
of industries such as aluminium (2 responses), cement (n=2) , chemicals (n=10) , fertilizers 
(n=5), glass (n=2), metals (n=3), pulp &paper (n=2) , and steel (n=7), with downstream sectors 
represented by the automotive industry (n=1), batteries and storage (n=2), construction (n=2), 
energy,  including  clean  tech  manufacturers  (n=10),  electricity  (n=8),  gas  &  oil  (n=3),  heat 
(n=2) and wind (n=3) - waste management & recycling (n=4) and other (n=54).  

Barriers to industrial decarbonisation 

Stakeholders across sectors cited high costs, regulatory uncertainty, and limited infrastructure 
as  major  obstacles  to  decarbonisation.  Energy-intensive  industries  identified  CAPEX  and 
OPEX for new technologies—exacerbated by volatile energy prices—as key financial barriers. 
Many highlighted fragmented and unclear regulations across Member States. In sectors like 
metals, aluminium, and glass, current EU policies were seen as overly focused on breakthrough 
tech, neglecting scalable solutions. Steel stakeholders pointed to limited demand and lack of 
price  premiums  for  low-carbon  products.  SMEs  were  also  noted  as  challenged  by  complex 
permitting and funding systems. 

99 

 
Identifying and promoting priority projects 

There  was  strong  support  for  the  prioritisation  of  decarbonisation  projects.  Respondents 
emphasised  the  importance  of  eligibility  criteria  remaining  broad  and  flexible  to  reflect  the 
technological diversity and specific decarbonisation pathways across sectors. There was broad 
agreement  that  prioritised  projects  should  benefit  from  simplified  permitting,  fast-track 
approval processes, and access to de-risking instruments such as public guarantees. 

Creation and Protection of European Lead Markets for Low-Carbon Products 

Stakeholders  broadly  supported  the  development  of  lead  markets  as  a  key  mechanism  to 
stimulate demand for low-carbon products and foster investment in decarbonised production, 
confirming the results  of the Public Consultation. A majority  welcomed the introduction of 
low-carbon labels and minimum EU content requirements, although some expressed concern 
about possible market distortions and administrative burdens. Across sectors, there was strong 
support  for  harmonised  environmental  standards,  including  the  application  of  life-cycle 
assessment  (LCA)  methodologies  and  the  integration  of  social  and  resilience  criteria  in 
procurement practices. 

While public procurement was broadly acknowledged as a potential driver of demand, several 
contributions pointed out that its current reach is too limited and must be complemented by 
initiatives for all products put on the market.  

Streamlining and speeding-up permitting procedures 

Permitting  processes were identified across all sectors  as one of the main  challenges to  the 
timely  implementation  of  decarbonisation  projects.  Stakeholders  described  the  permitting 
process  as  fragmented,  non-transparent,  and  excessively  slow.  Particular  concerns  were 
expressed  regarding  the  lack  of  uniformity  across  Member  States  and  the  complexity  of 
navigating approvals for grid infrastructure, electrification, and hydrogen deployment. 

In  response,  there  was  a  strong  call  for  the  creation  of  a  streamlined  EU-wide  permitting 
framework, which includes digitalised processes, legally enforceable deadlines, and centralised 
contact  points.  This  included  support  for  tacit  approval  and  fast  tracking.  There  was  also 
recognition  that  SMEs  actors  face  disproportionately  high  administrative  burdens  under  the 
current system, and that simplified procedures are needed.  

Foreign Direct Investments 

FDI  was viewed as essential  for scaling infrastructure and clean technologies. Stakeholders 
stressed aligning FDI with EU goals and safeguarding domestic standards. High energy costs 
and regulation could deter FDI without better risk-sharing tools. 

Stakeholders  proposed  several  solutions,  including  the  definition  of  clear  sustainability 
benchmarks, incorporation of EU content requirements, and the design of FDI frameworks that 
complement rather than displace existing industrial capacities. 

3.  Targeted consultation for EIIs 

3.1 Targeted survey 

Overview 

The targeted consultation questionnaire included questions on the creation and protection of 
European lead markets for low-carbon products, as well as the streamlining and acceleration 
of permitting procedures for industrial access to energy and decarbonisation. 

Creation and Protection of European Lead Markets for Low-Carbon Products 

100 

 
A large majority of respondents, 56 (90%) out of 62, agreed that stimulating demand for low-
carbon  industrial  products  is  essential,  with  support  consistent  across  company  sizes  and 
stakeholder groups.  

When looking at key design principles for low-carbon requirements, a technology-neutral, 
performance-based  approach  was  backed  by  13  respondents  (21%)  with  another  13  (21%) 
stressing  the  need  for  regulatory  flexibility.  Lifecycle  assessment  methods  were  considered 
essential by 19 respondents (31%) and progressive tightening of benchmarks over time was 
proposed in 20 responses (32%). Green Public Procurement emerged as a key lever in 17 replies 
(27%),  with  calls  for  integrating  CO₂  benchmarks,  lifecycle  criteria,  and  EU-origin  rules. 
Additionally,  10  respondents  (16%)  recommended  harmonised  labelling  and  certification, 
while financial support was emphasised in 15 responses (24%).  

Regarding  the  cost  impact  of  low-carbon  alternatives  and  downstream  pricing, 
stakeholders across energy-intensive industries reported significant cost increases tied to low-
carbon production—typically 10–50%, sometimes higher. However, most agreed the effect on 
final product prices is modest. By sector breakdown: 

•  Cement:  All  respondents  agreed  low-carbon  cement  has  little  or  no  impact  on 
construction costs. Studies show even doubling cement prices raises building costs by 
only 1–3%. 

•  Steel:  14  of  18  (77%)  respondents  reported  minimal  downstream  price  effects  from 
low-carbon steel, citing studies and internal data: <1% for an average car; 0.1–0.2% for 
buildings;  0.6–1.2% for industrial sites;  1.6–5.5% for appliances and offshore wind; 
0.15–0.5% for military vehicles. 

•  Chemicals: Stakeholders noted variability across products; most estimates place end-

product cost increases at 1–5%. 

•  Ceramics:  Producers  anticipate  significant  value  chain  cost  increases,  stressing  low 

price elasticity in key downstream sectors. 

•  Glass, non-ferrous metals, pulp & paper: No figures or clear data. 

Risks  of  material  substitution  due  to  low-carbon  requirements  vary  across  sectors; 
however,  most  respondents  agreed  that  the  risks  can  be  mitigated  with  lifecycle-based, 
material-neutral policies applied consistently across sectors and imports.  

Regarding social and economic impacts of low-carbon requirements, 45 (75%) out of 62 
respondents saw long-term socio-economic benefits from low-carbon requirements. However, 
27%  warned  of  short-term  risks,  including  higher  production  costs,  investment  pressure 
(CAPEX/OPEX), inflation, job losses, and delocalisation.  

Stakeholder  views  on  the  impact  of  low-carbon  requirements  on  SMEs  were  mixed.  29 
(47%) out of 62 respondents believed the requirements are supportive of SMEs, while 24 (39%) 
expressed concern over barriers such as high upfront costs, administrative burden, and limited 
access to finance or technical support.  

EU content requirements for industrial products 

Support for stimulating demand for EU-made industrial products was strong across stakeholder 
groups, with 53 (86%) out of 62 respondents in favour. Stakeholders showed a clear preference 
for defining “EU content” in industrial products based on value creation within the EU, with 
51%  supporting  minimum  percentage  of  the  value  creation  (i.e.  value  of  the  final  product 
compared to initial input) in the EU, followed by a minimum share of specific materials used 
in a product to be manufactured in the EU (23%), products to have proof of origin or traceability 

101 

 
 
certification showing compliance with EU content rules (10%) and specific production steps 
or final assembly taking place within EU (8%). 

Regarding  the  most  appropriate  policy  instruments  to  introduce  minimum  EU  content 
requirements, the responses favoured all forms of public funding and support schemes (35%), 
followed by private procurement (i.e., product requirements) (23%), and public procurement 
(19%). 

Stakeholder views on traceability of EU origin vary, with most supporting sector-specific or 
existing frameworks for practicality and enforceability. In cement, 43% supported traceability 
via tools like Environmental Product Declarations and origin disclosures under the CPR, while 
29% viewed origin tracking as irrelevant. Ceramics unanimously supported direct application 
of EU Rules of Origin. In chemicals, 50% favoured sector-adapted Digital Product Passports, 
but  25%  expressed  uncertainty  due  to  supply  chain  fragmentation.  Glass  stakeholders  fully 
supported traceability using existing tools like CE marking and Declarations of Performance, 
especially with Digital Product Passports. In iron and steel, 72% backed traceability with the 
"Melted and Poured in the EU" rule, Mill Test Certificates, and Digital Product Passports, but 
warned  of  loopholes  and  complexity.  Non-ferrous  metals  had  60%  support  for  traceability 
through origin checks, mass-balance approaches, and import monitoring, with concerns over 
scrap-based  supply chains.  The sole pulp  and paper respondent  supported traceability using 
existing  systems  like  the  EU  Deforestation  Regulation,  FSC/PEFC  certifications,  and 
Declarations of Compliance. 

When asked about the potential economic and social impacts of EU content requirements, the 
pulp and paper sector sole respondent was entirely positive across economic, employment, and 
SME  impacts.  Non-ferrous  metals  stakeholders  were  divided:  60%  supported  the  economic 
shift,  while 20%  were cautious and 20% opposed, mainly due to  concerns about  cost  pass-
through. Iron and steel respondents were largely positive on economic (61%) and skills (50%) 
impacts, with a smaller share noting conditional effects or risks. In the glass sector, economic 
views were evenly split—positive, mixed, negative, and conditional (each 25%). Chemicals 
perspectives  were  cautious  and  design-dependent.  Ceramics  respondents  were  unanimously 
positive on economic impacts, with some also anticipating job benefits. Cement stakeholders 
expressed  mixed  views  on  economic  impacts;  half  emphasised  the  need  for  upskilling, 
particularly in carbon capture and digital technologies, while a third considered skills impacts 
not relevant. 

Furthermore, 49% of respondents considered the introduction of EU content requirements for 
industrial products to be supportive of SMEs, with 47% SMEs agreeing as well.  

The identified downstream sectors where it be technically and economically feasible to apply 
minimum  EU  content  requirements  were  reported  as  follows:  Automotive  &  transport 
equipment  is  strongly  supported  by  steel  (88%)  and  non-ferrous  (80%)  respondents  as  a 
relevant downstream sector. Buildings & construction had the highest support, backed by all 
ceramics and most steel, cement, and non-ferrous stakeholders. Civil infrastructure & public 
works gained support from steel (81%) and non-ferrous (60%). Clean energy & renewables 
saw moderate backing from steel (44%) and non-ferrous (60%). Machinery, white goods & 
heavy  equipment  were  supported  by  50%  steel  and  40%  non-ferrous.  Defence  &  security 
received  support  from  38%  steel  and  40%  non-ferrous.  Packaging,  consumer  goods  & 
glassware were backed by glass (75%) and 40% of non-ferrous respondents. 

Streamlining and speeding-up permitting procedures 

Most respondents (63%) agreed that the permitting measures under the Net Zero Industry Act 
are  not  enough  to  improve  permitting  conditions  for  energy  intensive  industries.  Sectoral 

102 

 
support was high in glass, (100%), pulp and paper (100%), ceramics (100%), steel (72%), and 
non-ferrous metals (80%). The cement (43%) and chemical sector (25%) were however less 
aligned. 

Most  stakeholders  highlighted  the  need  for  further  measures  to  improve  the  permitting 
processes, with 72% support for facilitating access to grid and relevant energy infrastructure, 
67% advocating for the digitalisation of the permitting process, and 67% for tacit approval for 
specific  steps  or  permits.  Meanwhile,  64%  expressed  the  need  for  targeted  environmental 
derogations for industrial clusters and projects and 59% supported the wider use of overriding 
public interest provisions. 

Despite 2/3 of respondents indicating that tacit approval could be relevant to improve the 
efficiency  of  the  permitting  processes,  only  a  few  of  them  suggested  specific  steps:  early 
procedural steps of the Environmental Impact Assessment (1 mention), environmental permits 
for known low-impact technologies (provided safeguards are in place) (1), changes to permits 
that  will  not  increase  the  negative  environmental  impact  (1),  (low  risk)  modifications  with 
limited  impact  (3),  minor  modifications  to  existing  permits  (1),  renewed  permits  (1),  non-
critical administrative steps (completeness checks or intermediate reviews) (1), permitting for 
grid connection and land access (2), for iron & steel, the biomethane use (1), the for non-ferrous 
metals, the environmental permitting process (1). When asked which EU legislation presents 
the bigger hurdles when addressing the permitting granting processes for a decarbonised 
industrial  investment,  the  main  directives  mentioned  were:  Industrial  Emissions  Directive 
(34% ), Water Framework Directive (19%), Environmental Impact Assessment Directive (6%), 
Birds  and  Habitats  Directives  (5%),  followed  by  Ambient  Air  Quality  Directive,  Waste 
Framework  Directive,  and  Natura  2000  (each  3%),  and  finally,  Nitrogen  emission  impact 
calculations, Hydrogen Delegated Acts, BREFs, Air Quality Directives, and Waste Shipment 
Regulation (1% each).245 SMEs also reported various hurdles in the permit granting process for 
decarbonisation  projects,  including,  from  a  regulatory  perspective,  complex  and  lengthy 
environmental assessments and other permitting processes (2 mentions), administrative delays 
and  unclear  procedures  (n=2),  unpredictable  timelines  (n=1),  lack  of  technical  and  general 
support / guidance (n=3), lack of early access to pre-consultation services or tailored regulatory 
advice  (n=1),  complex  documentation  requirements  and  uncertainty  about  eligibility  for 
permits  or  incentives  (n=2),  with  permitting  rules  being  designed  around  large  installations 
rather than SMEs  (n=2). On  an internal  level,  they encounter high  costs of compliance and 
consulting as well as limited internal capacity to navigate complex regulatory frameworks.  

3.2 Reality Check with Industry on Industrial Accelerator Act 

Overview 

The  consultation  workshop  with  energy  intensive  industry  representatives  included 
preliminarily shared questions and discussion around the topics of (i) the creation of European 
lead markets for low-carbon products, with discussions on EU content, and (ii) streamlining 
and accelerating permitting procedures. 

Regarding  the  creation  and  protection  of  European  lead  markets  for  low-carbon 
products, during the workshop participants broadly confirmed the results of the targeted 
survey. They agreed that there is currently only a niche market for low-carbon products, as 
customers  tend  to  be  price  sensitive,  and  few  incentives  exist  for  a  green  premium.  In  this 
context, supporting the creation of lead markets for low-carbon products will increase demand 
and production, thereby aiding the decarbonisation of energy-intensive industries. Public and 
private procurement, EU content targets, and low-carbon labels, however, must be tailored to 

245 To note, some of the replies received via the consultation are not EU legislation per se but are covered by legislation mentioned earlier.  

103 

 
 
the needs and complexities of each industry and their supply chains. Participants noted varying 
demand  shares  currently  met  by  public  procurement,  depending  on  the  specific  energy-
intensive  application  in  different  end-use  sectors,  and  mostly  agreed  that  incentives  for 
products put on the market are needed to grow the market for all industry players. They also 
confirmed that EU content requirements are important for ensuring that the market for low-
carbon products is not undermined by non-EU competition.  

streamlining  and 

Concerning 
speeding-up  permitting  procedures,  participants 
acknowledged  that,  permitting  bottlenecks  can  cause  significant  delays,  extra  costs,  and 
uncertainty  which  leads  to  postponement  in  investment  or  even  idle  operations.  Suggested 
solutions include a central authority for permitting, a one stop shop for permitting procedures, 
digitalisation, regulatory sandboxes, support for permitting new technologies, tacit approval if 
time  limits  are  exceeded,  fast  track  permitting  processes  for  decarbonisation  projects,  one 
application  covering  multiple  permits,  and  early-stage  public  participation  to  accelerate 
approvals. 

3.3 Reality Check with Steel Industry on the Carbon Intensity Label 

Overview 

The consultation workshop with steel industry representatives included preliminarily shared 
questions and discussion on the development of an EU low-carbon product label for steel.  

Scope and methodology 

•  Product Coverage: There was broad consensus from participants that hot-rolled steel 
should  serve  as  the  reference  product  for  the  label.  Stakeholders  supported  a 
comprehensive emissions scope for the label, particularly including emissions resulting 
from relevant upstream processes such as the use of alloying elements. 

•  Use of EU ETS Benchmarks: Stakeholders generally supported using EU ETS product 
benchmarks as the foundation for the label. However, they also called for the inclusion 
of  additional  upstream  and  indirect  emissions  not  covered  by  these  product 
benchmarks, and the need to align the approach with CBAM rules to ensure consistent 
treatment of imported steel.  

•  Hydrogen:  Stakeholders  agreed  that hydrogen-related emissions must be included in 
the carbon footprint calculation. They emphasised the need for harmonised EU-level 
rules to ensure consistency in the methodology. 

•  CCUS: Captured and permanently stored CO₂ should be eligible for exclusion from the 
product’s carbon footprint, in alignment with the current EU ETS accounting rules. 
•  Electricity:  The  role  of  electricity-related  emissions  is  becoming  increasingly 
significant. Stakeholders were divided on whether to use market-based data, average 
national grid mixes or an average EU-mix.,  

•  Scrap: there was agreement about that emissions from scrap should not be differentiated 
based on source (pre-consumer vs. post-consumer). Stakeholders cited concerns over 
traceability, verification challenges, and the risk of manipulation. 

Monitoring, Reporting, Verification, Certification 

•  Data  Reporting:  Stakeholders  emphasised  the  need  for  accurate  and  verifiable 
emissions data, with broad agreement on the importance of transparency. The use of 
primary data should be the priority, while possible default factors should be sufficiently 
conservative.  

•  Baseline Data: Most stakeholders supported using a 12-month average as the baseline 
for  emissions  reporting,  with  some  flexibility  allowed  in  cases  of  significant 

104 

 
 
transformation  or  process  upgrades.  Verification:  There  was  consensus  among 
stakeholders that verification procedures must  be comparable to  those under the  EU 
ETS framework, especially if the label is to apply equally to EU and non-EU steel. 
•  Certification:  Some  stakeholders  recommended  that  certification  responsibilities  be 
assigned  to  existing  EU  ETS  verification  bodies,  leveraging  their  established 
infrastructure  and  expertise.  Larger  companies  indicated  that  they  would  be  able  to 
manage the administrative demands of regular audits under such a system. 

Label Design Elements 

The  use  of  a  sliding  scale  for  differentiating  the  performance  classes  or  of  an  alternative 
classification method not as a function of scrap was highly debated with no clear preference or 
compromise solution within industry. Supporters of the sliding scale which participated in the 
reality check view it as a fair mechanism for reflecting decarbonisation progress in primary 
steelmaking. Opponents on the other hand argued it could undermine the environmental value 
of  secondary  production,  by  diluting  incentives  for  recycling  and  disadvantaging  EAF 
producers.  Some  stakeholders  were  critical  towards  the  idea  of  having  two  different 
classification  systems,  based  on  production  route,  as  it  would  risk  locking-in  technological 
innovation. 

•  Production  Route  Transparency:  Some  participants  called  for  including  production 
route, recycled content, and place of origin data on the label, alongside carbon intensity. 
•  Harmonisation Needs: A consistent EU-wide methodology is necessary to build trust 
across markets and ensure clear messaging for both consumers and B2B customers. 

3.4 Reality Check with Member States on Industrial Accelerator Act 

Overview 

The consultation workshop with Member States representatives included preliminarily shared 
questions and discussion around the topics of European lead markets for low-carbon industrial 
products and streamlining permitting procedures. 

Creation and protection of European lead markets for low-carbon products 

Member States welcomed the IAA's ambition to develop lead markets but emphasised the need 
for clarity of scope, particularly distinguishing IAA from the Net-Zero Industry Act (NZIA). 
The participants underlined the importance of alignment with existing EU legislation such as 
ESPR,  Renewable  Energy  Directive,  and  Circular  Economy  initiatives.  Several  countries 
supported  EU  preference  criteria  in  procurement,  highlighting  that  minimum  EU  content 
requirements  could  drive  market  creation,  especially  in  key  sectors  like  steel,  cement, 
fertilizers, and batteries. Technological neutrality was broadly supported, with calls for verified 
and  interoperable  labelling  systems  that  build  on  ETS  data  without  adding  new  burdens. 
Concerns  were  raised  about  electricity  access,  calling  for  EU  support  in  addressing  grid 
capacity  constraints.  There  was  consensus  on  avoiding  new  regulatory  burdens  and  instead 
simplifying existing frameworks to attract investments. 

Streamlining and speeding-up permitting procedures 

All Member States called for streamlined permitting but rejected hard deadlines, with some 
emphasizing  outcome-focused  simplification,  preferring  procedural  flexibility  over  rigid 
timelines. Others highlighted the complexity arising from regional administrative structures, 
which  must  be  respected  in  any  EU-level  initiative.  Some  Member  States  called  for 
identification and removal of legal inconsistencies that delay permitting, while others warned 

105 

 
 
 
against creating new layers of bureaucracy. Digitalisation and standardised procedures were 
favoured, especially for environmental assessments, but cautioned that real-world constraints, 
such  as  limited  regional  capacity  and  financing,  must  be  addressed.  Beyond  simplification, 
Member States raised practical implementation concerns. Some of them suggested narrowing 
IAA’s  permitting  acceleration  to  large-scale  decarbonisation  projects  to  avoid  over-
prioritisation,  while  others  called  for  a  horizontal  simplification  approach,  applicable  to  all 
decarbonisation projects. 

4.  Targeted consultation on the battery sector 

The  consultation  focused  on  the  potential  introduction  of  EU  content  requirements  for  the 
battery  sector,  including  their  definition,  implementation  through  policy  instruments,  and 
expected impacts on competitiveness, pricing, and employment.  

Support for Policy Instruments 

Out of 63 respondents, a large majority supported the inclusion of EU content requirements in 
various  policy  mechanisms.  Public  funding  and  support  schemes  received  the  highest 
endorsement (45 responses; 71%), followed by public procurement and private procurement 
(each with 39 responses; 62%). Notably, 29 respondents (46%) supported the use of all three 
instruments simultaneously. Only 7 respondents (11%) expressed opposition to any form of 
EU content requirement. 

Definitions of EU Content 

Respondents provided varied interpretations of  what constitutes “EU content” in the battery 
value chain. The most common definition was “components made in the EU” (n=43, 68%), 
followed by “assembly in the EU” (n=36, 57%). Less frequently cited were “bill of materials 
produced  in  the  EU”  (n=14,  22%),  “value  generated  in  the  EU”  (n=12,  19%),  and 
“weight/volume  generated  in  the  EU”  (n=4,  6%).  Only  one  respondent  (2%)  provided  a 
definition that did not fit into these categories. 

Expected Impacts 

Stakeholders were asked to assess the expected impacts of EU content requirements in batteries 
across six dimensions: 

-  Social Aspects (e.g. Jobs): 39 respondents (62%) anticipated very positive effects, with 
another 18 (29%) expecting positive outcomes. Only 5% saw no impact, and just one 
respondent (2%) foresaw negative consequences. 

-  Economic Aspects (e.g. Profitability): 42 respondents (67%) expected positive or very 
positive impacts, while 12 (19%) anticipated negative effects. A small share (10%) saw 
no impact. 

-  SMEs: 40 respondents (64%) viewed EU content requirements as beneficial to SMEs, 

while 3 (5%) expressed concern about negative impacts. 14% saw no impact. 

-  Skills and Workforce Development: This dimension received strong support, with 30 
respondents  (48%)  rating  the  impact  as  very  positive  and  26  (41%)  as  positive.  No 
respondents anticipated negative effects. 

-  Battery Price: Stakeholders expressed concern about cost implications. 26 respondents 
(41%)  expected  negative  impacts  on  battery  prices,  with  5  (8%)  anticipating  very 
negative effects. Only 11 (18%) saw positive effects, and 15 (24%) expected no impact. 
-  Downstream Product Price: 22 respondents (35%) anticipated negative impacts, and 4 
(6%)  expected  very  negative  effects.  Meanwhile,  20  (32%)  saw  no  impact,  and  10 
(16%) expected positive or very positive outcomes. 

106 

 
 
 
Annex 3: Who is affected and how? 

1.  Practical implications of the initiative 

Businesses – particularly EIIs, battery manufacturers, solar manufacturers, and key automotive 
component industries – will benefit the most from the initiative. It aims at creating lead markets 
for European, low-carbon products,  depending  on the industry, through  public procurement 
mandates and/or mandates for all products put on the market, supported by a low-carbon label 
(in the case of steel). 

For businesses that have already invested in decarbonisation, the impact will be felt in the short 
term,  as  markets  for  their  products  expand.  For  companies  that  have  not  yet  invested  in 
decarbonisation, IAA will provide an incentive on the demand side, increasing confidence in 
decarbonisation investments. 

The  initiative  will  also  accelerate  manufacturing  industry’s  decarbonisation  projects  by 
speeding-up  using  tacit  approval  for  intermediate  steps  (with  certain  limitations  and 
safeguards), and simplifying permitting procedures, including by digitalisation of procedures. 
Decarbonisation  will  require  high  initial  CAPEX  as  well  as  higher  OPEX  in  the  short  and 
medium term. Some of these costs will be passed down the value chain – in the form of a “green 
premium” – to downstream sectors that have the capacity to absorb them to different degrees. 
Since most provisions focus on public procurement and public support schemes, these costs 
are  likely  to  be  absorbed  by  public  administrations,  but  the  extent  and  availability  of  such 
support will depend on national budgetary capacities and political priorities.  

In the long term, the cost premium associated with producing low-carbon materials is expected 
to  decline  as  relevant technologies mature and demand for low-carbon materials transitions 
from niche lead markets to larger-scale markets, while in parallel carbon intensive products are 
expected to become more expensive as a result of the tightening of the EU’s climate policies, 
e.g. the EU ETS and CBAM.  

Citizens and consumers will benefit by having a more reliable access to low-carbon products, 
which will be easier to differentiate, thereby being able to make more sustainable consumer 
choices. Initially, final consumer goods containing low-carbon industrial products will be more 
expensive, but in specific sectors analysed in the assessment (construction and automotive), 
the increase in the final product price will affect consumers only to some extent and until the 
lead markets become the norm.  

In the long term the green premium will be reduced, therefore consumers will benefit from that 
as well. Public procurement and public support schemes measure would support lead markets, 
entailing  fiscal  benefits  for  purchasing  products  containing  low-carbon  and  EU  content 
materials, which  are, for example, already in  place for EVs. Citizens will also  benefit from 
improved information and, more broadly, carbon emissions reduction. 

Member  States  will  play  an  important  role  in  the  implementation  of  this  initiative.  Public 
procurement and support schemes will contribute the most to the creation of lead markets of 
low-carbon,  EU  content  products.  Thereby,  administrations  will  need  to  include  these 
provisions  in  their  procurement  practices,  including  monitoring  and  reporting.  Permitting 
provisions  will  also  have  to  be  implemented  by  Member  States,  where  coordination  across 
public authorities will be crucial.  

The  financial  burden  associated  with  low-carbon  requirements  in  public  procurement 
procedures  and  support  schemes  would  primarily  fall  on  Member  States  and  other  public 
authorities, requiring a limited increase in public spending on low-carbon products.  

107 

 
2.  Summary of costs and benefits 

I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

LAB 2 – Creation of label 
on carbon intensity steel 

Direct benefits 

Steel businesses: Will benefit from a certification that will allow the differentiation of 
low-carbon  steel  on  the  market  and  increased  transparency,  leading  to  a  competitive 
edge, reduced administrative burden from the multiplications of labels, and possibility 
to derisk investment in decarbonisation and new markets (combined with LEAD_EII 2). 
Downstream businesses: Customers will benefit from increased transparency on low-
carbon steel, which will help them reduce their scope 3 emissions and achieve their own 
decarbonisation goals.  
Public administration: Will benefit from a common European, pre-verified label on the 
carbon intensity of steel, which will provide a clear reference for assessing compliance 
with low-carbon requirements in public procurement rules. It would also create a level 
playing  field  across  the  single  market.  It  will  eventually  allow  procedural  and 
environmental costs saving. 

A  label  for  low-carbon  steel,  through  the  standardisation  and 
improved  information  on  the  carbon  emissions  impacts  of  steel, 
will increase the value and marketability of low-carbon steel, open 
new  markets,  derisk  investment  and  increase  access  to  green 
finance  or  ESG-linked  loans,  and  create  a  level  playing  field 
between steel companies engaged in decarbonisation activities. 

LEAD_EII  2  -  Increased 
demand  for  low-carbon 
EU EII products 

EII businesses: Benefits include value added increases, market certainty and increased 
demand  for  European,  low-carbon  EII  products,  thereby  facilitating  investment  in 
decarbonisation by providing security of offtakes. In the  long term, this will result in 
decreased production costs and greater competitiveness in global markets.  

Other benefits include preserving European industrial capacities in 
strategic sectors at risk of becoming too much imports dependent.  

The introduction of a 25% low-carbon steel, a 5% low-carbon cement and a 25% low-
carbon  aluminium  target  in  relevant  downstream  sectors  can  result  in  the  following 
yearly CO2 savings (2030): Steel: 3.37 Mtonnes CO2, Cement: 0.69 Mtonnes CO2 and 
Aluminium:  0.22  Mtonnes  CO2.  Total:  4.28  Mtonnes  CO2.  It  would  also  lead  to  the 
preservation of up to 4 500 new jobs in the steel sector.  

Low-carbon measures in steel, cement and aluminium would result in GVA EUR 241 
million for steel and aluminium sectors, and GVA EUR 445 million for cement (EUR 
686 million). 

See Annex 4 Section 2 for calculations of the benefits highlighted 
here.  

 
 
 
 
 
 
 
 
I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

LEAD_BAT 
- 
Increased demand for EU 
batteries 

1 

LEAD_SOL 
– 
Increased demand for EU 
solar manufacturing 

1 

Amount 

Comments 

Batteries  manufacturing  businesses:  Secure  demand  for  EU-made  batteries  and  key 
battery components to develop a strong value chain and cut strategic dependencies for 
a  sector  crucial  for  achieving  climate  goals,  defence  applications,  and 
the 
competitiveness of downstream sectors. The benefits of Made in EU on batteries include 
creating  the  market  certainty  needed  to  de-risk  investments  and  anchor  battery 
production along the supply chain within the EU.  

This measure would help anchor  the total number of jobs expected under the current 
pipeline of projects, which stands at 170 000 by 2030, out of which around 85 000 are 
considered to be at medium or high risk.  
Additionally, LEAD_BAT 1 would result in 25.6 Mtonnes CO2 savings in 2030. 

Upstream businesses: Expected benefits for the batteries-related critical raw materials 
projects.  A  stable  demand  of  critical  battery  components  will  allow  to  de-risk 
investments into upstream critical raw materials projects related to battery materials. 

Solar manufacturing businesses: Offtakes for the EU solar manufacturing supply chain 
are expected to be secured, in alignment with the projected 2030 manufacturing capacity 
based on the project pipeline. With the LEAD_SOL 1 policy option, over 20 GW of the 
deployment  of  PV  would  be covered  which helps  ensure  the  current  existing  project 
pipeline (as per the European Solar Industry Alliance246) to be realised. Thus, this would 
help bridge the gap between EU manufacturing capacity and the demand for EU-made 
solar modules. 

The  measures  focused  on  public  procurement/auctions,  as  well  as  public  support 
schemes for solar manufacturing could result in a combination of 58 852 jobs. 

In the long term,  the benefits include decreased production costs 
in  global  markets.  Securing 
and  greater  competitiveness 
manufacturing at scale through IAA  can help narrowing the cost 
gap with China by approximately 40%. 

The benefits include increased demand for EU solar manufacturers 
and  the  preservation  of  existing  EU  production  capacity  while 
strengthening  the  business  case  for  new  manufacturing  projects. 
Additionally,  reduced  investment  risks  will  enable  more  solar 
manufacturing projects to reach their Final Investment Decision. 
Implications for consumers include more reliable delivery due to 
lower exposure to geopolitical or trade disruptions, easier warranty 
enforcement and repairs due to easier access to EU-firms/installers, 
increased  traceability  of  material  origin,  lower  environmental 
impact  thanks  to  shorter  transport  distances,  reduced  risk  of 
purchasing products linked to forced labour, and a contribution to 
strengthening  local  resilience  and  industrial  sovereignty  through 
job creation.  

246 Meet our members – European Solar PV Industry Alliance 

109 

 
 
 
 
 
 
I. Overview of Benefits (total for all provisions) – Preferred Option 

Amount 

Comments 

Description 

LEAD_VC  1  –  Increase 
demand for EU content in 
vehicle components 

The increase in EU content of EVs sold in the EU would lead to higher sales of EU 
components.  
Furthermore,  the  measure  is  projected  to  lead  to  the  generation  of  EUR  10.5  billion 
Global Value Added in 2027 and EUR 9.7 billion in 2030 when assessing the impact, 
taking into account only the first tier of the value chain. 

Notably:  

LEAD_VC 1 would lead to an overall increase in sales for vehicle component suppliers 
(referred to as: “Companies”: EUR 6.5 billion in 2027 and 6.9 billion in 2030. 
The extra cost for the downstream sector (EU EV manufacturers) of EUR 1.9 billion in 
2030 would be completely offset by the increase in sales of EUR 9 billion in 2030 across 
all vehicle segments.  

When it comes to the consumers, Made in EU compliant EVs gain a price advantage, 
and cars are assumed to become more affordable.  

The  impact  on  EU  automotive  component  suppliers  should  be 
positive  in  both  scenarios  due  to  increased  sales  to  car 
manufacturers that sell in the EU market.  

In  addition,  for  those  EU  manufacturers  that  comply  with  the 
requirements,  the  measure  will  not  represent  any  additional 
adjustment costs, since the initial share of Made in EU content is 
estimated  at  70%.  Hence  the  first  target  would  contribute  to 
safeguarding 
industry,  while 
local  vehicle  component 
preventing  further  offshoring supply  chains.  The  measure would 
imply  an  increase  in  costs  (see:  Section  6),  however  due  to  the 
increased sales of vehicles, the negative implications on the EU EV 
manufacturers would be mitigated.  

the 

As the policy measure would apply indistinctively to EU and non-
EU car manufacturers, the level-playing field would be preserved 
and EU EV manufacturers could gain competitive advantage in the 
EU  single  market,  while  not  having  significant  impact  on  the 
competition.  

Overall,  benefits  of  the  measure  are  significant,  and  it  would 
contribute to safeguarding the EU industry, re-establishing a level 
playing field, while providing a competitive advantage for the EU 
EV manufacturers in the internal market.  

The  preferred  option  is  not  intended  to  deter  investment  but  to 
enhance quality, stability, and long-term value of investments in 
the  EU.  Conditionalities  aim  to  anchor  foreign  investors’ 
technological,  R&I,  and  production  activities  within  Europe, 
ensuring  that  the  EU  remains  an  attractive  and  predictable 
destination for strategic and high-quality investment. By enforcing 
legal  certainty,  the  measure  supports  continued  inflows  of 
productive investment rather than restricting them.  

INV  2  –  Maximise 
foreign 
of 
benefits 
investments in the EU via 
conditionalities 

EII Businesses: Benefits include securing critical technologies and intellectual property 
vital  for  European  innovation  and  competitiveness.  Companies  are  also  expected  to 
embed  more  R&I  and  technologies  in  their  EU  operations.  Domestic  value-added 
production  encourages  long-term  investment  and  a  more  predictable  investment 
environment, including for SMEs.  

110 

 
 
 
 
I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

PERM  2  –  Digitalisation 
of permitting procedures 

Industrial manufacturing businesses (NACE code C): Cost savings of EUR 240 million 
for  all  manufacturing  industries  (2.2  million)  in  the  EU  could  be  perceived  for  the 
digitalisation of 5 similar administrative processes.247  

MS  administrations:  Digitalisation  of  permitting  procedures  per  year  in  efficiency 
savings could lead up to EUR 1.3 billion for procedures with a volume of at least 100 
000 transactions.248 

 Projects in industrial areas: Benefits include improved support for access to funding for 
decarbonisation projects, which is likely to accelerate investment decisions and support 
industrial decarbonisation efforts across companies in the EU. 

AREA 2 - Member States 
to  designate 
industrial 
areas and facilitate access 
to public funding  

Indirect benefits 

Increased  access  to  low-
carbon products 

Citizen  /  Consumers:  The  steel  label  will  provide  transparency  regarding  the  carbon 
intensity of steel content, supporting market differentiation for low-carbon products and 
enabling consumers to make more sustainable choices. 

Furthermore, when the label is linked to public support schemes, it 
can  incentivise  consumers  to  increase  their  demand  for  lower-
carbon products.  

Employment 

LEAD_EII 2 – Low-carbon & Made in EU for EII products: increased stable demand 
for EU, low-carbon materials are expected to generate new employment opportunities 
linked to these technologies and supporting the industrial transition. 

The IAA provisions will generally lead to new job creation in the 
industry  field,  plus  upskilling  and  reskilling  opportunities  in 
relation to decarbonisation projects.  

Low-carbon steel requirements in public procurement could preserve up to 4 500 jobs 
by 2030. 

LEAD_BAT 1 – Made in EU for batteries: announced gigafactories expected to create 
by 2030 up to 85000 jobs  

LEAD_SOL 1 – Made in EU for solar manufacturers: In terms of the policy segments 
assessed in the impact assessment, this corresponds to an estimated 5 193 jobs created 

247 Commission estimations based on a study on business procedures carried out to underpin the Single Digital Gateway impact assessment concluded that for 9 procedures, the cost savings for all EU businesses - if e-procedures were 
introduced where missing - would be in the order of magnitude of EUR 7 billion. Procedures in the scope of the study were linked to ten tax procedures. An adjustment was made to reflect lower volume of processes, and to reflect 
industrial manufacturing companies only.  
248 Estimates based on digitalisation of procedures in the Netherlands, following a stakeholder consultation on the single digital gateway. These figures could be an overestimation, since costs and savings depend largely on the type 
of administrative procedure to be digitalised, the number of transactions/uses per procedure, amongst others. EUR-Lex - 52017SC0213 - EN - EUR-Lex 

111 

 
 
 
 
 
 
I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

by  the  public  procurement  provisions,  32  888  jobs  by  auctions,  and  20  771  jobs  by 
public support schemes, with a total of 58 852 jobs. 

INV 2 - Conditions on value added production (R&I, engineering, domestic processing 
and  manufacturing)  could  lead  to  more  EU  quality  jobs.  Particularly,  staffing 
requirements and social protection conditionalities could lead to more employment.  

LEAD_VC 1 could stop, and possibly reverse, the trend of progressive job losses which 
has been materialising over the past years in the EU’s vehicle components supply chain. 

GHG 
reductions 

emission 

LAB  2  –  Low-carbon  steel  label:  will  support  the  decarbonisation  of  the  (high 
emissions) steel industry, covering up to 78% of steel emissions. 

Indirect positive effect on society at large by reducing industrial 
carbon emissions, with energy intensive industries accounting for 
almost 20% of industrial GHG emissions in the EU.  

LEAD_EII 2 – Low-carbon & Made in EU for EII products: Increased demand for low-
carbon products will lead to carbon emission reductions for EII industries.  Assuming 
low-carbon targets for steel, cement and can lead to GHG emission reductions of 4.28 
Mtonnes CO2 in 2030, with a monetary value of around EUR 428 million per year.  

LEAD_BAT 1 - EU-made batteries emit ~25% less CO₂ than Chinese-made ones (based 
on average grid). Reductions extend across the upstream value chain and so boosting 
domestic  supply  chains  create  environment  and  climate  benefits.  This  could  lead  to 
GHG emission reductions of 25.6 Mtonnes CO2eq in 2030, with a monetary value of 
EUR 2 560 million.  

 LEAD_SOL  1  –  Solar  PV  systems  produced  in  EU  must  comply  with  strict 
environmental standards throughout their entire life cycle, including requirements on 
carbon footprint, which will have a positive environmental effect. 

LEAD_VC  1-  In  the  “Internal  market  reaction”  scenario  of  the  presented  analysis, 
global GHG emissions from vehicle manufacturing decrease by 0.5 Mtonnes CO2e in 
2027 and by 0.6 Mtonnes in 2030 due to shifts in production; they further decline by 0.1 
Mtonnes due to reductions in international transport associated with EU imports, with a 
total monetary value of EUR 70 million.  

112 

 
 
 
 
 
 
 
 
II. Overview of costs – Preferred option 249 

SO 

 Cost Type 

Citizens/Consumers  

Businesses  

Administrations (MS/COM)  

One-off  

Recurrent  

One-off  

Recurrent  

One-off  

Recurrent 250 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

LAB 2 

LEAD_EII 
2 

Direct 
adjustment 
costs 

European 
Commission: 2 FTE 
(EUR 388 000 total) 
for developing the 
methodology for the 
low-carbon steel 
label  

Selected downstream 
sector: Expected 
moderate but non-
quantified impact 
from the potential 
readjustment of supply 
chains, including 
finding manufacturers 
for low-carbon/EU 
products, and 
manufacturing 
processes to ensure 
compliance with low-
carbon and Made in 
EU requirements 

For energy intensive 
industries: limited 
increase in cost, 

Low-carbon measures: 
Automotive sector EUR 291 
million from low-carbon steel 
and aluminium,  

The construction sector EUR 
691 million from low-carbon 
steel, aluminium and cement,  

249 For the calculations of the costs, including the assumptions made, see Annex 4, under 2. Analysis of impacts 
250 Recurring costs are yearly, unless otherwise stated. Applicable for citizens and businesses as well 

113 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
passed down to 
consumer 

Direct 
administrative 
costs 

LEAD_BA
T 1 

Direct 
adjustment 
costs 

EVs: EUR 292-
730 million for 
public support 
schemes 

Selected downstream 
sector: Expected 
moderate but non-
quantified impact 
from the potential 
readjustment of supply 

114 

1 week FTE per year for the 
automotive sector 
 for demonstrating 
compliance with low-carbon 
and made in Made in EU 
requirements (including for 
batteries and vehicle 
components) 

And ¾ weeks FTE per year 
for the construction sector 

3/4 weeks FTE per year for 
automotive sector for 
demonstrating compliance 
with low-carbon content 
requirements  

And ½ weeks FTE per year 
for the construction sector 

With a total cost of EUR 1 
million for affected OEM and 
construction companies 

Steel label certification: EUR 
6 700 per site per year, with a 
total of EUR 154 100 for 23 
steel sites 

EVs: EUR 0.9-2.2 billion for 
public support schemes  

Member States: 2 
FTE (EUR 3.3 
million total for all 
Member States) per 
year to design and 
monitor in relation to 
lead market 
provisions. (including 
for batteries and 
vehicle components) 

European 
Commission: 1 month 
FTE (EUR 16 167) 
per year for 
monitoring lead 
provisions (including 
batteries, solar and 
vehicle components) 

Member States total: 
Auctions for BESS: 
EUR 26-66 million 
Vehicle fleet EVs: 
EUR 132 – 331 
million  

 
 
 
 
 
  
 
 
 
 
 
 
 
 
Direct 
administrative 
costs 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

LEAD_SOL 
1 

chains, including 
finding manufacturers 
for EU products, and 
manufacturing 
processes to ensure 
compliance with made 
in Made in EU 
requirements 

Selected downstream 
sector: Expected 
moderate but non-
quantified impact 
from the potential 
readjustment of supply 
chains, including 
finding manufacturers 
for EU products, and 
manufacturing 
processes to ensure 
compliance with Made 
in EU requirements. 

115 

1/2-week FTE (EUR 2 117 
total for all companies) per 
year for demonstrating 
compliance with made in EU 
requirements 

1/2 week FTE (EUR 2 646 
total for all companies) per 
year for demonstrating 
compliance with made in EU 
requirements 

EUR 241.8 
million for public 
support schemes 

Member States: 1/4 
FTE (EUR 412 776 
total for all Member 
States) per year to 
design and monitor in 
relation to lead 
market provisions  

Member States: EUR 
60.45 million per year 
for public 
procurement 

EUR 382.85 million 
for auctions 

Member States: 1/2 
FTE per Member 
State (EUR 825 552 
total for all Member 
States) per year to 
design and monitor in 
relation to lead 
market provisions  

 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
LEAD_VC 
1 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

INV 2 

Direct 
adjustment 
costs 

Direct 
administrative 
costs 

PERM 2 

Direct 
adjustment 
costs 

EVs: EUR 689.66 
million 

Small price 
increase in the 
short term (e.g. 
ECs, buildings) 
as firms adapt 
supply chains to 
meet FDI 
conditionalities. 

Non quantified but  
limited costs of  
implementing FDI  
conditionalities such  
as value-added  
production, including  
staffing requirements  

For downstream 
sector, expected 
moderate and 
temporary cost 
increases if suppliers 
pass through 
compliance costs.  

1 month FTE (EUR 
117 600 total for all 
companies) for 
notification of 
Member State 
authorities for FDIs 
screening 

116 

Corporate fleet EVs: EUR 
1.24 billion 

Downstream sector (OEMs): 
EUR 1.9 billion  

Vehicle fleet EVs: 
EUR 100.29 million 

European 
Commission:3/4 FTE 
(EUR 145 000) per 
year to ensure 
implementation and 
operation 

Member States: 1 
FTE (EUR 1.65 
million total for all 
Member States) per 
year 
European 
Commission: EUR 20 
000 per year per 

European 
Commission: 
investment in the 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct 
administrative 
costs 
Direct 
adjustment 
costs 

Direct 
administrative 
costs 

AREA 2 

back-end SDG 
system EUR 20 000 

section for expanding 
Annex I of the  
SGDR with 
permitting (Your 
Europe Portal)  

Member States: up to 
EUR 40 000 per year 
per section, with a 
total cost of EUR 1.08 
million for all 
Member States 

1 FTE (EUR 1.65 
million for all 
Member States) per 
year to designate 
priority projects / 
acceleration areas and 
facilitate benefits 

III. Application of the ‘one in, one out’ approach – Preferred option(s) 

EUR in million 

One-off 
(annualised total net present value over the relevant period)251 

Recurrent 
(nominal values per year) 

Total 

Businesses 

New administrative 
burdens (INs) 

Total: EUR 0.01 million for FDI notification:  
Large Companies: EUR 0.0059 million 
SMES: EUR 0.0041 million 

LEAD_EII & LEAD_VC:  

EUR 1.17 million 

251 The annualised values were calculated using the one-off estimates from the main text, allocating them over a 10-year period and applying a 3% discount rate. 

117 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
•  Automotive sector: EUR 

0.0148 million (large 
companies) 

•  Construction sector: EUR 

0.988 million 

o  SMEs: EUR 0.982 

million 

o  Large Companies: 
EUR 0.0067 million 

LEAD_SOL: EUR 0.0026 million 
(large companies) 
LEAD_BAT: EUR 0.0021 million 
(large companies) 

Total EUR 1.009 million for lead 
market provisions 

EUR 0.154 million for steel label 
certification (large companies) 

Total: EUR 1.16 million 

Removed 
administrative 
burdens (OUTs) 

Net administrative 
burdens* 

Adjustment costs** 

Total: EUR 28.14 million252 for all manufacturing industries in 
the EU for the digitalisation of 5 permit-granting procedures:  

Large Companies: EUR 0.28 million 

SMEs: EUR 27.85 million 

Not available 

EUR 28.14 million 

EUR - 28.13 million 

EUR 1.16 million 

- EUR 26.97 million 

EUR 3.7 million  

252 This is the annualised value corresponding to one-off cost savings of EUR 240 million under Annex 4 - savings for PERM. 

118 

 
 
 
 
 
 
 
 
New adjustment cost 

Citizens 

New administrative 
burdens (INs) 

Removed 
administrative 
burdens (OUTs) 

Net administrative 
burdens* 

Adjustment costs** 

Total administrative 
burdens*** 

Not available 

Not available 

Not available 

Not available 

Not available 

Not available 

EUR 1.442 million 

- EUR 28.13 million 

EUR 1.16 million 

- EUR 26.97 million 

(*) Net administrative burdens = INs – OUTs;  
(**) Adjustment costs falling under the scope of the OIOO approach are the same as reported in Table 2 above. Non-annualised values;  
(***) Total administrative burdens = Net administrative burdens for businesses + net administrative burdens for citizens. 

3.  Relevant sustainable development goals 

IV. Overview of relevant Sustainable Development Goals – Preferred Option(s) 

Relevant SDG 

Expected progress towards the Goal 

DG  #7  Affordable  and  clean 
energy,  SDG  #13  Climate 
action 

The creation of lead markets for EU solar manufacturing will enable the local development of clean and affordable energy. Similarly, ensuring demand 
for  low-carbon,  EU-made  EIIs  industrial  products—including  through  the  creation  of  a  label  for  steel  and  content  requirements—will  result  in 
reductions in carbon emissions from the most hard-to abate sectors. 

SDG  #8  Decent  work  and 
economic growth 

The implementation of IAA is expected to have a positive impact on employment, reskilling, and upskilling—particularly in EII industrial regions, as 
well as in solar, battery, and automotive parts manufacturing. This will also generate positive effects on the specific downstream sectors targeted by 
IAA and, by extension, across the entire value chain. 

119 

 
 
 
 
 
 
 
 
 
 
 
 
IV. Overview of relevant Sustainable Development Goals – Preferred Option(s) 

Relevant SDG 

Expected progress towards the Goal 

SDG  #9  Industry,  innovation 
and infrastructure 

The  proposal  is  expected  to  strengthen  EU  industrial  resilience  by  increasing  demand  for  EU  industrial  products,  supporting  investment  in 
decarbonisation through the identification of industrial decarbonisation priority projects and foreign direct investment conditionalities, and ensuring 
faster decarbonisation processes by speeding up and facilitating permitting procedures. 

120 

 
 
Annex 4: Analytical method 

1.  Models used 
The  analysis  contained  in  this  Impact  Assessment  builds  on  data  collected  from  desk  research 
(academic studies, economic reports, media items, input from stakeholder outreach activities) and 
Commission officials’ expert knowledge.  

In  addition,  the  analytical  framework  used  for  some  parts  of  this  impact  assessment  builds  on 
CARMEN, FIGARO, FIDELIO, SMILE EU, and SCAN. Information has been analysed against 
the  main  problems  identified  for  the  purpose  of  this  initiative,  the  problem  drivers  as  well  as 
stakeholder positions. Whenever possible, the Impact Assessment provides a quantitative analysis 
of  benefits  and  costs  relating  to  the  main  economic,  environmental  and  social  impacts.  The 
cost/benefit analysis, however, is not fully comprehensive due to data gaps, notably related to the 
short time available to request and collect information beyond questions identified early on in the 
call for evidence and the public consultation The views of stakeholders are transparently reflected 
in the Impact Assessment. 

1.1. CARMEN 

CARMEN (Computable Analysis of the Regional Multipliers of the European economy) is a 
model developed by the European Commission’s JRC that allows for a wide range of policy relevant 
impact  analyses  at  territorial  and  industry  level.  CARMEN  is  developed  in  a  modular  approach 
allowing, for the first time, to cluster groups of regions (e.g. regions with a significant share of high-
tech component in their economy) throughout the EU and assessing the impacts of investments both 
in the regions inside and outside the cluster. CARMEN was used to evaluate the competitiveness 
gain of increased EU global market shares (e.g., 1%) in energy intensive industries.  

We have identified eight clusters, one for each EII by selecting the top 60 EU NUTS2 regions in 
terms of their total industry output. The EIIs cluster comprises the following industries: paper and 
paper products; coke and refined petroleum products; chemicals and chemical products; other non-
metallic mineral products; cement (subset of other non-metallic products); basic metals; steel (subset 
of basic metals); aluminium (subset of basic metals). 
CARMEN253’s  capability  is  to  evaluate  the  short-term  economic  effects  of  external  shocks, 
delivering outcomes with detailed insights by industry and specific regions. 

CARMEN’s  main  input  is  the  FIGARO-REG  Multi-regional  Input-Output  (MRIO)  table,  a 
comprehensive  economic  database  that  covers  240  EU  regions  (NUTS2),  48  non-EU  regions 
(Norway and United  Kingdom), and 16 main non-EU trading  actors, with data for 56 industries 
(Garcia Rodriguez et al., 2023). 

The FIGARO-REG tables encompass a complete description of all bilateral trade flows between the 
above  mentioned  288  regions,  for  intermediate  and  final  uses,  as  well  as  with  other  non-EU 
countries. This allows to measure the gross value added (GVA254) embodied in exports or in the 
final  demand  of  specific  products  by  NUT2  region.  As  such,  it  enables  an  understanding  of  the 
potential impact that economic shocks may have on activities in different regions. Therefore, the 
findings of this study here should be interpreted as a detailed snapshot of trade in terms of value 
added, rather than as an analysis of the effects of policy shocks on GVA. 

Output multipliers measure the total change in production resulting from a one-unit change in the 
final use of a specific product. In this exercise, we calculated GVA multipliers as shown in Miller 
and Blair (2022) to estimate intraregional (i.e. regional value added generated within the energy-

253 Other modules are related to the territorial impact analyses of supply chain disruptions of economic activities (Rueda-Cantuche et al., 2024a) or 
the analysis of the EU regional trade exposure to specific protectionist measures of non-EU countries (Rueda-Cantuche et al., 2024b). 
254 GVA is obtained as the sum of gross operating surplus, compensation of employees and other taxes less subsidies on production. 

 
 
 
intensive industries cluster); interregional (i.e. regional value added generated by the interactions of 
the EIIs cluster with all non-energy-intensive industries outside the cluster) and feedback (i.e. value 
added  generated  by  the  interactions  between  non-energy-intensive  industries  outside  the  cluster) 
effects.  

1.2. FIDELIO 

JRC  contribution  with  the  FIDELIO  (Full  Interregional  Dynamic  Econometric  Long-term 
Input-Output) model 

FIDELIO stands for Fully Interregional Dynamic Econometric Long-term Input-Output model. It is 
a  dynamic  general  equilibrium  model  developed  by  the  JRC  that  has  been  used  in  this  Impact 
Assessment to model the economic and competitiveness impacts of introducing  Low-carbon and 
Made  in  EU  requirements  for  steel,  cement  and  aluminium  in  the  construction  and  automotive 
industries  in  the  EU.255  FIDELIO  (Rocchi  et  al.,  2025)256  is  a  general  equilibrium  model  which 
provides results based on external “shocks” to the economy, which are then transmitted to the rest 
of the economy according to the model specifications, using the Eurostat's official statistics on input-
output tables for the European Union - FIGARO database (Rueda-Cantuche and Remond Tiedrez, 
2019257). 

For simulating the impacts of low-carbon and Made in EU requirements for aluminium and steel, 
FIDELIO  was  used  in  combination  with  the  FIGARO-E3  database  (Cazcarro  et  al.,  2025);  a 
disaggregation of the Eurostat’s global FIGARO input-output tables (Remond-Tiedrez and Rueda-
Cantuche, 2019) that includes such materials explicitly represented. 

Two scenarios were modelled: 

•  Scenario 1: the transition to low-carbon requirements within the FIDELIO framework is 
modeled  as  a  shift  towards  higher-cost  sustainable  inputs.  The  "green  premium"  is 
incorporated  into  sectoral  production  costs  by  applying  targeted  cost  shocks258  to  key 
industries (steel and aluminum procurement in the automotive sector (C29), as well as to 
cement,  steel,  and  aluminum  in  the  construction  industry  (F)).  The  results  are  then 
implemented when public intervention is present i.e. in public procurement or public support 
schemes (LEAD_EII_1 and LEAD_EII_2), as well as for the entire market, irrespective of 
the public intervention in the automotive and construction sectors. (LEAD_EII_3) 

•  Scenario 2: a ‘Made in EU’ scenario of 85% European content requirement for steel, 70% 
for  aluminium  and  95%  for  cement  is  implemented  to  construction  and  automotive 
production (LEAD_EII_3). 

The following assumptions were used: 

•  EU Member States can do a different effort to achieve the EU target, notably influenced by 
what  the  previous  EU  content  of  their  production  activities  was  before  the  policy 
implementation. 

•  Directly impacted downstream industries are automotive and construction. 

Temporal profile to reflect gradual implementation: 

-  Scenario 1 assumes a gradual increase until 2030. 

255 Further information on FIDELIO and its underlying equations and data can be found in the FIDELIO manual 
256 Rocchi et al. (JRC) (2025). FIDELIO Manual: Model description, equations, data sources and econometric estimations. 
257 Remond Tiedrez (Eurostat) (2019). European Union inter-country supply, use and input-output tables — Full international and global accounts for 
research in input-output analysis (FIGARO). 
258 The calibration of these shocks resulted in estimated EU average price increases of 0.225% for automotive products and 0.45% for construction, 
reflecting the anticipated inflationary impact of the green transition. 

122 

 
 
 
 
-  Scenario 2 assumes that the policy measure starts in 2025, gradually increasing until 2028, 
remaining constant until 2035 and fading from 2036 onwards. This reflects the anticipation 
of  the  activities  by  public  authorities  with  the  legislative  proposal  of  the  Commission 
adopted,  but  only  a  real  entry  into  force  of  these  provisions  by  2028.  The  fact  that  this 
obligation fades post-2036 is here to reflect that such requirements will be subject to a review 
clause that could phase out these policy measures.  

1.3. SMILE EU 

JRC contribution with the SMILE EU (Single Market Integration through a MIcroeconomic 
LEns) 

SMILE EU (Single Market Integration through a MIcroeconomic LEns) is a set of analytical and 
quantitative  tools  on  market  efficiency  and  microeconomic  behaviour  to  provide  tailor-made 
answers  related  to  industrial,  innovation  and  employment  policies.  At  its  core,  there  is  a 
macroeconomic model where economic outcomes are the result of microeconomic decisions made 
by heterogeneous firms and/or households. In SMILE EU, the micro drives the macro. The impact 
assessment  builds  on  various  tools  developed  within  SMILE  EU.  It  leverages  the  methodology 
developed to disaggregate input-output data, which provides science-to-policy evidence at a more 
granular level.  

JRC uses the econometric model behind to disentangle the production technology of EVs (electric 
vehicles)  and  ICE  (internal  combustion  engine)  vehicles  from  the  macroeconomic  industry  C29 
(Manufacture of motor vehicles, trailers and semi-trailers). The results also unveil the differences 
in the global value chain of EU car manufacturers when producing EVs as opposed to ICE vehicles. 
JRC utilised the modelling capabilities behind  SMILE EU to  account  for how policy affects  the 
microeconomic  decisions  of  firms  and  households.  Consumer  reactions  to  prices,  substitution 
between ICEs and EVs, and competition between EU and non-EU car manufacturers are crucial to 
get a comprehensive picture of the aggregate effects. The different mechanisms that come into place 
inform policymakers of the suitability of various instruments that can mitigate the side effects of the 
policy. 

As with any modelling exercise, the scenarios analysed are a simplification of the reality. In the case 
of vehicle components, only one “average” EV (and one average ICE) is modelled (full battery EVs 
cannot be differentiated from other EVs such as plug-in EVs or fuel cell EVs). It is also assumed 
the  same  production  technology  (same  input)  to  produce  a  vehicle  over  the  years.  Nevertheless, 
some of the modelling assumptions are relaxed through the analysis of two different scenarios on 
vehicle components (accounting for different potential reactions of non-EU manufacturers) – see 
Annex 14 – and a sensitivity analysis of key parameters (elasticities of demand and of substitution) 
is performed – see Annex 15. 

1.4. JRC-GEM-E3 

JRC assessment of environmental impact LEAD_VC using the JRC-GEM-E3 model 
In  a  reference  scenario  which  includes  current  policies259,  the  JRC-GEM-E3  model  projects  the 
emission intensity (emissions including from electricity use divided by output) in the “Manufacture 
of motor vehicles, trailers and semi-trailers” sector in regions from which the EU imports vehicles 
to be at least twice as high as in the EU in 2025. This efficiency gap is projected to increase over 
time as the emission intensity in the EU declines faster than outside the EU. This intensity does not 

259  European  Commission  (2024).  Commission  Staff  Working  Document:  Impact  Assessment  Report  Part  1.  Accompanying  the  document: 
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee 
of the Regions. Securing our future: Europe's 2040 climate target and path to climate neutrality by 2050, building a sustainable, just and prosperous 
society, SWD/2024/63 final. 

123 

 
 
 
contain the whole vehicle value chain. The difference in the emission intensity is used to calculate 
changes in emission from the production of vehicles.  

1.5. SCAN 

SCAN (Supply Chain Alert Notification), developed by DG GROW, complements these models by 
monitoring supply chain distress across the EU. It is an indicator-based quantitative system designed 
to  detect  early signs of shortages or inflationary pressures in  strategic products  and sectors. The 
SCAN combines: 

•  High-frequency indicators (Block 1), which track import prices and quantities using customs 
data updated every two weeks, identifying products that show a simultaneous rise in import 
prices and fall in import volumes as potential distress cases; and 

•  Structural indicators (Block 2), which assess ex-ante risks based on import concentration 
(Herfindahl-Hirschman Index), dependency on non-EU suppliers, and substitutability with 
EU production, using COMEXT and PRODCOM data. 

At the sectoral level, the SCAN also integrates short-term business statistics and business surveys 
to identify industries where firms report material and equipment shortages, enabling a cross-check 
between quantitative and qualitative evidence. 

In this Impact Assessment, SCAN indicators were used to assess the exposure of the EU’s energy-
intensive industries (EIIs) to external supply disruptions and dependencies 

2.  Analysis of impacts  
All  costs  in  this  Impact  Assessment  are  presented  for  the  year  2030.  The  Impact  Assessment 
explores measures in a short to medium term to be re-evaluated in 2030 to assess the success of the 
measures. As such, 2030 is identified as key year to measure potential impacts on costs and benefits.  

Annex 15 provides a sensitivity analysis for some of the values analysed below to provide a full 
spectrum of potential cost impacts.  

2.1. Administrative costs and benefits 
•  For the purpose of this exercise, it is assumed that the one-off costs and savings occur in 
2030. In reality, however, these are expected to be incurred closer to the date of entry into 
force. 

•  Full Time Equivalents (FTEs were established based on internal Commission analysis. The 
hourly wage for Member States and businesses was estimated at EUR 29.4 /h. The European 
Commission  costs  per  FTE  are  EUR  194  000/year.260  The  number  of  companies 
participating in public procurement was assumed to be 18% of total companies operating in 
the EU.261 

•  LEAD_EII:  The  number  of  affected  automotive,  battery  and  solar  manufacturing 
companies  was  estimated  based  on  available  data  on  companies  present  in  the  European 
market. 
The number of affected construction companies in the context of administrative costs are 
limited to large and medium sized companies, due to limited compliance requirements only 
applicable  to  large  and  medium  sized  companies.  The  administrative  costs  shown  for 
automotive manufacturers combines all impacts derived from different measures on steel, 
batteries  and  vehicle  components  jointly,  under  the  EII  table  below.  Public  procurement 
measures are limited to purchase/lease, not services. 

260 Based on internal Commission documents. 
261 Uni Europa (2025), European data shows: companies fear lowest price tendering 

124 

 
 
 
•  LAB: While the use of LAB 2 is voluntary by design, compliance for LEAD_EII measures 
on low-carbon steel would require the use of the label, or equivalent, to show compliance 
with  the  low-carbon  measures.  In  this  regard,  the  costs  for  LAB  have  been  assigned  to 
relevant steel sites. The low-carbon steel label costs for businesses can be estimated using 
the cost structure from ResponsibleSteel. This estimate took the average between costs for 
normal and large companies, resulting in a yearly approximate cost of EUR 6 700 per steel 
site.262 Recurrent administrative costs of demonstrating compliance with steel label would 
be limited as companies are already obliged to report on relevant data under the EU ETS. 

•  PERM: The cost savings from implementing a digitally integrated permit granting process 
are calculated based on the study on business procedures carried out to underpin the Single 
Digital Gateway impact assessment263. It concluded that for 9 procedures, the cost savings 
for all EU businesses (EU business  in  2023 represented 33 million  enterprises264), - if e-
procedures were introduced where missing - would be in the order of magnitude of EUR 6.5 
billion  for  domestic  users  (i.e.  433.3  million  for  the  2.2  million  businesses  in  the 
manufacturing sector). Following an adjustment to the EUR 6.5 billion to assume an average 
of 5 permit- granting procedures (average number of permits requested for industry), and 
assuming the costs for all procedures is equal, this could translate into savings of EUR 240 
million specifically for the manufacturing sector for an average of 5 procedures.  

the  Single  Digital  Gateway 

through  digitalised  procedures 

•  For  administrations,  benefits  for  national  administrations  from  digitalising  procedures 
proved difficult to assess, as the benefit figures can vary a lot (see tables 6.4 and 6.5 for the 
savings 
Impact 
in 
Assessment265).The  reference  values  (EUR  79.4  million266)  come  from  The  Netherlands, 
which  equals  6.1%  of  the  EU’s  GDP.267  To  have  a  more  nuanced  and  proportionate 
representation between the different Member States and their economic sizes -as a proxy to 
the use of this permitting systems by companies- a calculation based on Netherlands GDP 
in relation to the EU total is done (6.1% out of the EU 100%).  
It is difficult to give a meaningful figure for replacing an existing off-line procedure by an 
on-line version  without  considering the specific  context of each Member State, and their 
level of digitalisation. The costs of moving procedures online vary widely depending on the 
complexity  of  the  procedure,  the  availability  of  digitalised  process  infrastructure,  and 
whether we are talking about both front end (user interface) or both front end and back office 
(processing of the data by the administrations involved).  

• 

•  Moreover,  in  the  absence  of  concrete  data  on  digitalisation  of  industrial  permitting,  an 
approximation is taken with the digitalisation of business procedures in the framework of 
the Single Digital Gateway Impact Assessment to give a range. 

LEAD_EII 

LEAD_EII 

Member States  

Difference to the baseline 

PO1 

PO2 

PO3 

262 Responsible Steel Certification: cdn.prod.website-files.com/6538e481169ed7220c330f0a/6602e990a68fb2bab0a7ce49_Certification-Fees.pdf 
263 SWD/2017/0213 final - 2017/086 (COD) 
264 Large businesses make up only 0.2% of EU enterprises - News articles - Eurostat 
265 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52017SC0213#footnote176 
266 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52017SC0213#footnote176 
267 https://european-union.europa.eu/principles-countries-history/eu-countries/netherlands_en 

125 

 
 
 
 
 
 
 
 
 
LEAD_EII 

Difference to the baseline 

PO1 

PO2 

PO3 

Low-carbon and Made 
in EU requirements in 
public procurement: 

Low-carbon and Made in 
EU requirements in public 
procurement: 

Low-carbon and Made 
in EU requirements in 
public procurement: 

Administrative 
costs (recurring) 

2 FTE (yearly) x 27 
Member States 

2 FTEs (yearly) x 27 
Member States 

2 FTEs (yearly) x 27 
Member States 

Total cost: EUR 3.3 
million 

Total cost: EUR 3.3 
million 

Total cost: EUR 3.3 
million 

(Vehicle requirements 
include batteries and 
vehicle components)  

(Vehicle requirements 
include batteries and 
vehicle components) 

(Vehicle requirements 
include batteries and 
vehicle components) 

Businesses 

Low-carbon 
requirements: 

Low-carbon and Made in 
EU requirements: 

Low-carbon and Made 
in EU requirements: 

¾ week FTE for 
automotive (low-carbon) 

1 week FTE for 
automotive (low-carbon + 
made in EU)  

For low-carbon + made 
in EU reporting, no. of 
FTEs as in PO2 

No. of automotive 
OEMs: 13 (70 OEMs268 
x 18%)  

No. of automotive OEMs: 
13 (70 OEMS x 18%) 

No. of automotive 
OEMs: 70 

Administrative 
costs (recurring) 

½ weeks FTE for 
construction (low-
carbon) 

¾ weeks FTE for 
construction procurement 
(low-carbon + made in 
EU) 

No. of construction 
companies: 6 229 

Total automotive cost: 
EUR 82 320 

Total construction cost: 
EUR 5.49 million 

Total cost: EUR 5.57 
million 

Low-carbon steel label:  

For low-carbon reporting 
only, no. of FTEs as in 
PO1 

No. of construction 
companies: 1 121 (6 229 
large and medium sized 
companies x 18%) 

Total automotive cost: 
EUR 14 818 

Certification: EUR 6 
700/year 

Total construction cost: 
EUR 988 916 

No. of steel sites 
certified: 23 

No. of construction 
companies: 1 121         
(6 229269 large and 
medium sized 
companies x 18%) 

Total automotive cost: 
EUR 11 113 

Total construction cost: 
EUR 659 277 

Total cost: EUR 670 
391 

268 S&P Database 
269 EUROSTAT (NACE Rev. 2) 

126 

 
 
 
 
 
 
LEAD_EII 

Difference to the baseline 

PO1 

PO2 

PO3 

Low-carbon steel label:  

Total cost: EUR 1 million 

Total cost: EUR 154 
100 

Certification: EUR 6 
700 / year 

No. of steel sites 
certified: 4 (23 steel 
sites270 x 18%) 

Total cost: EUR 27 738 

Low-carbon steel label:  

Certification: EUR 6 700 / 
year 

No. of steel sites certified: 
23 

Total cost: EUR 154 100 

European 
Commission 

Administrative 
costs (recurring) 

½ month FTE 

1 month FTE 

1.5 month FTE 

Total cost: EUR 8 083 

Total cost: EUR 16 167 

Total cost: EUR 24 250 

(Covering all lead 
market provisions) 

(Covering all lead market 
provisions) 

(Covering all lead 
market provisions) 

LEAD_BAT 

LEAD_BAT 

Member States  

Administrative costs 
(recurring) 

Businesses 

Difference to the baseline 

PO1 

PO2 

PO3 

 Made in EU requirements in public 
procurement/ auctions: 

BESS: ¼ year FTE 

Total cost: EUR 412 776 

 Made in EU 
requirements in public 
procurement/auctions: 

BESS: ¼ year FTE 

Total cost: EUR 412 776 

Administrative costs 
(recurring) 

Made in EU requirements: 

BESS: ½ week FTE 

Made in EU 
requirements: 

BESS: ½ week FTE 

270 The number of steel sites was based on internal Commission analysis of projected low-carbon steel projects in the EU 

127 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
LEAD_BAT 

Difference to the baseline 

PO1 

PO2 

PO3 

No. of companies affected: 4 (20 BESS 
manufactures271 x 18%) 

Total cost: EUR 2 117 

No. of companies 
affected: 20 BESS 
manufactures 

Total cost: EUR 11 760 

Difference to the baseline 

PO1 

PO2 

PO3 

Made in EU requirements in public 
procurement/auctions: 

1/2 year FTEs x 27 Member States 

Total cost: EUR 825 552 

Made in EU requirements: 

1/2 week FTE 

No. of companies affected: 5 (25 large 
utilities272 x 18%) 

Total cost: EUR 2 646 

Made in EU 
requirements in public 
procurement/auctions: 

1/2 year FTEs X27 
Member States 

Total cost: EUR 825 552 

Made in EU 
requirements: 

1/2 week FTE 

No. of companies 
affected: 25 large 
utilities 

Total cost: EUR 14 700 

Difference to the baseline 

PO1  

PO2  

PO3  

LEAD_SOL 

LEAD_SOL 

Member States  

Administrative costs 
(recurring) 

Businesses 

Administrative costs 
(recurring) 

LAB 

LAB 

Businesses  

271 Europe Battery Energy Storage System (BESS) Companies - Top Company List 
272 SolarPower Europe webpage. Our Members.  

128 

 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
 
EUR 0 

Administrative costs 

European Commission   

label  certification 

EUR  0  (voluntary  label),  however,  the  cost  of 
included  under 
steel 
LEAD_EII  administrative  costs,  as  steel  sites 
must  obtain  low-carbon  steel  certification  to 
comply with lead market provisions 

is 

4 FTE 

2 FTEs 

Administrative costs 
(one off) 

Total cost:  

Total cost: EUR 388 000 

EUR 776 000 

INV 

INV 

Member States 
administrations 

Administrative costs 
(recurring) 

Businesses 

Difference to the baseline 

PO1 

PO2 

PO3 

FDI conditionalities 

1 year FTE x 27 Member States 

Total cost: EUR 1.65 million 

FDI conditionalities 

1 month FTE 

Administrative costs 
(one off) 

EUR 0 
(voluntary) 

No. of companies affected: 25 battery companies273 for 
notification and documentation of compliance with 
conditionalities. 

Total cost: EUR 117 600 

European Commission 

Administrative costs 
(recurring) 

½ year FTE  

Total cost: EUR 
97 000 

3/4 year FTE  

Total cost: EUR 145 500 

273 Operational, announced and under construction battery factories. Source: internal Commission documents 

129 

 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PERM 

PERM 

Member States  

Administrative costs 
(recurring) 

Difference to the baseline 

PO1 

PO2 

PO3 

Single Digital Gateway: 

 Up to EUR 40 000 annually per section x 27 Member States 

Total cost: EUR 1 080 000 million 

Digitalisation of permitting procedures 

Administrative 
savings (recurring) 

Up to 79.4 million274 for one Member State (the Netherlands as 
reference), which accounts for 6.1% EU GDP.275 Therefore, for the entire 
EU’s GDP, up to EUR 1.3 billion for Member State administrations. 

Total savings: Up to EUR 1.3 billion276 

Businesses 

Administrative 
savings 

(one-off)  

European Commission 

Digitalisation of permitting procedures 

EUR 240 million, annualised at 28.14 million over a 10-year period 

Single Digital Gateway: 

Administrative costs 
(one-off and 
recurring) 

Investment in the back-end SDG system EUR 20 000 (one –off) 

EUR 20 000 for expanding Annex I of the SDGR with permitting (Your 
Europe Portal – recurring) 

Total cost: EUR 40 000  

274  European  Commission  (2017).  Commission  Staff  Working  Document  -  Impact  Assessment  Accompanying  the  Document.  Proposal  for  a 
Regulation of the European Parliament and of the Council on establishing a single digital gateway, COM(2017) 256 final, Brussels, 2 May 2017, 
table 6.6. 
275 European Union webpage. Netherlands. 
276 This figure could be an overestimation, as it is based on business procedures with a volume of at least 100 000 transactions and costs for the 
procedure at hand can vary greatly. The reference values (EUR 79.4 million) come from The Netherlands’s feedback to the Single Digital Gateway 
Impact Assessment. To have a more nuanced and proportionate representation between the different Member States and their economic sizes, we use 
the EU’s GDP as a proxy to the use of permitting systems by companies. A calculation based on Netherlands’s share of the EU’s GDP in relation to 
the EU total is done (6.1% out of the EU 100%. (79.4x100)/6.1= 1.3 billion). 
130 

 
 
 
 
 
 
 
 
 
 
 
 
 
AREA 

Difference to the baseline 

PO1 

PO2 

PO3 

Member States  

Administrative costs 
(recurring) 

Designation of industrial area 

EUR 0 (voluntary) 

1 FTE x 27 Member States 

Total cost: EUR 1.65 million 

Administrative costs total 

TOTAL 

Difference to the baseline 

PO1 

PO2 

PO3 

One Off 

Recurring 

One Off 

Recurring 

One Off  Recurring 

 Member States 

EUR 0 

 Businesses 

EUR 0 

European 
Commission 

EUR  796 000 

EUR  
5.62 million 
EUR 
702 891 
EUR 
 125 083 

EUR  
0 
EUR 
117 600 
EUR 
408 000 

EUR 
8.92 million 
EUR 
1.16 million 
EUR 
 181 667 

EUR 
0 
EUR 
117 600 
EUR 
408 000 

EUR 
8.92 million 
EUR 
5.76 million 
EUR 
 189 750 

Total 
Administrative 
Costs 

EUR 796 000 

EUR 

EUR 

EUR 

EUR 

EUR 

 6.45 million  

525 600 

10.27 million 

525 600 

14.87  
million 

EUR 1.3 
billion 

Member states 

EUR 0  

Business 

EUR 240 
million  

EUR 1.3 
billion  

EUR 0 

EUR 0  

EUR 1.3 billion  EUR 0 

EUR 240 
million 

EUR 0 

EUR 240 
million 

EUR 0 

European 
Commission 

EUR 0 

EUR 0 

EUR 0 

EUR 0 

EUR 0 

EUR 0 

Total 
Administrative 
Savings 

EUR 240 
million 

EUR 

EUR 

EUR 

EUR 

EUR 

1.3 billion  

240 million 

1.3 billion 

240 
million 

1.3 billion 

131 

 
 
 
 
 
 
 
 
2.2. Adjustment costs  

LEAD_EII  

Assumptions taken for adjustment costs for the automotive sector:  

Low-carbon provisions:  

Price increase:  

•  The adjustment cost for a midsize passenger vehicle is estimated to range from 0.3% to 0.7% 
of  the  final  price,  with  a  100%  low-carbon  steel  depending  on  the  decarbonisation 
pathway.277 A 25% low-carbon steel target would see a price increase ranging from 0.075% 
to 0.175% (EUR 28 – 65 per passenger vehicle).  

•  Based  on  assumptions  regarding  future  increases  in  the  levelized  cost  of  low-carbon 
aluminium production278, the use of 100% low-carbon aluminium is projected to increase 
the cost of a new EV by approximately 0.32%.279 Accordingly, a 25% low-carbon aluminium 
target would be expected to result in only a 0.08% to 0.10% or EUR 22.6 increase in the 
price of a new light commercial EV.  

•  An average price increase of 0.225% is taken for the calculation of total costs from low-
carbon steel and aluminium. Therefore, a price increase of EUR 69.27 per vehicle can be 
expected for commercial and light commercial vehicles for both materials.  

•  Final costs/benefits are calculated with the percentage change estimated of different sectors’ 

GVA from FIGARO data per Member State and monetised. 

Made in EU provisions:  

•  Made in EU costs are obtained from the FIDELIO modelling results (please see Annex 4 
section 1.2 for more information on the model used) of the different sectors’ GVA, which 
are presented both in percentage compared to baseline and monetised.  

Assumptions taken for adjustment costs in the construction sector:  

Low-carbon provisions:  

Price increase:  

•  Low-carbon steel  estimates can  result in  a price  increase  ranging  from  0.1% to  1.2% for 
public procurement works depending on the type (office buildings or steel halls), based on 
100% low-carbon steel.280 

•  An  assumption  is  taken  that  the  premium  associated  with  low-carbon  steel  in  the 
construction sector accounts  for 1% of total building costs. Therefore, a 25% low-carbon 
steel target would lead to a price increase of 0.25%  

•  Assumptions for low-carbon cement or concrete on the final price of a house or construction 
project  can  range  from  less  than  1%  to  3%  increase  for  a  100%  low-carbon  cement  or 

277BCG (2022). Transforming the Steel Industry May Be the Ultimate Climate Challenge. 
278 Mission Possible Partnership (2022). Making net-zero aluminium possible. An industry-backed, 1.5ºC-aligned transition strategy. 
279 Underlying assumptions were that the average cost of an EV in 2030 is approximately EUR 28.500 (internal estimation, JRC) and an EV utilizes 
0.31 tonnes of aluminium in 2030 (European Aluminium). The cost for ICE or other types of motors will be lower as the electric motor is a key driver 
for aluminium usage in the overall amount per car. 
280 JRC (2024). Draft preparatory study on iron and steel – ecodesign measures under the ESPR; Global Efficiency Intelligence, TransitionAsia and 
Solutions for Our Climate (SFOC) (2024). Green Steel Economics. 

132 

 
 
 
 
 
 
 
 
 
• 

concrete281. With 2% average increase, a 5% low-carbon cement  target  would  result in a 
0.10% increase in a construction project.  
In the absence of construction-sector-specific data, the cost increase associated with low-
carbon aluminium is assumed to mirror that observed in the automotive sector. On this basis, 
a price increase of approximately 0.1% is projected. 

•  Based on the low-carbon targets proposed, the price increase for combining both low-carbon 

steel, aluminium and cement is therefore projected at an average 0.45%. 

Cost distribution:  

•  No  available  information  was  found  on  the  market  segment  covered  by  public  support 
schemes for EU construction. Therefore, cost calculations are always a hard split between 
public procurement (PO1/PO2) and the full market (PO3).  

Made in EU provisions:  

•  Costs linked to  Made in EU  measures  are  obtained from  the FIDELIO modelling  results 
(please see Annex 4 section 1.2 for more information on the model used) of the different 
sectors’ GVA, which are presented both in percentage compared to baseline and monetised. 

LEAD_EII 

Member States 
administrations  
Adjustment costs 
(recurring)  
Citizens/Consumer  
Adjustment costs 
(recurring)  
Businesses  
Adjustment costs 
(recurring)  

Difference to the baseline  
PO1  

PO2  

PO3  

Low-carbon measures:  

Low-carbon 
measures: 

Low-carbon measures: 

Automotive 

Automotive 

Automotive 

EUR 291 million GVA 

EUR 291 million GVA 

EUR 396 million GVA 

Construction  

Construction  

Construction  

EUR 691 million GVA 

EUR 691 million GVA 

Made in EU 
measures: 
No GVA change282 

EUR 2 229 million 
GVA 

Made in EU measures: 

EUR 6 651 million for 
automotive sector from 
Made in EU 
requirements  

281 Agora Industry (2024). Creating markets for climate-friendly basic materials. Potentials and policy options, p. 13; Bellona Foundation (2018). 
Building with Low Carbon Cement is Affordable. 
282 Assuming traditional supply chains for steel, aluminium and cement remain the same, the domestic supply for these materials is already higher 
than the proposed targets for PO2. Therefore, no additional costs would be expected from Made in EU requirements, only from the additional low-
carbon cost.  

133 

 
 
 
 
 
  
  
  
 
 
  
  
  
  
 
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
  
 
LEAD_EII 

Difference to the baseline  
PO1  

PO2  

PO3  
EUR 13 996 million for 
construction sector 
from Made in EU 
requirements  

LEAD_SOL 

Assumptions taken for adjustment costs:  

•  Assumptions of a deployment rate of 65 GW by 2030, using 2024 deployment rates which 

could go down, in which case the costs would decrease respectively. 

•  The costs associated with auctions and public procurement are assigned to Member States, 
while citizens and consumers are attributed costs related to public support schemes and the 
non-supported market. By the time the provisions enter into force we could expected that 
the Chinese solar module price stabilises to sustainable levels of 15.9 € ct/Wₚ  

•  Under  NZIA  rules  diversification  would  kick  in  and  we  assume  this  would  come  from 
Southeast Asia for which prices are calculated at 16.5 € ct/Wₚ for fully Southeast Asian solar 
modules. 

•  Final  price  of  EU  modules  will  depend  on  the  Member  State  application  of  the 
Competitiveness Fund options and CISAF, as it would impact CAPEX and OPEX of the 
manufacturers and thus the final price. But as this is uncertain, the SolarPower Europe and 
Fraunhofer study 283 offers the following minimum sustainable price (MSP) range:  

o  19 € ct/Wₚ: NZIA EU components with polysilicon and ingot wafer from CN. 
o  13.2  € ct/Wₚ: South East Asia ( SEA)  cell and module with polysilicon and ingot 

wafer from CN. 

•  The EU solar market is assumed to be split as follows:  

o  Public procurement is assumed to account for 3% of the PV capacity deployed. 
o  Renewable energy auctions are assumed to account for 19% of the PV capacity 

deployed.  

o  Public support schemes are assumed to account for 12% of the PV capacity 

deployed. 

Two different price scenarios compare the cheapest alternative for PV (e.g. Chinese imports) to a 
European NZIA-compliant PV with polysilicon and wafers / ingots from China.  

•  65 GW of Chinese modules: EUR 10.335 billion  
•  65 GW of European products with poly-wafer come from China: EUR 12.35 billion  

The delta between them is EUR 2.015 billion for 65 GW of solar PV, which is broken down per 
market segment as follows: 

•  Public procurement: 0.03 × 2.015 = EUR 0.06045 billion 
•  Auctions: 0.19 × 2.015 = EUR 0.38285 billion 
•  Schemes: 0.12 × 2.015 = EUR 0.2418 billion 
•  Private procurement: 0.66 × 2.015 = EUR 1.3299 billion 

LEAD_SOL  

Member States  

Difference to the baseline  
PO1  

PO2  

PO3  

283 SolarPower Europe and Fraunhofer (2025). Reshoring Solar Module Manufacturing to Europe. 

134 

 
 
 
 
 
 
  
  
  
  
 
Adjustment costs 
(recurring)  

Public procurement: EUR 60.45 
million  

Public procurement: EUR 
60.45 million  

Auction margins decrease by: EUR 
382.85 million  

Auction margins decrease by: 
EUR 382.85 million  

Citizens/Consumer  
Adjustment costs 
(recurring) 

Public support schemes: EUR 241.8 
million  

Public support schemes: EUR 
241.8 million  

Other PV placed on the market: 
EUR 1.33 billion  

LEAD_BAT  

Assumptions taken for adjustment costs:  

•  The  total  adjustment  costs  compare  the  average  cost  of  manufacturing  the  same  battery 
chemistries (i.e., localised battery cells, cathodes and anodes) in the current cheapest market, 
China, with those manufactured in the EU with a cost differential ranging from 26% to 50% 
(see  Annex  9).  These  costs  do  not  take  into  account  the  phased  approach,  which  would 
reduce the impact on prices during the first years of entry into force.  

o  Battery cell manufactured in China by Tier 1 manufacturers (i.e., 60 EUR/kWh in 

2024).  

o  Battery  cell  manufactured  in  in  the  EU  with  localised  CAM  (Cathode  Active 

Material) and AMM, (i.e., 75.6-90 EUR/kWh).  

Import costs of 10% over the total costs are assumed for the Chinese batteries.  

• 
•  Additionally,  global  price  decreases  in  batteries  have  been  accounted  for,  as  these  are 
expected to drop significantly in the upcoming years. As battery cell costs decline over time, 
the  total  cost  differential  with  China  is  expected  to  decrease,  ranging  between  11-21 
EUR/kWh in 2028, 9-17 EUR/kWh in 2030, and between 6-12 EUR/kWh in 2035. 

•  The baseline scenario assumes that only currently operational facilities and their expansions 
are  considered  active  by  2030  (i.e.  none  of  the  current  battery  project  currently  under 
construction, announced or on-hold are considered). As a result, unmet demand is assumed 
to be covered by imports from China.  

•  For BESS, since the requirements on the battery cell will enter into force by 2030 and the 
EU battery production is currently focused on EV batteries, the entire demand in the baseline 
scenario  is  assumed  to  be  met  through  Chinese  imports,  and  cost  comparisons  are  made 
accordingly. 

•  Adjustment  costs  are  passed  down  from  the  downstream  sectors  or  business  to  final 

consumers, this being either citizens or Member States.  

The  costs  are  calculated  based  on  demand  projections  for  both  EVs  and  BESS  in  kWh  and 
manufacturing costs expressed in EUR/kWh. Therefore, final impact on price can be calculated for 
all applications by assuming the average battery power pack.  

Cost comparison 2024-2035 

2024 

2028 

2030 

2035 

Cost difference EV passenger car (average 68 
kWh) 

EUR 653-1632 EUR 457-1142  EUR 360-900  EUR 268-670 

135 

 
  
  
  
  
  
 
 
 
 
 
Cost difference EV truck (average 279 kWh)284 

Cost difference EV bus (average 441 kWh) 

EUR 2678-
6696 
EUR 4233-
10584 

EUR 1875-
4687 
EUR 2964-
7409 

EUR 1477-
3691 
EUR 2334-
5835 

EUR 1099-
2747 
EUR 1737-
4342 

Figure: Cost comparison for EVs equipped with batteries using EU-made battery cells with locally sourced 
CAM and AAM, compared to using Chinese imports. 

Total adjustment costs have been calculated based on the market distribution assumptions expressed 
below: 

•  Assumptions of the market distribution between EVs 

o  3.5% through public procurement 
o  80.2% public schemes, of which 60% are  for corporate  consumers and 20.2% for 

private consumers. 

o  16.3% through consumers. 

•  Assumptions of the market distribution for BESS 

o  5% through BESS auctions 
o  95% through consumers (57% citizens and 38% companies) 

In  LEAD_BAT  1,  for  those  consumers,  private  or  corporate,  choosing  to  buy  vehicles  without 
European batteries, the price would not be impacted but would not benefit from a public subsidy 
either. This means that the total cost calculated for consumers is only a theoretical maximum, not 
considering consumer decisions, and based on the assumption that the demand side incentives will 
continue to cover part of the European EV demand.  

LEAD_BAT 

Difference to the baseline 

PO1 

PO2 

PO3 

Member States 
administrations 

Adjustment costs 
(recurring) 

Citizens/Consumer 

Adjustment costs 
(recurring) 

Auctions for BESS (5% of total 
BESS demand): EUR 26 – 66 
million (average EUR 46 million) 

Auctions for BESS (5% of total BESS 
demand): EUR 26 – 66 million 
(average EUR 46 million) 

Public procurement for EVs 
(3.5% of total EV demand): EUR 
132 – 331 million (average EUR 
231.5) 

Public procurement for EVs (3.5% of 
total EV demand): EUR 132 – 331 
million (average EUR 231.5) 

Public subsidy schemes for 
EVs285 (20.2% of total EV 
demand): EUR 292-730 million 
(average EUR 511 million) 

BESS (57% of total BESS demand): 
EUR 282-706 million (average EUR 
494 million) 

284Weighted average truck battery pack size and cost, 2020-2024, IEA 
285 We assume that there is public support to buy EV vehicles in Europe for corporate purchases. In contrast, public support is only available for 
consumers in Austria, Belgium, Croatia, Cyprus, Czechia, Estonia, France, Greece, Hungary, Ireland, Lithuania, Luxembourg, Malta, the Netherlands, 
Poland, Slovenia, Spain, and Sweden (ACEA, 2025). Against this background, we estimate that LEAD_VC 1 would affect 80.2% of EV registrations, 
including 60.0% from corporate purchases, and 20.2% from consumers. 

136 

 
 
 
 
 
 
 
 
 
 
 
LEAD_BAT 

Difference to the baseline 

PO1 

PO2 

PO3 

EVs (36.5% of total EV demand): 
EUR 0.5 – 1.3 billion (average EUR 
0.9 billion) 

Businesses[5] 

Adjustment costs 
(recurring) 

LEAD_VC:  

Public subsidy schemes for EVs 
(60% of total EV demand): EUR 
0.9-2.2 billion (average EUR 1.55 
billion)  

BESS (38% of total BESS demand): 
EUR 107-268 million (average 187.5) 

EVs (60% of total EV demand): EUR 
0.9-2.2 billion (average EUR 1.55 
billion) 

The following assumptions have been taken to calculate adjustment costs:  

•  On one hand, vehicles produced outside Europe will likely not be able to comply with the 
measure, given their current very low EU content (below 20%). On the other hand, vehicles 
produced in  Europe will likely  be able to  comply  with  the measure, eventually  at  a cost, 
given their current EU content (70%). As a proxy, non-EU manufacturers will be assumed 
to be non-compliant, meaning that in this case, they will lose access to public procurement 
and the subsidies, whereas EU manufacturers will be assumed to be compliant, maintaining 
access to public procurement and the subsidies.286 

•  Non-EU manufacturers will face a relative price increase as a result of  EU buyers losing 

access to public subsidies. 

•  The  public  subsidies  that  are  no  longer  accessible  to  buyers  of  non-EU  manufactured 
vehicles are partially redistributed. The model assumes that 50% of this liberated amount is 
going to increase the available subsidies/vehicle for EU manufacturers.287  
•  There is an aggregate demand effect as the measure affects average price. 
•  There  is  a  substitution  between  ICE  and  EVs  and  substitution  between  EU  and  non-EU 

manufacturers  

•  The presented scenarios take into account obligation to sell only zero-emission vehicles in 

2035.288 

•  We  consider  for  this  impact  assessment  a  30%  price  premium  for  EU-manufactured 

components compared to import prices. 

•  This calculation does not take into consideration the price increase as a result of Made in EU 
requirement  on  the  electric  batteries  set  out  in  LEAD_BAT  of  this  proposal  nor  in 
LEAD_EII.  

Non-EU  vehicle  manufacturers  will  not  be  able  to  access  public  procurements  or  benefit  from 
support schemes. In the latter case, they will not be able to cover the loss of subsidies coming from 

286 Definition of EU and non-EU manufacturers has been derived from PRODCOM and COMEXT databases. 
287 As a baseline, this Impact Assessment assumes EUR 14 billion of public subsidies for passenger cars and LCVs, which is based on existing public 
support schemes already put in place. The findings of CEEPR in the Global Clean Investment Monitor: Government Support for Electric Vehicles 
and  Batteries  -  CEEPR  (2025).  In  the  model,  it  is  assumed  that  50%  of  the  subsidies  that  would  have  been  used  for  non-EU  manufacturers  is 
redistributed among the EU manufacturers. The model is taking into account the fact that Member States may decide to allocate the liberated resources 
elsewhere, hence for the sake of a conservative calculation, it is assumed that only 50% of this liberated amount is used to subsidy EU manufacturers.  
288 European Commission. Fit for 55. 

137 

 
 
 
 
 
 
 
 
the support schemes and the prices of their vehicles will increase by the amount of the lost subsidies. 
In other words, consumers will face a price increase equalling the lost subsidies for non-EU vehicles. 

Calculations are made for both 2027 and for 2030 – using the assumption that the share of made in 
Made in EU would increase gradually over time from 70% in 2027 to meet the second target of 75% 
set out for 2030.  

Under LEAD_VC 1, the measure focuses on vehicles that are impacted by public procurement and 
public subsidies. We estimate that this scenario would affect 83.7% of EVs put on the EU market, 
which includes all vehicles either publicly procured or supported by a public scheme in Europe.289 

Under LEAD_VC 2, we assume that 100% of the EVs put on the market will be impacted.  

Light Commercial Vehicles (LCVs):  

In the case of LCVs290, due to the unavailability of data, for the sake of this Impact Assessment, the 
same assumptions apply as set out at the beginning of this Section. 

Heavy Duty Vehicles (HDVs): 

In the HDV291 segment, the Impact is difficult to assess due to the unavailability of data and the 
limitations of the applied model when it comes to estimating the current share of Made in EU in this 
vehicle segment. For this reason, the same assumptions are taken as for the passenger cars for the 
sake of this Impact Assessment.292 Anecdotal evidence suggests that the Made in EU in HDV is 
likely to be higher than the assumed requirements, consequently the measure may result in zero cost 
implications for EU HDV manufacturers, while preserving the positive effect on sales and overall 
competitiveness. It would also act as a safeguard mechanism in case of a sudden and rapid decrease 
in European market shares for components. 

When  measuring  the  impacts  for  LEAD_VC,  two  scenarios  were  modelled  to  take  into  account 
uncertainties  regarding  the  possible  reaction  of  non-EU  manufacturers:  one  purely  based  on  the 
“Internal market reaction” and an alternative scenario in which “non-EU manufacturers absorb the 
price increase”. The scenario based on the “Internal market reaction” was used to assess impacts 
through the Impact Assessment and are the costs and benefits reflected for final calculations in the 
adjustment costs table below, as well as final costs throughout all POs. However, for comparative 
analysis of both scenarios see Annex 14.  

Further assumptions taken into account to build the potential scenarios293:  

The economic impact depends critically on three elements that reflect the reaction of the agents:  

289 We assume that public and corporate purchases account for 3.5% (JRC technical report, 2022) and 60.0% (COM(2025) 96 final), respectively, of 
total vehicle registrations in the EU, while the remaining 36.5% corresponds to consumer purchases. We assume that there is public support to buy 
EV vehicles in Europe for corporate purchases. In contrast, public support is only available for consumers in Austria, Belgium,  Croatia, Cyprus, 
Czechia, Estonia, France, Greece, Hungary, Ireland, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Slovenia, Spain, and Sweden (ACEA, 
2025). Against this background, we estimate that LEAD_VC 1 would affect 83.7% of EV registrations, including 3.5% from public procurement, 
60.0% from corporate purchases, and 20.2% from consumers.  
290 In this Impact Assessment, LCVs refer to Light Commercial Vehicles below 3.5 tonnes of GVW.  
291  In  this  Impact  Assessment,  HDVs  refer  to  3  sub-categories:  Medium  Commercial  Vehicles  (between  3.5  and  32  tonnes  of  GVW),  Heavy 
Commercial Vehicles (above 32 tonnes of GVW) and Buses (between 20 and 30 tonnes of GVW). 
292 This means that a 70% share of EU content is assumed in the HDV segment as well. Furthermore, owing to limitations of data regarding the 
amount of public subsidies, for HDVs, we estimate a public subsidy of EUR 1 billion, taking into account already existing schemes in the EU Member 
States. 
293 When measuring the impacts for LEAD_VC, two scenarios were modelled to take into account uncertainties regarding the possible reaction of 
non-EU manufacturers: one purely based on the “Internal market reaction” and an alternative scenario in which “non-EU manufacturers absorb the 
price increase”. The scenario based on the “Internal market reaction” was used to assess impacts through the Impact Assessment and are the costs 
and benefits reflected for final calculations. However, for comparative analysis of both scenarios see Annex 14. 

138 

 
 
 
 
 
 
 
 
•  Price effect: Supposes that car manufacturers can pass through a potential increase in cost 
to prices. In that case, the demand for cars will reduce as the average car price increases. The 
price elasticity of demand captures this effect.294  

•  Product  substitution:  Supposes  that  a  potential  price  increase  occurs  only  in  the  EV 
segment,  the  one  directly  affected  by  the  policy  measure.  In  that  case,  there  could  be  a 
substitution  in  demand  for  EVs  over  ICEs  if  mitigation  measures  not  foreseen,  as  ICEs 
become  relatively  cheaper  after  the  policy  is  implemented.  The  product's  cross-price 
elasticity of demand captures this substitution effect. The following matrix of product cross-
price elasticity of demand is assumed (Leard and Wu, 2023):  

e
i
t
i
t
n
a
u
q

s

ICE 

EV 

price 
ICE 

-0.58 

0.50 

EV 

0.30 

-1.50 

•  Region substitution: Supposes that vehicles produced by EU manufacturers benefit from a 
relative  price  decrease  in  comparison  with  vehicles  produced  by  non-EU  manufacturers. 
This  is  determined  on  one  hand  by  the  loss  of  access  to  public  subsidies  by  non-EU 
manufacturers,  and  on  the  other  hand  by  the  expected  increase  of  the  available 
subsidies/vehicle  for  vehicles  produced  by  EU  manufacturers.  The  region's  cross-price 
elasticity  of  demand  captures  this  substitution  effect.  The  region  substitution  within  one 
segment,  i.e.,  ICE  or  EVs,  is  larger  than  the  product  elasticity  across  the  segments  and 
assume  the  following  matrix  of  region  cross-price  elasticity  of  demand  (Leard  and  Wu, 
2023): 20 

s
e
i
t
i
t
n
a
u
q

EU 

non-EU 

price 
EU 

-1.23 

1.00 

non-EU 

1.00 

-2.00 

Furthermore, the following assumptions were taken into consideration when calculating the cost 
pass through:  

In 2030, EV car sales are expected to reach the following figures: 

Type of car 
Passenger EVs 
Light commercial EVs 
Heavy duty EVs 

PO1 & PO2 
9 094 347 
1 107 046 
156 333 

The projected price increases are estimated at: 

PO3 
9 079 484 
1 107 463 
158 009 

Type of car 

Passenger EVs 

PO1 & PO2 

PO3 

% increase 
1.2% 

Total increase 
EUR 343 

% increase 
1.4% 

Total increase 
EUR 400 

294 We assume a demand price elasticity for the car industry of -0.5 (Leard and Wu, 2023). This elasticity implies that a 1% increase in the average 
car price results in a 0.5% decrease in the number of cars sold in the EU. 

139 

 
 
 
 
 
  
 
 
 
 
 
 
  
 
 
 
  
 
Light commercial 
EVs 
Heavy duty EVs 

0.4% 

1.2% 

EUR 91.46 

EUR 1300 

0.5% 

1.4% 

EUR 114 

EUR 1516.84 

The  cost  distribution  of  the  different  market  segments  follows  the  same  structure  as  under 
LEAD_EII for the automotive sector.  

To ensure consistency with the assumptions applied in LEAD_EII regarding vehicle cost impacts, 
the effect of subsidies has not been taken into account in the calculation below. 

For the purpose of the exercise, full cost pass through onto consumers is presumed. 

LEAD_VC 

LEAD_VC 

Difference to the baseline 

PO1 

PO2 

PO3 

Member States 
administrations 

Adjustment costs 
(recurring) 

Public procurement for EVs 
(3.5% of total EV demand): EUR 
100.29 million  

Public procurement for EVs (3.5% of 
total EV demand): EUR 139.97 

Citizens/Consumer 

Adjustment costs 
(recurring) 

Businesses 

Adjustment costs 
(recurring) 

Public subsidy schemes for EVs 
(20.2% of total EV demand): 
EUR 690 million 

EVs (36.5% of total EV demand): 
EUR 1.37 billion 

Public subsidy schemes for EVs 
(60% of total EV demand): EUR 
1.249 billion 

EVs (60% of total EV demand): EUR 
2.49 billion 

Cumulative  adjustment  costs  for  citizens  and  businesses  (corporate  fleets)  as  consumers 
(LEAD_EII, LEAD_BAT, LEAD_VC, LEAD_SOL):  

Sector 

Impacted 
Stakeholders 

PO1  

PO2  

PO3  

Automotive - passenger 
vehicles  
Automotive - corporate 
fleet 

Citizens 

EUR 1.20 billion  EUR 1.20 billion  EUR 2.77 billion  

Businesses295  EUR 3.09 billion   EUR 3.09 billion   EUR 11.27  billion  

295 All cost results from LEAD_EII in the automotive sector have been allocated to the automotive industry, in the business category. However, some 
or all of these costs may be transferred to consumers (either citizens or companies for corporate fleets). 

140 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotal – automotive (LEAD_EII, 
LEAD_VC, LEAD_BAT) 

Construction 

Citizens & 
business 

EUR 4.29 billion   EUR 4.29 billion   EUR 14.04 billion  

EUR 691 million  EUR 691 million   EUR 16.23 billion  

Electricity 

Citizens 

EUR 242 million  EUR  242 million  EUR 1.57 billion 

Cumulative adjustment costs for downstream sector296:  

Downstream sector  

PO1  

PO2  

PO3  

Automotive (LEAD_EII, 
LEAD_VC, 
LEAD_BAT) 

Construction 
(LEAD_EII) 

Electricity utilities 
(LEAD_SOL, 
LEAD_BAT) 

EUR 4.41 billion  

EUR 4.41 billion  

EUR 14.20 billion  

EUR 691 million 

EUR 691 million 

EUR 16.23 billion  

EUR 729 million 

EUR 729 million 

EUR 2.91 billion 

Cost increase per type of vehicle (LEAD_EII, LEAD_BAT, LEAD_VC):  

Type of car  

PO1  

PO2  

PO3  

Passenger EVs (LEAD_EII , LEAD_BAT 
and LEAD_VC) 

Heavy duty EVs (LEAD_EII , LEAD_BAT 
and LEAD_VC) 

EUR 1 042.28  EUR 1 042.28 

EUR 1 099.44 

EUR 4 353.38  EUR 4 353.38 

EUR 4 570.07 

Passenger ICEs (LEAD_EII) 

EUR 59.52 

EUR 59.45  

EUR 59.45  

Heavy duty ICEs (LEAD_EII ) 

EUR 277.96  

EUR 277.96  

EUR 277.96 

Cumulative administrative and adjustment costs, and benefits for Member States:  

Member States 

PO1  

Adjustment Costs 

EUR 3  

PO2  

EUR   

PO3  

EUR  

296 Where the costs for the downstream sector are cumulative of the costs reflected under citizens & businesses, and Member States, assuming cost 
increases are passed down to consumers. 

141 

 
 
 
 
 
Member States 

PO1  

PO2  

PO3  

821 million 

821 million 

860 million 

Administrative Costs 

EUR 5.62 million 

EUR 8.92 million 

EUR 8.92 million  

Benefits 

EUR 1.3 billion 

EUR 1.3 billion 

EUR 1.3 billion 

Net benefits  

EUR 473 million 

EUR 469 million 

EUR 430 million 

Adjustment costs total  

Difference to the baseline 

PO1 

PO2 

PO3 

Member States 

EUR 821 million 

EUR 821 million  

EUR 860 million  

Businesses 

EUR 3.7 billion 

EUR 3.7 billion 

EUR 27 8 billion 

Citizens 

EUR 1.4 billion 

EUR 1.4  billion 

EUR 4.3 billion 

Total Adjustment 
Costs  

EUR 6 billion  

EUR 6 billion 

EUR 32 billion 

2.3. Benefits: environmental 

LEAD_EII, LEAD_BAT, LEAD_SOL and LEAD_VC: In relation to the monetisation of GHG 
emissions, a cost of carbon is used.297 Figures underpinning the analysis are below, with the central 
value used (as most consistent with the climate commitments) and the 2030 value used of 100 EUR 
per tCO2eq. This is an approximation, and no variation is made to reflect the time profile of when 
emissions will occur.  

Values in current EUR per tCO2 

Up to 2030 
Post 2030 

Low 
60 
156 

Central 
100 
269 

High 
189 
498 

297 European Commission (2019). Handbook on the external costs of transport.  

142 

 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of LEAD benefits: monetisation of GHG saved 

LEAD_EII (low-carbon 
steel, cement and 
aluminium) 

PO1 

PO2 

PO3 

Steel: 3.37 Mtonnes CO2 
(EUR 337 million)  

Steel: 3.37 Mtonnes CO2 
(EUR 337 million) 

Steel: 10.26 Mtonnes CO2 
(EUR 1 025 million) 

Cement: 0.69 Mtonnes 
CO2 (EUR 68 million) 

Cement: 0.69 Mtonnes 
CO2 (EUR 68 million) 

Cement: 2.22 Mtonnes 
CO2 (EUR 222 million) 

Aluminium: 0.22 Mtonnes 
CO2 (EUR 22 million) 

Aluminium: 0.22 
Mtonnes CO2 (EUR 22 
million) 

Aluminium: 1.1 Mtonnes 
CO2 (EUR 110 million) 

Total: 4.28 Mtonnes CO2 
(EUR 428 million) 

Total: 4.28 Mtonnes CO2 
(EUR 428 million) 

Total: 13.58 Mtonnes CO2 
(EUR 1 358 million) 

LEAD_BAT 

25.6 Mtonnes CO2 (EUR 2 
560 million) 

25.6 Mtonnes CO2 (EUR 
2 560 million) 

34.17 Mtonnes CO2 (EUR 
3 417 million) 

LEAD_VC 

0.7 Mtonnes CO2 (EUR 70 
million) 

0.7 Mtonnes CO2 (EUR 
70 million) 

0.9 Mtonnes CO2 (EUR 90 
million) 

TOTAL 

30.58 Mtonnes CO2  

30.58 Mtonnes CO2  

48.65 Mtonnes CO2  

(EUR 3 058 billion) 

(EUR 3 058 billion) 

(EUR 4 865 billion) 

LEAD_EII 

Emission savings from low-carbon steel:  

•  Low-carbon steel calculated at 0.575 t CO2 / t steel based on the Steel label methodology. 

o  Based on the assumption that 50% of steel in 2030 will be produced via the primary 

route, and 50% via the secondary route. 

o  Based on low-carbon steel label developed through the act, with the average primary 
steel emission factor at 0.9 t CO2 / t steel and secondary steel at 0.25 t CO2 / t steel. 
•  Fossil fuel-based steel calculated at 1.06 t CO2 / t steel based on the Steel label methodology. 
o  Based on the assumption that 50% of steel in 2030 will be produced via the primary 

route, and 50% via the secondary route. 

o  Based on 2019 data of average primary steel emission factor at 1.8 t CO2 / t steel and 

secondary at 0.32 t CO2 / t steel.298 

•  Demand assumptions for 2030:  

o  37% of steel demand coming from construction299, of which 11% can be attributed 

to public procurement.300 

298VUB Brussels School of Governance (2024). Public procurement of steel and cement for construction. Assessing the potential of lead markets for 
green steel and cement in the EU. 
299 EUROFER (2025). European Steel Figures 2025.  
300 VUB Brussels School of Governance (2024). Public procurement of steel and cement for construction. Assessing the potential of lead markets for 
green steel and cement in the EU. 

143 

 
 
 
 
o  20% of steel demand coming from automotive301, of which 73.6% can be attributed 

to public procurement and subsidy schemes.302 

o  Total EU steel demand in 2030 estimated at 150 Mtonnes.303 

Emission savings from low-carbon aluminium:  

•  Based on the assumption that CO2 emissions from European primary aluminium production 
will decline by 36.9% of by 2030304 compared to the 2021 baseline, resulting in a cumulative 
reduction of 11 Mtonnes of CO2 between 2021 and 2030.  

•  Considering  the  cumulative  11  Mtonnes  CO2  reduction  from  2021  to  2030,  the  yearly 

absolute emissions reduction is 1.22 Mtonnes CO2.  

•  Demand assumptions for 2030:  

o  18%  of  aluminium  demand  coming  from  construction305,  of  which  30.2%  can  be 

attributed to public procurement.306 

o  20%  of  aluminium  demand  coming  from  automotive307,  of  which  73.6%  can  be 

attributed to public procurement and subsidy schemes.308 

o  Demand  for  primary  aluminium  is  assumed  to  be  equal  to  supply,  due  to  lack  of 
granular  data.  Primary  supply  of  aluminium  in  2030  estimated  at  3.6  Mtonnes,309 
assuming no growth from the 2021 levels.310 

Emission savings from low-carbon cement: 

• 

Internal  analysis  showed  44.47  Mtonnes  CO2  of  emissions  for  100%  low-carbon  cement 
used in construction in 2030.  
•  Demand assumptions for 2030: 

o  Total EU demand for cement in construction in 2030 estimated at 160.7 Mtonnes.311  
o  31% of cement used in construction is attributed to public procurement projects.312 

LEAD_BAT  

Emissions for 2030 are estimated by calculating the projected share of battery demand in GWh for 
that year within the 2024–2030 period and applying it to the total aggregated CO₂ emissions savings 
compared to China for the same period, which amount to a total 133 Mtonnes of CO₂.313  

•  For PO1/PO2 emission savings would account to 25.6 Mtonnes CO2 savings or EUR 2.5 

billion. 

•  PO3 it would amount to 34.17 Mtonnes CO2 savings or EUR 3.4 billion. 

LEAD_VC 

Changes in GHG emissions due to the policy options come from three aspects. Firstly, emissions 
during  the  manufacturing  process  influenced  in  both  the  EU  and  non-EU  regions;  reductions  in 
emissions are driven by cleaner manufacturing in the EU compared to vehicle production outside 
the EU. Secondly, emissions from international transport emissions are influenced as EU imports 

301 EUROFER (2025). European Steel Figures 2025.  
302 European Commission internal analysis (2025). 
303 OECD (2025). OECD Steel Outlook 2025.  
304 European Aluminium (2023). Net-Zero By 2050: Science-Based Decarbonisation Pathways for The European Aluminium Industry. 
305 Agora Industry (2024). Creating markets for climate-friendly basic materials. Potentials and policy options. 
306 VUB Brussels School of Governance (2024). Public procurement of steel and cement for construction. Assessing the potential of lead markets for 
green steel and cement in the EU. The 30.2% share was calculated dividing the value of the public procurement construction industry EU by the value 
of the construction industry EU in 2019. 
307 2025. Agora Industry (2024). Creating markets for climate-friendly basic materials. Potentials and policy options. 
308 European Commission internal analysis (2025). 
309 European Aluminium (2023). Net-Zero By 2050: Science-Based Decarbonisation Pathways for The European Aluminium Industry, p. 32. 
310 Eurometaux and KU Leuven (2022). Metals for Clean Energy: Pathways to solving Europe’s raw materials challenge, p. 36. 
311 Onestone Consulting (2023). The cement industry in Europe at the crossroads. Published in ZKG International. 
312 Bellona Foundation (2024). Green Public Procurement of cement and steel in the EU: An overview of the state of play.  
313 T&E (2024). An Industrial blueprint for batteries in Europe. 

144 

 
 
 
 
 
 
are affected. Finally, emissions during the use phase of vehicles are affected as the number of ICEs 
and EVs in EU sales is influenced; considering the higher fuel use emissions of ICEs compared to 
EVs.  

The impacts depend mostly on the reaction of foreign producers (Table 7).  

Table 7: Changes in global greenhouse gas emissions (Mt CO2e), JRC calculations based on emission projections from 
the JRC-GEM-E3 model. 

Production 
Intl. transport 
Usage (passenger vehicles only) 
Total 

Internal market reaction 

LEAD_VC 1 

LEAD_VC 2 

2027 
-0.5 
-0.1 
0.8 
0.2 

2030 
-0.6 
-0.1 
0.1 
-0.7 

2027 
-0.9 
-0.2 
1.0 
-0.1 

2030 
-0.7 
-0.1 
0.1 
-0.8 

The JRC-GEM-E3 reference scenario is in line with the trade projections used for analysis of policy 
options. International transport emissions due to all EU imports of “Manufacture of motor vehicles, 
trailers and semi-trailers” are calculated to be about 0.8 Mtonnes CO2 in 2025 and 2030. This is 
used  to  calculate  the  emission  reduction  in  international  transport,  assuming  reduced  imports 
translate to emission reductions proportionally. 

For the utilisation phase, different lifetime emissions from fuel use for ICEs, PHEVs and ICEs are 
derived  and  multiplied  with  EU  sales.314  Emissions  attributed  to  the  substitution  of  vehicles  are 
accounted in the year when vehicles are purchased. An increasing share of EVs in the fuel mix is 
considered in line with the CO2 standards for cars, implying a reduced impact in 2030 as substitution 
to ICE cars is increasingly limited.  

2.4. Benefits: gross value added and employment 

Employment 

Table 8: Summary of LEAD benefits: jobs gained or preserved 

PO1 

PO2 

PO3 

LEAD_EII 

Made in EU cement:  

4 272 jobs (preserved) 

Made in EU steel and 
aluminium: 3 762 jobs 
(preserved) 

Low-carbon steel:  

Up to 4 500 jobs 
(preserved) 315 

Total: up to 4 500 jobs 

Low-carbon steel:  

up to 4 500 jobs 
(preserved) 

314 This is in line with the results for Buberger, J., Kersten, A., Kuder, M., Eckerle, R., Weyh, T., & Thiringer, T. (2022). Total CO2-equivalent life-
cycle emissions from commercially available passenger cars. Renewable and Sustainable Energy Reviews, 159, 112158. Emissions from utilisation 
are only quantified for passenger cars. 
315 Strategic Perspectives (2025). Lead markets: driving net-zero industries made in Europe. Estimate from dataset used in report’s underlying analysis. 
145 

 
 
 
 
 
 
 
 
PO1 

PO2 

PO3 

LEAD_BAT 

85 000 jobs (new) 

LEAD_SOL 

Public procurement: 5 193 jobs (new) 

Auctions: 32 888 jobs (new) 

Public support schemes 20 771 jobs (new)  

Total: 58 852 

Total: up to 12 534 jobs 

85 000 jobs (new) 

(More jobs expected but 
cannot be quantified) 

Public procurement:  

5 193 jobs (new) 

Private procurement 
114 243 jobs (new) 

Auctions: 32 888 jobs 
(new) 

Public support schemes 
20 771 jobs (new) 

Total: 173 095 

TOTAL 

143 852 

148 352 

270 629 

LEAD_EII:  

Employment benefits linked to Made in EU requirements for steel, aluminium and cement sectors 
are calculated based on the number of workers below and multiplied for each % of GVA gained 
from the made in EU measures outlined in Section 2.2 of this Annex.  

Table 9 shows impacts on employment,  value added and output on energy-intensive industries for 
each 1%316 of their global final demand.  

Table 9: Top potential impacts for each 1% of global final demand in energy-intensive industries, 
JRC elaboration based on CARMEN results 

Industry impacted 

Paper and paper products 

Refineries 

Chemicals 

Non-metallic mineral products 
(Total) 

Non-metallic mineral products 
(Cement) 

Employment  
(# workers) 

Value  Added 
million 

in  EUR 

Output in EUR million 

3 849 

7 216 

8 370 

3 729 

1 780 

243 

585 

702 

199 

110 

730 

2 161 

1 935 

542 

300 

316 CARMEN is a linear model, where a 10% decrease/increase in global final demand would yield a result 10 times worse/better than the baseline. 
To facilitate understanding, a 1% reduction is used as a reference point, providing a more manageable and comparable outcome. 

146 

 
 
 
 
 
Industry impacted 

Employment  
(# workers) 

Value  Added 
million 

in  EUR 

Output in EUR million 

Basic metals (Total) 

1 945 

Basic  metals  (Steel  Upper 
Value Chain) 

Basic metals (Aluminium) 

714 

458 

101 

38 

20 

410 

188 

131 

LEAD_SOL  

•  At full GW-scale production, each gigawatt of solar PV manufacturing capacity is estimated 
to generate around 1 065 direct full-time jobs, including approximately 70 in polysilicon, 75 
in  ingot  production,  75  in  wafering,  200  in  cell  manufacturing,  85  in  solar  glass,  200  in 
module assembly, and 360 in inverter production. Applying an indirect jobs multiplier of 
1.5, this results in an additional 1 598 indirect jobs, bringing the total employment impact to 
roughly 2 663 jobs per GW.  

•  For  private  procurement,  targeting  the  remaining  market,  114  243  jobs  could  be  created 

(should it apply to over 40GW).  

Value added 

Table 10: Summary of LEAD benefits in 2030 

LEAD 
LEAD_EIII Low-carbon measures: 

PO1 

GVA EUR 241 million for 
the steel and aluminium 
sectors 

PO2 

PO3 

Low-carbon measures: 
GVA EUR 241 million for 
the steel and aluminium 
sectors 

Low-carbon measures: 
GVA EUR 327 million for 
the steel and aluminium 
sectors 

GVA EUR 445 million for 
the cement sector 

GVA EUR 445 million for 
the cement sector 

GVA EUR 1 509 million for 
the cement sector  

Made in EU measures: 

No GVA added 

LEAD_VC  EUR 9.7 billion in Value 

Added 

TOTAL  EUR 9.7 billion 

EUR 9.7 billion in Value 
Added  (value  chain  for 
intermediate inputs) 
EUR 10.41 billion 

Environmental and value-added benefits total  

147 

Made in EU measures: 
GVA EUR 2 883 million for 
the  steel  and  aluminium 
sector  from  made  in  EU 
requirements 

GVA EUR 2 079 million for 
the  cement  sector 
from 
made in EU requirements 
EUR 11.5 billion in Value 
Added  (value  chain  for 
intermediate inputs) 
EUR 12.57 billion 

 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL  

Difference to the baseline 

PO1 

PO2 

PO3 

EUR 12.47 billion 

EUR 14.13 billion 

EUR 17.17 billion 

Total Monetised 
Benefits (not including 
admin savings in 
Section 2.1 of this same 
Annex) 

148 

 
 
2.5. Final costs and benefits 

Table 11: Aggregated overview of costs and benefits  

EUR in millions 

PO1 

Difference to the baseline 

PO2 

PO3 

One Off 

Recurring 

One Off 

Recurring 

One Off 

Recurring 

Costs and benefits 
Member States 
Adjustment costs 
Administrative costs 
Administrative savings 
EU Commission 
Administrative costs 
Citizens 
Adjustment costs 
Administrative costs 
Businesses 
Adjustment costs 
Administrative costs 
Administrative savings 
Increase in GVA/VA 
Other benefits 
GHG emission reduction savings 
Increase in jobs (not monetised) 
Total costs 
Total benefits 
Net benefits 

€0,00 
€0,00 
€0,00 

€0.80 

€0,00 
€0,00 

€0,00 
€0,00 
€240,00 
€0,00 

€0,00 

€0.80 
€240,00 
€239.20 

€821,09 
€5,62 
€1.300,00 

€0.13 

€1.442,47 
€0,00 

€3.782,05 
€0,70 
€0,00 
€10.386,92 

€3.058,23 
143.852 
€6,052.06 
€14.745,15 
€8,693.08 

€0,00 
€0,00 
€0,00 

€0.41 

€0,00 
€0,00 

€0,00 
€0,12 
€240,00 
€0,00 

€0,00 

€0.53 
€240,00 
€239.47 

€821,09 
€8,92 
€1.300,00 

€0.18 

€1.442,47 
€0,00 

€3.782,05 
€1,16 
€0,00 
€10.386,92 

€3.058,23 
148.352 
€6,055.88 
€14.745,15 
€8,689.27 

€0,00 
€0,00 
€0,00 

€0.41 

€0,00 
€0,00 

€0,00 
€0,12 
€240,00 
€0,00 

€0,00 

€0.53 
€240,00 
€239.47 

€860,78 
€8,92 
€1.300,00 

€0.19 

€4.337,96 
€0,00 

 €27,498.35 
€5,76 
€0,00 
€18.299,67 

€4.865,13 
270.629 
 €32,711.96 
€24.464,80 
 -€8,247.16 

 
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 
 
 
Annex 5: Competitiveness check  

1.  Overview of impacts on competitiveness  

Dimensions of Competitiveness 

Impact of the initiative 
(++ / + / 0 / - / -- / Not 
available) 

References to sub-sections of the main 
report or annexes 

Cost and price competitiveness 

International competitiveness  

Capacity to innovate 

SME competitiveness 

0 

+ 

+ 

+ 

6.1.1.1;  6.1.1.2;  6.1.1.3;  6.2.1.1;  6.2.1.2; 
6.2.1.3. 

6.1.1.1; 6.1.1.6; 6.2.1.6; 6.2.1.8. 

5.2; 6.1.1.1; 6.1.1.7; 6.1.1.2. 

6.1.1.4; 6.2.1.4. 

Synthetic assessment  

Cost and price competitiveness 

The impacts on cost and price competitiveness primarily arise from the creation of lead markets 
(SO2) and maximising benefits of foreign investments in the EU (SO3).  

In terms of lead market development, low-carbon requirements for EIIs for products put on 
the market will affect product prices across various downstream sectors. However, as outlined 
in Section 6, available estimates suggest these impacts are expected to remain limited: 

•  0.225% increase in price increase in the  cost of passenger vehicles from low-carbon 

steel and aluminium.  

•  0.45% total increase price construction project from low-carbon steel, aluminium and 

cement:  

Over time, the cost premium associated with low-carbon materials is expected to decline317, 
while carbon-intensive production methods will likely become more expensive due to rising 
CO₂  prices  –  gradually  narrowing  the  cost  gap  between  conventional  and  low-carbon 
alternatives. Therefore, the impact on costs and prices will be visible in the short term, while 
in the long term it will tend to neutralise, helping companies to improve their competitiveness. 

Introducing  Made  in  EU  requirements  in  EIIs,  batteries  and  solar  panels  for  public 
procurement, auctions and public support schemes will also have cost implications – although 
the  phased  approach  would  ensure  that  the  costs  of  the  final  product  are  not  significantly 
increased. 

•  Using EU made battery cells with both local cathode and anode active materials would 
increase total downstream products costs if compared with China by approximately 16-
30 EUR/kWh. However, due to projected price decreases in battery cells the total cost 
differential with China is expected to decrease, ranging between 11-21 EUR/kWh in 
2028, 9-17 EUR/kWh in 2030, and between 6-12 EUR/kWh in 2035. 

Similarly, Made in EU requirements for solar PV would modestly increase the overall cost of 
a PV module in public procurement, public support schemes and auctions.  

317 As related technologies matures and demand for low-carbon materials move from niche, lead markets to larger scale markets. 

150 

 
 
 
 
 
 
 
 
•  Chinese solar modules are currently offered in Europe at approximately 8.7 €ct/Wp, 
which is significantly below their estimated sustainable production cost of 15.9 €ct/Wp 
in China and 16.5 €ct/Wp in Southeast Asia. By comparison, a module manufactured 
in the EU compliant with the Policy Option 1 and 2 (ie combining EU manufacturing 
of inverters, cells and modules with Chinese polysilicon, ingot and wafers) is estimated 
to cost around 19 €ct/Wp. Once Chinese market prices return to their sustainable level, 
the  price  differential  between  EU-made  and  imported  modules  would  therefore  be 
moderate rather than disproportionate. 

While  a  price  gap  with  non-EU  imports  may  initially  persist,  this  is  expected  to  narrow  as 
European manufacturers scale up, vertically integrate and improve cost competitiveness. 

Regarding  FDI  conditionalities,  measures  that  may  restrict  supply  based  on  value-added 
production or securing critical value chains may raise the price of certain products, particularly 
in the short term, as local supply chains adjust to new FDI-driven demand. However, a more 
harmonised and predictable investment framework is expected to yield longer-term benefits 
for  industry,  including  on  their  competitiveness  in  strategic  supply  chains,  outweighing  the 
operational costs of complying with such conditionalities. Streamlined permitting provisions 
will  also  accelerate  decarbonisation  investments  across  industrial  manufacturing  sectors, 
facilitating  compliance  with  EU  climate  objectives  and  increasing  the  shift  towards  a  low-
carbon economy.  

The preferred policy option is expected to significantly strengthen the competitiveness of EU 
EIIs and clean tech manufacturers (batteries and solar cells) by securing demand and supporting 
investment within EU value chains (SO2). 

Low-carbon  requirements  for  EIIs  would  send  strong  market  signals  to  drive  investment  in 
low-carbon technologies by creating stable demand. Nevertheless, less stringent requirements 
in other regions could create export disadvantages for EU companies. 

Made in EU requirements for EIIs in public procurement and support schemes will redirect 
demand toward EU producers, reduce reliance on imports support import substitution and help 
shield  EU  EIIs  from  unfair  competition,  in  combination  with  existing  trade  defence 
instruments. While these measures are expected to boost job creation and regional growth, they 
may not fully prevent resource shuffling, given the global role of some partner countries. 

Regarding Made in EU requirements in batteries, these measures would boost demand for EU-
made batteries, helping to secure ongoing projects and attract future investments in the sector, 
fostering a more vertically integrated value chain and reducing strategic dependencies on third 
countries. 

In solar manufacturing,  Made in  EU  requirements are expected to drive scale-up and lower 
costs  through  large-scale  manufacturing,  vertical  integration  and  innovation,  and  foster  a 
resilient industrial ecosystem. Applying such requirements in public tenders would incentivise 
EU-based investment and improve supply chain security, in line with broader industrial policy 
objectives. Overall, Made in EU requirements, by creating strong and predictable demand, help 
ensure that the EU builds competitive supply chains, contributing to its resilience and strategic 
autonomy.  Should  trading  partners  impose  countervailing  measures,  this  could  however 
negatively impact the EU industry’s competitiveness on global markets. FDI conditions (SO3) 
are also expected to strengthen the long-term competitiveness of the European industries by 
securing access to critical technologies and intellectual property, offering immediate market 
advantages and improve their position within key value chains. Ownership and joint venture 
requirements  would  support  the  development  of  strategic  value  chain  segments  in  the  EU. 

151 

 
 
 
Combined  with  value  added  production  and  securing  technological  advancements,  these 
measures can deliver lasting, structural benefits for EU industrial competitiveness. Permitting 
measures (SO4) will reduce regulatory uncertainty and enable economies of scale for next-
generation low-carbon manufacturing, further improving EU industrial competitiveness. 

Capacity to innovate 

Developing a common EU label on the carbon intensity of steel (SO1) will increase customer 
awareness and preference for low-carbon steel, driving demand for these products. This will, 
in turn, encourage companies to invest in cleaner production technologies, fostering innovation 
in the industry.  

(SO2) By anchoring guaranteed offtake, low-carbon and Made in EU requirements in EIIs and 
clean  tech  manufacturing  can  serve  as  catalyst  of  domestic  investment  and  manufacturing 
expansion - laying the foundation for sustained innovation. As European industrial ecosystems 
grow, companies are better equipped to develop, commercialise, and scale innovative solutions. 

FDI conditions (SO3) are expected to strengthen the EU’s capacity to innovate by securing 
access  to  critical  technologies,  IP,  and  value  chains.  While  they  may  place  some  limits  on 
business models, these measures would promote value retention in the Single Market and give 
European companies greater access to advanced technologies and know-how - key drivers of 
long-term innovation and competitiveness. 

(SO4) Permitting measures will support innovation by relying on technical assistance by the 
European  Commission  to  Member  States  for  first-of-a-kind  decarbonisation  projects,  as 
currently the case through INCITE, or the Technical Support Instrument, helping to streamline 
approvals  and  accelerate  deployment.  Additionally,  regulatory  sandboxes  for  innovative 
technologies  (such  as  renewable  hydrogen  production)  could  ensure  these  innovations  are 
future-proof while maintaining regulatory safeguards.  

SME competitiveness  

Made  in  EU  requirements  in  public  support  schemes  and  procurement  will  encourage 
localisation  and  partnerships  with  EU  suppliers,  opening  up  new  market  opportunities  - 
particularly  in  batteries  and  solar,  where  SMEs  play  a  major  role.  While  low-carbon 
requirements may impose higher costs on SMEs compared to larger firms, these impacts are 
expected to be limited (SO2). 

FDI conditionalities will largely affect larger enterprises, but SMEs could benefit indirectly 
through increased activity in value chains (SO3). Permitting reforms, including digitalisation 
and  streamlined  procedures,  will  reduce  administrative  burden  and  improve  cross-border 
access, supporting SME competitiveness across the Single Market (SO4). 

2.  Competitive position of the most affected sectors 

Energy intensive industries 

Annex 7 provides an overview of the competitive position of EIIs. As outlined in the problem 
section318,  the  competitiveness  challenges  facing  EU  EIIs  are  driven  by  a  combination  of 
economic  and  geopolitical  factors  -  most  notably  high  energy  costs,  global  non-market 
overcapacity,  and  unfair  competition.  Production  declines  have  been  observed  in  several 
sectors, including refineries, glass, ceramics, with the most severe impacts in steel, chemicals, 

318 And complemented in Annex 7. 

152 

 
 
 
 
and aluminium. Risks related to global overcapacity are particularly evident in steel, refineries, 
and aluminium; they are also present at a regional level in cement and ceramics and are growing 
in the chemicals sector. 

The  impact  of  declining  production  in  energy-intensive  industries  is  unevenly  distributed 
across  the  Union.  Analyses  show  that  manufacturing  employment  in  EIIs  is  regionally 
concentrated319, with certain NUTS-2 regions highly exposed to further industrial decline. In 
regions where basic metals, chemicals, or non-metallic minerals account for a large share of 
manufacturing  employment, additional closures could translate directly into  local job losses 
and widening regional disparities. 

Figure 11 Regional manufacturing employment share: manufacturing of chemicals and chemical products (left) 
and basic metals (right) 

Solar 

The EU’s competitive position in the solar sector is increasingly weakening, as it struggles to 
compete with Chinese manufacturers who dominate global production and drive prices below 
cost through overcapacity. Between 2021 and 2023, the EU imported nearly 190 GW of PV 
modules,  almost  double  what  was  installed,  leaving  massive  stockpiles  and  pushing  local 
producers out of the market. Meanwhile, Chinese firms are expanding production in countries 
like Vietnam and Malaysia to avoid U.S. trade barriers, further intensifying global competition.  

Batteries 

The EU’s battery sector is losing ground when it comes to competitiveness, as it faces intense 
pressure  from  overseas  manufacturers  who  dominate  global  production.  Massive 
overcapacities in China have led to a surge of cheap imports into Europe, undermining local 
producers  and  distorting  market  dynamics.  Additionally,  competitors  in  Asia  benefit  from 
vertically  integrated  value  chains,  enabling  them  to  scale  rapidly  and  reduce  costs  across 
production stages. In contrast, many European battery projects have been delayed or cancelled 
due to deteriorating market conditions and uncertain policy support. As the Act aims to create 
lead markets for the above-mentioned sectors, their competitiveness will be positively affected.  

319 Chief Economist Unit, DG GROW, based on Eurostat regional structural business statistics (sbs_r_nuts2021).  

153 

 
 
 
 
 
 
 
Annex 6: SME Check 

OVERVIEW OF IMPACTS ON SMES 
Relevance for SMEs  

Based on SME filter and the ISSG discussion, this initiative is relevant for SMEs, as they represent 
up to 99% of companies from the manufacturing and EII sectors, as well as for clean tech (solar and 
batteries) and automotive (vehicle components). 

(1)  IDENTIFICATION OF AFFECTED BUSINESSES AND ASSESSMENT OF RELEVANCE 

Are SMEs directly affected? In which sectors? 
Yes, SMEs are directly affected by the preferred policy option. 

All  SME  manufacturing  industries  will  benefit  from  the  permitting  measures  for  decarbonisation 
projects. This would impact notably those companies in the manufacture of wood and of products of 
wood and cork (except furniture), manufacture of wearing apparel and textiles, repair and installation 
of  machinery  and  equipment  or  manufacture  of  fabricated  metal  products  (except  machinery  and 
equipment), where the share of SMEs in the sector is the highest in the EU.  
For  measures  impacting  energy  intensive  industries,  such  as  the  creation  of  lead  markets,  SMEs 
represent 99% of companies active in the entire EIIs ecosystem and account for 51% of employees, 
31% of the EIIs ecosystem turnover and 37% of value added. 
Made in EU requirements in solar, batteries and key vehicle components will also impact SMEs, where 
they represent 80% of solar and 99% key vehicle components sector respectively. 
The introduction of low-carbon and Made in EU requirements (SO2) in EIIs, batteries, solar cells, and 
key  vehicle  components  will  affect  SMEs in  downstream sectors, most  notably in  the  construction, 
automotive and potentially wind energy.  
Estimated number of directly affected SMEs 
Manufacturing  sector:  The  potential  number  of  impacted  SMEs  within  the  scope  of  the  permitting 
provisions would be more than 2 million, corresponding to the broad number of SMEs active in the 
manufacturing sector.320 

Energy intensive industries: In 2022, the estimated number of SMEs in EIIs was 577 796.321 

Solar  manufacturing:  SMEs  represent  80%  of  the  membership  in  ESIA.322  The  majority  of  the  EU 
manufacturing segment and projected projects consist of SMEs. The installation sector is also largely 
made up of SMEs (rooftop and small commercial segments).  

320 Eurostat 2022. 
321 Industrial Ecosystem key SME figures 2025, link: SME Performance Review - European Commission 
322 INNO/Solar Alliance webpage. Meet our members – European Solar PV Industry Alliance. 

154 

 
 
 
 
 
 
 
 
Batteries: SMEs accounted for 43% of respondents in the targeted battery survey.  
Automotive: SMEs represent around 99% of all companies (i.e. 1.8 million companies) operating in 
the automotive sector and are responsible for 26% of the value added.323 They are however not expected 
to be directly affected as lead market provisions would apply to original equipment manufacturers.  

Construction:  99%  of  construction  companies  are  SMEs  (i.e.  5.29  million  companies).324  However, 
only a subset of companies would be affected by the lead market provisions, the ones in the lead on 
new building or infrastructure projects. 
Estimated number of employees in directly affected SMEs 
Manufacturing sector: Estimated number of employees in these SMEs would be more than 15 million, 
roughly half of the employment of the manufacturing325 
EIIs:  In  2022,  SMEs  were  estimated  to  employ  approximately  3.91  million  people,  accounting  for 
50.5% of total employment in EIIs.326  
Solar:  Although  SME-specific  data  is  not  available,  the  solar  sector  employed  648  000  people  in 
2022.327 
Batteries sector: Data currently not available.  
Automotive: SMEs employ around 1.5-2 million people in direct car manufacturing (roughly 60-70% 
of the total direct employment in the sector), and an additional 6-8 million jobs in related industries, 
such as automotive services, trade, and distribution.328 
Wind energy: The exact number of jobs related to wind power in SMEs is not known. However, overall, 
in 2022, wind energy sustained 300 000 jobs in the EU.329 
Construction: SMEs employed 20.6 million people in 2022, representing 76.5% of the employment in 
the construction sector.330 
Are  SMEs  indirectly  affected?  In  which  sectors?  What  is  the  estimated  number  of  indirectly 
affected SMEs and employees? 
This  initiative  is  expected  to  indirectly  affect  SMEs  in  the  value  chain  of  EII  and  clean  tech 
manufacturing, especially in the downstream part, such as the finishing steps of the production process 
or road transport. It is not possible to estimate the number of indirectly affected SMEs and employees, 
since these span across a wide number of downstream sector players.  

(2)  CONSULTATION OF SME STAKEHOLDERS 

How has the input from the SME community been taken into consideration?  

Are SMEs’ views different from those of large businesses? (Yes/No)  

The Open Public Consultation (OPC) received 176 answers from SMEs, out of a total of 314 (56%).  

When analysed alongside large companies’ responses, there was substantial alignment, indicating 
that both small and large companies face similar decarbonisation challenges. This coherence also 
applies to the solutions considered by the IAA, which would seemingly benefit both SMEs and large 
enterprises.  While  the  level  of  support  varied  slightly  throughout  the  consultation,  alignment 
remained on most points detailed in the OPC analysis set out in Annex 2. 

Some  differences  were  however  observed,  especially  in  the  context  of  permitting,  with  a  higher 
percentage of SMEs responding to the permitting questions and showing a stronger support for the 

323 Euroclusters and RESIST (2023). Future challenges for SMEs in automotive, transport and mobility vehicle production and their 
manufacturing suppliers. 
324 European Commission (2023). Transition Pathway for Construction. 
325 Eurostat 2022 
326 Industrial Ecosystem key SME figures 2025, link: SME Performance Review - European Commission 
327 SolarPower Europe (2023). EU Solar Jobs Report 2023. 
328 Euroclusters and RESIST (2023). Future challenges for SMEs in automotive, transport and mobility vehicle production and their 
manufacturing suppliers. 
329 WindEurope webpage. Wind energy and the economy.  
330 European Commission (2025). SME Performance Review - Annual report on European SMEs. 

155 

 
 
 
 
 
 
 
 
 
proposed  solutions.  This  is  further  supported  by  the  results  of  the  targeted  consultation,  where 
respondents  highlighted  that  SMEs  typically  have  fewer  resources  to  manage  the  administrative 
workload  and  costs  associated  with  the  permitting  processes.  Furthermore,  in  the  section  on 
identifying and promoting industrial decarbonisation priority projects, most SMEs (90, 96%) favour 
improved  access  to  funding  -  an  option  that  ranked  lower  among  general  respondents.  This  is 
followed  by  support  for  faster  permit-granting  procedures  (85,  90%)  and  priority  status  for 
administrative procedures (81, 86%). In comparison, only 50% of large companies selected faster 
permitting, suggesting again that permitting is a more pressing issue for SMEs.  

(3)  ASSESSMENT OF IMPACTS ON SMES331 

What are the estimated direct costs for SMEs of the preferred policy option?  
Qualitative assessment 
Assuming  the  low-carbon  steel  label  (SO1)  applies  to  the  most  energy-intensive  stages  of  steel 
production, it is likely to affect primarily the largest steel producers, which typically are not SMEs. 
Costs impact for SMEs is thus expected to be marginal. 

Low-carbon  and  Made  in  EU  requirements  (SO2)  will  however  imply  costs  for  SMEs,  when 
procuring low-carbon and EU-made products. However, these costs are expected to be distributed 
across  the  value  chain  and  leading  only  to  a  limited  increase  in  the  final  price.  These  costs  are 
expected to be passed on to consumers or absorbed by economic operators or public authorities – 
though SMEs may be less able to do so than larger firms.  

Made in EU requirements in solar cells (SO2) may lead to a temporary slowdown in solar panel 
installations  by  SMEs.  This  impact  is  expected  to  be  limited  and  manageable,  as  Europe’s 
commitment to ambitious PV deployment targets remains firm and unchanged. Conversely, it will 
support the establishment of manufacturing SMEs. 
Quantitative assessment 
There is no available data on price increases specific to SMEs, however, the financial impacts of the 
policy measures, as outlined in Annex 3, are expected to apply to SMEs to a similar extent as to other 
(large) companies.  
What are the estimated direct benefits/cost savings for SMEs of the preferred policy option? 
Qualitative assessment 
SMEs  are  expected  to  benefit  directly  from  an  expanded  market  for  their  European,  low-carbon 
products, and indirectly through their role in the supply chains of larger companies. As outlined in 
Annex 3, these benefits—excluding those related to FDIs—are anticipated to apply to SMEs in the 
same way as to (large) companies. 
Permitting measures are expected to deliver significant cost savings and benefits for SMEs (SO4), 
by speeding-up and facilitating the administrative process (see, also below on administrative burden 
reduction), while also creating legal certainty.  
The definition of criteria for priority projects (SO5) is expected to facilitate access to funding for 
decarbonisation  projects,  including  those  led  by  SMEs.  This  is  likely  to  accelerate  investment 
decisions and facilitate the participation of SMEs in industrial decarbonisation efforts across the EU.  
Quantitative assessment 
Provisions on permitting will apply to all manufacturing and EII SMEs, which stand to benefit from 
administrative cost savings, as detailed in Annex 3 and reflected in the 35% burden reduction target 
outlined below. 
What are the indirect impacts of this initiative on SMEs? 
By improving the competitiveness of EIIs and clean tech ecosystems, which are largely composed of 
SMEs,  this initiative is  expected  to  generate  positive  spillover  effects  for  SMEs  operating  across 

331 The costs and benefits data in this annex are consistent with the data in annex 3. The preferred option includes the mitigating measures 
listed in Section 4.  

156 

 
 
 
 
related  value  chains.  Improved  market  conditions,  increased  demand,  and  enhanced  innovation 
capacity will help SMEs grow, scale, and better integrate into domestic and international markets. 

(4)  MINIMISING NEGATIVE IMPACTS ON SMES 

Are SMEs disproportionately affected compared to large companies?  
No 
If yes, are there any specific subgroups of SMEs more exposed than others? 
This initiative is expected to lead to additional administrative costs for companies, particularly within 
downstream  sectors  such  as  automotive  and  construction,  which  will  be  required  to  demonstrate 
compliance  under lead market  provisions  (LEAD)  and  notify  authorities  under FDI  conditionalities 
(INV). As can be seen from the table above, the majority of companies operating in the manufacturing 
sector are SMEs.  
For PO2, under LEAD_EII measures, SMEs will face some administrative costs due to demonstrate 
compliance reporting. In the construction sector, where the Act may impact up to 921 948 companies, 
only large and medium-sized companies are proposed required to demonstrate compliance, excluding 
small and micro companies (totalling 915 729). This aims to reduce the administrative and financial 
burden on SMEs. In other sectors such as automotive and energy, most companies complying with the 
measures are expected to be large organisations, as outlined in the company size breakdown in Annex 
3.  The  administrative  cost  per  company  remains  minimal,  at  EUR  882  per  year  for  construction 
companies, and EUR 1176 per year for automotive. 
These total administrative costs for SMEs, calculated at EUR 982 191 annually, will be outweighed by 
permitting  savings,  calculated  at  EUR  27.85  million  annually,  leading  to  total  net  savings  in 
administrative costs for SMEs of EUR 26.86 million. 
PO1 and PO2 will result in lower administrative costs for SMEs, as lead market provisions are limited 
to public procurement and public support schemes. Meanwhile, in PO3, those costs would increase, as 
lead market provisions expand to products placed on the market. 
Have mitigating measures been included in the preferred option/proposal? (Yes/No)  
Yes, some SMEs, such as the small and micro companies operating in the construction sector, could 
use self-declaration to demonstrate compliance with low-carbon and Made in EU requirements. 

CONTRIBUTION TO THE 35% BURDEN REDUCTION TARGET FOR SMES 
Are there any administrative cost savings relevant for the 35% burden reduction target for SMEs? 
Permitting measures under the preferred policy option (SO4) are expected to deliver administrative cost 
savings relevant for the 35% burden reduction targets for SMEs.  
SMEs  consistently  cite  red  tape  as  a  major  barrier  to  offering  services  across  borders.  Streamlining 
procedures  -  particularly  through  the  digitalisation of  permit-granting  processes  under  the  SDG  -  can 
significantly ease this burden. 
Moreover, by providing access to clear information on rules and procedures, the SDG can help SMEs—
who often lack the resources of larger firms - better navigate and seize opportunities in the Single Market.  

157 

 
 
 
 
 
 
 
Annex 7: Sectoral analyses 

The following subsection outlines a sectorial analysis and, where possible, the readiness and 
cost  evolution  of  industrial  technologies  utilised  to  decarbonise  energy  intensive  industries 
processes.  According  to  an  internal  JRC  analysis,  a  common  dominator  across  all  the  EIIs 
considered is that the promising decarbonisation technologies are either not cost competitive 
in  the  current  scenario  or  have  not  reached  sufficient  technology  readiness  levels  (TRLs). 
Furthermore,  the  analysis  clearly  outlines  the  need  for  future  large-scale  investment  to 
transition these sectors and its industrial applications. For the iron and steel sector only, the 
impact  assessment  for  the 2040  Climate  Target  plan  an investment  need  of  EUR  80  billion 
between  2031  and  2040  and  EUR  100  billion  between  2031  and  2050.  332,  333    No  clear 
indication  can  be  derived  from  the  projections  on  to  when  the  various  decarbonisation 
technologies are reaching cost parity with the conventional technologies, as these depends on 
many parameters, varying according to the specific technology pathway. However, according 
to  the  analysis,  there  is  a  correlation  between  the  attractiveness  of  these  CAPEX  intensive 
investments and a sufficient high ETS price in 2030. 

1.  Energy intensive industries 
For  the  purposes  of  this  impact  assessment,  we  consider  the  following  energy-intensive 
industrial sectors and their related products: chemicals, steel, pulp and paper, plastics, oil and 
gas  refining,  cement,  non-ferrous  metals,  glass,  and  ceramics.  Their  production  process  is 
characterised  by  the  highest  energy  consumption  and  emissions  intensity,  accounting  for  a 
significant  share  of  the  EU’s  industrial  GHG  emissions.  These  sectors  hold  strategic 
importance  for  EU  value  chains  and  autonomy,  providing  input  materials  to  downstream 
sectors and key net-zero technologies. They involve processes with hard-to-abate emissions 
that  make  decarbonisation  costly  and  challenging  and  contribute  substantially  to  economic 
activity and employment.334 

In  2021,  energy  intensive  industries  (EIIs)  contributed  EUR  549  billion  in  added  value 
(corresponding to 4.55% of EU value added) and employ 7.8 million people in Europe.335 The 
map below shows that EIIs are present throughout Europe:336 

332 European Commission (2024)., Commission Staff Working Document: Impact Assessment Report (Part 3), accompanying the document 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions: Securing our future - Europe's 2040 climate target and path to climate neutrality by 2050, building a sustainable, 
just and prosperous society, COM(2024) 63 final, pp.164-167. 
333 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 99.  
334 European Commission (2019). Masterplan for a competitive transformation of EU energy-intensive industries enabling a climate-neutral, 
circular economy by 2050. 
335 European Commission (2021).. Commission Staff Working Document. For a resilient, innovative, sustainable and digital energy-intensive 
industries ecosystem: Scenarios for a transition pathway, SWD(2021) 277 final. 
336 JRC (2025). Energy and Industry Geography Lab (EIGL). 

158 

 
 
 
 
Figure 12 – Facilities of Energy-intensive industries in the EU, JRC/EIGL, 2025 

1.1. Aluminium 

Key facts 
EU aluminium market: valued at EUR  40 billion,337 1 million direct and indirect jobs.338 In 
2023, the EU produced 0.925 Mtonnes of primary339. EU aluminium exports in 2024: EUR 
18.4 billion, imports: EUR 29.5 billion.  Major trading partners: UK, USA, Switzerland and 
China.340  

Key challenges 

High energy costs, unfair global competition, including market-distorting tariffs and persistent 
overcapacity in some producing countries.  

Aluminium production has decreased with jobs being lost, and permanent loss of production 
capacity  - with  50% of primary production capacity being  idled since 2021.341 EU share of 
global  primary  aluminium  production  only  represents  3.8%.342  EUs  primary  and  secondary 
aluminium  production  covers  46%  of  the  region’s  domestic  demand343  whereas  a  demand 
growth until 2050 is expected by 33%.344  
In  2023,  the  EU  aluminium  industry  emitted  approximately  6.6  Mtonnes  of  CO₂345  in  the 
production of primary aluminium. In line with EU climate goals, the aluminium industry is 
shifting  toward  cleaner  production  through  different  decarbonisation  pathways,  including 
improving  energy  efficiency.346.  To  deploy  further 
increasing  recycling  rates  and 
decarbonisation technologies, an investment of EUR 33 billion and additional R&I efforts are 
required347. Since 1990, the aluminium industry reduced its CO2 emissions by 53%.348 

337 European Aluminium (2024). The Strategic Role of European Aluminium. 
338 European Aluminium (2024). The Strategic Role of European Aluminium. 
339 JRC analysis based on JRC IDEES 2026 Database. 
340 Eurostat (2025). EU recorded a trade deficit of €11.1 billion in aluminium. 
341 European Commission (2025). A European Steel and Metals Action Plan, COM(2025) 125 final, 19 March 2025. 
342 European Commission (2025). A European Steel and Metals Action Plan, COM(2025) 125 final, 19 March 2025. 
343 European Commission (2025). A European Steel and Metals Action Plan, COM(2025) 125 final, 19 March 2025. 
344 Eurometaux and KU Leuven (2022). Metals for Clean Energy: Pathways to solving Europe’s raw materials challenge. 
345 European Aluminium (2025). Environmental Profile Report 2024 V.2.0 – Executive Summary. 
346 JRC (2026). Mapping the transition of the EU aluminium industry to carbon neutrality. 
347 European Aluminium (2024). Our Policy Recommendations for an Ambitious Clean Industrial Deal and Metals Action Plan. 
348 Eurometaux webpage. About our industry.  

159 

 
 
 
 
Cost evolution 

Table 12 below displays the decarbonisation pathways for the EU aluminium industry, which 
primarily  focuses on switching to  low-carbon electricity, adopting inert  anodes in  smelting, 
and transitioning high-temperature thermal processes (refining, casting, recycling) from fossil 
fuels to electric or hydrogen-based systems. The CAPEX estimates are primarily sourced from 
techno-economic models, converted to  cost  per tonne of annual  aluminium  (Al) or alumina 
capacity, with costs generally referenced to EUR 2022 prices.  

In  detail,  the  CAPEX  figures  for  smelters  (Inert  Anodes,  CCS)  are  based  on  greenfield 
investments. Conversely, CAPEX for alumina refining (Boilers, MVR, Electric Furnaces) is 
calculated assuming brownfield investments (retrofitting existing facilities). CAPEX estimates 
for  downstream  segments  like  semi-fabrication  and  recycling  are  explicitly  noted  as 
approximations  based  on  thermal  energy  share  relative  to  calcination,  reflecting  a  lack  of 
publicly available data.349 

Table 12: CAPEX estimates for the aluminium industry compiled by the JRC, 2025 

Technology 
Pathway 

Current 
Value/Reference 
CAPEX (per tonne 
capacity) 

CAPEX in 2030 
(per tonne 
capacity) 

CAPEX in 
2040 (per 
tonne capacity) 

CAPEX in 
2050 (per 
tonne capacity) 

Primary 
Smelting: Inert 
Anodes (IA)350, 
351 

EUR 6 309.1/t Al 
(Greenfield 
investment, 2022 
prices). TRL 7. 

EUR 6 309.1/t Al 
(Mass deployment 
expected to begin 
around 2035). 

Primary 
Smelting: 
Carbon Anode 
+ CCS352, 353 

TRL 9 (CCS 
component) / TRL 
3-4 (Smelter 
integration). 

EUR 6 688.6/t Al 
(Greenfield 
investment, 2022 
prices) Commercial 
readiness expected 
by 2035. 

Alumina 
Refining: 
Electric Boiler 
(Digestion)354, 

EUR 30.7/t Al 
(Brownfield retrofit, 
2022 prices). TRL 9 
(Mature). 

EUR 30.7/t Al. 
Deployment 
expected from 
2025. 

Costs expected 
to remain stable 
after full 
commercialisati
on. 

Costs expected 
to remain stable 
after full 
commercialisati
on. Full market 
coverage 
expected 2040–
2045. 

EUR 6 688.6/t 
Al. 

EUR 6 688.6/t 
Al. 

EUR 30.7/t Al.  EUR 30.7/t Al. 

349 Mission Possible Partnership (2022). Making Net-Zero Aluminium Possible. An industry-backed, 1.5-aligned transition strategy.  
350 European Aluminium. (2023). Net-Zero by 2050: Science-based decarbonisation pathways for the European aluminium industry.  
351 Mission Possible Partnership (2022). Making Net-Zero Aluminium Possible. An industry-backed, 1.5-aligned transition strategy 
352 Ibid. 
353 Zore, L. (JRC) (2024). Decarbonisation Options for the Aluminium Industry. 
354 European Aluminium (2023).Net-Zero by 2050: Science based decarbonisation for the European aluminium industry.  

160 

 
 
 
 
Technology 
Pathway 

Current 
Value/Reference 
CAPEX (per tonne 
capacity) 

Alumina 
Refining: MVR 
(Digestion) 355, 
356, 357 

EUR 76.9/t Al 
(Brownfield retrofit, 
2022 prices). TRL 
7–8. 

CAPEX in 2030 
(per tonne 
capacity) 

CAPEX in 
2040 (per 
tonne capacity) 

CAPEX in 
2050 (per 
tonne capacity) 

EUR 76.9/t Al. 

EUR 76.9/t Al 
(Commercial 
readiness 2027). 
Deployment grows 
significantly 
towards 2030. 

EUR 76.9/t Al 
MVR systems 
play a dominant 
role in digestion 
by 2050. 

TRL 4–5 (In trial 
phase). 

TRL 9 (Heating 
technologies exist)  

TRL 8 (High 
maturity in other 
sectors). 

Alumina 
Refining: 
Electric 
Furnace 
(Calcination)358 

General High 
Temp: Electric 
Furnace (e.g., 
Remelting/Cast 
House)359, 360 

General High 
Temp: 
Hydrogen 
Furnace (e.g., 
Remelting/Cast 
House)361 

EUR 155.6/t Al 
(Brownfield 
retrofit, 2022 
prices). 
Commercial 
readiness expected 
2030. 

EUR 31.3–EUR 
38.3/t Al 
(Brownfield 
estimate for Cast 
House/Anode 
Paste, 2022 prices). 
Commercial 
readiness 2030. 

EUR 15.1–EUR 
18.4/t Al 
(Brownfield 
estimate for Cast 
House/Anode 
Paste, 2022 prices). 
Commercial 
readiness 2035. 

EUR 155.6/t Al. 

EUR 155.6/t Al 
(Full market 
penetration 
expected by 
2040). 

EUR 31.3–EUR 
38.3/t Al. 

EUR 31.3–EUR 
38.3/t Al. 

EUR 15.1–EUR 
18.4/t Al. 

EUR 15.1–EUR 
18.4/t Al. 

Total Investment Needs (TCI) for EU Transition 

The EU aluminium industry will need approximately EUR 33 billion in cumulative investments 
for new technology deployment between 2021 and 2050 to meet the 1.5°C scenario, with about 
EUR  22  billion  (67%  of  the  total)  expected  between  2031–2040.  This  investment  peak  is 
primarily  directed  towards  greenfield  smelter  facilities  with  inert  anode  technology.  These 
figures exclude R&I costs and necessary energy system developments, such as grid upgrades 
and new renewable capacity, which will also drive up the overall cost. 

355 European Aluminium. (2023). Net-Zero by 2050: Science-based decarbonisation pathways for the European aluminium industry.  
356 Mission Possible Partnership (2022). Making Net-Zero Aluminium Possible. An industry-backed, 1.5-aligned transition strategy.  
357 Zore, L. (JRC) (2024). Decarbonisation Options for the Aluminium Industry. 
358 European Aluminium (2023). Net-Zero by 2050: Science-based decarbonisation pathways for the European aluminium industry.  
359 Ibid. 
360 Zore, L. (JRC) (2024). Decarbonisation Options for the Aluminium Industry 
361 European Aluminium (2023). Net-Zero by 2050: Science-based decarbonisation pathways for the European aluminium industry. 

161 

 
 
 
 
1.2. Cement 

Key facts 

EUR 25.8 billion sales and EUR 8.5 billion Gross Value Added (cement and clinker) in 2022, 
40.3 thousand direct jobs in 2023, plus 14.5 million in construction, 161.1 Mtonnes production 
in  2023362,  main  EU  producers:  Germany,  Italy,  France,  and  Spain.363  EU  exports  in  2022: 
EUR 1.1 billion, imports: EUR 0.7 billion. Major trading partners: Türkiye, Egypt, China, and 
Ukraine.364 

Key challenges 

High energy costs, tightening environmental regulations, and declining construction demand. 
Production volumes decreased by 3.3% between 2022 and 2023.  
The EU cement industry emits over 120 Mtonnes of CO₂ annually.365 In line with EU climate 
objectives, the industry is moving toward cleaner production through several decarbonisation 
pathways,366  including  the  use  of  alternative  fuels,  process  electrification,  deployment  of 
carbon  capture,  utilisation  and  storage  (CCUS)367,  and  clinker  substitution  with  low-carbon 
materials.368 These approaches aim to cut emissions across key production stages, from raw 
material  processing  to  downstream  applications  in  construction.  The  investment  need  is 
estimated  at  EUR  94.4  billion  by  2050.  Key  challenges  to  achieve  decarbonisation  include 
limited availability of proven low-carbon alternatives at scale, insufficient CO₂ transport and 
storage infrastructure, and the technical difficulty of reducing process-related emissions from 
clinker production. 

Cost evolution 

Table 13 below synthesizes these CAPEX estimates for main decarbonisation pathways in the 
EU  cement  industry.  Unless  otherwise  specified,  the  specific  CAPEX  values  for  capture 
technologies are derived from techno-economic assessments based on a 1 Mtonne clinker/year 
reference plant capacity, with base costs set to EUR 2014.369 

Table 13: CAPEX estimates for the cement industry compiled by the JRC, 2025 

Technology 
Pathway 

Current Value (per 
tonne clinker 
capacity) 

CAPEX in 2030 
(per tonne 
clinker capacity) 

Post-
Combustion 
Capture (MEA) 
370, 371 

EUR 28.6/t clinker 
(Base Case, 2014). 
TRL 8–9. 

Expected to 
remain stable or 
decrease slightly 
after initial 
deployment and 
learning curves.  

CAPEX in 
2040 (per 
tonne clinker 
capacity) 

CAPEX in 
2050 (per 
tonne clinker 
capacity) 

Expected to 
remain 
stable/mature. 

Expected to 
remain 
stable/mature. 

362 Cembureau (2025). Cembureau Key Facts & Figures 
363 Onestone Consulting (2023). The cement industry in Europe at the crossroads. Published in ZKG International. 
364 Cembureau (2023).Cembureau, Activity Report 2023. 
365 JRC (2021). Deep decarbonisation of industry: The cement sector.  
366 JRC144123 (2026). Mapping the transition of the EU Cement Industry to Carbon Neutrality. 
367 JRC (2024). The role of carbon capture across hard-to-abate industries in the EU. 
368 Cavalett, O. (2024). Paving the way for sustainable decarbonization of the European cement industry. Nat Sustain 7, 568–580 (2024). 
369 ECRA (2022). ECRA Technology Papers. 
370 Voldsund et al. (2019). D4.6 CEMCAP comparative techno-economic analysis of CO₂ capture in cement plants. 
371 ECRA (2022). ECRA Technology Papers.  

162 

 
 
 
Technology 
Pathway 

Current Value (per 
tonne clinker 
capacity) 

CAPEX in 2030 
(per tonne 
clinker capacity) 

CAPEX in 
2040 (per 
tonne clinker 
capacity) 

CAPEX in 
2050 (per 
tonne clinker 
capacity) 

Chilled 
Ammonia 
Process (CAP) 
372, 373, 374 

EUR 36.4/t clinker 
(Base Case, 2014). 
TRL 7–8. 

Membrane-
Assisted 
Liquefaction 
(MAL)375, 376 

EUR 46.7/t clinker 
(Base Case, 2014). 
TRL 4–5. 

Oxyfuel 
Technology377, 
378 

EUR 35.0/t clinker 
(Base Case, 2014). 
TRL 6. 

Expected to 
decrease due to 
learning curve 
assumption of 1% 
per year up to 
2030. 

Projected costs 
highly sensitive to 
maturity and 
demonstration 
efforts. TRL >8 
expected 2030–
2040. 

EUR 220-EUR 
250 million (Total 
Investment, 2 
Mtonnes 
clinker/y). 

Calcium 
Looping (CaL) 
- Tail-End379 

EUR 330–EUR 495 
million (Total 
Investment, 2 
Mtonnes clinker/y, 
2020 prices). TRL 7–
8. 

EUR 330–EUR 
450 million (Total 
Investment, 2 
Mtonnes clinker/y, 
2020 prices). TRL 
>8 expected 2025. 

Calcium 
Looping (CaL) 
- Integrated380 

EUR 44.9/t clinker 
(Base Case, 2014 
prices). TRL 6–7. 

TRL >8 expected 
2030. Investment 
ranges (New 
Install., 2 Mtonnes 
clinker/y, 2020 
prices): EUR 300–
EUR 425 million. 

N/A 
(Deployment 
expected post-
2025/2030). 

Potential for 
maturity by 
2040. 

N/A 

N/A 

EUR 200-EUR 
230 million 
(Total 
Investment, 2 
Mtonnes/y 
capacity). 

EUR 200-EUR 
230 million 
(Total 
Investment, 2 
Mtonnes/y 
capacity). 

EUR 330–EUR 
450 million 
(Total 
Investment, 2 
Mtonnes 
clinker/y, 2020 
prices). 

EUR 330–EUR 
450 million 
(Total 
Investment, 2 
Mtonnes 
clinker/y, 2020 
prices). 

Expected 
stability/maturit
y post-2030. 

Expected 
stability/maturit
y post-2030. 

372 Voldsund et al. (2019). D4.6 CEMCAP comparative techno-economic analysis of CO₂ capture in cement plants. 
373 ECRA (2022). ECRA Technology Papers.  
374 IEAGHG (2013). Deployment of CCS in the Cement Industry.  
375 ECRA (2022). ECRA Technology Papers. 
376 Voldsund et al. (2019). D4.6 CEMCAP comparative techno-economic analysis of CO₂ capture in cement plants. 
377 Ibid. 
378 ECRA (2022). ECRA Technology Papers. 
379 Ibid. 
380 Ibid. 

163 

 
 
 
Technology 
Pathway 

Current Value (per 
tonne clinker 
capacity) 

CAPEX in 2030 
(per tonne 
clinker capacity) 

Indirect 
Calcination 
(e.g., LEILAC) 
381, 382 

CAPEX range: EUR 
90–EUR 135 million 
(Leilac unit only, 1.2 
Mtonnes clinker/y). 
TRL 6–7. 

EUR 220–EUR 
290 million (Total 
Investment New 
Install., 2 Mtonnes 
clinker/y, 2020 
prices). TRL >8 
expected 2025. 

CAPEX in 
2040 (per 
tonne clinker 
capacity) 

CAPEX in 
2050 (per 
tonne clinker 
capacity) 

Expected 
stability after 
commercialisati
on. 

Expected 
stability after 
commercialisati
on. 

Alternative 
Cements: LC3 
(Limestone 
Calcined Clay 
Cement) 383 

Waste Heat 
Recovery 
(WHR) 384, 385 

Investment for 
calcined clay unit 
(New Install., 2 
Mtonnes clinker/y, 
2020 prices): EUR 
20–EUR 40 million  

EUR 15–EUR 30 
million (Installation 
Cost, constant price 
from 2015 to 2050). 
TRL 9. 

EUR 20–EUR 40 
million. 

EUR 20–EUR 
40 million. 

EUR 20–EUR 
40 million. 

EUR 15–EUR 30 
million. 

EUR 15–EUR 
30 million. 

EUR 15–EUR 
30 million. 

Figure 13: Evolution of CCS and non-CCS based cement production costs in Europe under different CO2 price 
scenarios386 

Total Investment Needs (TCI) for EU Transition 

Initial investments in the 2020s are crucial for scaling up these technologies and achieving cost 
reductions  through  learning-by-doing.  Early  initiatives  are  focused  predominantly  on  CO₂ 
capture  and  associated  infrastructure,  while  higher  estimates  include  broader  technological 

381 Ibid. 
382 Leilac (2023). A techno-economic analysis of the Leilac technology at full commercial scale.  
383 ECRA (2022). ECRA Technology Papers. 
384 Ibid. 
385 Marmier, A. (JRC) (2023). Decarbonisation options for the cement industry. 
386  Mission  Possible  Partnership  (MPP),  E3G  and  the  Industrial Transition Accelerator  (ITA)  (2025).  Building the  EU’s  Clean  Industrial 
Future: Unlocking Investment through Lead Markets. 

164 

 
 
 
 
 
 
transformations such as alternative raw materials, fuel changes, and process electrification. The 
corresponding estimation are a TCI of EUR 16-22 billion387 on the low estimate and EUR 40-
80  billion388  on  the  more  holistic  view.  Between  2030  and  2040,  the  cement  industry  is 
anticipated to invest heavily in deep decarbonisation technologies. 

The materialisation and attractiveness of these CAPEX intensive investments is heavily linked 
to constant EU ETS price of EUR 100-150/tCO₂ from 2030. These carbon price levels have 
often been cited as a critical enabler. 

Mature CO₂ capture technologies have stable costs, while newer ones like Calcium Looping 
may  see  CAPEX  reductions  over  time.  However,  the  sheer  scale  of  investment  required  to 
retrofit  or  replace  existing  capacity  may  offset  these  savings.  Beyond  plant-level  CAPEX, 
significant investments are needed for shared CO₂ transport and storage infrastructure, as well 
as new energy infrastructure (e.g., hydrogen pipelines, renewable electricity grids) to support 
decarbonised cement plants. 

1.3. Ceramics 

Key facts 
EUR  25.5  billion  revenue  in  2022  employing  338  thousand  direct  jobs,389  172  Mtonnes 
production in 2023, main EU producers: Italy, Germany, France, and Spain.390 EU exports in 
2022: EUR 10.2 billion, imports: EUR 4.4 billion. Major trading partners: USA, Switzerland, 
UK and Türkiye.391 

Key challenges 

High energy costs, competition from low-cost producers in emerging economies, supply chain 
disruptions, and stringent environmental regulations. Production volumes decreased by 2–3% 
between 2022 and 2023.392 
The EU ceramic industry emits over 20 Mtonnes of CO₂ annually.393 In line with EU climate 
goals, the sector is transitioning toward more sustainable production through trajectories such 
as electrification of kilns, fuel switching to low-carbon gases or hydrogen, implementation of 
energy  efficiency  measures,  and  the  integration  of  circular  raw  materials  and  recycling 
practices.394  These  measures  aim  to  reduce  greenhouse  gas  emissions  across  manufacturing 
processes and product life cycles. Main decarbonisation challenges include high investment 
needs  to  retrofit  existing  facilities,  limited  technological  readiness  of  electric  and  hydrogen 
kilns at industrial scale, insufficient infrastructure for clean energy supply, and the technical 
complexity of maintaining product quality under altered processing conditions. 

1.4. Chemicals 

Key facts 
EUR  655  billion  sales  in  2023395,  1.2  million  direct  jobs.396  218  Mtonnes  production  of 
industrial chemicals in 2023, main producers: Germany, France, The Netherlands, Italy and 

387 ECRA (2022). ECRA Technology Papers. 
388 Voldsund et al. (2019). D4.6 CEMCAP comparative techno-economic analysis of CO₂ capture in cement plants. 
389 European Commission webpage. Ceramics. 
390 Market Data Forecast (2025). Europe Ceramic Tiles Market. 
391 Cerame-Unie webpage. Ceramic Industry. 
392 Blog Sicer (2024). From the record of 2022 to the decline of 2023: fluctuations in the Italian Ceramic Industry. 
393 Cerame-Unie webpage. Continuing our Path towards Climate Neutrality - Ceramic Roadmap 2050. 
394 JRC (2026). Mapping the Transition of the EU Ceramics Industry to Carbon Neutrality. 
395 Statista. Revenue distribution of the chemical industry in the European Union from 2016 to 2022, by country. 
396 Statista. Number of employees in the European Union's chemical industry from 2008 to 2023. 

165 

 
 
 
Belgium.  EU  exports  in  2023:  EU  523  billion,  imports:  EUR  325  billion.  Major  trading 
partners: USA, Switzerland, UK, and China.397 

Key challenges  

High  energy  costs,  weak  demand,  increased  regulatory  pressure,  and  global  competition. 
Production volumes have decreased by 14% between 2021 and 2023 putting at risk up to 200 
000 jobs.398 

The chemical industry is the third-largest source of global CO₂ emissions, after the cement and 
steel sectors. In 2022, the EU chemical industry emitted 104 Mtonnes CO2 equivalent. In line 
with  EU  climate  goals,  the  sector  is  shifting  toward  cleaner  production  through  different 
decarbonisation  pathways,  including  electrification  of  processes,  deployment  of  low-carbon 
hydrogen, implementation of carbon capture, utilisation and storage (CCUS),399 and increased 
use of circular feedstocks and recycling.400 These approaches aim to reduce greenhouse gas 
emissions across core chemical production processes, interconnected value chains, and end-
use applications. The main barrier to decarbonising is the high investment requirement. In the 
impact  assessment  for  the  2040  climate  target,  the  estimated  investment  needs  for 
decarbonisation in the chemical sector average EUR 13 billion per year for the 20 year period 
of 2031-2050, summing to around EUR 260 billion by 2050.401 Additional challenges include 
limited availability and scalability of low-carbon technologies, insufficient infrastructure for 
clean energy supply, and the complexity of electrifying high-temperature chemical processes. 

Cost evolution 

Table  14  below  synthesizes  the  available  CAPEX  data  for  key  chemical  industry 
decarbonisation  pathways,  primarily  derived  from  techno-economic  modelling  assumptions 
hydrogen cost projections. However, the estimated CAPEX for decarbonisation technologies 
in the EU chemical industry vary widely depending on the technology's maturity, the reference 
year used for the cost calculation, and whether the costs refer to process equipment (PCE), total 
installed  cost  (CAPEX),  or  costs  per  unit  of  capacity  (EUR/Mtonne  product  or  EUR/kW 
power). 

Table 14: CAPEX and PCE for the chemical industry compiled by the JRC, 2025 

Technology 
Pathway 

Current Value 
(Reference Year) 

CAPEX/PCE in 
2030 

CAPEX/PCE 
in 2040 

CAPEX/PCE 
in 2050 

Electrolyser 
Systems 
(Installed 
CAPEX, per 
kWel)402,403 

EUR 2 250/kW 
(Low-Temp, 2024 
estimate, typical 
project). EUR 5 
400/kW (High-
Temp SOEC, 2024 
estimate). 

EUR 600–EUR 
800/kW (System 
Cost, projection). 
Conventional parts 
should be below 
EUR 1 000/kW 
(Alkaline) and EUR 

Expected 
continued 
decline due to 
mass 
manufacturing.  

Expected 
convergence 
around EUR 
500/kW(ALK/P
EM) to EUR 
600/kW(SOE). 

397 Statista. Revenue distribution of the chemical industry in the European Union from 2016 to 2022, by country. 
398  Commission staff working document, impact assessment report,  Securing our future Europe's 2040 climate target and path to climate 
neutrality by 2050 building a sustainable, just and prosperous society, SWD/2024/63 final. 
399 JRC (2024). The role of carbon capture across hard-to-abate industries in the EU. 
400 Cefic (2024). 2024 Facts and Figures of the European Chemical Industry. 
401  European Commission (2024). Commission Staff Working Document: Impact Assessment Report (Part 3), accompanying the document 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions: Securing our future - Europe's 2040 climate target and path to climate neutrality by 2050, building a sustainable, 
just and prosperous society, COM(2024) 63 final, p. 167. 
402 Hydrogen Europe (2024). Clean Hydrogen Production Pathways - Report 2024.  
403 Fuel Cells and Hydrogen Joint Undertaking (2014). Development of water electrolysis in the European Union.  

166 

 
 
 
 
Technology 
Pathway 

Current Value 
(Reference Year) 

CAPEX/PCE in 
2030 

CAPEX/PCE 
in 2040 

CAPEX/PCE 
in 2050 

1 500/kW (PEM).  

Partial 
Electrified 
Steam Cracking 
(High Value 
Chemicals, 
PCE/Mtonnes 
capacity)404 

Fully Electrified 
Steam Cracking 
(High Value 
Chemicals, 
PCE/Mtonnes 
capacity)405 

CO₂ 
Hydrogenation 
to Methanol 
(CCU route, 
PCE/Mtonnes 
capacity)406 

Chemical 
Recycling 
(Plastic Waste 
Pyrolysis, 
PCE/Mtonnes 
capacity)407 

Carbon 
Capture (Amine 
Capture) 
(PCE/Mtonnes 
CO₂ capacity) 
408, 409 

EUR 265/Mtonnes 
(PCE, Million 2019 
prices). 

EUR 265/Mtonnes 
(PCE, Million 2019 
prices). 

EUR 
265//Mtonnes 
(PCE, Million 
2019 prices). 

EUR 
265/Mtonnes 
(PCE, Million 
2019 prices). 

Not yet 
commercially 
mature (TRL 
expected 2035). 

Not widely 
available or 
modelled at 
cost/capacity until 
post-2035. 

EUR 
522/Mtonnes 
(PCE, Million 
2019 prices). 

EUR 
522/Mtonnes 
(PCE, Million 
2019 prices). 

EUR 289/Mtonnes 
(PCE, Million 2019 
prices). 

EUR 287//Mtonnes 
(PCE, Million 2019 
prices). 

EUR 
282/Mtonnes 
(PCE, Million 
2019 prices). 

EUR 
277/Mtonnes 
(PCE, Million 
2019 prices). 

EUR 1 453/Mtonnes 
(PCE, Million 2019 
prices). 

EUR 1 
180/Mtonnes (PCE, 
Million 2019 
prices). 

EUR 
958/Mtonnes 
(PCE, Million 
2019 prices). 

EUR 
958/Mtonnes 
(PCE, Million 
2019 prices). 

EUR 292/Mtonnes 
CO₂ (PCE, Million 
2019 prices). 

EUR 
278/Mtonnes 
CO₂ (PCE, 
Million 2019 
prices). 

EUR 287/Mtonnes 
CO₂ (PCE, Million 
2019 prices). 
(Targeted CAPEX 
reduction: 20%). 
Expected further 
reduction based on 
innovation targets. 

EUR 
278/Mtonnes 
CO₂ (PCE, 
Million 2019 
prices). 
(Targeted 
CAPEX 
reduction: 
50%). 

404 CEFIC webpage. The carbon managers - iC2050 model.  
405 Ibid. 
406 Ibid. 
407 Ibid. 
408 Ibid. 
409 A.SPIRE aisbl (2021). SPIRE. Processes4Planet 2050 Roadmap. 

167 

 
 
 
Total Investment Needs (TCI) for EU Transition 

To  facilitate  the  transition  to  a  low-carbon  future,  the  primary  chemicals  sector  globally 
requires  over  $6.5  trillion  in  additional  cumulative  investments  by  2050,  with  the  majority 
directed towards green ammonia (60%) and green methanol (27%). This split can be justified 
by the fact that ammonia is expected to be the world’s most produced chemical by 2030.410 In 
Europe,  the  chemical  sector  alone  will  need  EUR  318  billion  referenced  to  EUR  2019  in 
cumulative discounted capital investments (CAPEX) between 2019 and 2050, under a "Base 
Case" scenario. 

Investment urgency in Europe is critical, as 58% of the continent's primary production capacity 
needs  reinvestment  by  2035,  risking  fossil  fuel  lock-ins.  Consequently,  the  majority  of 
significant investments in abatement solutions are anticipated to occur between 2030 and 2040. 

1.5. Plastics  

Key facts  

EU plastics production in 2024 was 54.6Mtonnes, with a turnover of €398 billion, 1,5 million 
direct  jobs  in  over  50.000  companies  and  a  trade  deficit  of  1,6Mtonnes,  with  19.5Mtonnes 
exported and 21.1Mtonnes imported.    

Key challenges 

EU plastics production has experienced a sustained decline, falling from 62.3 Mtonnes in 2018 
to 54.6 Mtonnes in 2024. This trajectory includes a 13% reduction in output over the past two 
years  alone,  without  any  increase  in  recycling  capacity.  Europe's  share  of  global  plastics 
production has contracted from 22% in 2006 to 12% in 2024, and the EU has transitioned to a 
net importer of both plastics resins and finished goods. 

These market dynamics affect and challenge the entire plastics value chain in the EU, including 
primary  manufacturers,  compounders,  processors,  and  recyclers,  thereby  creating  risks  for 
established industrial supply networks within the EU. 

Cost of low-carbon plastics 

Low-carbon  plastics  carry  a  cost  premium  relative  to  fossil-based  virgin  alternatives. 
Mechanically recycled plastics, the lowest-cost low-carbon option, exhibit a premium of 10-
15% when destined for specification-grade applications. 411 However, market prices for certain 
mechanically recycled plastics are currently lower than for virgin alternatives but the total cost 
to end-users tend to be at parity or exceeds virgin plastic prices due to additional requirements 
including certification, quality assurance protocols, and audit procedures. 412 413 Current price 
levels are to be considered with caution, as global over-supply and market disturbances have 
introduced significant market volatility for both recycled and virgin materials, reducing also 
transparency of future cost trajectories.  

Mechanical recycling is projected to achieve cost parity with virgin fossil plastics by 2035, 
contingent upon increasing costs for CO2 emissions and fossil fuel inputs. The timeline for 

410 JRC (2026). Mapping the transition of the EU ammonia industry to carbon neutrality. 
411  ING  Economics  Department,  "How the plastics  industry  can go green  and at  what  cost".  Available  at:  think.ing.com/articles/how-the-
plastics-industry-can-go-green-and-at-what-cost/ 
412 bvse Market Report – Plastics 2025. Available at: plasticker.de/docs/preise/bvse_market_report_plastics_2025_05.pdf 
413  European  Environment  Agency,  "Competitiveness  of  secondary  materials".  Available  at:  eea.europa.eu/en/circularity/thematic-
metrics/business/competitiveness-of-secondary-materials 

168 

 
 
 
 
 
chemical  recycling  is  longer;  competitive  positioning  could  be  achieved  once  cumulative 
global volume reaches  650Mtonnes of polyolefins recycled through pyrolysis414, calling  for 
policy incentives to accelerate the cost convergence with fossil counterpart. Bio-based plastics 
carry currently a premium of 20-50% but are already established on markets.  

The proposed measures 

To support decarbonisation of the EU plastics sector and ensure sustained production capacity 
in EU, “Made in EU” and low-carbon requirements could be proposed with the aim to create 
demand  for  low-carbon  plastics  that  incentivise  industrial  investment  and  subsequent  cost 
reductions. The plastics products considered in this analysis are within the construction sector, 
which is the second-largest plastics consumer in Europe using 20% of plastics production (10-
11Mtonnes annually). Plastic pipes, insulation materials, and window/door frames account for 
60%  of  plastics  consumption  in  the  construction  sector.  These  products  can  be  effectively 
addressed with proportionate administrative complexity and deliver a meaningful impact for 
the plastics supply chain. These are also long-lived applications, likely to result in permanent 
emission reductions.  

Public  procurement  and  works  represent  approximately  40%  of  the  addressed  market  (i.e. 
plastics in construction). Application of the 30% European low-carbon content requirement is 
projected  to  generate  EU-made  low-carbon  plastics  demand  of  approximately  0.8  Mtonnes 
annually415.  

Projects receiving public subsidies will create additional demand, but an estimation of volumes 
contain significant uncertainty regarding leverage ratios and supported project typologies post-
2030. A very approximative estimate of this additional demand, assuming focus on renovation 
and larger share of thermal insulation compared to piping and frames, is a range of 0.3-0.9 Mt 
of  low-carbon  plastics  demand416.  The  design  of  public  support  measures  will  impact  this 
estimate  significantly,  driving  investments  to  any  combination  of,  for  example,  insulation, 
heating, ventilation, renewable installations, and holistic renovation of the building envelope.  

In total, this measure could generate additional demand of 1.1-1.7 Mt for EU-made low-carbon 
plastics.  While  this  represents  11-17%  of  current  recycling  volumes  (10.6  Mt  in  2024),  it 
provides a meaningful incentive to maintain and expand the low-carbon plastics supply chain 
within  the  EU.  Such  supply  chain  development  is  also  expected  to  stimulate  additional 
voluntary demand for low-carbon plastics from private sector actors. 

The  projected  additional  demand  requires  investments  of  at  least  €1.5-2.6  billion  into 
production  capacity,  based  on  established  investment  parameters  for  mechanically  recycled 
plastics.  The  annual  trade  balance  is  expected  to  improve  with  €1.1-1.7  billion,  assuming 
substitution of virgin imports at €1,000 per tonne. 

Cost of measures 

414  Packaging  Gateway,  "Europe  chemical  recycling  vs  virgin  plastics".  Available  at:  packaging-gateway.com/news/europe-chemical-
recycling-virgin-plastics/ 

415 Based on volume in construction sector of 11Mt, a 60% share of the 3 product categories, a 40% share of public procurement, and the 30% 
target for the products covered. 
416 The estimate is strongly influenced by assumptions on the building renovation rate, and availability and form of public financing. The total 
renovation activities in scope are difficult to assess due to many and heterogeneous public support programs. Annual renovation needs are 
estimated at €300bn but has a  €165bn financing gap, which indicate that significant renovation volume  will exist beyond 2030. If annual 
€20bn publicly supported renovation materialise post-2030, and is in scope of this regulation, with an average share of 15-19% of spending 
into the 3 plastic products at an average cost of €1500/t, the plastics demand is 2-2,5mt, whereof 30% is 0,6-0,76Mt. However, with the large 
uncertainty on the assumptions and support programs a significantly larger bracket of 0,3-0,9Mt is considered.  
https://energy.ec.europa.eu/topics/energy-efficiency/financing/financing-building-renovations_en 
https://energy.ec.europa.eu/topics/funding-and-financing/recovery-and-resilience-facility-clean-energy_en 

169 

 
 
 
 
The cost impact on the covered construction activity is limited, as plastics represent only 2-4% 
of  total  building  costs417,  the  proposed  three  products  cover  60%  of  plastics  and  analysed 
targets apply to 30% of that plastic. In favourable market conditions the costs for low-carbon 
plastics could approach parity with conventional alternatives. However, in the initial years of 
implementation a 10-20% premium is likely, set by mechanical recycling cost levels, which 
when applied to total construction costs implies an overall increase of 0.036-0.14% 418. 

Benefits of measures 

The societal benefits, including employment creation, emissions reductions, and reduced waste 
disposal  costs,  are  expected  to  generate  a  positive  economic  case  at  the  societal  level  well 
before cost parity is achieved at production plant level.  

The measures contribute to robust industrial supply chains and reduced dependencies on fossil 
inputs, the main intended impacts. But these are joined by several other benefits. The impact 
on direct employment is significant, with projected job creation of 29 000-45 000 positions, 
applying the sector average employment ratio per unit capacity. The substitution of fossil-based 
plastic will reduce annual CO2 emissions with 3-4,8Mt419.  

The increase in procurement costs is to a large share borne by the contracting or supporting 
public authorities. These authorities will in most cases benefit from several meaningful positive 
effects within their jurisdictions: 

•  Economic development: Activities linked to the low-carbon plastics supply chain are 

generating economic value, employment, and tax revenues. 

•  Climate action: The emission reductions contribute to voluntary or mandatory climate 

targets through more sustainable building stock. 

•  Waste  management:  Enhanced  recycling  addresses  plastic  disposal  challenges  and 

reduces associated waste management costs. 

Administrative burden  

Manufacturer  compliance  costs  will  remain  limited,  primarily  because  Regulation  (EU) 
2024/3110  (Construction  Products  Regulation)  already  mandates  the  underlying  product 
information  infrastructure,  including  Digital  Product  Passports  (DPP)  and  environmental 
declarations. 

Certification and verification requirements at manufacturer level will have minimal impact on 
product costs, with a likely range of 0,02-0,05% additional cost420.  

Additional  administrative  cost  for  the  public  authorities  will  be  generated  from  costs  for 
procurement  staff  training,  tender  specification  updates,  bid  evaluation  and  monitoring  for 
compliance, but these costs are very limited as this regulation add only one element into an 
existing  set  of  requirements  and  does  not  necessitate  introduction  of  new  systems  or  major 
procedures.  

417  The plastic sector turnover share, based on 10Mtonnes, of the construction sector turnover of €1500bn is a function of the mix of different 
products, resulting in plastic sector turnover of  between €30bn and €60-70bn. The lower bracket is set by plastic pipes in civil engineering 
and profiles at €3000/ton, and the upper bracket by higher-spec insulation at €6000-7000/ton in product market value. This is 2-4% of the total 
construction  sector  turnover.  [sources:  https://www.ela.europa.eu/sites/default/files/2023-09/ELA_construction-sector-report-2023.pdf  ; 
https://www.teppfa.eu/about-us 
; 
https://publications.jrc.ec.europa.eu/repository/bitstream/JRC108692/kj1a28816enn.pdf  ;  https://www.acrplus.org/docs/2024104804_guide-
en.pdf] 
418 The bracket is a calculation of the values referenced in text, with 0.036-0.14% calculated as [0.02*0.6*0.3*0.1 - 0.04*0.6*0.3*0.2]. 
419 Based on 1.1-1.7Mt /13*37, extrapolating from a national transition scenario: CE Delft, "Mandatory percentage of recycled or bio-based 
plastic" 
[cedelft.eu/wp-
Agenda 
content/uploads/sites/2/2022/03/CE_Delft_200289_Mandatory_percentage_of_recycled_or_bio-based_plastic_Def.pdf] 
420 As example, annual certification and verification costs of €40,000 for a 100,000 ton facility would increase plastics production costs by 
€0.40 per tonne, equivalent to 0.04% for a polymer priced at €1,000/t. 

https://www.eurowindoor.eu 

Transition 

Plastics). 

(Dutch 

for 

; 

170 

 
 
 
 
1.6. Glass  

Key facts  
EUR 6.3 billion  in glass sales in  2021421, 178 500 direct  jobs422, 37  Mtonnes production in 
2023423, main EU producers: Germany, France, Italy and Poland.424 EU exports in 2023: 3.4 
Mtonnes, imports: 4.9 Mtonnes. Major trading partners: China, UK and Switzerland.425 

Key challenges 

High  energy  costs  and  intense  international  competition.  As  a  result,  production  volumes 
decreased by 18% since 2022, with a steady decline in employment since 2019.426 
The EU glass industry emits  approximately 22 Mtonnes  of CO₂427. In line with  EU climate 
goals,  it  is  shifting  towards  cleaner  production  through  different  decarbonisation  pathways, 
including shifting to electric and hybrid furnaces, greater use of renewable energy, improved 
recycling systems, and innovation in glass design to support circularity.428 This industry faces 
significant  barriers  in  implementing  these  measures,  including  high  capital  and  operational 
expenditure and complex EU regulatory requirements.429 

1.7. Pulp and paper  

Key facts 
EUR 100 billion sales430 in 2023, 180 000 direct jobs431, 47.6 Mtonnes production432 in 2023, 
roughly 22% of global paper production433, main EU producers: Sweden, Finland, Portugal and 
Germany.434 EU exports in 2023: 23.2 Mtonnes, imports 10.7 Mtonnes. Major trading partners: 
other European countries, Asia and Latin America.435 

Key challenges 
High energy costs and geopolitical instability potentially affecting trade and supply chains.436 
Although paper and board output declined in 2022-23 due to weakened demand, production 
increased by 5.2% in 2024.437 
In 2023, the EU pulp and paper industry emitted approximately 33 Mtonnes of CO₂.438 In line 
with  EU  climate  goals,  the  sector  is  shifting  toward  cleaner  production  through  different 
decarbonisation  pathways,  including  deployment  of  heat  pumps,  electrification,  energy 
efficiency  improvements439,  carbon  capture  and  storage  (CCS),  and  a  switch  to  renewable 
energy.440 However, significant implementation challenges exist. Key barriers include capital 

421 JRC Analysis. 
422 statistical-report-glass-alliance-europe.pdf. 
423 Ibid. 
424 Tendate. Global Glass Exports by Nation in 2023 -. 
425  Glass  Alliance  Europe  (2025).  Statistical  Report  2024-2025.https://www.wko.at/bgld/industrie/glasindustrie/statistical-
report-glass-alliance-europe.pdf 
426 Ibid. 
427 European Commission (2022). How LIFE is reducing emissions from glass production. 
428 FEVE (2024). One destination, multiple pathways: How the European container glass industry is decarbonising glassmaking. 
429 FEVE (2024). One destination, multiple pathways: How the European container glass industry is decarbonising glassmaking. 
430 Cepi (2023). Key Statistics 2023 - European pulp & paper industry,  
431 Ibid. 
432 Ibid. 
433 European Commission webpage. Pulp and paper industry. 
434 Cepi (2024). Key statistics 2023 - European pulp & paper industry. 
435 Cepi (2024). Press release: In a very difficult context, pulp and paper industry has shown resilience in 2023. 
436 EMGE (2025). EMGE Paper and Pulp Industry Outlook: 2026. 
437 Cepi (2024). Press release: In a very difficult context, pulp and paper industry has shown resilience in 2023. 
438 Reinvent webpage. Paper.  
439 Cepi (2023). Press release: Pulp and paper manufacturers are innovating their way out of CO2 emissions. 
440 Lipiäinen, S. et al. (2023). Decarbonization Prospects for the European Pulp and Paper Industry: Different  Development Pathways and 
Needed Actions, Energies, 16(2), 746. 

171 

 
 
 
intensive infrastructure and high upfront costs for new technologies, as well as legal uncertainty 
and complexity.441 So far, the sector reduced its CO₂ emissions by 46% since 2005.442 

Cost evolution 

Table 15 below includes the Capital Expenditure cost estimates for the key decarbonisation 
technologies applicable to the EU pulp and paper industry. Since the sector prioritizes process 
heat, energy efficiency, and Carbon Capture and Storage (CCS), most cost estimates are given 
as unit costs for essential equipment (e.g., boilers or heat pumps) or as inputs for determining 
the total capture cost (Total Capital Requirements (TCR) or Nth-of-a-Kind (NOAK) estimates. 

Table 15: CAPEX for the pulp and paper industry compiled by the JRC, 2025 

Technology 
Pathway 

Current 
Value/Reference 
CAPEX 

Biomass Boiler 
(New 
Installation)443 

850 EUR/kWth 
(Reference cost for 
boiler). 

High-
Temperature Heat 
Pumps (HTHP)444, 
445 

EUR 300–EUR 1 
000/kWth 
(Estimates for 
systems like 
reverse-Rankine 
cycle, typical 
project range). 

Electric Boiler 
(Direct 
Electrification) 446 

Requires 
significant 
investments in 
electricity grid 
connections, which 
acts as a barrier. 

CAPEX in 2030 

CAPEX in 
2040 

CAPEX in 
2050 

850 EUR/kWth 
(Costs for mature, 
deployed 
technology 
typically 
considered stable). 

Maximum 
acceptable specific 
CAPEX threshold 
for economic 
viability in 
Sweden is up to 
EUR 1 600/kW. 
Broad deployment 
requires significant 
cost reductions. 

Cost remains 
largely dependent 
on required grid 
upgrades. 

850 
EUR/kWth. 

850 
EUR/kWth. 

Expected 
stability after 
deployment 
and cost 
optimisation. 

Expected 
stability after 
full 
technological 
maturity. 

Cost remains 
largely 
dependent on 
required grid 
upgrades. 

Cost remains 
largely 
dependent on 
required grid 
upgrades. 

441 Engie Impact (2024). Overcoming Decarbonization Hurdles in the Pulp and Paper Industry. 
442 Cepi (2025). Press Release: Pulp and Paper Industry Showcases Commitment to Phase out Fossil Energies, at European Parliament Event. 
443 ECN, TNO and PBL Netherlands Environmental Assessment Agency (2019). Decarbonisation options for the Dutch paper and board 
industry.  
444 Ibid. 
445  Ciambellotti  et  al.  (2024).  High-Temperature  Heat  Pumps  for  Electrification  and  Cost-Effective  Decarbonization  in  the  Tissue  Paper 
Industry.  
446 ECN, TNO and PBL Netherlands Environmental Assessment Agency (2019). Decarbonisation options for the Dutch paper and board 
industry.  

172 

 
 
 
Technology 
Pathway 

Current 
Value/Reference 
CAPEX 

CAPEX in 2030 

CAPEX in 
2040 

CAPEX in 
2050 

Carbon Capture 
(PCC - 
Amine/Carbonate) 
447, 448 

CAPEX calculated 
using Nth-of-a-
Kind (NOAK) 
factors, meaning 
current costs are 
likely higher than 
estimates. 

NOAK costs are 
assumed, 
reflecting a high 
level of maturity 
where technology 
is expected to be 
deployed. 

Expected 
CAPEX 
stability. 

Expected 
CAPEX 
stability, as 
major cost 
reductions 
(learning curve 
of 1%) are 
primarily 
assumed only 
until TRL 8 is 
reached, 
typically before 
2030. 

Total Investment Needs (TCI) for EU Transition 

To achieve its GHG emission reduction targets by 2030 the European pulp and paper industry 
estimates a TCI of EUR 24 billion is needed throughout the 2020s. Of this amount,  EUR 6 
billion  is  allocated  to  immediate  emission  reduction  measures,  while  EUR  18  billion  is 
earmarked for further technological advancements and infrastructure upgrades. A significant 
portion of these investments will target advanced CO2 capture technologies. However, these 
estimates are considered optimistic compared to near-term implementation, because the current 
estimates assume a more mature technology base than likely to be available in the short term. 

1.8. Refining 

Key facts 
EUR 487 billion sales in 2022449  130 000 direct  jobs,  602.8 Mtonnes  production of refined 
petroleum  products  in  2022,  Germany,  Italy,  the  Netherlands,  and  Spain.450  EU  exports  in 
2021:  EUR  186  billion,  imports:  EUR  150  billion.  Major  trading  partners:  USA,  Norway, 
Middle East and Russia.451 

Key challenges 

Dependency on crude oil imports, exposure to global price volatility, and increasing regulatory 
pressure to decarbonise. Production volumes have decreased by 8% between 2022 and 2023.452 
EU refineries emit approximately between 150 and 200 Mtonnes of CO₂ per year.453 In line 
with  EU  climate  goals,  refineries  are  transitioning  toward  cleaner  production  and  de-
fossilisation  of  their  products  through  several  decarbonisation  pathways,  including  fuel 
switching  to  low-carbon  hydrogen,  electrification  of  heat  processes,  deployment  of  carbon 
capture, utilisation and storage (CCUS), and increased production of advanced biofuels and 

447 ACCSESS (2024). Providing access to cost-efficient, replicable, safe and flexible CCUS. D5.3 Advanced capture configurations for 
selected pulp and paper plants incl. technoeconomic analysis. 
448 ECRA (2022). ECRA Technology Papers. 
449 ERT (2024). Europe’s energy transition: ERT releases analysis on the EU’s competitiveness for energy-intensive industries and state of 
energy infrastructure. 
450 T&E (2023). The ‘biofuels first, e-fuels later’strategy of European refining sector. What future for European refining?  
451 Insight EU Monitoring (2024). Eurostat reports drop in imports of energy products to the EU. 
452 Eurostat webpage. EU imports of energy products. 
453 Sector Analyses (2024). Chemical Industry.  

173 

 
 
 
 
synthetic  fuels.  The  estimated  investment  requirement  is  EUR  650  billion  by  2050.  Main 
decarbonisation challenges include the limited availability of low-carbon technologies at scale, 
underdeveloped  infrastructure  for  clean  hydrogen  and  CO₂  transport  and  storage,  and  the 
complexity of adapting current assets to new energy systems. 

1.9. Steel  

Key facts 
Third-largest global steel producer (7-8% of global production) after China and India 454, EUR 
177 billion of Gross Value Added in 2024, 298 000 direct and 1 550 000 indirect jobs, 130 
Mtonnes production, main EU producers: Germany, Italy, Spain and France.455 EU exports in 
2024:  16.7  Mtonnes,  and  imports:  27.4  Mtonnes  of  finished  steel  products  Türkiye,  South 
Korea,  India,  Vietnam,  China, Taiwan) for imports, and USA,  Türkiye  and Switzerland for 
exports.456 

Key challenges 

High  energy  costs,  unfair  competition,  increased  import  pressure  resulting  from  global 
overcapacity  and  low  demand  for  green  steel.457  As  a  result,  production  volumes  have 
decreased by 34 Mtonnes since 2018, and nearly 100 000 jobs have been lost over the past 15 
years.458 Capacity utilisation has dropped to an unsustainable level of around 65% 459 compared 
to the minimum 85% to remain competitive under market conditions. While Europe was a net 
exporter  of  steel  in  2012,  by  2022  imports  had  surged  to  EUR  20  billion  -  an  increase  of 
640%.460 
In 2023, the EU steel industry emitted approximately 49.15 Mtonnes of CO₂.461 In line with 
EU  climate  goals,  the  steel  industry  is  shifting  toward  cleaner  production  through  different 
decarbonisation pathways, including electric furnaces, such as direct reduced iron (DRI) and 
electric arc furnaces (EAF), as well as the implementation of carbon capture and storage (CCS). 
462, 463, 464 These technologies aim to reduce greenhouse gas emissions across the production 
processes, as 95% of emissions  come from the steelmaking,  finishing and distribution. The 
main barriers to decarbonisation include limited availability of green infrastructure, the need 
for  capital  investment  until  2030  estimated  at  over  EUR  31  billion  and  EUR  54  billion  for 
operating  expenditure  (OPEX),465  lack  of  market  demand  for  premium-priced  green  steel, 
varying  maturity  levels  of  decarbonisation  technologies,  and  regulatory  uncertainty, 
particularly regarding the ongoing CBAM/ETS implementation standards.466 

Cost evolution 

Table 16 below and its subsequent data presents CAPEX as (1) the specific CAPEX per tonne 
of annual crude steel capacity, adjusted for inflation to the base year (EUR 2022 or USD/EUR 
2023), and (2) the projected specific capital costs associated with future technology maturity 
by 2030, 2040 and 2050. Certain decarbonisation technologies within the steel industry like 

454 Eurofer (2025). European Steel in Figures 2025. 
455 Ibid. 
456 Ibid. 
457 Deloitte (2023). Steel – Pathways to decarbonization.  
458 Steel Times International (2024). European steel industry facing irreversible decline, says Eggert.  ERT (2024). Competitiveness of 
European Energy Intensive Industries. 
459Eurofer (2024). European Steel in Figures.  
460 UN Comtrade data; ERT (2024). Competitiveness of European Energy-Intensive Industries. 
461 World Steel (2025). Sustainability Indicators Report 2025. 
462 JRC144070 (2026) Mapping the Transition of the EU Steel Industry to Carbon Neutrality.  
463 JRC (2024). The role of carbon capture across hard-to-abate industries in the EU. 
464 Deloitte (2023). Steel – Pathways to decarbonization. 
465 Eurofer (2025). Low-CO2 emissions projects in the EU steel industry. 
466 Deloitte (2023). Steel – Pathways to decarbonization.  

174 

 
 
 
DRI  in  combination  with  EAF  have  been  around  for  decades,  however  the  utilisation  of 
hydrogen has yet to be seen on an industrial scale. In comparison, certain CCS and electrolysis 
technology pathways are currently projected to not reach necessary industrial scale before the 
beginning of the 2030s, which is reflected in the high prognosed CAPEX.  

Table 16: CAPEX estimates for the steel industry compiled by the JRC, 2025 

CAPEX (2030)  CAPEX (2040)  CAPEX (2050) 

Technology 
Pathway 

H-DRI-EAF 
(Integrated  DRP  + 
EAF) 
(Excluding 
Electrolyser)467, 468 

H-DRI-EAF 
(Including 
Integrated 
Electrolyser)469, 470 

BF-BOF  +  CCS 
(73% Capture)471 

$75 – $85/t (Crude 
steel capacity, 
specific capital costs 
for facilities) 

CAPEX (Current 
Value/Reference) 
EUR 592/t (Literature 
Median, 2022 prices) 
EUR 751/t 
(Announced Projects 
Median, 2022 prices) 
EUR 886/t (Literature 
Median, 2022 prices) 
EUR 1 600/t 
(Announced Projects 
Median, 2023 prices) 
TRL 3–4 (Pilot stage)  $34 – $66/t (Crude 

Up to EUR 1 000/t 
(Upper bound 
scenario estimate, 
including electrolysis 
unit) 

N/A 

N/A 

Expected to 
decrease due to 
anticipated 
electrolyser cost 
reduction 
N/A 

Expected to 
decrease due to 
anticipated 
electrolyser cost 
reduction 
N/A 

HIsarna  +  BOF  + 
CCS 
(93% 
Capture)472 

TRL 5–6 (Pilot plant 
status, development 
unclear) 

NG-DRI-EAF 
CCS473, 474 

+ 

N/A (TRL 8–9) 

steel capacity, 
specific capital costs) 
(Expected Readiness: 
2030–2035) 
$41 – $85/t (Crude 
steel capacity, 
specific capital costs) 
(Expected Readiness: 
2030–2035) 
$77 – $90/t (Crude 
steel capacity, 
specific capital costs 
for facilities) 
$22/t (Crude steel 
capacity, specific 
capital costs) 

N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

TRL 9 (Ready) 

Scrap 

Near-Zero 
Emissions 
EAF475 
Oxide 
Molten 
Electrolysis  (MOE) 
476 

TRL 3–4 (Pilot Plant)  Not applicable (Not 
available at necessary 
scale before 2030) 

Expected 
Readiness: 2035–
2040 

$60 – $122/t 
(Crude steel 
capacity, 
specific capital 
costs) 

467 Huttel A, Lehner J. (2024). Revisiting investment costs for green steel: Capital expenditures, firm level impacts, and policy implications.  
468 Agora Industry, Wuppertal Institute and Lund University (2024): Low-carbon technologies for the global steel transformation. A guide to 
the most effective ways to cut emissions in steelmaking 
469 Huttel A, Lehner J. (2024). Revisiting investment costs for green steel: Capital expenditures, firm level impacts, and policy implications. 
470 Agora Industry, Wuppertal Institute and Lund University (2024): Low-carbon technologies for the global 
steel transformation. A guide to the most effective ways to cut emissions in steelmaking. 
471 Ibid. 
472 Ibid. 
473 Ibid. 
474 IEAGHG (2024). Clean Steel: An Environmental and Technoeconomic Outlook of a Disruptive Technology March 2024.  
475 Agora Industry, Wuppertal Institute and Lund University (2024): Low-carbon technologies for the global 
steel transformation. A guide to the most effective ways to cut emissions in steelmaking 
476 Ibid. 

175 

 
 
 
 
Technology 
Pathway 
Alkaline Electrolysis 
(AEL-EAF) 477 

CAPEX (Current 
Value/Reference) 
TRL 4 (Moving to 
TRL 6 with support)  

CAPEX (2030)  CAPEX (2040)  CAPEX (2050) 

TRL 7 aimed by 2030 
(Medium scale pilot 
plant)  

Commercial 
readiness (TRL 
9) expected by 
2040 

$75 – $152/t 
(Crude steel 
capacity, 
specific capital 
costs) 

Figure 14: Levelized cost of net-zero and unabated materials in the EU, including the 
carbon price, 2024 Levelized Cost of Net-Zero Materials (BNEF 2024) 

Figure 15: Evolution of green and grey steel production costs in Europe under different CO2 price scenarios478 

Total Investment Needs (TCI) for EU Transition 

Based  on  the  analysis  above  as  well  as  other  projections,  the  total  investment  (TCI)  for 
transitioning the European steel  industry would require enormous scale. In order to  convert 
30% of listed European steelmakers' production capacity to the (H-)DRI-EAF route by 2030 it 

477 Ibid. 
478  Mission  Possible  Partnership  (MPP),  E3G  and  the  Industrial Transition Accelerator  (ITA)  (2025).  Building the  EU’s  Clean  Industrial 
Future: Unlocking Investment through Lead Markets. 

176 

 
 
 
 
 
 
 
would require  between  EUR  12.1 billion and  EUR  20.2 billion TCI, depending  on whether 
electrolysis  capacity  is  included.479  By  2050,  the  projected  cumulative  TCI  required  to 
commercialise  low-carbon  steel  technologies  and  replace  existing  plants  is  estimated  to  be 
between EUR 70 billion and EUR 100 billion.480 

2.  Automotive industry 
Key facts 

The  automotive  industry  has  traditionally  been  a  cornerstone  of  the  European  economy.  It 
serves as a major employer (accounting for 6.1% of total EU employment, directly impacting 
around 1.7 million people), and it contributes significantly to value added (accounting for 8% 
of the total manufacturing value added within the EU) and is a net exporter of vehicles and car 
parts  (with  a  EUR  117  billion  surplus  in  extra-EU  trade).481  Moreover,  the  EU  automotive 
industry  is  a  global  leader  in  R&I  investment,  making  up  36.5%  of  the  EU's  corporate 
investment.482 The EU automotive supply industry has combined sales of EUR 250 billion with 
a manufacturing presence in most Member States, and more than EUR 50 billion exports. 

Over the past years, the European automotive industry has been investing in the development 
of  cleaner  vehicles  and  innovative  automotive  components  that  are  key  to  improve  the 
environmental  performance  of  such  vehicles  (through,  e.g.  increased  range,  better  energy 
efficiency, or higher usage of sustainable material and processes).483 These components have 
the  potential  to  contribute  to  decarbonisation  by  enabling  optimised  routing  and  optimised 
traffic flow, reducing congestion and lowering emissions, improving energy efficiency through 
optimised  speed,  acceleration,  and  braking,  facilitating  the  adoption  of  electric  and  hybrid 
vehicles through optimised charging strategies and energy management.  

However,  the  transition  to  zero-emission  vehicles  and  the  increasing  role  of  software  and 
electronics also change value chain patterns and provide opportunities for new players from 
third countries calling into question historical industry patterns, including the appeal of supply 
chain regionalisation484. 

As a consequence, traditional European leadership in the global automotive market is being 
diminished,  as  shown  in  Figure  16.  The  EU's  share  of  the  global  automotive  market  has 
declined from 24% in 2010-14 to 22% in 2022. Meanwhile, China has increased its influence 
and surpassed Europe to become the world's largest car producer and a key supplier of critical 
components for electric vehicles (EVs), such as batteries. China's market share grew from 20% 
in the 2010-14 period to 26% in 2022. The United States has also seen a slight increase in its 
market share. Conversely, other countries, notably Japan (included in the Rest of the  World 
category), have experienced losses, with Japan's market share dropping from 12% to 7% during 
the same timeframe. 

479  Huttel  A,  Lehner  J.,  Revisiting  investment  costs  for  green  steel:  Capital  expenditures,  firm  level  impacts,  and  policy  implications. 
https://www.diw.de/de/diw_01.c.901042.de/publikationen/diskussionspapiere/2024_2082/revisiting_investment_costs_for_green_steel__ca
pital_expenditures__firm_level_impacts__and_policy_implications.html 
480 Somers, J. (JRC) (2022). Technologies to decarbonise the EU steel industry. 
481 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 140. 
482  European  Commission,  Joint  Research  Centre  (2024)  EU  Industrial  R&D  Investment  scoreboard,  Publications  Office  of  the  European 
Union  
483  Such key  components include, among  others, controllers, transformers, electric  motors,  charge  ports  and  chargers,  AC/DC  converters, 
power  inverters,  alternators,  control  units  that  are  essential  for  the  operations  of  the  powertrain,  regenerative  braking  systems,  thermal 
management  systems,  transmission  systems,  fuel-cells,  hydrogen  storing  and  fuelling  systems;  but  also  connected  and  automated  driving 
(CAD)  systems  (software  and  hardware)  such  as  cameras,  lidars,  radars,  ultrasonic  sensors,  vehicle-to-everything  (V2X)  communication 
systems,  navigation  and  mapping  systems,  human-machine  interface  (HMI)  systems,  vehicle-to-grid  (V2G)  systems,  advanced  driver-
assistance systems (ADAS). 
484 China’s subsidies, price and technical advantage, and overcapacity in parts of the industry keep Chinese vehicles and components cost-
competitive despite shipping costs, localization advantages, and trade barriers. China and the Future of Global Supply Chains, Rhodium Group, 
4 February 2025 

177 

 
 
 
Figure 16: Global automotive market in value JRC calculations based on Eurostat's FIGARO data485 

The JRC analysed the EU value content in the EU automotive production. The left panel of 
figure  17  shows  the  evolution  of  the  origin  of  the  inputs  used  by  the  industry  (excluding 
batteries)  between  2010  and  2022,  broken  down  by  country  of  origin.  While  the  European 
automotive  industry  still  primarily  relies  on  EU-manufactured  inputs,  this  proportion  has 
decreased, reducing the EU value content of the automotive sector from 89% in 2010 to 85% 
in 2022. This trend indicates a growing reliance on production inputs from non-EU countries, 
particularly from China, where sourcing has almost doubled (increased by 1.9 times) during 
that period. When zooming in on the EU production of motor vehicles only, it appears that 85% 
of the components of an EU-made internal combustion engine (ICE) car comes from the EU, 
while  it  is  only  70%  for  an  EU-made  EV  (right  hand  side  Figure  17).486  We  can  note  in 
particular  the  increased  dependency  on  China  (4.2  times)  in  EVs  production  compared  to 
conventional ICE vehicles. 

Figure 17: Origin of the EU car components used in the manufacturing industry: over time (left) and by type of 
vehicle (right)-JRC estimates based on Eurostat's FIGARO data487 

EVs  have  a  greater  dependence  on  third  countries  for  any  segment  or  component  (inputs) 
compared to ICE cars (See: Figure 18). 

485 Data refers to Industry C29 (NACE Rev. 2.1) Manufacture of motor vehicles, trailers, and semitrailers. 
486 This finding is consistent with other studies that estimate the EU's value content at approximately 85–90% for ICE vehicles and 70–75% 
for EVs. Source: McKinsey (2024). Europe's economic potential in the shift to electric vehicles. 
487 ICE includes mild hybrids. EV includes battery electric and plug-in hybrid electric vehicles. 

178 

 
 
 
 
 
 
 
 
 
Figure 18: Foreign input reliance by sector, JRC estimates based on Eurostat's FIGARO data488 

The  increased  dependence  on  non-EU  manufactured  inputs  in  the  production  of  EVs  may 
originate from two reasons:  

•  A technological shift as the production of EVs may depend, further than ICE vehicles, 
on industries or technologies where the EU has a comparative disadvantage; and  
•  A  value  chain  shift  as  the  production  of  EVs  may  have  come  with  a  shift  of  EU 
manufacturing value chain in favour of non-EU inputs. The JRC has shown through a 
counterfactual  analysis  of  EU-manufactured  EVs  (where  the  EU  content  of  the  EV 
inputs  would  be  the  same  as  that  of  ICE  inputs,  except  for  batteries  and  electric 
components)  that  the  primary  reason  for  the  reduction  of  EU  content  in  the 
manufacturing of EVs inside the EU is due to a shift in the value chain in favour of 
vehicle components coming from outside of the EU.  

These findings  highlight an outsourcing trend that  affects  the entire EV  value chain,  which 
goes far beyond battery and electric component production. 

Over the past years, import of automotive parts from China increased by around EUR 4 billion, 
affecting all vehicle component sub-sectors, but some are much more impacted than others (it 
is  in  these  sub-sectors  that  most  of the  restructuring  underway  since  2024  is  concentrated): 
+300% for gearboxes, +270% for bumpers, +195% for tyres and transmissions and +60% for 
shock absorbers and airbags. Consequently, the trade balance for automotive components is 
deteriorating very rapidly: from a surplus of EUR 4.6 billion in 2019 to a deficit of around EUR 
4.9 billion in 2025. All sub-sectors are now in deficit.  

At the same time, weaker than expected demand for EVs has created overcapacities for EV 
components  and  led  to  a  sharp  reduction  in  investment,  hampering  the  long-term  industrial 
capacities, and Chinese export restrictions on rare earths have created huge supply chain risks, 
while there is an increasing trend of non-EU manufacturers opening assembly plants within the 
EU, where they produce vehicles with an initial EU content of less than 30%. 

Key challenges 

EU  vehicle  components  manufacturers  face  increasing  cost  competitiveness  challenges 
compared to low-cost locations in the European neighbourhood or in Asia and stagnating or 
decreasing sales volumes in the EU. In addition, due to the pressure to reduce prices, vehicle 
manufacturers  increasingly  import  cheaper  components  from  overseas  suppliers.  This 
increasing reliance on foreign components points towards significant risks to EU technology 

488 Sectors  were  aggregated  following  the  Eurostat  technological  intensity  classification  for  the  manufacturing  segments  and  the  Eurostat 
knowledge-intensive services (KIS) for the services segments. Only direct effects of the value chain are considered. 

179 

 
 
 
 
 
sovereignty  and  the  urgent  need  for  targeted  policy  intervention  to  safeguard  the  industry 
alongside decarbonisation efforts. 

Vehicle components: the example of tyres 

Tyres are a key automotive component, not only for vehicle control, safety and comfort, but 
also for (environmental) performance and efficiency. EU tyre production is recognised globally 
for its high standards of safety, performance, and technological advancements. As shown on 
Figure 19  (left hand side), which displays trade data as a percentage of production sold  (in 
value), the EU's share of tyre imports from outside the EU is larger than its exports, and the 
gap between these two figures has been increasing over time. Imports from outside the EU rose 
significantly  from  EUR  881  million  in  2010  to  EUR  1.360  million  in  2024,  while  the 
dependence on Chinese tyres notably increased from 29% in 2010 to 58% in 2024 (Figure 19, 
right hand side). 

Figure 19: Tyres trade relative to production sold (left) and extra-EU imports composition in 2010 and 2024 
(right), JRC estimates based on PRODCOM489 and (left) and COMEXT490 (right) data 

The  rise  in  imports  compared  to  the  production  sold  can  be  attributed  to  price  differences 
between  domestic  production  and  international  trade.  The  increasing  production  price 
differential indicates that the cost of production in the EU has risen more quickly than the cost 
of imports (Figure 20). This trend has resulted in the EU losing its competitive edge. Similarly, 
while  the  cost  of  exports  has  increased  at  a  faster  rate  than  the  cost  of  imports,  the  price 
difference is even more significant. These data suggest that tyres produced in the EU are more 
expensive than those from foreign manufacturers (in the range of 20-50% in the last decade). 

Figure 20: Tyres EU price differentials relative to imports, JRC estimates based on PRODCOM data 

3.  Clean energy technologies 
According  to  the  IEA,  the  global  market  for  key  clean  energy  technologies  like  solar  PV, 
batteries, as well as wind and electrolyser, are projected to triple in the next decade.491 While 

489 Data refers to Industry 22.11.11.00 (NACE Rev. 2.1) New pneumatic rubber tyres for motor cars. 
490 Data refers to Industry 40.11.10 (HS nomenclature) New pneumatic tyres, of rubber of a kind used on motor cars. 
491 IEA (2024). Energy Technology Perspectives 2024. 

180 

 
 
 
 
 
 
 
these technology all face similar competitiveness challenges, this assessment is focuses on solar 
PV and batteries because the combination of high global overcapacities, being commoditised 
products, and high dependencies of the EU’s consumption on one single sources of supply is 
unique to these technologies. This level of concentration poses significant risks to the secure 
supply of PV modules and has widened the price gap between EU and Chinese producers. 492 

3.1. Batteries 

Key facts 

In 2024, the EU imported approximately EUR 28 billion worth of batteries, with 79% coming 
from China and 5% from South Korea as the second biggest battery exporter.493 The value of 
European battery production was EUR 24 billion.494 Batteries accounted for 91% of new clean 
tech  investment  in  Europe  in  2024495.  The  EU  currently  has  34  lithium-ion  battery  cell 
manufacturing  projects  across  operational,  under  construction,  and  announced.496  However, 
only 27% of the announced manufacturing capacity is considered low risk. Although the EU 
reached  188  GWh  of  installed  battery  cell  capacity  in  2024,  and  has  over  750  GWh  in  the 
pipeline, 238 GWh worth of planned projects have been cancelled or delayed. The battery cell 
sector supports around 128 000 jobs, of which 66% are at medium or high risk.497 Upstream 
the value chain, battery key components face the same problems. 

When  comparing  EV  and  battery  subsidies  across  the  three  major  battery  manufacturing 
regions  (China,  Europe,  and  the  US)  clear  strategic  differences  emerge.  Between  2018  and 
2024, China led with an average of USD 22.4 billion annually in subsidies, followed by Europe 
with USD 13.8 billion, and the US with USD 6.1 billion498. However, while China and the US 
increasingly  directed  their  support  toward  manufacturing  by  allocating  over  50%  of  their 
subsidies to industrial development, the EU and its Member States have focused on demand-
side measures, with 89% of its subsidies going to EV purchase incentives. In 2024, the EU 
spent USD 18 billion on EV purchases but only USD 2.5 billion on manufacturing, both for 
EVs and batteries. In contrast, China invested USD 17.5 billion in manufacturing, including 
USD  7.3  billion  specifically  for  batteries,  and  the  US  allocated  USD  8.6  billion  to  battery 
production alone. These targeted manufacturing subsidies have enabled Chinese and American 
manufacturers to attract bigger investments than the EU, scale up production, reduce costs, and 
strengthen their positions in global supply chains. 

Meanwhile, Europe is spending significant amounts on EV and battery subsidies, but with less 
strategic  impact  on  its  own  manufacturing  base.  The  EU’s  focus  on  purchase  subsidies 
inadvertently  benefits  non-EU  manufacturers,  who  can  offer  lower  prices  and  capture  EU-
funded demand, while European manufacturers struggle to compete on costs and scale. Without 
Made in EU requirements, public funds risk flowing abroad, undermining the EU’s industrial 
competitiveness and long-term strategic autonomy. 

Key challenges 

Europe’s battery sector faces deep structural challenges. Technological development within the 
EU’s  battery  ecosystem  is  not  progressing  rapidly  enough  to  secure  strategic  autonomy, 

492  European  Commission  (2025).  Communication  from  the  Commission  providing  updated  information  to  determine  the  shares  of  the 
European Union supply of final products and their main specific components originating in different third countries under Regulation (EU) 
2024/1735 (C/2025/3236). Official Journal of the European Union C, 2025/C 3236. https://eur-lex.europa.eu/eli/C/2025/3236/oj/eng 
493 Bruegel. European Clean Tech Tracker. 
494 Ericher, M. et al. (2024), Les Thémas de la DGE: Deployment of electromobility: how to develop the European battery supply? 
495 BloombergNEF (2025). Energy Transition Investment Trends in Europe 2025.  
496 T&E (2024). An Industrial Blueprint for Batteries in Europe. 
497 Idem. 
498 MIT CEEPR (2025). Global Clean Investment Monitor: Government Support for Electric Vehicles and Batteries. 

181 

 
 
 
increasing the risk of long-term dependency on imports. Despite efforts to scale up domestic 
production, EU manufacturers struggle to compete with aggressive pricing from third-country 
producers,  particularly  from  China,  which  benefit  from  bigger  subsidies,  significant 
manufacturing overcapacities, lower energy and material costs, and vertically integrated supply 
chains.  China  currently  dominates  global  battery  manufacturing,  accounting  for  85%  of 
installed production capacity (4 534 GWh)499, despite having an end use demand of only 850 
GWh.500 

3.2. Solar 

Key facts 

Between 2020 and 2022, rapid capacity expansion in the solar PV sector created severe global 
oversupply, with crystalline silicon module manufacturing capacity reaching over 1.4 TW in 
2024, twice the forecast demand for 2025, driving module prices down by 50% in 2023. China 
controls over 80% of global PV manufacturing across all segments, with the top nine producers, 
seven of them Chinese supplying more than 60% of modules worldwide. Since 2012, US trade 
policy  has  excluded  solar  products  made  in  China,  prompting  Chinese  manufacturers  to 
establish  module  and  cell  factories  in  Southeast  Asia  to  serve  the  US  market.  However, 
following 2025 investigations, the US imposed duties of 70% to 700% on imports from four 
Southeast Asian countries. In response, Chinese firms are considering manufacturing bases in 
the  Middle  East  and  North  Africa,  though  direct  US  investments  remain  limited.  This 
dominance,  combined  with  intense  price  competition,  has  triggered  financial  losses,  mass 
layoffs, and factory closures globally, with 2025-2026 expected to remain difficult. The EU is 
particularly exposed, importing 94% of its PV modules and cells, 79% of wafers, and 50% of 
inverters  from  China,  and  faces  higher  energy,  labour,  and  capital  costs,  smaller-scale 
production, and limited supply chain integration. Although the EU projects by 2030 to expand 
PV ingots from almost nothing today to 25 GW, PV wafer capacity from almost nothing today 
to 34 GW, PV cells from 2 GW to over 30 GW, and PV modules from 12 GW to more than 40 
GW,  achieving  supply  security  will  require  accelerating  this  build-out,  securing  vertical 
integration,  and  developing  large-scale  factories  to  withstand  continued  Chinese  price 
pressure..  The  solar  energy  has  experienced  remarkable  growth  in  recent  years,  driven  by 
technological  advancements  and  decreasing  costs,  positioning  solar  energy  as  a  pivotal 
component in the global shift towards renewable energy sources.501 Thanks to technological 
improvements and falling costs, solar energy is becoming increasingly competitive, making it 
one of the most appealing options in the global energy landscape.502 

Key challenges 

Chinese manufacturers have sharply decreased the prices to reach unprecedented low levels of 
EUR 0.06/W in Europe by the end of 2024.503 Given this is reported to be below manufacturing 
costs, as a result, the profit margins of the largest Chinese solar manufacturers have sharply 
declined, as firms compete on price to defend their market share. Willingness of consumers to 
carry the price difference between EU and Chinese production is lacking. Although the planned 
expansion of PV manufacturing capacity in the EU is encouraging504, it must accelerate and 
secure full vertical integration as well as creation of large-scale factories to withstand continued 

499 BloombergNEF. 
500 Volta Foundation (2025). 2024 Battery Report.  
501 European Commission (2025). Report from the Commission to the European Parliament and the Council: Progress on competitiveness of 
clean energy technologies. 26.2.2025 COM(2025) 74 final. 
502 JRC. Clean energy technology observatory. 
503 PV Magazine (2024). Solar modules now selling for less than €0.06/W in Europe. 
504 PV wafer capacity planned to expand from less than 1 GW today to around 8 GW in 2030, PV ingots capacity from less than 1 GW to 
around 6 GW, PV cells capacity from around 2 GW to more than 20 GW, PV module capacity from around 8 GW to more than 30 GW.  

182 

 
 
 
Chinese price dumping. An expansion of the supply chain will result in decreased price levels 
of European producers, so that a price level in the long-term can be reached which consumers 
would be willing to pay.  

183 

 
 
 
 
Annex 8: Interplay with other legislation and policies and baseline scenario 

1.  Interplay with existing initiatives 
The two tables  below summarise the main instruments with  which this initiative interplays. 
The detailed interactions are subsequently presented.  

Table 17: Interplay with existing EU instruments 
Climate 

Energy 

Permitting 

Product 

Competition 

Transport 

Trade 

Funding 

Climate Law, EU Emission Trading System, Industrial Emissions Directive, Carbon Border 
Adjustment Mechanism. 
Electricity and gas Market Regulations and Directives, the Renewable Energy Directive, 
the Energy Efficiency Directive, the Energy Performance of Buildings Directive, the Gas 
and  Hydrogen  Decarbonisation  Package,  Electricity  Market  Design,  Action  Plan  for 
Affordable Energy. 
Strategic  Environmental  Assessment  Directive,  Environmental  Impact  Assessment 
Directive,  Industrial  and  Livestock  Rearing  Emissions  Directive,  Habitats  and  Birds 
Directives, Water Framework Directive, Net Zero Industry Act, Critical Raw Materials Act, 
Grids Package 
Construction  Product  Regulation  (CPR),  Energy  Performance  of  Buildings  Directive, 
Batteries Regulation, Ecodesign for Sustainable Products Regulation. 
Clean  Industrial  Deal  State  Aid  Framework,  Climate,  Energy  and  Environmental  Aid 
Guidelines, Important Projects of Common European Interest (IPCEI), Competition rules 
and enforcement. 
Alternative Fuels Infrastructure Regulation, ReFuelEU Aviation, FuelEU Maritime, CO2 
Standards  for  Cars  and  Light  Commercial  Vehicles  Regulation,  Cooperate  Clean  Fleet 
Regulation, Battery Booster. 
Trade  Defence  Instruments,  Steel  and  Metals  Action  Plan,  Foreign  Direct  Investment 
Regulation. 
Current  multiannual  financial  framework,  Industrial  Decarbonisation  Bank,  Horizon 
Europe,  Research  Fund  for  Coal  and  Steel,  Innovation  Fund,  Recovery  and  Resilience 
Facility, post-2027 MFF, European Competitiveness Fund. 

Table 18: Interplay with ongoing and announced initiatives 
Ongoing 

Proposal  for  a 
Regulation  on 
the  End-of-Life 
Vehicles 

be 
To 
adopted  in 
2026 

Circular 
Economy Act 

Electrification Action Plan  
Strategic  Roadmap 
for 
digitalisation  and  AI  in  the 
energy sector 

Proposal 
for 
and 
Ecodesign 
Energy Labelling 
rules 
for  PV 
modules 
Automotive 
Action Plan 

New 
harmonised 
standard 
on 
cement  GHG 
emissions 
Strategy 
Heating 
Cooling  

on 
and 

of 

the 
Revision 
Public  Procurement 
Framework 

Cloud and AI Development Act 

Non-exhaustive overview of existing instruments 

This initiative is one of the key deliverables of the Clean Industrial Deal, aiming to complement 
and build upon existing legislation and policy framework relevant to EIIs: 

1.  The European Climate Law505 enshrines in legislation the EU’s commitment to reach 
climate  neutrality  by  2050  and  the  intermediate  target  of  at  least  55%  net  GHG 
emissions reduction by 2030, compared to 1990 levels. In July 2025, the Commission 

505 Regulation (EU) 2021/1119 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and 
(EU) 2018/1999 (‘European Climate Law’). 

184 

 
 
 
 
 
 
 
 
 
proposed an amendment to the European Climate Law (ECL) introducing a 2040 EU 
climate  target of 90%  reduction  in  GHG  emissions,  compared  to  1990  levels.  In 
December  2025, 
the  European  Parliament’s 
representatives reached a provisional agreement on the amendment.  ➔ IAA aims to 
the  Climate  Law’s  commitment  by  supporting 
to  achieving 
contribute 
decarbonisation investment in industry.  

the  Council  presidency  and 

2.  The  EU  Emission  Trading  System506  (EU  ETS)  is  the  main  climate  policy 
instrument  to  reduce  GHG  emissions  in  the  power  sector  and  energy  intensive 
industries operating in Europe. While the EU ETS remains an important cornerstone 
for reducing  industrial  emissions cost-effectively, it is  not  sufficient  on its own to 
create a market for low-carbon products and address the broader structural challenges 
faced by EIIs, for instance due to these sectors’ exposure to international competition 
and  limited  capacity  to  pass  carbon  costs  through  to  the  consumer.  ➔  IAA’s 
measures, notably on lead markets, complement the price signal provided by the EU 
ETS. The EU ETS MRV system is used to verify data under the label on steel.  

3.  In  2023,  the  Carbon  Border  Adjustment  Mechanism  Regulation507  (CBAM) 
entered into force in its transitional phase with the aim of subjecting the import of 
certain  carbon-intensive  products  from  third  countries  to  a  financial  adjustment 
equivalent  to  the carbon price paid  under the EU ETS  for the production of these 
products. The CBAM covers the following energy-intensive sectors: iron and steel, 
cement,  fertilisers,  aluminium,  and  hydrogen.  It  will  start  having  financial 
implications in its definitive phase as of 2026. The CBAM financial adjustment for 
imports will be phased in gradually until 2034, in parallel to the gradual phasing out 
of ETS free allowances for the sectors covered. ➔ The CBAM MRV approach is used 
to allow importers to comply with the label on steel.  

4.  The  Industrial  and  Livestock  Rearing  Emissions  Directive508  (IED)  lays  down 
rules  on  integrated  prevention  and  control  of  pollution  arising  from  industrial 
activities and designed to prevent or, where that is not practicable, to continuously 
reduce emissions into air, water and land, to prevent the generation of waste, improve 
resource  efficiency,  and  to  promote  the  circular  economy  and  decarbonisation,  in 
order to achieve a high level of protection of human health and the environment taken 
as a whole. It applies to the industrial activities giving rise to pollution referred to in 
its Annexes I and Ia, notably to EII. Approximately 37 000 industrial installations are 
subject  to  permitting  requirements  under  the  Directive.  In  a  2024  revision  to  the 
Directive  a  new  Innovation  Centre  for  Industrial  Transformation  and  Emissions 
(INCITE)  will  gather  information  on  innovative  pollution  control  solutions  and 
transformative  technologies,  helping  to  speed  up  their  development.  Additionally, 
new flexibilities in permitting will allow frontrunners to test and deploy emerging 
techniques and will facilitate deep industrial transformation, including EII. The IED 
requires Member States to make the operation of an installation subject to obtaining 
a permit containing conditions set in accordance with the principles and provisions 
of  the  IED.  The  permit  conditions  should  take  into  account  the  environmental 
performance  of  an  installation,  including  emissions  to  air,  water  and  soil.  In  that 
regard, the permit should include emission limit values. ➔ IAA suggests INCITE to 

506 Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the European Union. 
507 Regulation (EU) 2023/956establishing a carbon border adjustment mechanism. 
508 Ibid. 

185 

 
 
 
 
 
 
provide assistance for innovative projects. IAA provisions on permitting could help 
streamline the implementation of the IED.  

5.  The  Strategic  Environmental  Assessment  Directive509  (SEA)  provides  a  set  of 
procedural  rules  to  integrate  environmental  considerations  into  their  preparation, 
adoption and implementation of public plans and programmes by national authorities, 
including for land-use. For example, national authorities have to examine reasonable 
alternatives and take account effects on the environment including biodiversity, soil, 
water, air.  

6.  The Environmental Impact Assessment Directive510 (EIA) requires Member States 
to  make  projects  likely  to  have  significant  effects  on  the  environment,  because  of 
their nature, size or location, subject to consent and an assessment by a competent 
national authority (i.e. a permit). To get a permit, the EIA Directive requires e.g. the 
preparation  of  an  environmental  impact  assessment  report  and  the  carrying  out  of 
consultation of the authorities, the public and, where relevant, other Member States 
affected  by  the  project.  Under  the  EIA  Directive  a  depending  on  their  likely 
significant  impact  on the environment,  certain  projects  are subject  to  a mandatory 
assessment while for others a determination by a competent authority is required to 
decide if the project shall be subject to an assessment. ➔ the IEA directive is at the 
core  of  the  permitting  provisions  IAA  aims  to  streamline,  notably  through 
digitalisation provisions, and to be able to reuse data sets.  

7.  The  Habitats511  and  Birds512  Directives  require  Member  States  to  prevent 
significant  negative  effects  on  protected  species  and  habitats  in  Natura  2000  sites 
(there are also some species protection obligations applicable also outside the sites). 
To that end, industrial related projects that are likely to have a significant effect on 
such a site, must be subject  to  an appropriate assessment.  The competent national 
authorities can, based on the assessment, agree to the project it is does not adversely 
affect  the  integrity  of  the  site  concerned.  In  exceptional  cases,  developments  that 
could  have  an  adverse  effect  on  a  protected  site  can  still  go  ahead  under  certain 
conditions, i.e., lack of alternatives, justification by imperative reasons of overriding 
public  interest  and  compensatory  measures;  in  certain  cases,  an  opinion  of  the 
Commission  prior  to  the  authorisation  by  the  Member  State’s  authorities  may  be 
required.  The  assessment  of  impacts  on  Natura  2000  can  be  carried  out  in  a 
coordinated procedure or jointly with the environmental assessment under the EIA 
Directive. ➔  provisions  on  overriding  public  interest  under  IAA  would  put  such 
projects  under  the  specific  requirements  for  the  presumption  of  overriding  public 
interest. 

8.  The Water Framework Directive513 provides that the deterioration of the ecological 
status of a body of water is only allowed where justified by overriding public interests 
or societal  benefits,  where no feasible environmental alternatives exist, and where 
mitigation  measures  are  taken.  In  light  of  this  requirement,  projects  potentially 
affecting  bodies  of  water,  including  raw  materials  projects,  need  to  be  subject  to 

509 Directive 2001/42/EC on the assessment of the effects of certain plans and programmes on the environment. 
510 Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment (codification). 
511 Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora. 
512 Directive 2009/147/EC of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (Codified 
version). 
513 Directive 2000/60/EC establishing a framework for Community action in the field of water policy. 

186 

 
 
 
 
 
 
 
assessment  and  permitting  procedures  (which  may  be  integrated  with  the  EIA 
procedure set out above). ➔ relevant in IAA context for projects subject to the WFD 
with respect to permitting provisions.  

9.  The  main  energy  frameworks  relevant  for  EIIs  include  the  Electricity  and  gas 
Market  Regulations  and  Directives514,  the  Renewable  Energy  Directive515,  the 
Energy  Efficiency  Directive516 
the  Gas  and  Hydrogen  Decarbonisation 
Package.517 The third revision of the Renewable Energy Directive518 (RED III) set 
the EU ambitious target to achieve a share of 42.5% of renewables in final energy 
consumption. By 31 December 2027, the European Commission is entitled to table 
an amendment proposal covering the post-2030 period, taking into account the latest 
and relevant scientific data, and touching on National Energy and Climate Plans, the 
effects of the implementation of GHG and sustainability criteria on renewable fuels 
of  non-biological  origin  (RFNBOs)  and  recycled  carbon  fuels,  and  technology 
developments. By virtue of art. 22a, industrial sectors are included in the scope of the 
RED III. Accordingly, Member States shall strive to increase the share of renewables 
in final industrial energy consumption by an annual average of 1.6% for the periods 
2021-2025 and 2026-2030. At a more granular level, national governments will have 
to attain a share of RFNBOs – such as renewable hydrogen - from the total industrial 
hydrogen consumption of 42% in 2030 and 60% in 2035. This obligation applies to 
government and not to industries as such. Member States are now in the process of 
implementing these provisions. ➔ IAA’s provisions on regulatory sandboxes would 
interact with the hydrogen package and renewable energy directive, since derogation 
to the application of the two delegated acts on hydrogen would be envisaged.  

10. The  Electricity  Market  Design519  is  the  main  instrument  to  regulate  electricity 
market functioning. As such, it influences the price paid and conditions for access to 
electricity for energy intensive industries as well as for other energy users. The 2024 
Electricity Market Design Reform brought new requirements setting clear deadlines 
for replies to a grid connection request, within 3 months, as well as on transparency 
regarding available grid capacities. The reform followed up on existing requirements 
in  the  legal  framework  guaranteeing  open  and  non-discriminatory  access  to  the 
electricity grid. 

11. The  Action  Plan  for  Affordable  Energy520,  adopted  in  February  2025,  includes 
three flagship measures that are particularly relevant to industry: (1) lowering energy 
bills, (2) accelerating the roll-out of clean energy and electrification, with completed 

514 Directive (EU) 2024/1788 on common rules for the internal markets for renewable gas, natural gas and hydrogen, amending Directive (EU) 
2023/1791 and repealing Directive 2009/73/EC and Regulation (EU) 2024/1789 on the internal markets for renewable gas, natural gas and 
hydrogen, amending Regulations (EU) No 1227/2011, (EU) 2017/1938, (EU) 2019/942 and (EU) 2022/869 and Decision (EU) 2017/684 and 
repealing Regulation (EC) No 715/2009 
515 Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources. 
516 Directive (EU) 2023/1791 on energy efficiency and amending Regulation (EU) 2023/955 (recast).  
517 Directive (EU) 2024/1788 on common rules for the internal markets for renewable gas, natural gas and hydrogen, amending Directive (EU) 
2023/1791 and repealing Directive 2009/73/EC (recast) and Regulation (EU) 2024/1789 on the internal markets for renewable gas, natural 
gas  and  hydrogen,  amending  Regulations  (EU)  No  1227/2011,  (EU)  2017/1938,  (EU)  2019/942  and  (EU)  2022/869  and  Decision  (EU) 
2017/684 and repealing Regulation (EC) No 715/2009 (recast). 
518  Directive  (EU)  2023/2413  amending  Directive  (EU)  2018/2001,  Regulation  (EU)  2018/1999  and  Directive  98/70/EC  as  regards  the 
promotion of energy from renewable sources, and repealing Council Directive (EU) 2015/652 
519 Directive (EU) 2024/1711 amending Directives (EU) 2018/2001 and (EU) 2019/944 as regards improving the Union’s electricity market 
design and Regulation (EU) 2024/1747 amending Regulations (EU) 2019/942 and (EU) 2019/943 as regards improving the Union’s electricity 
market design 
520 An Action Plan for Affordable Energy, COM(2025) 79 final, 26.2.2025 

187 

 
 
 
 
 
 
interconnections and grids, as well as clean manufacturing,  and (3) ensuring well-
functioning gas markets.  

12. The  Ecodesign  for  Sustainable  Products  Regulation521  (ESPR)  establishes  a 
framework for setting performance and/or information requirements to improve the 
environmental  sustainability  and  circularity  of  products  placed  on  the  EU  market, 
with  the  aim,  inter  alia,  of  extending  their  lifetime,  increasing  recyclability,  and 
recycled  content.  ESPR  also  aims  at  making  information  relevant  to  life  cycle 
sustainability of products available along value chains to businesses, consumers and 
authorities  through  Digital  Product  Passports  and/or  through  the  introduction  of 
labels. The ESPR facilitates consumer choice and encourages the take-up of more 
sustainable and energy-efficient products.  Iron and steel as well as aluminium fall 
under the ESPR scope as ‘intermediate products’ and have been included in the ESPR 
and Energy Labelling Working Plan 2025-30, adopted in April 2025, with a tentative 
timeline of 2026.522 For some of the products  to  be covered by a delegated  act  as 
mentioned above, implementing acts will also be adopted to set public procurement 
criteria to create lead markets. ➔ IAA’s provisions on the steel label risk overlapping 
in timeline with the development of a delegated act on steel under ESPR. However, 
the preferred policy option on the steel label is built so as to be an important) building 
block of the broader methodology underpinning the ESPR requirements on steel. As 
such, it is coherent to start with a label with the emission boundaries envisaged under 
IAA  to  be  further  developed  and  complemented  by  additional  elements  under  the 
ESPR. (See par. on ‘Interplay with existing initiatives’ below for more details). 

13. The Construction Product Regulation523 (CPR) lays down harmonised rules for the 
marketing of construction products in the EU. It ensures the smooth functioning of 
the  single  market  of  construction  products.  It  is  the  regulatory  tool  to  address  the 
environmental sustainability of construction products with the same ambition as the 
ESPR. Manufacturers are obliged to declare the GHG emissions of their products and 
will make them available to professionals, consumers and authorities through Digital 
Product Passports. The GHG emissions of construction products are used for the life-
cycle calculations at building level required by the Energy Performance of Buildings 
Directive. ➔  Lead  market  provisions  for  construction  under  IAA  will  align  with 
initiatives under the Construction Product Regulation, in particular the harmonised 
standard on GHG emissions. See below for more details.  

14. The  Energy  Performance  of  Buildings  Directive524  (EPBD)  recognises  that 
buildings  are  responsible  for  greenhouse  gas  has  introduced  life  cycle  GWP  of 
building, indicating the building’s overall contribution to emissions before, during, 
and after their operational lifetime. The directive will decarbonise the building stock, 
going beyond that lead to climate change, including the focus on building operational 
greenhouse  gas  emissions,  by  introducing  as  well  as  the  consideration  of  the  life-
cycle  global  warming  potential  (GWP)  of  buildings.  Life-cycle  GWP  takes  into 
account  the  greenhouse  gas  emissions  embodied  in  construction  products  and 

521  European  Commission  (2024).  Regulation  (EU)  2024/1781  establishing  a  framework  for  the  setting  of  ecodesign  requirements  for 
sustainable products, amending Directive (EU) 2020/1828 and Regulation (EU) 2023/1542 and repealing Directive 2009/125/EC. 
522 European Commission (2025). Communication from the Commission: Ecodesign for Sustainable Products and Energy Labelling Working 
Plan 2025-2030. COM(2025) 187 final.  
523  Regulation  (EU)  No 305/2011  laying  down  harmonised  conditions  for  the  marketing  of  construction  products  and  repealing  Council 
Directive 89/106/EEC. 
524 Directive (EU) 2024/1275 on the energy performance of buildings (recast). 

188 

 
 
 
 
 
 
encourages  exemplary  design  options  and  choices  of  materials.  The  directive 
introduces  mandatory  calculation  and  disclosure  of.  The  revised  EPBD  includes 
information obligation, meaning it requires the life-cycle GWP of new buildings. In 
addition,  Member  States  are  required  to  draw  up  national  roadmaps  by  to  be 
calculated and disclosed in the energy performance certificate (EPC) of the building: 
a) from 1 January 2027 on the introduction of limit values on the life-cycle GWP of 
2028, for all new buildings from with a useful floor area larger than 1 000 m2; (b) 
from 1 January 2030, for all new buildings. ➔ Achieving the limit values on the GWP 
will  benefit  from  IAA’s  provisions  on  low-carbon  requirements  for  products  in 
construction sector. See below for more details.  

15. The Batteries Regulation525 takes a comprehensive life-cycle approach addressing 
the entire value chain of batteries, encompassing sourcing, manufacturing, use, and 
recycling.  It  gradually  introduces  product  requirements,  including  restrictions  on 
hazardous substances, minimum recycled content, carbon footprint, performance and 
durability standards, and labelling. It also obliges the use of responsibly sourced raw 
materials. Additionally, the Regulation establishes specific collection, recovery, and 
recycling  targets  for  different  types  of  batteries.  Furthermore,  it  ensures  access  to 
crucial  data  across  the  value  chain  through  the  Digital  Battery  Passport,  fostering 
efficient  and  circular  battery  use.  ➔  The  Batteries  Regulation  provides  for  the 
framework to set the environmental ambition for EU battery manufacturing, allowing 
lead  market  provisions  under  IAA  to  focus  on  Made  in  EU  requirements,  when 
justified.  

16. The  Critical  Raw  Materials  Act526  (CRMA)  ensures  EU  access  to  a  secure  and 
sustainable supply of critical raw materials, strengthening all stages of the European 
value chain,  diversify the EU’s imports to  reduce strategic dependencies, improve 
EU capacity to monitor and mitigate risks of disruptions to the supply of critical raw 
materials,  and  improve  circularity  and  sustainability.  The  CRMA  includes  within 
scope several energy-intensive sectors, namely copper, aluminium and silicon metal. 
It  establishes  simplified  permitting  procedures  and  sets  selection  criteria  for 
designating strategic projects. 

17. The Alternative Fuels Infrastructure Regulation527 (AFIR) is aimed at expanding 
and standardising  the infrastructure for alternative fuels  across the EU.  It seeks to 
ensure the availability of essential infrastructure, such as EV recharging pools and 
hydrogen  refuelling  points,  along  the  main  transport  corridors  and  other  strategic 
locations.  

18. ReFuelEU Aviation Regulation528 sets out mandates to increase the production and 
supply of sustainable aviation fuels (SAF) within the aviation sector in refineries in 
the EU. The Regulation mandates the blending of SAF with conventional jet fuels 
which will reduce the carbon footprint of aviation fuels and of air travel by more than 
60% by 2050. The regulation establishes the Flight Emissions Label (FEL)39 which 

525 Regulation (EU) 2023/1542 concerning batteries and waste batteries, amending Directive 2008/98/EC and Regulation (EU) 2019/1020 and 
repealing Directive 2006/66/EC. 
526 Regulation (EU) 2024/1252 establishing a framework for ensuring a secure and sustainable supply of critical raw materials and amending 
Regulations (EU) No 168/2013, (EU) 2018/858, (EU) 2018/1724 and (EU) 2019/1020. 
527 Regulation (EU) 2023/1804 on the deployment of alternative fuels infrastructure. 
528 Regulation (EU) 2023/2405 on ensuring a level playing field for sustainable air transport (refuelEU aviation). 

189 

 
 
  
 
 
 
 
regulates  the  accounting  and  display  of  flight  emissions  and  will  allow  airlines 
showcase their purchases of SAF produced in refineries and other production sites.  

19. The FuelEU Maritime Regulation529 targets the maritime sector, promoting the use 
of cleaner energy and curbing greenhouse gas emissions from ships. It sets stricter 
limits on the carbon intensity of the energy used by ships, encouraging the transition 
to alternative fuels such as biofuels, hydrogen, and ammonia. FuelEU Maritime is 
designed  to  align  the  shipping  industry  with  the  EU’s  climate  goals,  ensuring 
maritime transport contributes to reducing overall carbon emissions. ➔ The above 
three  legislations  directly  affect  the  EU  refineries  sector  in  terms  of  lead  market 
provisions and justify why IAA does not include low-carbon obligations for refined 
fuels.  

20. The  current  multiannual  financial  framework530  (MFF),  the  EU's  long-term 
budget, leverages the financial capacity of the Union and runs until the end of 2027. 
The  broader  financial  architecture  of  EU  spending  programmes  includes  loans, 
guarantees  and  financial  instruments  backed  by  the  EU  budget,  mobilises  co-
financing  from  Member  States  and  beneficiaries  and  unlocks  private  investments. 
With the Strategic Technologies for Europe Platform531 (STEP) Regulation, the EU 
is  redirecting  funding  from  11  different  financing  programmes  towards  industrial 
projects  across  three  critical  technologies:  digital  technologies  and  deep-tech 
innovation; clean and resource-efficient technologies; and biotechnologies.  

21. The  objective  of  the  EU’s  Foreign  Direct  Investment  Regulation532  (FDI)  is  to 
make sure that the EU is better equipped to identify, assess and mitigate potential 
risks  to  security  or  public  order,  while  remaining  among  the  world’s  most  open 
investment areas. It creates a cooperation mechanism where Member States and the 
Commission  can  change  information  and  raise  concerns  to  specific  investments; 
allows the Commission to issue opinions when an investment threatens the security 
or public order of more  than one Member State;  and sets  certain  requirements  for 
Member  States  that  wish  to  maintain  or  adopt  a  screening  mechanism  at  national 
level. It fully applies since 11 October 2020. ➔ Under IAA, possible conditions for 
foreign investments are related but not overlapping with the FDI regulation, as the 
policy objective is significantly different: national security and public order for the 
FDI  Regulation,  and  single  market  functioning  for  IAA.  see  below  for  additional 
elements.  

22. In July  2025, the Commission  put  forward comprehensive proposals  for the  post-
2027 MFF533 and for the next generation of financial programmes. As announced in 
President von der Leyen's Political Guidelines, the Commission has notably proposed 
a European Competitiveness Fund with a total envelope of EUR 409 billion will 
boost  support  to  research,  innovation,  development  and  deployment.  It  will  draw 
together EU investment to accelerate the scaling-up, manufacturing and deployment 
of  strategic  technologies  in  Europe.  It  aims  to  bolster  the  competitiveness  of 
European companies and strengthen the EU’s industrial base, by supporting Made in 

529 Regulation (EU) 2023/1805 on the use of renewable and low-carbon fuels in maritime transport, and amending Directive 2009/16/EC. 
530 Council Regulation (EU, Euratom) 2020/2093 laying down the multiannual financial framework for the years 2021 to 2027 
531 Regulation (EU) 2024/795 establishing the Strategic Technologies for Europe Platform (STEP) 
532 Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union. 
533 Proposal for a Council Regulation COM/2025/571 final, laying down the multiannual financial framework for the years 2028 to 2034 

190 

 
 
 
 
 
 
 
 
EU  technologies,  products  and  services.  The  Fund,  operating  under  one  rulebook, 
will offer  a single gateway to  funding applicants,  will simplify and accelerate  EU 
funding and catalyse private and public investment.  

23. The  new  proposal  for  an  Industrial  Decarbonisation  Bank  will  be  based  on  the 
Innovation  Fund,  additional  revenues  resulting  from  parts  of  the  ETS  as  well  as 
InvestEU. The bank will aim at supporting projects with carbon emission reduction 
as a metric to enable technology-neutral support across industrial sectors, including 
through carbon contracts for difference. As announced in the Clean Industrial Deal, 
it will be integrated in the governance of the ECF.  

24. Competition rules and enforcement protect fair competition in the Single Market 
and  incentivise  companies  to  innovate  and  become  more  efficient.  The  Clean 
Industrial Deal State Aid Framework (CISAF) adopted on 25 June enables necessary 
and proportionate State aid that crowds in private investment for projects contributing 
to the objectives of the Clean Industrial Deal, while preserving the level playing field 
and European  cohesion.  In particular, the CISAF  simplifies  State aid  rules in  five 
main areas: (i) the roll-out of renewable energy and low-carbon fuels;(ii) temporary 
electricity price relief for energy-intensive users to ensure the transition to low-cost 
clean  electricity;  (iii)  decarbonisation  of  existing  production  facilities;  (iv)  the 
development of clean tech manufacturing capacity in the EU, and; (v) the de-risking 
of  investments  in  clean  energy,  decarbonisation,  clean  tech,  energy  infrastructure 
projects  and projects  supporting  the circular  economy.  Furthermore, the State Aid 
Guidelines for Climate, Energy and Environmental protection (CEEAG) remain an 
important  instrument  to  assess  the  compatibility  of  aid  in  the  field  of  industrial 
decarbonisation. 

25. Trade defence instruments such as anti-dumping and anti-subsidy measures as well 
as  existing  steel  safeguard  are  primarily  applied  for  the  products  produced  by  the 
energy-intensive industries such as steel, non-ferrous metals, ceramics and others. In 
the Steel and Metals Action Plan (SMAP)534, the Commission committed to propose, 
a  measure  replacing  the  steel  safeguards  (which  expires  on  30  June  2026).  The 
Commission  has  now  adopted  this  proposal  addressing  the  negative  trade-related 
effects  of  global  overcapacities  on  the  Union  steel  market535,  which  is  under 
consideration by the co-legislators. It maintains tariff-rate quotas (TRQs) for a wide 
range of steel products, introduces a “melt and pour” information requirement and 
caps TRQ volumes at the average level of 2013 imports to prevent structural increases 
in  import  penetration.  These  provisions  strengthen  the  safeguard’s  effectiveness 
against  trade  diversion  and  circumvention  while  preserving  predictability  for 
downstream users. ➔ The IAA’s lead market measures complement the safeguard by 
steering market demand towards low-carbon and EU-produced steel, ensuring that 
trade protection and decarbonisation objectives reinforce each other rather than act 
in isolation. 

26. Under its free trade agreements (FTAs), the EU generally commits to investment 
liberalisation  in  the  manufacturing  and  energy  sectors,  granting  foreign  investors 
broad  market  access  and  national  treatment.  In  manufacturing,  the  EU  typically 

534 European Commission (2025). A European Steel and Metals Action Plan. COM(2025) 125 final, 19 March 2025. 
535 European Commission (2025). Proposal for a Regulation of the European Parliament and of the Council addressing the negative trade-
related effects of global overcapacity on the Union steel market. COM(2025) 726 final. 

191 

 
 
 
 
 
 
 
ensures full liberalisation across virtually all subsectors, meaning foreign investors 
can  establish  and  operate  businesses  under  conditions  no  less  favourable  than 
domestic  firms,  with  minimal  reservations.  In  the  energy  sector,  the  EU’s 
commitments are more nuanced (including a chapter on energy and raw materials) 
where it maintains certain reservations linked to public services, nuclear energy, and 
security of supply. Across both sectors, the EU’s approach in FTAs is to lock in an 
open  and  predictable  investment  regime  while  retaining  the  right  to  regulate  in 
sensitive  areas,  particularly  regarding  environmental  protection,  public  safety,  and 
strategic resources. Moreover, the EU is bound by its international commitments on 
investment under WTO law, in particular under GATS and TRIMs. In addition, most 
modern  EU  FTAs  include  a  dedicated  chapter  on  public  procurement,  granting 
partner  countries  access  to  public contracts  at  central  and sub-central  levels  under 
transparent  and  non-discriminatory  conditions,  in  line  with  the  WTO  Government 
Procurement Agreement (GPA) principles. These commitments ensure that suppliers 
from  FTA partner countries  can participate in  EU public tenders on equal  footing 
with EU operators for the covered entities and contract types, effectively opening a 
portion of the EU procurement market to foreign competition while maintaining the 
possibility to exclude non-covered sectors or apply exceptions linked to security and 
public policy.➔ IAA’s measures are framed so as to exclude countries with which 
the EU has free trade agreements  (FDI provisions) or to  benefit  from  exemptions 
under the EU’s international obligations (Made in EU requirements) 

27. The proposal for a Corporate Clean Fleet536 Regulation, adopted in December 2025, 
aims at supporting the decarbonisation of the road transport sector by accelerating 
the shift to zero-emission vehicles in corporate fleets stimulating the market uptake 
of zero-emission vehicles and safeguarding the competitiveness and sustainability of 
the European road transport sector. In this context, the introduction of a sustainability 
and Made in EU requirement is currently under consideration➔ In order to be in a 
position  to  align  requirements  on  strengthening  domestic  value  chains  in  the 
automotive sector with the IAA, the Commission will rely on delegated acts to set up 
a methodology for determining the criteria for a car or van to be considered made in 
EU. 

28. As set out in Article 7a of the CO2 standards for light-duty vehicles Regulation, the 
Commission  is  developing  a  harmonised  methodology  for  the  assessment  and  the 
consistent data reporting of the full life-cycle CO2 emissions of passenger cars and 
light commercial vehicles537, so that manufacturers may voluntarily report on such 
emissions. Furthermore Article 5 of the regulations introduces measures to booster 
the  new  car  category  called  ‘small  zero-emissions  vehicles’  which  may  receive 
additional CO2 credits if made in the EU. Additionally announced was the to creation 
of uptake for made in the EU and low-carbon steel through an additional crediting 
system.➔ The Industrial Accelerator Act is also expected to develop a label on the 
carbon intensity of industrial products, starting with steel, as well as parameters for 
Made in the EU”. This will be relevant to rely on these developments as appropriate, 
to ensure consistency of  the methodologies. It is  equally valid for the reference to 
Made in the EU” for small electric cars. 

536 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the 
Committee of the Regions, Decarbonise Corporate Fleets, COM(2025) 96 final, 5 March 2025. 
537 Regulation (EU) 2019/631 setting CO2 emission performance standards for new passenger cars and for new light commercial vehicles, and 
repealing Regulations (EC) No 443/2009 and (EU) No 510/2011 (recast). 

192 

 
 
 
 
 
29. The  Commission  also  put  forward  an  Action  Plan  for  the  chemical  sector538,  a 
sector-specific Omnibus, as well as a Chemicals Industry Package adopted end of 
2025, as part of the Clean Industrial Deal, with the aim to maintain critical production 
capacities in  Europe and boost investments  for the modernisation  and competitive 
transition to net-zero. ➔ IAA therefore does not include targeted measures for the 
chemicals  sector,  which  will  be implemented  more  directly  under  the  forthcoming 
package. 

30. In the Automotive Action Plan539, the Commission announced that, in cooperation 
with Member States and the industry, conditions for inbound foreign investments in 
the automotive sector to further increase their added value for the EU. This will likely 
include conditions with respect to EV batteries. The Commission further announced 
European content requirements for batteries and other vehicles components to boost 
the global competitiveness of the sector. ➔ The legislative arm of this initiative, in 
relation to batteries, addressed under IAA, according to the preferred policy option 
put forward in this impact assessment.  

31. The Grids Package announced as part of the Clean Industrial Deal will ensure cross-
border  integrated  planning  and  delivery  of  projects,  especially  on  interconnectors, 
and facilitate access to affordable, secure and clean energy. It proposes measures to 
accelerate  the  upgrading,  digitalisation  and  expansion  of  the  European  grid 
infrastructure.  It  removes  grid  bottlenecks,  accelerate  permitting  for  grids, 
renewables  and  storage,  and  increases  overall  efficiency,  while  promoting  more 
robust interconnections. With its main focus on electricity, it also covers hydrogen 
and  other  infrastructure  categories  included  in  the  framework  for  trans-European 
energy networks (TEN-E). Moreover, to tackle increasing grid connection queues in 
several EU countries, Guidance on grid connections is part of the Grids package, to 
provide best practices on how to ensure accelerated grid connection for demand as 
well  as  generation  and  storage.  To  support  existing  legal  requirements,  the 
Commission published a guidance on anticipatory investments in grid infrastructure, 
addressing also access of industry in time and in capacity requested.➔ The European 
Grids Package addresses issues related to access to grid infrastructure for industrial 
decarbonisation projects. Interactions exist with a policy measure discussed under 
PO3  on  permitting  for  IAA,  since  they  could  be  better  addressed  under  the  grids 
package. 

32. Simplification  of  administrative  burdens 

legislation 
(Environmental Omnibus): the Commission adopted an Omnibus package in the 
environmental sector in December 2025, which includes provisions to simplify and 
accelerate environmental permitting and environmental assessments provisions. 

in  environmental 

Overview ongoing initiatives 
The IAA needs to ensure consistency with upcoming related initiatives, notably: 

•  The proposal for a Circular Economy Act, scheduled for adoption in 2026, will create 
demand for secondary materials and a single market for waste, notably in relation to critical 

538 European Commission (2025). Communication from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of the Regions - A European Chemicals Industry Action Plan. COM/2025/530 final, 8 July 2025. 
539 European Commission (2025). Communication from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of the Regions - Industrial Action Plan for the European automotive sector, COM(2025) 95 final, 5 
March 2025. 

193 

 
 
 
 
 
 
 
raw materials. It will address supply and demand side measures. On the demand side, it 
might include mandatory, targeted, impactful and implementable requirements for public 
procurement of circular goods, services and works that can stimulate EU demand. ➔ The 
circular economy act may promote the recycling of EII products, creating synergies with 
the decarbonisation efforts put forward by IAA 

•  As  set  out  in  Article  7a  of  the  CO2  standards  for  light-duty  vehicles  Regulation,  the 
Commission  is  developing  a  harmonised  methodology  for  the  assessment  and  the 
consistent data reporting of the full life-cycle CO2 emissions of passenger cars and light 
commercial vehicles, 540 so that manufacturers may voluntarily report on such emissions. 
•  The Commission plans to propose Ecodesign541 and Energy Labelling542 rules for PV 
modules  and  inverters  sold  in  the  EU.  These  measures  would  concern  the  efficiency, 
durability, reparability and recyclability of products, to ensure that the devices deployed 
are environmentally sustainable. Requirements on the carbon footprint of PV modules are 
also  being  prepared.  However,  such  requirements  would  not  look  at  the  origin  of  the 
products,  nor  include  any  mandate  to  support  European  manufacturing.  ➔  Like  for 
batteries, this initiative will address the environmental performance of PV modules, while 
IAA focuses on Made in EU aspects. 

•  The Commission also put forward an Action Plan for the chemical sector543, a sector-
specific Omnibus, as well as a Chemicals Industry Package by the end of 2025, as part 
of  the  Clean  Industrial  Deal,  with  the  aim  to  maintain  critical  production  capacities  in 
Europe and boost investments for the modernisation and competitive transition to net-zero. 
➔ IAA therefore does not include targeted measures for the chemicals sector, which will 
be implemented more directly under the forthcoming package. 

• 

•  Expected  for  Q1  2026,  the  Electrification  Action  Plan  will  address  system-level 
challenges and focus on barriers and incentives in different sectors: industry, transport and 
buildings.  It  will  put  forward  measures  targeted  at  these  sectors  based  on  their 
electrification  potential.  The  Plan  will  also  set  out  the  necessary  conditions  on  the 
generation side to achieve its objective, with growing and diversified renewable electricity 
matching demand. 
In  the  Automotive  Action  Plan544,  the  Commission  announced  it  will  propose,  in 
cooperation  with  Member  States  and  the  industry,  conditions  for  inbound  foreign 
investments in the automotive sector to further increase their added value for the EU. This 
will  likely  include  conditions  with  respect  to  EV  batteries.  The  Commission  further 
announced European content requirements for batteries and other vehicles components to 
boost the global competitiveness of the sector. ➔ The legislative arm of this initiative, in 
relation  to  batteries,  would  be  addressed  under  IAA,  according  to  the  preferred  policy 
option put forward in this impact assessment. The Grids Package announced as part of 
the  Clean  Industrial  Deal  will  ensure  cross-border  integrated  planning  and  delivery  of 
projects, especially on interconnectors, and facilitate access to affordable, secure and clean 
energy. It will propose measures to accelerate the upgrading, digitalisation and expansion 
of the European grid infrastructure. It will remove grid bottlenecks, accelerate permitting 
for grids, renewables and storage, and increase overall efficiency, while promoting more 
robust interconnections. With its main focus on electricity, it will also cover hydrogen and 

541  Official  Journal  of  the  European  Union  (2024).  Regulation  (EU)  2024/1781  establishing  a  framework  for  the  setting  of  ecodesign 
requirements  for  sustainable  products,  amending  Directive  (EU)  2020/1828  and  Regulation  (EU)  2023/1542  and  repealing  Directive 
2009/125/EC. 
542 Official Journal of the European Union (2017). Regulation (EU) 2017/1369 setting a framework for energy labelling and repealing Directive 
2010/30/EU. 

194 

 
 
 
 
  
 
 
other  infrastructure  categories  included  in  the  framework  for  trans-European  energy 
networks (TEN-E). Moreover, to tackle increasing grid connection queues in several EU 
countries, Guidance on grid connections will be part of the Grids package, to provide for 
best  practice  on  how  to  ensure  accelerated  grid  connection  for  demand  as  well  as 
generation and storage. To support existing legal requirements, the Commission published 
a  guidance  on  anticipatory  investments  in  grid  infrastructure,  addressing  also  access  of 
industry in time and in capacity requested.➔ The European Grids Package is expected to 
address  issues  related  to  access  to  grid  infrastructure  for  industrial  decarbonisation 
projects. Interactions exist with a policy measure discussed under PO3 on permitting for 
IAA, since they could be better addressed under the grids package. 

•  The upcoming revision of the Public Procurement Framework in 2026 will review the 
possibilities to  use  criteria  for  sustainability,  resilience  and  European  preference  in  EU 
public procurement for strategic sectors. The revision will assess, consolidate and clarify 
the  interactions  between  public  procurement  provisions  across  different  pieces  of 
legislation, to simplify application by contracting authorities. ➔ Consistency between the 
sectorial measures set out in the IAA on what to buy and the overarching framework will 
have to be ensured.  

•  The proposed new End-of-Life Vehicles (ELV) Regulation will require manufacturers 
to  use  a  certain  percentage  of  recycled  plastic  when  designing  and  constructing  new 
vehicles.  Minimum  requirements  for  the  use  of  recycled  steel  and  aluminium  may  be 
introduced at a later date, thereby reducing the carbon footprint of new vehicles. 

•  By the end of 2025, the Commission will conduct a comprehensive review of CBAM, 
accompanied by an anti-circumvention strategy. It will also present a legislative proposal 
on extending the scope to certain downstream products in the steel and aluminium sectors 
that contain a significant share of at least one of the goods within the scope of the CBAM 
and to strengthen anti-circumvention measures. Moreover, the Commission announced in 
July 2025 to propose a measure by the end of the year to address the problem of carbon 
leakage for CBAM goods that are exported.  

•  The Strategic Roadmap for digitalisation and AI in the energy sector (announced for 
Q1 2026) is a key deliverable of the Action Plan for Affordable Energy. It will leverage 
AI-driven  solutions  to  offer  secure,  clean  and  competitively  priced  energy  to  all 
consumers.  Smart  integration  of  energy  storage  and  demand  side  flexibility  will  bring 
substantial system benefits and reduce consumer bills. Data-driven services and analytics 
will optimise energy generation, transmission and consumption, while AI-powered digital 
twins will be at the core of system operations and maintenance. 

Interplay between IAA and the NZIA 

The Net Zero Industry Act545 (NZIA) sets out measures to stimulate investment in net-zero 
emissions  technologies,  including  provisions  for  energy-intensive  industry  transformative 
projects – projects that deliver significant and lasting reductions in greenhouse gas emissions. 
It  offers  benefits  such  as  accelerated  permitting  procedures  and  the  designation  of  strategic 
project status. Furthermore, the NZIA sets the goal for net-zero technologies manufacturing 
capacity, including batteries and solar, to reach at least 40% of EU annual deployment needs 
by 2030. 

545  Regulation  (EU)  2024/1735  on  establishing  a  framework  of  measures  for  strengthening  Europe’s  net-zero  technology  manufacturing 
ecosystem and amending Regulation (EU) 2018/1724. 

195 

 
 
 
 
The construction or conversion of certain energy -intensive plants in the steel, aluminium, non-
ferrous metals, chemicals, cement, lime, glass, ceramics, fertilisers, pulp and paper sectors are 
also in the scope of the NZIA. However, they need to meet two cumulative criteria to qualify: 

•  The future production of the energy intensive industry decarbonisation project facility 

is a priori relevant for net-zero technologies (e.g. steel is used for wind towers.)  

•  The project needs to have significant and permanent reduction of CO2 emissions that is 

technically feasible.  

Amongst  others,  the  regulation  covers  several  permitting  measures  that  energy-intensive 
industry decarbonisation projects can benefit from:  

•  Single Point of Contact as coordination point for all permitting processes. 
•  Timelines for permit-granting process depending on production volume (if GW) of the 

plant 

•  Bundling or coordination of environmental assessments whenever several assessments 

are required. 

•  Strategic project status for some projects, which in turn grants them shorter timelines, 
automatic consideration of highest national importance and public interest, and when 
relevant may be considered as well as being of Overriding public interest (OPI).  

•  Authorities to consider NZIA potential for zoning planning provisions.  

Moreover, whenever Member States decide to do so, they can designate Net Zero Acceleration 
Valleys: obligation to perform a Strategic environmental assessment for the area, consideration 
of projects to be in the public interest and may be considered to be of overriding public interest, 
as well as dedicated single points of contact. 

Importantly, the NZIA regulation also introduces its “Access to Markets” chapter. This chapter 
introduces  the  mandatory  use  of  non-price  criteria  for  the  public  procurement  of  net-zero 
technologies, for renewable energy auctions, and for other forms of public intervention aiming 
to support the purchase of net-zero technology final products. One of the non-price criteria is 
resilience; where there is a high dependency from a single source of supply for a certain net-
zero technology or component, contributing to resilience means to diversify away from that 
dominant source of supply. Hence, any potential interplay with IAA provisions on sourcing 
components and technologies needs to be taken into account. At the same time, while NZIA 
provisions strengthen resilience in reducing the dependency from a single source of supply, 
they do not directly support manufacturing in the EU – which is needed as argued earlier in 
this  impact  assessment.  Other  non-price  criteria  include,  depending  on  the  context,  cyber 
security, environmental sustainability, and innovation. 

Interplay of the preferred policy option (PO2) with existing and upcoming initiatives 
The  measures  that  are  part  of  the  preferred  policy  option  (PO2)  fit  with  the  existing  and 
upcoming initiatives in the following way:  

•  As far as SO1 is  concerned, the development of a  label on the carbon intensity of 
steel will provide a first, voluntary and EU certification to disclose the carbon footprint 
of steel products, covering scope 1, scope 2 and other emissions (hydrogen use, heat) 
up until the level of the hot rolling production step, as explained in Annex12. This will 
send an important  signal to  the market,  aiming  at  accelerating investment  decisions. 
The  methodology  developed  under  IAA  will  constitute  a  building  block  of  the 
upcoming full LCA methodology currently being developed under the ESPR, in view 
of  the  Delegated  Act  setting  information  and/or  performance  requirements  of  the 
environmental footprint of steel products. Once the mandatory ESPR requirements will 
be  adopted,  the  voluntary  steel  label  will  feed  into  the  ESPR  criteria,  becoming  an 

196 

 
 
integral part of the methodology, so that producers will not have to face two different 
carbon  footprint  calculation  methods.  Furthermore,  the  ESPR  requirements  will  go 
beyond carbon emissions including other relevant environmental impacts (i.e. recycled 
content, substances of concern). allowing consumers to see the comprehensive product 
environmental footprint. 

•  For SO2, the measures introducing low-carbon and Made in EU requirements for 
some energy-intensive materials in targeted downstream sectors, as well as Made in 
EU  requirements  for  batteries,  solar  PV  and  vehicle  components  in  the  public 
procurement  market  will  anticipate  the  use  of  sustainability  and  resilience/  EU 
preference  criteria  that  will  be  streamlined  as  part  of  the  upcoming  revision  of  the 
Public  Procurement  Framework.  The  revision  will  clarify  the  interaction  between 
sectorial provisions across different pieces of legislation, ensuring a common approach 
and to simplify application by authorities. Concerning the introduction of low-carbon 
content requirements for the steel and cement placed on the market, these measures will 
be complemented by the downstream sectors specific regulations. Specifically, in the 
building and construction sector, the IAA measures will be complemented by the CPR 
obligations to disclose the environmental footprint of construction products, as well as 
the  EPBD  provisions  requiring  Member  States  to  develop  national  roadmaps 
introducing  limit  values  on  the  life-cycle  Global  Warming  Potential  (GWP)  of 
buildings, which will benefit from the IAA provisions introducing lead markets on low-
carbon steel and cement. Finally, the achievement of the low-carbon target will also be 
influenced by the effects of the ETS on the decarbonisation technologies, as well as the 
effective implementation of CBAM to mitigate the risk of carbon leakage.  

•  For SO3, the proposed investment conditionalities under IAA would apply in addition 
to  the  existing  FDI  framework,  with  a  specific  sectoral  scope  and  Single  Market 
considerations. Moreover, countries that the Union have existing FTAs with would be 
excluded  from  the  conditionalities  to  comply  with  the  provisions  set  therein. 
Compliance with further international obligations will also be considered.  

•  For  SO4,  the  simplification  of  permitting  provisions  align  with  the  Environmental 

Omnibus package which the Commission adopted in Q4 2025. 

•  For SO5, introducing a set of criteria for identifying priority industrial areas would 
help  Member  States  identify  relevant  projects  and  create  synergies  with  existing 
funding  programmes,  to  facilitate  access  to  public  funding,  without  prejudice  to  the 
State aid regime nor to the specific eligibility criteria of each funding programme. At 
EU  level,  the  Commission  would  consider  these  criteria  for  the  revision  of  the 
Innovation  Fund  calls  and  the  upcoming  Decarbonisation  Bank.  A  link  would  be 
established between the IAA criteria and the Competitiveness Seal of the European 
Competitiveness Fund, presented as part of the MFF legislative proposal. 

2.  What is the baseline? Detailed description 
EIIs  such  as  steel,  aluminium,  cement  and  chemicals  form  the  backbone  of  the  European 
economy. They are indispensable for the green and digital transitions and thus for Europe’s 
long-term  competitiveness  and  economic  security.  Strengthening  these  sectors  contributes 
directly to the “Promote” pillar of the European Economic Security Strategy, which aims to 
reinforce  the  EU’s  capacity  to  innovate,  invest,  and  maintain  leadership  in  strategic  value 
chains. 

However, over the past two decades, EIIs have faced persistent  competitive pressures: high 
energy costs, global overcapacity, and delayed investment in low-carbon technologies. These 
conditions  have  resulted  in  a  contraction  of  EU  industrial  production,  rising  import 
dependence, and limited technological renewal. The outcome is not only a decarbonisation gap, 

197 

 
 
but also an economic-security gap, a growing divergence between the EU’s industrial trajectory 
and  the  level  of  domestic  capacity  needed  to  sustain  secure,  climate-compatible  and 
competitive supply chains. 

To better understand the immediate competitiveness challenges, Figure 21 zooms in on recent 
years  (2019-2024)  and  compares  production  trends  of  EIIs  with  those  of  the  wider 
manufacturing sector. While broader manufacturing has returned to its pre-crisis production 
levels, EIIs have declined. Since 2022, high energy prices, weaker demand and stronger global 
competition have driven a sharper contraction in EII output, which now stands well below its 
pre-pandemic level.546 

The  transition  will  entail  higher  adjustment  costs  for  EIIs  in  the  short  term,  as  production 
processes, energy inputs and supply chains adapt to stricter carbon pricing and new regulatory 
standards. Yet delaying this transition would result in much higher costs in the medium term—
through stranded assets, lost technological leadership, and deepened reliance on foreign clean-
tech suppliers. In line with the Clean Industrial Deal, the baseline thus reflects a credible but 
demanding  pathway  in  which  European  industry  follows  through  on  the  2040  and  2050 
emission-reduction  commitments,  recognising  that  this  is  the  only  sustainable  route  to 
competitiveness and climate neutrality. 

Figure 21: Production volume index for EIIs and other manufacturing, European Commission internal analysis 

The main text of the impact assessment presented the dynamic baseline and decarbonisation 
gap for all EIIs, illustrated by the iron and steel sector547.  below shows a clear slowdown since 
2023548,  with  the  number  of  new  final  investment  decisions  (FIDs)  and  projects  entering 
construction falling by roughly 40% compared with 2022–2023 levels. This confirms that while 
the  decarbonisation  pipeline  is  expanding,  actual  delivery  of  low-carbon  steel  capacity  has 
stagnated. 

546 EII sectors include C171, C19, C20, C231, C233, C234, C235, C244, all other manufacturing sectors form the comparison group. For each 
group, the production volume index is value-added weighted: each sector’s index is multiplied by its share of total group value added (average 
2021–2023). The weighted sector indices are then summed and rescaled so that 2019-Q1 = 100. 
547 See Section 5.1 What is the baseline from which options are assessed? in the main text. 
548 BloombergNEF, Decarbonizing Steel Project Database (1.0.5), 2025. Commission analysis. 

198 

 
 
 
 
 
Figure 22: Annual announcements vs FIDs in EU steel projects (BNEF, 2025) 

The  remainder  of  this  Annex  provides  the  same  methodology  more  details  for  aluminium, 
cement,  and  chemicals.  For  each  sector,  the  historical  data  (2005-2023)  on  production  and 
emissions were compiled. Then, a linear extrapolation was performed on production, anchored 
in  the 2023  value, using the slope  derived  from the historical  regression.  Emissions are not 
extrapolated,  but  taken  directly  from  JRC  model  projections549,  which  already  capture 
technological  assumptions  and  EU  climate-policy  consistency.  These  are  aligned  with  EU-
wide  climate-policy  assumptions  and  the  decarbonisation  trajectory  consistent  with  the  EU 
Green Deal. 

This methodology ensures analytical consistency: extrapolated production trends capture the 
economic reality of EU industries under current investment conditions, while JRC projections 
provide  the  climate-policy  reference  for  emission  reductions.  The  resulting  combination 
highlights  the  gap  between  policy-driven  decarbonisation  assumptions  and  market-driven 
industrial decline. 

Aluminium 

As shown in Figure 23, EU primary aluminium production has fallen sharply, particularly since 
2022, due to high electricity prices and limited access to affordable renewable energy.  If the 
current trend continues at the same historical rate, marked by sustained cost pressures and no 
major new primary smelting capacity, Europe would lose approximately 42% of its aluminium 
production by 2050. The JRC emission pathway shows a more pronounced reduction, driven 
by  assumed  electrification  and  efficiency  improvements.  The  resulting  gap  indicates  that, 
without further support, EU aluminium may decarbonise statistically only because production 
declines, not because cleaner processes are deployed. 

549  Source  data  2005-2023:  JRC-IDEES,  consistent  with  EUROSTAT  data.  Source  projections  2024-2050:  internal  calculations  and  JRC 
CETO 2025, developed with POTENCIA. 

199 

 
 
 
 
Figure 23: Aluminium: production and CO₂ emissions including projection pathways. JRC analysis, based on 
IDEES and JRC CETO 2025 

Cement 

As shown in Figure 24, cement production and emissions have historically evolved together, 
with modest efficiency improvements but limited process innovation.  If the trend continues, 
the production projection, extrapolated from historical data, suggests a substantial 73% by 2050 
compared to the 2023 baseline. 

In  contrast,  the  JRC  emission  projection  assumes  wider  fuel  substitution  and  gradual 
introduction  of  carbon  capture,  leading  to  a  faster  decline.  This  highlights  the  growing  gap 
between modelled decarbonisation potential and the sector’s limited investment reality. 

Figure 24: Cement: production and CO₂ emissions including projection pathways 

200 

 
 
 
 
 
 
 
 
Chemicals 

As shown in Figure 25, the chemical sector presents a mixed picture. While aggregate output has 
remained broadly stable since 2005, this masks a structural shift within the sector. Production 
of basic chemicals has declined or relocated outside the EU, driven by high energy and gas 
prices,  limited  feedstock  availability  and  stronger  global  competition.  At  the  same  time, 
specialty and downstream chemical segments have remained relatively resilient but account 
for  a  much  smaller  share  of  total  energy  use  and  emissions.  The  extrapolated  projection 
therefore  assumes a continuation  of  this  dual trend:  gradual contraction  of energy-intensive 
base chemicals combined with modest growth in lower-emission, higher-value segments. As a 
result,  overall  industrial  output  decreases  slowly,  and  aggregate  emissions  decline  only 
moderately.  By  contrast, 
the  JRC  emission  projection  reflects  a  policy-consistent 
decarbonisation  path,  assuming  large-scale  electrification  of  process  heat,  adoption  of 
alternative feedstocks (such as green hydrogen), and wider deployment of carbon-management 
technologies.  The  divergence  between  the  extrapolated  and  modelled  trends  highlights  the 
sector’s core challenge: under current conditions, emission reductions are achieved mainly by 
reducing production of basic chemicals, not by transforming production technologies at scale. 

Figure 25 Chemicals production and CO₂ emissions including projection pathways. JRC analysis, based on 
IDEES and JRC CETO 2025 

Driver  1/SP1/SO1:  Challenges  in  distinguishing  low-carbon  industrial  products  from 
high-carbon  alternatives:  The  baseline  scenario  would  result  in  no  common  definition, 
methodologies  or  minimum  threshold  for  low-carbon  industrial  products.  Under  the  ESPR, 
there  is  a  mandate  to  set  specific  performance  and/or  information  requirements  e.g.,  on  the 
environmental and/or carbon footprint of a product from a life-cycle perspective, as conditions 
to place products on the market. These mandatory requirements, when in place, will certainly 
help  to  provide  comprehensive  information  to  customers  and,  potentially,  performance  at 
products  level,  e.g.  steel  containing  products.  Regarding  the  specific  case  of  cement,  as 
announced in  the Clean  Industrial Deal,  the CPR will introduce  a label  for cement in  2027 
when the new – to be developed – harmonised standard will be made mandatory. However, 
current  rules  do  not  have  specific  obligation  on  the  public  procurement  side,  nor  introduce 
minimum performance requirements. 

201 

 
 
 
 
 
Driver  2/SP1/SO2:  Limited  willingness  to  pay  a  premium  for  low-carbon  industrial 
products:  While  existing  public  procurement  rules  establish  how  to  buy,  they  fall  short  of 
addressing  what  to  buy  in  terms  of  low-carbon  criteria.  Current  green  public  procurement 
practices  remain  largely  voluntary,  fragmented,  and  inconsistently  applied  across  Member 
States. Only a few national or local authorities systematically integrate non price low-carbon 
criteria  into  procurement  processes  for  construction  products  or  infrastructure  projects.550 
Resilience criteria are even less considered in the current procurement procedures, as they are 
relatively  new.  Furthermore,  in  the  NZIA,  resilience  criteria  refer  to  components,  not 
specifically to the energy-intensive materials used. As the Commission is expected to propose 
a  revision  of  the  Public  Procurement  Framework  in  the  last  quarter  of  2026,  consistency 
between  the  sectorial  measures  set  out  in  the  IAA  on  what  to  buy  and  the  overarching 
framework  will  have  to  be  ensured.  The  revised  EPBD551  has  introduced  an  obligation  to 
calculate and provide information on the life cycle GWP of buildings, including the emissions 
embodied  in  construction  products.  It  will  be  important  to  ensure  consistency  between 
measures proposed for low-carbon construction materials in IAA and the obligation under the 
EPBD.  When  it  comes  to  vehicles,  the  proposed  End-of-Life  Vehicles  (ELV)  Regulation 
includes the possibility to establish requirements for vehicle manufacturers to use recycled steel 
and aluminium.552 However, due to their timing and/or voluntary nature, none of the mentioned 
initiatives can be expected to produce tangible effects in terms of increased demand of green 
steel and aluminium in the short term.  

Driver  3/SP2/SO2:  European  industry  loss  of  competitiveness  due  to  fierce  global 
competition and value chain dependencies: The viability and competitiveness of European 
projects  across  the  entire  upstream  value  chain  are  undermined  by  the  economic  pressures 
outlined  above,  resulting  in  a  widened  technological  gap  vis-à-vis  non-EU  manufacturers. 
While the Battery Regulation and the NZIA, including the Implementing Act on actions and 
draft Implementing Act on sustainability in public procurement, as well as the Ecodesign and 
Energy  labelling  requirements  for  photovoltaic  modules  and  inverters  establish  important 
frameworks  for  environmental  standards  and  for  reducing  strategic  dependencies  on  single 
countries, they do not sufficiently address the economic pressure faced by domestic battery and 
solar PV producers. This is because the NZIA resilience criterion may lead to increased imports 
from Asian countries such as Vietnam, Malaysia, Thailand and Cambodia – whose PV projects 
pipeline  is  largely  owned  and  controlled  by  Chinese  manufacturers..￼553Furthermore,  the 
NZIA framework does not cover the entire spectrum of vehicle components that can contribute 
to the decarbonisation of road transport not only in terms of reduced vehicle’s emissions, but 
also in terms of optimised traffic flows￼.  

Driver 4/SP2/SO3: A fragmented EU approach towards foreign investments: under the 
baseline  scenario,  the  EU  risks  continued  fragmentation  of  the  Single  Market  due  to  non-
harmonised  investment  conditions,  potentially  only  attracting  low  value-added  activities  in 
sectors  where  the  EU  faces  a  significant  technological  gap.  Under  the  current  framework, 
Member States with an FDI screening mechanism may screen FDI554 under the FDI Screening 
Regulation (EU) 2019/452, but only on grounds of security or public order. This mechanism 
enables the EU to block or condition transactions that raise national security concerns. In 2023, 
only 18 Member States had screening mechanisms in place. France, Germany, Italy and Spain 

550 Implementing the OECD Recommendation on Public Procurement in OECD and Partner Countries. 
551 Directive (EU) 2024/1275 (“recast EPBD”). 
552 In addition, the CO2 Emission Performance Standards for Cars Regulation also empowers the Commission to develop a methodology that 
could allow manufacturers to voluntarily report on the life-cycle emissions of vehicles. 
553 IEA (2024). Energy Technology Perspectives 2024. 
554 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of 
foreign direct investments into the Union 

202 

 
 
 
 
together made up nearly 70% of all cases. These larger Member States not only screen the most 
but  are also  the most active in  imposing mitigating conditions  where risks are identified.555 
What it does not provide for is a tool to shape the quality of FDI, among others: systemically 
incentivizing  knowledge  transfer,  technology  diffusion,  or  local  value  chain  creation  in  the 
Single Market.  

Driver  5/SP3/SO4:  Lengthy,  fragmented  and  uncertain  permitting  procedures  for 
decarbonisation projects. While the efficiency of the permit granting procedures for some 
energy  intensive  industry  decarbonisation  projects  is  expected  to  improve  following  the 
implementation  of the NZIA, most manufacturing industries are not  covered  under existing 
frameworks  and  can  continue  to  face  complex  and  lengthy  permitting  procedures,  since  no 
initiative has so far addressed horizontally the permitting problem at large.  

Driver 6/SP3/SO5: Difficulty to access resources (e.g. inputs and funding) would remain 
in  the baseline scenario. While several initiatives aim at  identifying key  projects  that  could 
benefit from EU support, introducing criteria for identifying priority industrial decarbonisation 
projects  could  help  Member  States  identify  relevant  projects  and  focus  their  attention  on 
creating better framework conditions to facilitate access to public funding, without prejudice 
to the State aid regime nor to the specific eligibility criteria of each funding programme.  

Against this baseline, we can conclude that the competitiveness of all manufacturing industries, 
notably  energy  intensive  industries  and  some  clean  energy  technologies,  is  likely  not  to 
improve  in  the  coming  years  without  further  actions,  with  significant  economic,  social  and 
environmental  implications.  The  JRC  has  estimated  that  for  each  1%  loss  of  global  final 
demand in energy-intensive industries, the potential impacts on employment would be losing 
28  000  jobs,  EUR  2  billion  in  value  added  and  EUR  6.4  billion  in  turnover.556  Further 
competitiveness losses would prevent investment in decarbonisation, affecting the EU’s ability 
to achieve its climate objectives. 

555 European Commission (2025). Report from the Commission to the European Parliament and the Council - Fifth Annual Report on the 
screening of foreign direct investments into the Union. COM(2025)632 final. 
556 CARMEN is a linear model, where a 10% decrease/increase in global final demand would yield a result 10 times worse/better than the 
baseline. To facilitate understanding, a 1% reduction is used as a reference point, providing a more manageable and comparable outcome. 

203 

 
 
 
 
 
Annex 9: Overview of policy measures 

SO1: Enable differentiation for low-carbon industrial products to increase their value and 
marketability  
Establishing a low-carbon product labelling system would allow for the differentiation of low-
carbon industrial products from high-carbon ones to increase their value and marketability.557 
This measure would develop a labelling system that attributes GHG emissions emitted during 
the various stages of the manufacturing process to the industrial products, resulting in a clear 
GHG intensity per product, based on a harmonised and transparent methodology.  

Various design elements need to be considered. In addition to this GHG-intensity metric, the 
assessment  will  include  other  elements,  such  as  the  categorisation  of  the  product’s  GHG-
intensity  according  to  a  predefined  classification  system  (e.g.  establishment  of  classes  of 
performance) or the inclusion of further elements such as the share of recycled materials used 
in the production process.  

To establish the label, the Commission will set up rules for determining the GHG-intensity, 
including system boundaries and calculation methodologies, as well as rules for ensuring high-
data  quality  via  verification  and  certification.  For  their  development,  maximum  use  will  be 
made  of  existing  detailed  GHG  reporting  rules,  such  as  the  ones  included  under  the  ETS 
framework or the related CBAM methodology. To avoid any discrimination, labelling should 
not result in a treatment of imported products less favourable than that accorded to domestic 
products. 

LAB 1 - Development of a low-carbon product label for all EII 

Given the diversity and high complexity of the manufacturing industry, a wide range of product 
labels could be envisaged. This measure would establish several product-specific and reliable 
labels that would cater for the specificities of each of the EIIs and attribute GHG emissions 
from  the  manufacturing  phase  to  industrial  products.  Given  the  broad  scope  of  sectors  and 
related products, this option would have a horizontal approach, establishing in the legislation 
only the broad principles of the labelling systems, including elements on GHG certification 
methodologies,  the  rules  on  verification  and  certification  and,  when  possible,  the  rules  for 
setting up the classification systems. As a next step, product specific rules and values would be 
developed only in a second stage, via implementing and delegated acts or a review of the basic 
act. 

LAB 2 - Development of a low-carbon product label for steel  

This  measure  would  develop  the  general  principles  of  a  low-carbon  labelling  system  and 
operationalise  such  principles  to  develop  a  low-carbon  product  label  for  the  intermediate 
product of steel, covering production steps up to hot-rolling steel. Compared to LAB 1, this 
measure would have a narrower scope, but a more in-depth approach, as all elements relating 
to the determination of the GHG-intensity of steel products, the verification and certification 
rules, and the possible classification system for steel would be frontloaded and included in the 
legislative initiative. This initial focus on steel is justified by the fact that the steel industry is 
one of the most emission-intensive industrial sectors, representing almost 20% of the industrial 
GHG emissions in the EU. Furthermore, most of the GHG emissions of the sector (up to 60-
80%) can be attributed to the industrial production stages covering up to hot-rolling steel, which 
most products have to go through regardless of whether the production route is based on iron 

557 See, Section 2.3.1, Driver 1.  

204 

 
 
 
ore  input,  or  as  steel  scrap  input.  The  table  below  shows  the  design  elements  that  will  be 
analysed in  Annex 12 to  develop  a low-carbon product  label  for steel,  based on three main 
aspects: 

LAB 2.2 – 
Classification 

Table 19 Development of low-carbon product GHG label for steel 
LAB 2.1 – 
Determination 
GHG-intensity 
system 
and 
boundaries 

CALC1 System boundaries and calculation methodologies in line with free allocation 
rules under ETS and embedded emissions under CBAM methodology 
CALC2  System  boundaries  in  line  with  ETS  scope,  limited  nr.  of  key  indirect 
emissions 
CALC3  Wider  life  cycle  system  boundaries  included  in  scope,  in  line  with  draft 
Product Carbon Footprint (PCF) method developed by JRC under ESPR 
CLAS1 No classification 
CLAS2  One  classification  system  without  (CLAS2.a)  or  with  (CLAS2.b)  a  sliding 
scale 
CLAS3 Two different classification systems per steel production route 
CLAS4 Classification system based on steel quality 
DATA1  Label  for  EU  steel  producers  only,  based  on  self-declared  emissions  and 
production volumes 
DATA2  Label  for  EU  steel  producers  only,  with  third-party  verification  and 
certification 
DATA3 Label for EU steel producers and importers, with third-party verification and 
certification 

LAB 2.3 – 
Ensuring  data 
quality 

SO2: Boost demand for European low-carbon products and clean tech 
As established in the problem section, low-carbon industrial products are not yet produced at 
the necessary scale to compete with conventional products. The demand and willingness to pay 
for such materials  remain uncertain,  making producers hesitant  to  invest in  scaling up their 
production.  Demand-side  measures  can  break  the  chicken  and  egg  problem.  Lead  market 
initiatives  have  been  introduced  around  the  world  to  incentivise  cleaner  alternatives  by 
ensuring a demand, notably through green public procurement policies. See Annex 10 for more 
information.  

It must be recalled that all measures considered under SO2 would be subject to a review clause 
about 5 years after entry into force of this legislation, to ensure whether such measures remain 
necessary to achieve the policy objectives of this initiative.  

Energy intensive industries 

Scope considerations for LEAD_EII 1, LEAD_EII 2 and LEAD_EII 3 

The  most  energy-  and  carbon-intensive  sectors  include  steel,  non-metallic  minerals  and 
chemicals (and their derivatives such as plastics and fertilisers). Steel and cement alone account 
for more than 6% of the EU’s annual GHG emissions, and as such are considered in priority in 
the development of lead markets for low-carbon products.  

In addition, aluminium should also be included in the scope consideration given its recognition 
as a strategic material in the Critical Raw Material Act, its demand increase driven by the green 
transition needs, as well as its emission intensity.558 While the chemicals industry is the third 
largest industrial contributor to GHG emissions, the development of robust specific low-carbon 
criteria  for  chemicals  and derived products  (e.g.  plastics) presents  significant  challenges, in 

558 EU production of primary aluminium is about 6.8 kg of CO2 per kg of primary aluminium. Source: Zore, L. (JRC) (2024). Decarbonisation 
Options for the Aluminium Industry. 

205 

 
 
 
 
 
particular  due  to  the  heterogeneity  of  the  sector  and  its  outputs,  which may  require  a  more 
tailored  approach,  targeted  to  specific  market  segments,  such  as  plastic  products  used  in 
construction.  
Other energy intensive sectors should be considered as appropriate. For these energy intensive 
materials, the relevant downstream sectors should be identified to support the creation of lead 
markets.  

Suitable lead markets to stimulate demand for low-carbon materials are generally downstream 
industries where the share of energy-intensive input in total production value is relatively small 
(thus reducing the impact of any price premium) while output volumes are sufficiently large to 
support the scaling-up of low-carbon production.559  

Figure 26: Breakdown of energy intensive materials (steel, cement and aluminium) use in downstream sectors560 

Based on  the  figure  above,  the automotive and construction sectors,  major consumers of 
cement,  aluminium  and  steel,  can  play  a  key  role  in  driving  decarbonisation  across  these 
industries since the costs of their end products is minimally driven by the shares of the material, 
but  rather  from  other  value-added  activities related to  how  these products are  designed and 
manufactured.561 

In  the  automotive  and  construction  sectors,  low-carbon  requirements  could  be  introduced 
through different intervention areas, depending on the level of ambition pursued:  

•  Public procurement:  requiring contracting authorities to incorporate low-carbon criteria 
(as a technical requirement or award criteria) into public procurement procedures related 
to the use of energy intensive materials in certain selected downstream sectors.  

•  All public support schemes (incentives, grants, subsidies, tax benefits): requiring Member 
States to integrate low-carbon criteria concerning the use of a minimum share of energy 
intensive materials (e.g. steel) in selected downstream sectors, subject to public support 
schemes (e.g. tax incentives for purchasing an EV), without prejudice to State aid rules.  
•  Products  placed  on  the  market  (product  regulation/internal  market  rules):  establishing 
minimum mandatory low-carbon requirements for energy intensive materials (e.g. steel) 
used  in  products  (e.g.  vehicles)  placed  on  the  EU  market  –  which  manufacturers  must 
comply with.  

Other sectors were identified due to their potential relevance, but not considered for measures 
at this stage:  

559 Draghi, M. (2024). The future of European competitiveness: In‑depth analysis and recommendations (Part B), p. 111. 
560 JRC analysis. Source: Analysis based on data from European Aluminium (2023), CemBureau (2025), EUROFER (2025). The data used 
correspond to the following years: NA for aluminium, 2023 for cement, 2024 for steel.  
561 Deloitte (2025). Mobilizing consumer demand for sustainable investments. 

206 

  
 
 
 
 
The wind energy sector also emerges as a relevant downstream sector for energy intensive 
industries and in particular steel. The EU plans a significant expansion of wind energy capacity 
to  meet  its  climate  objectives  and  wind  turbines  are  highly  steel-intensive,  with  steel 
requirements  estimated  at  107-132  tonnes  per  MW,  making  it  a  relevant  sector  for 
decarbonisation, beyond its direct contribution as a clean energy technology. At the same time, 
also the impact of potential measures on the competitiveness of the sector would need to be 
assessed. 

Similarly, the European defence industry is expected to grow substantially in the coming year, 
driven by increased government spending and a focus on strengthening defence capabilities. 
In the defence sector, the cost impact of using low-carbon steel and aluminium in a military 
tank is estimated to remain below 1% by 2030.562 

Based on the Open Public Consultation, the most important downstream sectors supporting the uptake of clean 
energy-intensive materials were identified as construction and infrastructure (218, 70%), automotive (196, 62%), 
defence (92, 30%), machinery (40 respondents), electrical and electronic equipment (136, 43%), and clean energy 
technologies (186, 60%).  

LEAD_EII  1  -  Low-carbon  requirements  for  EIIs  outputs  in  public  procurement  and 
support schemes (no Made in EU requirements) 

This policy measure introduces low-carbon requirements in public procurement and support 
schemes for steel, cement and aluminium used in selected downstream sectors. 

Targets setting  

The 2030 low-carbon (LC) target for steel is calculated as the ratio between the expected LC 
production capacity that is committed or under construction and the projected total production 
in 2030 for the relevant sector. This ensures that the target reflects the credible supply base 
likely to be available by 2030 and excludes projects still at the announcement or feasibility 
stage. 

Under  this  measure,  a  specified  share  of  materials  used  in  publicly  financed  projects  or 
supported activities must come from low-carbon production routes, as defined in LAB 2.2. The 
share  would  increase  progressively  over  time  through  a  review  clause,  in  line  with  climate 
targets and the expected ramp-up of LC capacity. 

The objective of this measure is to stimulate demand for low-carbon steel, providing a market 
signal  that  justifies  continued  investment  in  industrial  decarbonisation  while  remaining 
manageable given current supply constraints and costs differentials.  
BloombergNEF data563 shows that 61 new European low-carbon steel projects are currently 
ongoing  and  can  be  classified  between  Label  A–C,  following  the  classification  system 
proposed in Annex 12, with a material capacity amounting to 75.4 Mtonnes per year. However, 
only 23 of these projects, equivalent to 29.7 Mtonnes per year, have reached a committed or 
under-construction stage. These are the projects most likely to be operational by 2030. Around 
41.4 Mtonnes of potential capacity remain in earlier planning or feasibility stages and are at 
risk of delay or non-realisation. 

Targets 

562 Analysis by Industrial Transition Accelerator (ITA) and Third Generation Environmentalism (E3G).  
563 BloombergNEF (BNEF), Decarbonised Steel Projects Database, Version 1.0.5 (2025). Commission analysis. 

207 

 
 
 
 
 
Regarding steel, the target is calculated by dividing the committed low-carbon capacity of 29.7 
Mtonnes by the projected total EU-27 steel production of 134 Mtonnes in 2030 (based on the 
OECD Steel Outlook 2025564, excluding the United Kingdom’s 4 Mtonnes of output reported 
in  World  Steel  in  Figures  2025565,  and  not  taking  into  account  possible  effects  from  the 
proposal for a Regulation addressing the negative trade-related effects of global overcapacity 
on the Union steel market566). This results in an estimated low-carbon share of about 22% of 
total EU production in 2030. On this basis, a low-carbon requirement of 25% by 2030 is 
proposed for public procurement and support schemes, ensuring an ambitious yet achievable 
target that reflects expected industrial deployment while stimulating early market demand. 

Regarding cement, FID projects for low-carbon cement are estimated to produce 2.3 Mtonnes 
in 2030567, which is equivalent to a 1% of EU overall production. A more ambitious target, also 
considering the size of the construction market, could make some of the announced capacity 
materialise earlier. Therefore, a low-carbon requirement of 5% cement target in 2030 seems 
opportune. Such target will be subject to review overtime, based on the pace at which low-
carbon capacity comes online.  

Regarding  aluminium,  the  target  is  based  on  primary  production  and  derived  from  the 
following  assumptions.  First,  European  primary  aluminium  supply  in  2030,  including 
production  in  the  UK,  Norway,  and  Iceland,  is  assumed  to  remain  constant568  at  current 
capacity  levels  of  approximately  3.6  Mt569.  Furthermore,  a  recent  industry  analysis  of 
decarbonisation  pathways  for  European  primary  aluminium  production  estimates  total 
emissions reduction for primary aluminium by approximately 36.9% in 2030 compared with 
baseline 2021.570 This corresponds to around 11 MtCO2e emissions in 2030. On this basis, the 
average CO2 emission intensity of European primary aluminium in 2030 is assumed to be 3.27 
tCO2e. per tonne of primary aluminium. 

While European primary aluminium supply is considered to remain stable, aluminium demand 
in Europe is projected to increase to around 16 Mt by 2030, with some of the predicted growth 
to  be  generated  by  aluminium  replacing  other  materials571.  Under  these  assumptions,  low-
carbon aluminium produced via the primary route could supply approximately 22.5% of total 
European  demand  in  2030572.  Accordingly,  a  target  of  25%  in  2030  is  considered  both 
appropriate and achievable, as it is closely aligned with the projected availability of low-carbon 
primary aluminium. 

Proposed measure under EII_1  

This measure proposes a low-carbon content target of 25% for steel publicly procured in the 
selected  downstream  sectors  in  2030,  where  low-carbon  steel  is  considered  compliant  with 
classes A to C of the voluntary label designed in LAB.2. A review clause will be included for 
after  2030,  based  on  projected  supply  of  low-carbon  steel,  projects  that  have  reached  final 
investment decisions, and the general imports share. Participants in public tenders would be 

564 OECD (2025). OECD Steel Outlook 2025.  
565 World Steel Association (2025). World Steel in Figures 2025. 
566 European Commission (2025). Proposal for a Regulation of the European Parliament and of the Council addressing the negative trade-
related effects of global overcapacity on the Union steel market. COM(2025) 726 final. 
567 Mission Possible Partnership (MPP), E3G and the Industrial Transition Accelerator (ITA) (2025). Building the EU’s Clean Industrial 
Future: Unlocking Investment through Lead Markets. 
568 Eurometaux and KU Leuven (2022). Metals for Clean Energy: Pathways to solving Europe’s raw materials challenge.  
569 European Aluminium (2023). Net-Zero By 2050: Science-Based Decarbonisation Pathways for The European Aluminium Industry. 
570 Ibid. 
571 European Aluminium (2022). Circular Aluminium Action Plan - A Strategy for Achieving Aluminium’s Full Potential for Circular 
Economy by 2030. 
572 Where 22.5% is calculated by dividing the projected increase in EU aluminium demand in 2030 (16 Mtonnes) with the projected supply 
low-carbon capacity (3.6 Mtonnes) by 2030. 

208 

 
 
 
asked to demonstrate compliance with the low-carbon requirement by using the steel label (or, 
potentially, an equivalent certification). 

For  cement,  this  measure  proposes  a  low-carbon  content  target  of  5%  for  cement/concrete 
publicly procured in construction in 2030. As for steel, a review clause will be introduced to 
review the target level after 2030, depending on market developments. This target is based on 
current  final  investment  decision  projects  for  low-carbon  cement,  estimated  to  produce  2.3 
Mtonnes in 2030, which is equivalent to 1% of EU overall production. The specific design of 
the ambition level will reflect the methodological approach followed under the CPR. 

For  aluminium,  the  measure  proposes  a  low-carbon  content  target  of  25%  for  aluminium 
publicly  procured  in  construction  and  selected  downstream  sectors  in  2030.  Similarly  to 
cement,  a  review  of  the  post-2030  target  level  will  be  conducted,  based  on  market 
developments. This target is based on the 2030 availability of EU supply of low-carbon primary 
produced  aluminium.  The  underlying  design  of  the  ambition  level  will  reflect  the 
methodological approach followed under the ESPR. 

Table 20: Overview of LEAD_EII 1 
Requirement 

Market segments 

Low-carbon 
requirement 

Public procurement  
Public support schemes 

Targets 

intensive 

Energy 
material 
Steel  
25% in 2030 
Cement (concrete573)  5% in 2030 
25% in 2030 
Aluminium 

LEAD_EII  2  –  Low-carbon  requirements  for  EII  outputs  and  minimum  Made  in  EU 
requirement for EIIs in public procurement and support schemes  

Scope considerations for LEAD_EII 2 

Based  on  sectoral  analysis  described  in  Annex  7,  steel,  aluminium  and  cement  are 
considered high-potential  sectors for this measure as  the market  share of EU producers has 
been  declining  substantially  in  the  past  10  years,  making  them  particularly  at  risk  of  de-
industrialisation. 

To address these challenges, the measure couples the low-carbon requirements with minimum 
Made in EU requirements in public procurement and support schemes. 

Targets  

Under  this  option,  the  low-carbon  and  made  in  EU  requirement  would  apply  to  steel 
products in public procurement and public support scheme ensuring that at least 25% of the 
steel used in the automotive and construction sectors as part of public procurement and support 
schemes in 2030 is of European origin and is  compliant with the classes A to C as defined 
under LAB.2. This corresponds to the domestic supply of approximately 35.1 Mtonnes per year 
(29.7  Mtonnes  from  EU  production).  Given  the  potential  for  uptake  of  low-carbon  steel  is 
different in these two market segments, there is higher potential to use low-carbon EAF steel 
in construction, versus low-carbo primary route-based steel in automotive. A minimum Made 
in  EU  requirement  ensuring  that  the  low-carbon  steel  used  in  publicly  financed  projects 
originates from EU or EEA producers.  

To  introduce  minimum  Made  in  EU  requirements  in  public  procurement  in  line  with 
international  commitments  for  EIIs  but  with  maximum  use  of  exemptions  from  those 

573 For the objective of lead markets in the construction sector, the requirement may be established at the level of concrete, as the carbon 
impact of energy intensive materials depends heavily on the specific design and material mix.  

209 

 
 
 
 
 
 
international commitments, the following design elements on how to define “EU content” will 
be considered: 

•  Minimum percentage of the value creation (i.e. value of the final product compared to 

initial input) to take place in the EU 

•  Minimum share of specific materials used in a product to be manufactured in the EU 
•  Specific production steps or final assembly must take place in within EU 

Analysis on the target for EU low-carbon requirements for cement and steel is carried out under 
LEAD_EII 1. 

Overview of LEAD_EII 2 

Market segments 

Table 22: Proposed targets under LEAD_EII 2 
Energy 
Requirement 
material 
Steel 
Cement (concrete) 
Aluminium 

 Public procurement 
Public support schemes 
 (in  selected  downstream 
sectors) 

Low-carbon 
Made 
in 
requirement 

+ 
EU 

intensive 

Targets 

25% in 2030 
5% in 2030 
25% in 2030 

LEAD_EII 3 –Low-carbon and EU content for EIIs in products placed on the market (in 
selected downstream sectors) 

This policy measure extends the scope of low-carbon and Made in EU requirement beyond 
public  procurement  and  support  schemes  to  include  selected  downstream  sectors  placing 
products on the market. It combines the low-carbon requirement within that low-carbon share, 
thereby incentivising both  the use of decarbonised materials  and their European production 
across industrial value chains.  

The targets are determined based on projected EU production capacity and demand and have 
been set at a level that is intended to be both ambitious and achievable. The measure would be 
implemented up to 2030, with a review clause allowing the targets and coverage to be adjusted 
based on realised production capacity and market developments. 

Table  Projected European production and demand in million tonnes for selected EII products, 
Commission internal analysis 
Material 

Aluminium 

Cement 

Steel 

Expected production 

Expected demand 

%  of  EU  production  that  can  cover 
demand 

134 

176.52 

75.9% 

2030 

9 

16 

68.75% 

197 

160.7 

122.6% 

Table : proposed targets under LEAD_EII 3 
Requirement 

Market segments 

intensive 

Targets 

Low-carbon 
Made 
in 
requirement 

+ 
EU 

All products placed on the 
market 
selected 
(in 
downstream sectors) 

Energy 
material 
Steel 
Cement (concrete) 
Aluminium 

25% in 2030 
5% in 2030  
25% in 2030 

Steel 

85% from entry into force 

210 

 
 
 
 
 
 
 
 
 
in 
Made 
requirement 

EU 

All products placed on the 
market 
selected 
(in 
downstream sectors)  

Cement (concrete) 
Aluminium 

95% from entry into force 
70% in 2030;  

Clean technologies 

LEAD_BAT 1 - Made in EU requirements in batteries for public procurement, auctions, 
and public support schemes  

Driver 3 under Sub-problem 1 is particularly relevant to the batteries industry, which is why 
Made in EU requirements are the only policy option assessed. As outlined in the baseline, low-
carbon requirements for batteries are already addressed under existing legislation, namely the 
Battery Regulation.  

This  measure  would  introduce  Made  in  EU  requirements,  in  line  with  international 
commitments, for batteries in public procurement, auctions and public support schemes with a 
particular  focus  on  EVs  and  BESS.  Under  this  measure,  ‘Made  in  EU  requirement’  refers 
exclusively to content originating within the EU and potentially EEA. 

Scope considerations 

The  battery  value  chain  is  complex,  and  the  final  product  consists  of  key  components  and 
materials,  each  of  which  constitutes  a  distinct  finished  product  originating  from  upstream 
sectors which are often located in different countries. The final battery product is composed of 
the  following  10  components,  as  listed  in  the Commission  Implementing  Regulation 
2025/1178: battery pack, battery module, battery cell, cathode active material (CAM), anode 
active  material  (AAM),  separator,  electrolyte,  battery  management  system  (BMS),  battery 
thermal  management  system  (BTMS),  and  current  collectors.  Therefore,  LEAD_BAT  1 
considers which product step would most benefit from the introduction of an Made in EU 
requirement. 

First,  the  requirement  will  be  assessed  at  the  level  of  the  battery  final  product  using  a 
component-based approach. This means that a specified number of the battery’s components 
must  be  manufactured  within  the  EU  and  possibly  EEA,  including  certain  mandatory 
components.  An  additional  list  of  components  ranging  from  precursor  active  materials  to 
critical raw materials could be introduced through a delegated act to ensure coverage of the 
entire battery value chain. At this stage, there is insufficient data and cost analysis to justify the 
inclusion of upstream segments or to establish reliable EU content targets. Importantly, this 
extended list could not apply exclusively to EU-based production but could also include EU 
plus other regions’ sourcing, depending on local manufacturing capacities and global supply 
dependencies. 

Second, the requirement should follow a phased implementation. Given that the maturity of 
the  battery  value  chain  varies  significantly  across  its  different  segments,  Made  in  EU 
requirements should be phased in progressively, with an initial focus on the most developed 
segments  of  the  value  chain:  the  production  of  battery  cells.  As  upstream  manufacturing 
capabilities  (e.g.  active  materials,  separators,  electrolytes)  develop  within  the  EU,  content 
requirements could gradually extend to these components. This time phased approach ensures 
that  requirements  are  realistic,  enforceable,  and  aligned  with  industrial  development  of  the 
battery sector. 

EVs: Mandatory Made in EU requirements of at least 4 components at one year after entry into force, including 
the battery cell, increasing to 6 components after three years of entry into force, including the BMS and the CAM. 

211 

 
 
 
 
 
 
BESS:  Mandatory  Made  in  EU  requirements  of  at  least  three  components  at  one  year  after  entry  into  force, 
including the  BMS; increasing to 6 components after three years of entry into force, including the battery cell 
and the CAM.  

Targets 

The targets set are based on projected installed capacity for battery components, derived from 
industry  announcements574,  and  compared  against  total  European  demand  EVs  and  BESS 
batteries.  This  approach  is  conservative,  as  Made  in  EU  requirements  will  not  apply  to  the 
entire demand of EV and BESS batteries. Additionally, all projects currently on-hold have not 
been accounted for. 

Midstream value chain 

Battery cells will become a mandatory requirement for EVs one year after entry into force. 
For  BESS,  the  mandatory  requirement  for  battery  cells  will  apply  once  a  robust  EU-based 
battery  cell  manufacturing  capacity  for  stationary  storage  is  established  for  which  further 
investments  will  be  needed.  In  2027  and  2028,  projected  installed  battery  cell  capacity  is 
expected to reach 379 GWh and 504 GWh, respectively. This would be sufficient to meet 93% 
and 98% of the combined internal demand for EVs and BESS. Specifically, EV battery demand 
is projected to reach 353 GWh in 2027 and 453 GWh in 2028, meaning that installed capacity 
alone could  fully  meet  EV demand in  both  years. These figures  include operational,  under-
construction, and announced projects. Even if announced projects are excluded, the remaining 
operational, including expansions, and under-construction capacity would still cover 93% and 
98% in 2027 and 2028 of EV demand. The installed production capacity of the EU plus the 
EEA countries could already cover 97% of EV demand in 2027 and 103% in 2028. Looking 
ahead, battery cell capacity including announced projects is expected to meet 108% of total EV 
and  BESS  demand  by  2029.  If  announced  projects  are  excluded,  this  threshold  would  be 
reached by 2030, with installed capacity covering 103% of total demand.575 Although the EU 
is  approaching  self-sufficiency  in  this  segment,  it  is  still  reliant  on  imports  and  additional 
investments will still be necessary to keep up with demand increases and the development of 
next-gen batteries. 

Upstream value chain 

Unlike battery cells, many CAM and  AAM projects  are still at  the announcement stage.  In 
2027 and 2028, total CAM capacity is expected to reach 587 GWh and 797 GWh, covering 
144%  and  154%  of  demand.  However,  when  considering  only  operational,  including 
expansions, and under-construction projects, coverage drops to 99% and 89%. By 2030, total 
CAM  capacity  would  cover  119%  of  demand,  but  only  77%  if  announced  projects  are 
excluded.  For AAM, total  projected  capacity reaches 255 GWh  and 411  GWh in  2027 and 
2028,  covering  62%  and  80%  of  demand.  Yet,  operational  and  under-construction  capacity 
only covers 12% and 14%, respectively. By 2030, total capacity would cover 60% of demand, 
while operational and under-construction projects would only reach 9%.576 

Separator and electrolyte  capacity is  concentrated in  a few large-scale  projects.  Separator 
capacity is expected to meet 102% of demand by 2030, while electrolyte capacity covers 100% 
of demand in 2025 and 57% by 2030, indicating a lack of long-term investments.577 

Downstream value chain 

574 European Battery Alliance, BloombergNEF and European Commission internal analysis. 
575 BloombergNEF and European Battery Alliance 
576 Ibid. 
577 BloombergNEF 

212 

 
 
 
 
Battery  pack  and  battery  module  capacity  in  the  EU  battery  module  is  distributed  and 
developed across Europe, with many automotive OEM manufacturers handling these processes 
locally.  The  EU’s  capacity  for  pack  assembly  currently  stands  over  102  GWh578,  which 
includes approximately 54.8 GWh dedicated to EV-only applications, 11 GWh for BESS-only 
systems, and 37 GWh for mixed-use applications (both EV and stationery). In addition, another 
316 GWh are currently in the pipeline, comprising 268.45 GWh for EV-only applications, 8 
GWh for BESS-only systems, and 40 GWh for mixed-use applications.579 Any Made in EU 
requirement on cells will most likely lead to modules and packs also being manufactured within 
the EU, since they have to include the EU-made cells in the final product. Additionally, the EU 
counts with a significant number of companies producing BMS, at least 32580, and BTMS, with 
two EU-based firms ranked among the five largest globally581, spanning over 10 Member States 
and providing solutions both for EVs and BESS. 

In terms of production costs, the EU battery industry reflects a mix of start-ups still refining 
their  manufacturing  processes  and  well-established  companies  with  existing  overseas 
operations.  Production  costs  between  these  companies  vary  depending  on  their  level  of 
maturity  and  stage  in  their  ramp  up  phase.  Currently,  battery  manufacturing  in  the  EU  is 
generally more expensive than in markets like China or the United States. This is primarily due 
to  lower  levels  of  manufacturing  subsidies582,  elevated  material  prices  for  which  the  EU  is 
dependent on third countries, which account for 55% of the production costs, and higher energy 
and labour costs, which account for 15% and 13% of production costs, respectively.583 
In 2023, on average, European battery production costs584, were almost 50% higher than in 
China  for  the  same  chemistry.  However,  there  is  potential  for  innovation  in  the  battery 
manufacturing  sector  in  the  EU  which  could  cut  the  cost  gap  with  China  by  40%.585 
Additionally, economies of scale are essential for producing batteries competitively, as battery 
production, driven by fierce cost competition and global overcapacities, is often a low margin 
business  that  requires  extreme  precision  and  efficiency,  and  therefore  high  yields  and 
automation.586  This  underscores  the  strategic  importance  of  rapidly  scaling  up  European 
production to be able to reduce the cost gap with overseas markets. It is estimated that an EU 
based battery cell manufacturer could reach a 26% cost difference when producing the same 
battery chemistry under the same conditions and using localised CAM and AAM.587 Battery 
cells, and its components, remain the most expensive part of a battery, amounting to around 
68% of the total costs in 2024. These estimates do not account for additional factors such as 
higher logistics costs from China, import tariffs, and higher profit margins outside the EU. In 
fact, import costs represent around 10% of the total costs of imported batteries.588 

While certain steps of the battery value chain are more developed, the EU battery ecosystem 
already has production capacity across the entire value chain, and this capacity is expected to 

578 Up to six operational projects do not have available information on their installed capacities. Current installed capacity for modules and 
packs must absorb both EU made and imported cells. 
579 Battery Pack Manufacturing Assets, BloombergNEF 
580 BMS Manufacturers, Battery News 
581 Top Companies in Battery Thermal Management System Industry, Markets and Markets 
582  MIT  CEEPR.  Global  Clean  Investment  Monitor:  Government  Support  for  Electric  Vehicles  and  Batteries.  In  2024,  Europe  allocated 
approximately EUR 2.15 billion in subsidies for both electric vehicles and battery manufacturing. By comparison, China and the United States 
allocated EUR 6.32 billion and EUR 7.4 billion, respectively, for battery manufacturing alone. 
583 IEA (2024). Energy Technology Perspectives 2024. 
584 Battery manufacturing cost differentials are assessed at battery cell level and include battery cells as well as cathode and  anode active 
materials. These components account for the largest share of total battery costs and also due to their energy-intensive nature and the importance 
of  manufacturing efficiency, they  are  where  cost  disparities  between China  and  other  regions  are  most  pronounced.  Costs  for  separators, 
electrolytes, current collectors, and other upstream materials are based on global average estimates.  
585 IEA (2024), Energy Technology Perspectives 2024. 
586 Intercalaction Station, 2023 
587 Battery Report 2024, Volta Foundation. Model parameters: same yields, factory automation, material margins; no import tariffs or local 
premiums on materials and region-average energy prices. 
588 IEA (2024). Energy Technology Perspectives 2024. 

213 

 
 
 
grow significantly in the coming years. The targets are designed to allow for flexibility while 
ensuring  that  critical  components  are  manufactured  within  the  EU.  These  targets  will  help 
ensure  that  current  industry  announcements  materialize,  while  also  attracting  additional 
investment  into  the  sector,  particularly  in  battery  technologies  and  chemistries  that  require 
greater development within the EU.  

LEAD_BAT 2 - Made in EU requirements in batteries placed on the market  

Scope considerations 

In addition to the measure described in LEAD_BAT 1, this measure would introduce Made in 
EU requirements for batteries used in EVs and energy storage systems in in batteries placed in 
the market. It would establish a market entry requirement for all EVs, and BESS placed on the 
EU market. 

LEAD_SOL 1 - Made in EU requirements in solar for public procurement, auctions, and 
public support schemes 

This measure proposes to cover the entire solar PV value chain, addressing not only the final 
product but also the key components that comprise it. The provisions are to kick in with entry 
into force of IAA. The solar PV final products and their key components are defined in the 
NZIA Implementing Act on main specific components.589  

The measure introduces a requirement that solar PV systems and their main components are 
manufactured in the EU and is designed in alignment with the access to markets provisions as 
per the NZIA. 
Considering the dependencies related to solar PV technologies590, the inclusion of countries 
which are part of the GPA591 or with which the EU has entered an FTA592 (including GPA and 
FTA countries in the content requirement would significantly reduce the measure’s added value 
compared to relevant provisions under NZIA. Consequently, this alterative will not be further 
assessed, and the requirements will focus exclusively on EU content only.  

Choice of measure 

The EU solar PV market is divided into utility-scale, commercial & industrial (C&I) rooftops, 
and residential rooftops, with emerging specialty products (agrivoltaics, vehicle-integrated PV, 
space PV) remaining niche.593 

•  Utility-scale PV: around 40-45% of annual additions 2025–2030 
•  C&I Rooftops: around 30-40% of additions, varying by country 
•  Residential Rooftops: 10-20% of additions mid-2020s, recovering towards 2030 

Share of PV deployment covered by public procurement, auctions and public schemes based 
on industry estimates provided during the NZIA drafting.  

•  Across Member States, public procurement is assumed to account for 3% of the PV 

capacity deployed. 

589 C(2025) 9033 final ANNEX  
590 Highlighted in the Commission Communication on shares of the Union supply under NZIA; Communication of the Commission of 23 May 
2025 providing updated information to determine the shares of the European Union supply of final products and their main specific components 
originating in different third countries under Regulation (EU) 2024/1735 on establishing a framework of measures for strengthening Europe’s 
net-zero technology manufacturing ecosystem (Net-Zero Industry Act). 
591  Parties  to  the  GPA  include  Armenia,  Australia,  Canada,  Chinese  Taipei,  EU,  Hong  Kong  SAR,  Iceland,  Israel,  Japan,  Liechtenstein, 
Moldova, Montenegro, New Zealand, North Macedonia, Norway, Singapore, South Korea, Switzerland, Ukraine, United Kingdom, and the 
United States. 
592  An  mapping  of  the  EU’s  trade  agreements  is  available  at  0e05d6f3-64f5-4661-ae0c-aefb68094d19.  More  information  is  available  at 
https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/negotiations-and-agreements_en.  
593 SolarPower Europe (2025). Reshoring Solar Manufacturing to Europe. 

214 

 
 
 
 
 
 
•  Across Member States, renewable energy auctions are assumed to account for 19% of 

the PV capacity deployed. 

•  Across Member States, public support schemes are assumed to account for 12% of the 

PV capacity deployed. 

Relevance of public procurement: Public procurement is emerging as a crucial tool to shape 
demand for EU-made solar products. Whilst the overall market share of public procurement in 
solar  is  limited,  with  growing  deployment  of  solar  on  public  buildings  and  infrastructure, 
aligning procurement practices with industrial policy objectives can provide predictable, large-
scale demand for European manufacturing. 

Relevance of public support schemes: Public support schemes, such as subsidies, grants, and 
tax rebates for solar PV, can play a vital role in promoting EU-made technologies. Authorities 
designing these schemes must incentivise the purchase of solar products that meet the Made in 
EU  requirements  as  set  out  in  the  table.  This  can  be  done  by  offering  additional  financial 
bonuses or making EU content a condition for eligibility.  

Relevance  of  auctions:  Auctions  represent  a  critical  market  segment  for  solar  PV  as  they 
provide  a  structured  and  predictable  pathway  for  large-scale  deployment.  They  offer 
developers clear visibility on future demand and long-term offtake certainty, which is essential 
for mobilising investment in capital-intensive infrastructure.  

Trade aspects 

The EU is a net importer of all key components across the solar PV value chain. At present, 
the  majority  of  PV  modules  deployed  in  the  EU  are  imported,  and  domestic  production  of 
modules remains limited. As a result, imports of PV cells and upstream components remain 
correspondingly low. Given the sequential nature of the PV value chain, meaningful imports 
of PV cells will only materialise once EU module production has been scaled up. Likewise, 
significant imports of PV wafers will only occur once PV cell production has been reshored to 
Europe. According to the Commission Communication on shares of Union supply, in 2023 the 
EU supply of PV technologies was extremely reliant on Chinese imports. For the following 
components, the share of Union supply from China was the following one: 

•  PV modules and PV cells: 94% 
•  PV inverters: 50% 
•  PV wafers: 79% 

Targets proposed under IAA 

Following considerations apply:  

•  Component  based  approach,  i.e.  requiring  a  certain  number  of  components  to  be 

manufactured in the EU instead of a percentage 

•  Phased in approach: first step with entry into force, second step for 2030  
•  The targets are not limited in time but subject to the general review clause. 
•  Gigawatt scale production and innovation  should be encouraged as well as  products 

and components using EU equipment for the production.  

•  The mandatory components have been chosen to keep cost increase limited and focus 

on steps with most added value and with most job creation.  

Public procurement, auctions and support schemes: 
•  One  year  after  entry  into  force:  3  main  specific  components  to  be  made  in  EU,  out  of  which    inverter 

mandatory 

215 

 
 
 
 
 
 
•  Three years after entry into force: 4 main specific components should be made in EU of which cell, inverter 

mandatory.  

Manufacturing capacity targets in view of expected deployment  

In 2024, 65 GW on new solar PV was installed in the EU, a 4% growth rate from 2023.594  
Reaching the objective of 700 GW of deployed solar capacity by 2030, set out in the EU solar 
energy strategy595 under REPowerEU, requires maintaining a pace of 60 GW per year until 
then.  

Figure 27: Manufacturing capacity of solar PV components vis a vis PV deployment covered by the Industrial 
Accelerator Act, today-2030, Net-Zero Technology Manufacturing Dashboard  
Notes: Deployment covered by Industrial Accelerator Act IAA) includes public procurement, renewable energy 
auctions and public support schemes. FID = Final Investment Decision. 

The line referring to “Deployment covered by IAA” in the graph above represents the amount 
equivalent to the share of the annual deployment market covered by the market segments to 
which  the  Made  in  the  EU  requirements  would  apply  to  (public  procurement,  auctions  and 
support schemes).  

•  Ramping up manufacturing capacity of PV modules is fast, therefore a Made in  EU 
requirement to be introduced one year after entry into force of the Act would be feasible. 
•  By 2030, the EU has sufficient manufacturing capacity to fulfil the deployment covered 
by IAA through the whole value chain, provided that the right measures (like Made in 
EU requirements) are put in place.  

Operational capacity can fulfil the following percentages of current PV deployment covered 
by IAA: 

•  Polysilicon: >100%  
• 
Ingot: 0%  
•  Wafer: 0%  
•  Cell: 10%  
•  Module: >50%  
• 

Inverter: >100%  

594 PV Magazine (2024). EU solar installations hit 65.5 GW in 2024, says SolarPower Europe. 
595 European Commission (2022). Communication from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of the Regions - EU Solar Energy Strategy, COM/2022/221 final. 

216 

 
 
 
 
 
 
 
 
 
Capacity  expected  to  be  operational  one  year  after  the  entry  into  force  of  IAA  (i.e.  2028, 
operational + FID + under construction capacity) could fulfil the following percentage of PV 
deployment covered by IAA: 
•  Polysilicon: >100%  
• 
Ingot: 0%  
•  Wafer: 1%  
•  Cell: >60%  
•  Module: 80%  
• 

Inverter: >100%  

Further components from the list in the Communication on main specific components under 
the Net-Zero Industry Act can be used to meet the targets of LEAD_SOL 1.596  

Capacity  expected  to  be  operational  in  2030  (operational  +  FID  +  under  construction  + 
announced capacity) could fulfil the following percentage of PV deployment covered by IAA: 

•  Polysilicon: >100%  
• 
Ingot: >100%  
•  Wafer: >100%  
•  Cell: >100%  
•  Module: >100%  
• 
Inverter: >100%  

Further components from the list in the Communication on main specific components under 
the Net-Zero Industry Act can be used to meet the targets of LEAD_SOL 1.597  

In  public  procurement  procedures,  contracting  authorities  must 
limit  reliance  on 
overconcentrated supply chains and impose contractual obligations if more than 50% of a main 
specific component originates from a single third country. Public procurement is emerging as 
a crucial tool to shape demand for EU-made solar products.  

LEAD_SOL 2 - Made in EU requirements in solar PVs placed on the market 

In addition to the measure described in LEAD_SOL 1, this measure introduces Made in EU 
requirements for solar PV also in private procurement, in addition to public procurement and 
support schemes - to further strengthen EU manufacturing. 

To  ensure  effective  implementation,  manufacturers  would  be  required  to  document  the  EU 
content of their products, including sourcing, production, and assembly data. Compliance could 
be  verified  through  regular  reporting  and  independent  audits,  with  a  clear  methodology  for 
calculating EU value added. Enforcement could include penalties for non-compliance, ensuring 
transparency and consistency across both public and private procurement markets. 

Phased in approach  

To  mitigate  potential  supply  chain  disruptions,  Made  in  EU  requirements  can  be  phased  in 
gradually, aligning with the feasible expansion of manufacturing capacity within the EU. This 
staggered  approach  would  help  ensure  that  the  requirements  are  not  only  realistic  and 
enforceable but also in sync with the actual industrial development of the EU solar PV sector. 

596  European  Commission  (2025),  Communication  from  the  Commission  providing  updated  information  to  determine  the  shares  of  the 
European Union supply of final products and their main specific components originating in different third countries under Regulation (EU) 
2024/1735  on establishing  a  framework of  measures  for  strengthening  Europe’s net-zero  technology manufacturing  ecosystem  (Net-Zero 
Industry Act), C(2025) 3236, 18 June 2025. 
597European  Commission  (2025),  Communication  from  the  Commission  providing  updated  information  to  determine  the  shares  of  the 
European Union supply of final products and their main specific components originating in different third countries under Regulation (EU) 
2024/1735  on establishing  a  framework of  measures  for  strengthening  Europe’s net-zero  technology manufacturing  ecosystem  (Net-Zero 
Industry Act), C(2025) 3236, 18 June 2025. 

217 

 
 
 
 
Made in EU requirements could be phased in gradually, starting with low thresholds and less 
complex value chain segments, then expanding and rising over time as EU production capacity 
develops.  Alternatively,  rules  could  apply  only  once  minimum  capacity  is  in  place,  with 
voluntary commitments from large buyers encouraged in the meantime. 

LEAD_VC 1 – Made in EU requirements in vehicle components for public procurements 
and support schemes  

Driver 3 under Sub-problem 2 is relevant for automotive components, which is why Made in 
EU requirements are the only policy option assessed. As explained in the baseline, resilience 
criteria  laid  down  by  the  NZIA  framework  do  not  cover  the  entire  spectrum  of  vehicle 
components that have the potential to contribute to the decarbonisation of road transport, nor 
do  they  address  sufficiently  the  economic  pressure  (cost  disadvantage)  faced  by  domestic 
automotive component suppliers. In line with this driver, this measure would introduce Made 
in  EU  requirements  for  automotive  components,  as  the  minimum  share  (%)  of  EU-made 
components over total  components in  value, excluding batteries. in  public procurement and 
public support schemes. 

Scope considerations 

The EU content in a passenger car sold on the EU market may differ significantly depending 
on the model and type of vehicle considered and where it has been produced. Estimates from 
the JRC indicate that the EU content in passenger cars produced in the EU has been gradually 
decreasing over time and represented in 2022 on average 70% of the car's value in the case of 
an  EV  (excluding  the  battery)  while  it  was  totalling  85%  of  the  car's  value  for  an  internal 
combustion engine (ICE) car.598 It should be noted that passenger cars not produced in the EU 
have lower shares of EU content compared to the ones produced in the EU599, however the 
battery is assessed in a different provision (LEAD_BAT). Implementing a 70% Made in EU 
requirement for EVs sold in the EU upon the introduction of the measure could help reverse 
the erosion of EU content of EVs observed over the last decade, bringing it closer to that of 
ICEs. The requirement could then be gradually increased to 75% by 2030.  

A crucial aspect of vehicle components production regarding its complex value chain must be 
taken into consideration: the final vehicle component product is often composed of key sub-
components and materials (or software), each of which constitutes a distinct finished product 
originating  from  upstream  sectors  (tier  2  or  3  suppliers),  sometimes  located  in  different 
countries.  If  we  take,  for  instance,  the  example  of  an  electric  motor,  the  final  product  may 
include a stator and rotor, a shaft, bearings, bracket, terminal box (T-box) seat and its cover, 
washer, pre-load spring, external fan and its cover. 

At the same time, the proposed measure has to be based on criteria that are relatively simple to 
implement and limit the administrative burden of each player of the value chain. The Made in 
EU requirement on vehicle components should offer sufficient freedom to OEMs regarding 
their sourcing strategy (make or buy and choice of suppliers) and provide sufficient freedom 
to Tier-1 suppliers regarding their own sourcing strategy (make or buy and choice of tier 2+ 
suppliers).  

The metrics used to assess the EU content threshold should be defined as the minimum share 
(%)  of  EU-made  components  over  total  components,  in  value,  excluding  batteries.  The  EU 

598 These estimates are in line with the ones provided by McKinsey: 85-90% and 70-75% of EU content for an ICE and a battery electric 
vehicle,  respectively,  produced  in  Europe  in  2023.  https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/europes-
economic-potential-in-the-shift-to-electric-vehicles 
599  For 
https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/europes-economic-potential-in-the-shift-to-electric-vehicles 

instance,  McKinsey  estimated  20%  of  EU  content  for  a  battery  electric  vehicle 

in  Europe 

in  2023: 

imported 

218 

 
 
 
 
content definition should remain as close as possible to the existing rule of origin methodology 
referring to “last substantial transformation” to limit additional administrative activities to both 
OEMs and suppliers. 

EVs600: at least 70% EU-made components over total components, in value, excluding batteries one year after 
entry into force and 75% by 2030. 

LEAD_VC 2 - Introduce Made in EU requirements in automotive components for public 
procurements, public support schemes and all vehicles placing on the market. 

Scope considerations 

In addition to the measure described in LEAD_VC 1, this measure would introduce Made in 
EU  requirements  for  automotive  components  not  only  in  public  procurement  and  public 
support schemes, but also to placing on the market. 

EVs601: at least 70% of the total value of a vehicle one year after entry into force and 75% by 2030. 

SO3: Maximise the quality and benefits of foreign investment in the EU  

INV 1 – Guidance on voluntary FDI conditionalities 

This measure would entail issuing a non-binding, soft law instrument (e.g. guidelines) calling 
upon Member States to impose conditionalities on FDI for industries falling into scope (e.g. 
batteries  and  potentially  certain  energy  intensive  industries),  provided  these  are  compatible 
with provisions of EU law governing, for instance, free movement of capital and  mergers.). 
The guidelines would urge that Member States impose conditionalities in their national regimes 
covering FDI, including sectoral rules (for the sectors covered).  

INV 2 – Mandatory FDI conditionalities EU-wide 

Moving from “policy-by-project” to “policy-by-principle” is essential to retain as much added 
value from foreign investments as possible. Instead of negotiating conditionalities case by case, 
the  EU  will  define  clear,  horizontal  criteria  for  FDI  in  strategic  sectors  to  align  investor 
incentives with EU resilience targets while providing predictability for companies.  

This measure will impose mandatory rules on FDIs for the industries in scope, namely battery 
supply chain (especially batteries for EVs) and other critical technologies in strategic sectors. 
Determining  which  sectors  fall  under  mandatory  FDI  conditionalities  is  anchored  in  the 
established  framework  for  identifying  technologies  critical  to  economic  security.602  The 
Recommendation on critical technologies603 requires an assessment based on three narrowly 
defined  criteria:  1)  the  enabling  and  transformative  nature  of  the  technology,  2)  the  risk  of 
civil–military  fusion,  and  3)  the  risk  of  misuse  for  human-rights  violations.  This  is 
complemented by a systemic vulnerability analysis examining chokepoints, EU comparative 
position, supply-chain concentration, threat actors and global interdependencies. Applying this 
methodology, we can define a list of sectors for which it is justified that they are included in 
the scope of mandatory FDI conditionalities. 

600 This category includes BEVs and PHEVs. The target reflects on the aggregated value and the weighted average of both BEVs and PHEVs.  
601 This category includes BEVs and PHEVs. The target reflects on the aggregated value and the weighted average of both BEVs and PHEVs. 
602 European Commission (2023). Joint Communication to the European Parliament, the European Council and the Council on “European 
Economic Security Strategy”, JOIN(2023) 20 Final. 
603 Commission Recommendation C(2023) 6689 on critical technology areas for the EU's economic security for further risk assessment with 
Member States. 

219 

 
 
 
 
 
 
 
 
 
 
Safeguards  and  proportionality  are  ensured  through  the  design  of  the  conditionalities 
themselves. In line with the Commission’s requirement that protective measures be precisely 
targeted and proportionate to the risks identified, the legal provision applies a coherent, uniform 
set  of  conditions  that  applies  to  inbound  investors  in  these  designated  strategic  sectors. 
However, the Act differentiates the degree of obligation between two groups of technologies 
to  align  proportionality  with  the  intensity  of  risks  identified.  For  strategic  reinforcement 
technologies, vulnerabilities are acute, structurally embedded and linked to highly concentrated 
global supply chains. In these sectors, inbound investors must comply with all conditions, as 
flexibility would weaken the EU’s capacity to retain critical technology, secure supply chains 
and reduce exposure to foreign leverage. 

By  contrast,  for  other  emerging  key  strategic  sectors,  risks  remain  significant  but  more 
heterogeneous or forward-looking. To avoid hampering scale-up and innovation in areas where 
Europe still needs to deepen its capabilities, investors must meet with a subset of the conditions. 
This  calibrated  flexibility  preserves  a  meaningful  economic  security  baseline  while 
maintaining openness to investment essential for technological development. 

Through this two-tier structure, the Act applies strict conditionality where the Union cannot 
tolerate vulnerabilities, and targeted flexibility where it strengthens competitiveness without 
undermining economic security. 

The scope of the conditions would exclude FTA countries.  

These rules would either: 

•  Directly apply to FDIs covered in the measure OR 
•  Create an obligation for Member States to scrutinise FDIs above a certain threshold in 

the above-mentioned scope and prescribe conditionalities for that investment. 

Under both options, such conditionalities are:  

a.  Ownership and Structural requirements 

This option group of conditionalities includes measures that control the ownership structure 
and relations of foreign investments within the EU to maintain local interests.  

Ownership control requirements would introduce limits on non-European ownership/control 
for industries in scope (e.g. maximum 49% of the JV or EU firm can be owned by a non-EU 
based company or person). In addition, joint venture requirements could oblige FDI to partner 
with an EU firm, including a cap on their ownership control. 

The legal provisions would have to consider control relations from third countries. Applicable 
foreign investments would either have to obtain prior approval from Member States or Member 
States would implement compliance measures horizontally. 

b.  Value added production  

This group of conditionalities concern requirements to ensure that foreign investments lead to 
value  added  production,  including  R&I,  engineering  activities,  domestic  processing  and 
manufacturing while incentivizing local sourcing and production of intermediate goods.  

Such requirements may include using (a certain percentage) of EU-produced equipment and 
consumable inputs, aimed at boosting domestic industries in the upstream value stages, as well 
as to ensure independence of the investment from the origin country (and the investor’s other 
operations) to increase supply resilience. The quality of value chains should also be considered 

220 

 
 
 
 
 
 
to avoid foreign investments extracting value with minimal contribution to the internal market, 
for instance by only assembling readymade components imported from abroad. 

Further  to  the  above,  staffing  requirement,  job  creation  and  social  protection  conditionality 
could also be prescribed in IAA, as long as this does not to discrimination within the Single 
Market. This entails a requirement to actively recruit, hire, and train local workers and to ensure 
the creation of quality jobs in the EU, including via at least a certain percentage of the total 
workforce being composed of EU- residents. For acquisitions, this would include the protection 
of existing jobs. Moreover, conditions may consider specifying that key managerial positions, 
such as executive roles and board are filled with EU nationals or residents. 

c.  Technological advancements 

These  conditions  should  ensure  that  foreign  investors  contribute  to  the  technological 
advancement in the EU by making their proprietary technologies or IP available to local firms, 
institutions, or joint ventures. Agreements facilitating such technology and know-how sharing 
with  EU entities may be considered as market  entry conditionalities. Licensing terms  could 
also  include  co-development  or  training  to  maximise  the  domestic  innovation  capacity  and 
promote value retention in the internal market. 

Moreover, further conditions could be added on securing EU value chains by requiring foreign 
investors to sell to EU-based costumers, with the aim of ensuring availability of the products 
in  the EU. This  is  only/most relevant  if there is  a structural  or temporary shortage of these 
outputs (e.g. a foreign mining operation in the EU for a critical raw material should sell the 
mine output to EU customers). 

221 

 
 
 
 
 
SO4: Speed-up and simplify permits for industrial decarbonisation  

PERM 1 – One project-one digital procedure  

a.  Introduction of permitting provisions for all manufacturing industry projects on: 

To streamline permitting processes in the Union, Member States would be required to take the 
following concrete measures for any new (or reconverted) industrial manufacturing projects 
(NACE Section C) under the scope. No additional requirements would be requested from these 
manufacturing  projects  to  benefit  from  measures  below,  since  they  would  be  considered  as 
standard measures to improve the competitiveness of European manufacturing companies.  

The potential measures include:  

•  Applying a joint procedure combining all relevant permits like building or construction 
permits, including potential environmental assessments (i.e. those required by the EIA, 
Habitats, Birds, Water Framework, Seveso and Industrial Emissions Directives) for a 
given project; 

•  Make  permitting  procedures  fully  digitalised,  including  submission  of  evidence  by 
expanding the scope of the Single Digital Gateway Regulation; additionally, national 
authorities would need to standardise data sets in environmental permits to increase 
interoperability and the storage/depository and the re-use of data in electronic forms; 
•  Mandate minimum data interoperability sets for storage and reuse in other reporting or 

permitting activities; 

•  European Commission to provide technical assistance for innovative technologies in 

decarbonised projects.  

PERM 2 – One project –one digital procedure, and special focus on EIIs 

This  includes  the  measures  outlined  in  PERM  1  above,  and  additionally,  the  measures 
explained below.  

EIIs  should  demonstrate  a  specific  level  of  decarbonisation  effort,  (e.g.  "significant  and 
permanent GHG emissions reductions”) to qualify for these additional, cumulative benefits: 

b.  Mirroring basic NZIA permitting provisions for the EII decarbonisation projects  

that do not fall under the NZIA scope, including: 

•  Designation of an authority to fulfil the role of ‘one-stop shop’ and be the sole point of 

contact for project promoter. 

•  Time limits of 18 months: adhering to specific time limits for different stages of the 
permit granting procedure, and other measures linked to basic permitting provisions.  

To benefit from the NZIA provisions, an energy-intensive industrial decarbonisation project 
needs to fulfil two conditions: (i) the project has to manufacture a product or component that 
is a priori relevant to the supply chain of a net-zero technology and (ii) has to reduce emission 
rates  of  CO2-eq  of  industrial  processes  significantly  and  permanently  to  an  extent  which  is 
technically feasible. The evaluation and final decision, however, remain a prerogative of the 
national  authorities. Therefore, industries  that do not  fulfil these  conditions  can  continue to 
face complex and lengthy permit-granting processes.  

c.  Presumption of “Overriding Public Interest” principle:  

222 

 
 
 
 
 
 
 
 
 
To achieve the decarbonisation of the energy intensive industries in Europe, while enabling a 
security of supply of essential materials and avoiding dependencies from other regions of the 
world, energy intensive decarbonisation projects would be presumed to be of overriding public 
interest.  As  such,  they  should  qualify  for  the  most  favourable  procedure  available  in  their 
planning  and  permit-granting  procedures.  For  example,  under  Article  6(4)  of  the  Habitats 
Directive  this  concept  implies  that  the  competent  national  authorities  have  to  make  their 
approval  of  the  plans  and  projects  in  question  subject  to  the  condition  that  the  balance  of 
interests  between  the  conservation  objectives  of  the  Natura  2000  site  affected  by  those 
initiatives and the imperative reasons weighs in favour of the latter.  

d.  Regulatory sandboxes for energy intensive industries:  

Regulatory sandboxes enable the competent authorities to exercise a degree of flexibility to 
allow  participant/innovators  to  test  innovative  technologies  or  products  in  real  world 
environment and conditions for a limited period of time under appropriate supervision of one 
or  more  competent  authorities.  The  outcomes  of  these  regulatory  sandboxes  should  be 
established to enable experiences and regulatory learnings to be collected and shared across the 
EU.  This  would  allow  a  limited  derogation  from  specific  legislation,  such  as:  Delegated 
Regulation (EU) 2023/1185 and 2023/1184 (RFNBO DAs). 

e.  Tacit approval:  

The lack of an administrative reply of the relevant administrative bodies within a certain time 
limit  or  specific  intermediary  steps  could  be  considered  as  approved  for  relevant  EII 
decarbonisation projects. This provision would be accompanied by safeguards to ensure that 
such measures have minimal to no unintended impacts to the environment, safety or health of 
the population. Such a provision would not apply to decisions/permits required under relevant 
EU environmental law. Similarly, it would not apply to final decisions/permits on the outcome 
of the permit-granting procedure, which shall be explicit.  

PERM 3 – Dedicated measures for industrial clusters 

This option includes all measures from PERM 1 and 2 above, and additionally, the measures 
explained below.  

EIIs  must  demonstrate  a  specific  level  of  decarbonisation  effort,  (e.g.  "significant  and 
permanent GHG emissions reductions”) to benefit from these additional measures. 

This measure opens the possibility for Member States to designate “Industrial Decarbonisation 
clusters”  as  geographical  areas  of  industrial  presence  where  projects  can  access  several 
benefits.  They  are  “go-to  areas”  which  are  particularly  suitable  areas  for  the  installation  of 
newly  decarbonised  industrial  manufacturing  facilities  or  reconversion  of  the  existing  ones 
already operating in the perimeter. These areas of industrial symbiosis can foster the exchange 
of  raw  materials,  waste,  and  energy  flows  to  improve  their  resource  efficiency,  and 
environmental performance.  

f.  Tacit approval 

The lack of an administrative reply of the relevant administrative bodies within a certain time 
limit  or specific intermediary steps could  be considered as approved for  projects  within the 
industrial  cluster.  Such  a  provision  would  noy  apply  to  decisions/permits  required  under 
relevant EU environmental law. It should not apply to final decisions/permits on the outcome 
of the permit-granting procedure, which shall be explicit.  

223 

 
 
 
g.  Priority assessment by Distribution System Operator (DSO) for connection requests 
to  energy  infrastructure  (i.e.  electricity  and  /or  hydrogen)  located  in  industrial 
clusters.  

Member States would notify the distribution system operator whenever industrial clusters are 
established, providing  that the estimated industrial  activity justifies an energy infrastructure 
connection  (electricity  grid,  hydrogen  pipeline  or  others).  Secondly,  the  assessment  of  the 
cluster  connection  would  be  evaluated  as  a  matter  of  priority  by  the  DSO,  considering  the 
decarbonisation needs of the industrial sector as one of the largest CO2 emitters of the Union.  

h.  Derogation  from  Environmental  Impact  Assessment  provisions  for  projects  in 

industrial clusters 

In this  context,  they shall  be exempted, when relevant,  from  the  requirement to  carry out  a 
dedicated environmental impact assessment under Directive 2011/92/EU, provided that these 
projects comply with certain safeguards. There is however an obligation to perform a Strategic 
environmental assessment for plans dedicated to the designation of such clusters.  

i.  Exemptions for construction phase 

First stages of environmental assessments like Natura 2000 examines the likelihood of a plan 
or  project  having  significant  effects  on  the  environment.  In  this  context,  the  project’s 
examination involves the construction works. Targeted amendments to Art. 2(1) of Directive 
2011/92/EU  and  Art.  6(3)  of  the  Directive  92/43/EEC  could  be  introduced  to  exempt  the 
temporary  emissions  taking  place  during  construction  phase  of  projects  with  CCS  in  their 
design.  

SO5: Increase investment projects in industrial areas  

This  specific  objective  defines  criteria  for  identifying  industrial  decarbonisation  projects  in 
areas, to facilitate access to public funding. The objective criteria would be set horizontally and 
take into account: a) the project’s economic security potential for the EU, b) its decarbonisation 
potential, c) its contribution to the EU’s strategic autonomy and d) its deployment potential. 
The economic security potential for the EU would take into account the project’s value added, 
including in other EU Member States, and its contribution to an entry-level transition plan as 
well as to strategic value chains. The deployment potential should take into account the label 
being developed under SO1, for the carbon intensity of the sectors covered, primarily steel, 
insofar the industrial project can demonstrate the low-carbon production meet the classification 
set by the label, and could also reflect wider social aspects, such as skills.  

The majority of respondents to the Open Public Consultation, 197 (63%) out of 314, support the introduction 
of  a  category  of  priority  industrial  decarbonisation  projects,  supported  by  targeted  benefits,  with  the  goal  of 
accelerating the EU’s industrial decarbonisation efforts.  
The preferred criteria for identifying priority projects were: contribution to industrial decarbonisation (100 (32%) 
out of 314 respondents), contribution to strategic value chains (64, 20%), contribution to industrial electrification 
(9, 16%),) economic importance (43, 14%) and expected increased demand for outputs (28, 9%).  

AREA  1  –  Recommend  Member  States  to  facilitate  public  funding  for  projects  in 
industrial areas  

This  measure  would  recommend  Member  States  to  apply  criteria  defined  IAA  for  public 
support measures for decarbonisation projects, without prejudice to State aid guidelines. This 
means Member States, if they follow the recommendation, would apply the criteria to select 
priority projects,  for example,  with  regard to  national funds supporting decarbonisation. To 
support consistent implementation and reduce administrative burden, the Commission could 

224 

 
 
 
 
provide  technical  assistance  or  a  dedicated  toolkit  to  help  Member  States  apply  the  criteria 
effectively, also covering the carbon intensity criteria of SO1. In addition, peer learning and 
the  exchange  of  best  practices  would  be  encouraged  -  through  mechanisms  such  as  annual 
forums,  workshops,  or  the  creation  of  a  knowledge  hub  -  fostering  a  shared  approach  and 
greater coherence across national funding programmes. 

AREA  2  –  Member  States  to  designate  industrial  areas  to  facilitate  access  to  public 
funding  

Under this second measure, in addition to what is described in AREA 1, the criteria defined 
under  IAA for industrial areas  would be used to identify synergies with  existing  and future 
public  funding  opportunities,  with  the  aim  of  facilitating  access  to  finance  for  industrial 
decarbonisation projects in relevant industrial areas. Under this measure, Member States would 
be required to apply these criteria to identify relevant priority industrial areas under IAA, with 
the designation verified by the Commission. The Commission will issue guidance on how to 
apply  these  criteria.  Furthermore,  Member  States  would  be  required  to  take  these  priority 
projects  into  account  when  programming  their  EU  shared-managed  funds  at  national  and 
regional level, ensuring stronger alignment between EU and national funding strategies.  

At  EU  level,  the  Commission  would  take  into  account  these  criteria  and  the  areas/projects 
selected  under  them,  for  the  revision  of  existing  funds  and  programmes,  most  notably  the 
Innovation Fund calls and the upcoming Decarbonisation Bank. To the extent possible, a link 
would be established between the IAA criteria for the designation of the priority projects and 
the  Competitiveness  Seal  of  the  European  Competitiveness  Fund,  presented  by  the 
Commission as part of the next MFF legislative proposal. 

AREA 3 – Commission to designate industrial areas according to the selection criteria 
and giving the projects priority access to funds  

Under this third measure, the Commission would establish a process to use these criteria to 
designate priority projects according to the selection criteria. These projects would then receive 
an automatic preferential access (via e.g. a fast-track procedure, or a ring-fenced envelope, or 
preferred status in scoring) to existing and future EU funds. [Option discarded early on] 

225 

 
 
 
 
Annex 10: Extended information on the problem section 
This annex further describes and brings additional evidence to the overarching problem that 
this initiative seeks to address, namely the need for the EU industry, and in particular EIIs, to 
decarbonise  their  processes  and  products  while  addressing  the  global  competitiveness 
challenge.  

1. An industrial fabric at risk  

The different challenges described in Section 2 and below, from high energy price to regulatory 
burdens,  contribute  to  undermining  the  EU  industrial  fabric  and  affect  multiple  energy-
intensive sectors.  

Overall,  European  industrial  slowdown  is  confirmed  by  data  showing  that  over  50%  of  the 
electricity demand reduction that occurred between 2021 and 2023, at the peak of energy crisis, 
was due to industrial decline, following several production curtailments and plant closures, in 
some cases temporary, in others permanent.604 

The Commission’s JRC has tracked the general announcements of EIIs on plant developments. 
In the steel industry, a clear negative trend is evident with 33% more plant closures and layoffs 
announced  than  new  plant  constructions  or  reopening,  indicating  significant  challenges. 
Similar trends can be observed in the recycling industry, as no new plants are being announced 
but one project has been cancelled. In other EII industries like glass, ceramics and refractory, 
and pulp & paper the analysis shows a more even split between the announcements. Out of 
roughly  250  European  decarbonisation  projects  since  2018,  about  68%  are  still  at  the 
announcement or concept stage, with no final investment decision yet taken. Only around 28% 
have reached construction or operation, while 4% have been cancelled or suspended.605 This is 
consistent with Figure 28 focusing on aluminium, cement and steel sectors, which show that 
while Europe hosts a significant share of the global clean industrial project pipeline, only a 
limited proportion has reached final investment decision.606 

604 Eurelectric (2025). Power Barometer. 
605 European Commission, JRC internal analysis based on Europe Media Monitor.  
606Mission Possible Partnership (MPP), E3G and the Industrial Transition Accelerator (ITA) (2025). Building the EU’s Clean Industrial Future: 
Unlocking Investment through Lead Markets. 

226 

 
 
 
 
Figure 28:Comparison of the European and global clean project pipeline 

Regarding  steel,  Hydrogen-based  Direct  Reduced  Iron  –  Electric  Arc  Furnace  (DRI–EAF) 
routes  dominate  the  technological  pipeline,  accounting  for  more  than  70%  of  total  planned 
capacity, yet less than a quarter of that capacity is under construction. 

Figure 29: Technological split of EU low-carbon steel projects by stage (% of capacity), Commission 
elaboration on BNEF data 

For instance,  ThyssenKrupp announced plans  for 11 000 lay-offs in  Germany in  December 
2024.  In  November  2024,  ArcelorMittal  postponed  its  decarbonisation  investments  across 
Europe, and in April 2025, it informed unions of the elimination of 630 jobs at its seven sites 
in  northern  France,  representing  just  under  10%  of  the  workforce.607  Additionally,  Liberty 
Ostrava announced bankruptcy in the Czech Republic in June 2024.  

The  European  aluminium  sector  presents  warning  signs  of  a  de-industrialisation,  having 
permanently  lost  a  significant  part  of  its  production  capacity.  More  than  50%  of  primary 

607 RTL Today - Steel sector crisis: ArcelorMittal says to cut some 600 jobs in France. 

227 

 
 
 
 
 
 
 
aluminium production capacity has been idled since 2021 and, since 2020, twenty European 
aluminium, silicon and zinc facilities have been shut down.608  

Meanwhile,  the  European  chemical  industry  faces  an  unprecedented  crisis  and  structural 
disadvantages compared to its international competitors. These include both cost and no-cost 
factors. Due to these competitive pressures, production utilisation rates have stagnated at an 
unprofitable 74-75% range, significantly below the historical averages of 81.5%. This has led 
to an unprecedented wave of closures with 11 Mtonnes of capacity announced for shutdown 
over the past two years, ten times higher than the average annual variation of the past decade.609 

The  glass  sector  is  also  struggling  as  it  faces  declining  demand,  stalled  investment  and 
shrinking European capacity, with several plant closures reported since the start of 2025.610 For 
example, O-I Glass announced the closure of a facility in Europe, affecting 170 workers.611 

Figure 30: Extra-EU trade balance for energy intensive industries, in constant 2015 billion USD, 2012-2022, A 
comprehensive overview of the Energy Intensive Industries ecosystem, OECD 2025. 

When zooming into the projects marked as cancelled, closed or postponed, ten high-level cases 
can be identified across the chemicals, refining, lime and fertilisers sectors. These include BP’s 
H₂-Fifty electrolyser in Rotterdam (NL), which was put on hold until the Dutch government 
transposes  the  Renewable  Energy  Directive;  SGL  Carbon’s  Lavradio  carbon-fibre  site  in 
Portugal,  closed  in  2024;  and  Solvay  Chemicals  Finland’s  hydrogen-peroxide  project  in 
Voikka,  postponed  despite  Innovation  Fund  support.  Three  Carmeuse  “Columbus”  pilot 
projects  in  Belgium  were  cancelled  in  2024,  and  UPM’s  biorefinery  in  Leuna  (DE)  was 
postponed  from  its  planned  2024  start-up.  Achema’s  213  MW  green-hydrogen  project  in 
Lithuania was postponed and its EUR 122 million Just Transition Fund grant withdrawn, while 
Raffinerie Heide’s 30 MW Westküste 100 electrolyser and Dow Böhlen’s 120 kt advanced-
recycling  plant  were  both  cancelled.  Finally,  Uniper’s  Chemelot  syngas  facility  in  the 
Netherlands was cancelled in May 2025. 

Competitiveness challenges are also visible further down the value chain. According to a report 
by  CLEPA,  at  least  600  000  jobs  will  be  lost  on  the  2.4  million  directly  employed  by  the 
European automotive sector during the next 5-10 years.612  

2. What are the sub-problems and their drivers? 

608 European Commission (2025). A European Steel and Metals Action Plan, COM(2025) 125 final, 19 March 2025. 
609 Cefic, Advancy (2025). The Competitiveness of the European Chemical Industry.  
610 Glass for Europe (2025). Glass for Europe Board Directors discuss the EU's lack of competitiveness and circularity at first 2025 meeting. 
611 O-I Glass to Close European Facility, Approves Severance Plan - MarketWatch. 
612 CLEPA, Strategy& (2022). Electric Vehicle Impact Assessment Report 2020-2040. 

228 

 
 
 
 
 
The Section 2 analyses the three different sub-problems related to the EU’s limited business 
case for EU EIIs to decarbonise; each sub-problem and their drivers are further supported by 
evidence in the sections below. 

Sub-problem 1: Limited demand for European low-carbon industrial products at current 

prices 

Driver 1 (market failure): Challenges in distinguishing low-carbon industrial products 

from high-carbon alternatives 

Section 2 addresses the lack of harmonised carbon accounting methodology, with a plurality 
of ongoing initiatives seeking to define what constitutes a “low-carbon” industrial product by 
establishing methodologies and performance criteria.  

For certain products, such as hydrogen, EU legislation already provides legal definitions for 
what can be considered renewable or low-carbon, along with associated certification systems. 
However, for most industrial semi-finished and finished products (i.e. cement and steel), there 
is no consensus yet on what qualifies as low-carbon, nor is there EU legislation providing a 
legal definition for it nor how to label it. This lack of agreement reflects a fragmented approach 
to distinguishing low-carbon industrial products from high-carbon alternatives. 

This  difficulty  in  differentiation  at  the  manufacturing  level  carries  over  into  the  consumer 
market.  Low-carbon  industrial  products  are  often  very  similar  to  their  conventional 
counterparts in terms of chemical composition and material properties. Generally, there is no 
easy tangible way for customers to distinguish between low-carbon and conventional products. 
For example, rod steel produced through low-carbon processes typically has the same strength 
and fracture resistance as steel made using conventional methods. Similarly, many chemicals 
from low-carbon processes and non-fossil feedstocks—including those derived from recycled 
waste, biomass, and Carbon Capture Utilisation “CCU” technologies—are identical to those 
produced  through  established  fossil-based  routes.  While  this  may  not  hold  true  for  all 
products/materials—for  instance,  low-carbon  cement  might  be  produced  without  clinker  or 
with clinker substitutes— there is generally no easy visual or tangible way for customers to 
distinguish between low-carbon and conventional products.  

Existing methodologies to assess the carbon footprint embedded in product, in particular the 
LCA  Environmental  Footprint  methods,  are  not  widely  used  as  a  regulatory  basis  for 
environmental declarations, but they are increasingly applied by industry. As a result, while 
these methods are well known and used within companies, t. he reliability and comparability 
carbon content claims still depend on the consistency and verification of data across all steps 
of the supply chain. 

Driver 2: Limited willingness to pay a premium for low-carbon industrial products 

Section 2 addresses the higher costs for producing low-carbon products often faced by EIIs, 
using the example of steel and cement. For instance, low-carbon cement, costs approximately 
EUR 30 more per tonne than high-carbon cement, representing an average 20% premium that 
is  often  unaffordable  for  small-scale  buyers  such  as  individual  homebuilders.613 In  the  steel 
sector,  some  large  customers,  particularly  in  the  automotive  industry,  have  demonstrated  a 
willingness  to  pay  green  premiums  of  EUR  300–400  per  tonne  when  traceability  and 
compliance  with  sustainability  criteria  can  be  ensured.  However,  outside  of  these  early 
adopters, price sensitivity remains high, limiting demand for cleaner materials. 

613 ERT (2024). Competitiveness of European Energy-Intensive Industries. 

229 

 
 
 
 
 
 
This price difference is also evidenced for other sectors such as chemicals, for which the use 
of decarbonisation technologies is expected to significantly increase operational expenditures 
(discounted OPEX estimated at EUR 1.86 trillion for the 2019–2050 period).614 This would 
result in significant cost differentials between low-carbon and conventional chemical products. 
For example, chemically recycled PET615 via solvolysis616 is estimated at EUR 2 100–2 200 
per tonne, compared to approximately EUR 1 500 per tonne for food-grade virgin PET.617  

This weak market response is further exacerbated by low consumer awareness, the absence of 
mandatory climate performance standards, and a lack of effective incentives. Currently, there 
are no binding rules at EU level requiring the use of low-carbon materials in most industrial 
sectors,  nor  is  there  a  systematic  approach  to  offset  green  premiums  through  public 
procurement or targeted support.  

EU practice 

Across  the  EU,  several  Member  States  have  introduced  national  or  regional  initiatives  to 
stimulate demand for low-carbon industrial products through public procurement and targeted 
incentives, yet these approaches remain fragmented and call for greater harmonisation. 

France provides an additional EUR 1 000 ecological bonus for EVs assembled in Europe and 
equipped  with  a  European  battery,  directly  linking  green  incentives  to  local  production.618 
Germany  has  integrated  strict  carbon-intensity  thresholds  for  steel  and  cement  in  major 
infrastructure projects such as the U5 metro line in Hamburg619, achieving substantial emission 
reductions while signalling clear demand for low-carbon materials. Overall, the use of low-
carbon  steel  is  a  requirement  in  all  tenders,  with  a  maximum  carbon  intensity  of  500  kg 
CO2/tonne.  For  cement,  the  strategy  focuses  on  using  concrete  with  low-clinker  cement, 
anticipating the further development of low-carbon cement (including CCS).  620 The project 
plans to use 100% green concrete and 75% green steel and will require approximately 4 million 
cubic meters of concrete and 600 000 tonnes of steel.621 It is thereby sending a strong signal to 
the industry regarding the demand for low-carbon industrial products.  Berlin’s procurement 
regulation  further  mandates  environmental  criteria  for  public  tenders  above  EUR  50  000, 
leading to both emission cuts and significant cost savings. Studies have shown that the State of 
Berlin has managed to reduce its GHG emissions by 47% and that green public procurement 
has  led  to  an  annual  cost  reduction  of  3.8%  (approximately  EUR  38  million  annually),622 
mostly coming from the use of recycled materials such as concrete or road surface materials.623 

In the Netherlands, green and circular procurement has been applied to large infrastructure 
projects624  such  as  the  Cruquius  Bridge  renewal,  using  lifecycle  assessment  tools625  and 
environmental cost indicators to drive sustainability and lower long-term maintenance costs.626 

614 CEFIC webpage. The Carbon Managers – iC2050 model. 
615 Polyethylene terephthalate “PET”. 
616 Chemical process where polymers are broken down into oligomer or monomer building blocks, by means of a solvent. 
617 Internal Commission estimates based on the upcoming JRC study on the “Economic viability of chemical recycling”, due for publication 
by the end of the year.  
618 Increase in the subsidy for the purchase of an electric vehicle that meets European production criteria from 1 October – Press – Ministry of 
Finance. 
619 Hochbahn webpage. May we introduce? Germany's largest underground railway project! 
620 Strabag webpage. Factsheet: Großprojekt U5 Hamburg. 
621 Ibid. 
622 SEI (2023). Green Public Procurement: a key to decarbonizing construction and road transport in the EU. 
623 Senatsverwaltung für Wirtschaft, Energie und Betriebe, 2017. 
624  The  Environmental Cost  Indicator is  defined through  a  life  cycle  assessment  (LCA) expressed  in  euros; it  analyses the  environmental 
impact of a supply, work or contract over different life stages and expresses the expected social costs of reversing these environmental impacts. 
The lower the ECI value, the more durable. Source: PIANO (2024). Purchasing with the Environmental Cost Indicator. 
625 SEI (2023). Green Public Procurement: a key to decarbonizing construction and road transport in the EU. 
626 European Commission webpage. Competitive dialogue for a circular and sustainable bridge. 

230 

 
 
 
Spain’s  Catalonia  region627  and  Italy628  have  introduced  broad  green  public  procurement 
frameworks, embedding environmental clauses in a growing share of contracts. 

While these measures demonstrate growing national efforts to reward low-carbon production, 
their  varying  criteria  and  scope  risk  creating  fragmentation  across  the  Single  Market, 
underlining the need for greater coherence and harmonisation. 

Third countries 

Several  major  third  country  economies  have  taken  targeted  action  to  overcome  the  limited 
market willingness to pay a premium for low-carbon industrial products. The United States 
has  implemented  the  Federal  Buy  Clean  Initiative,  requiring  the  use  of  low-carbon  steel, 
concrete,  asphalt,  and  flat  glass  in  federal  procurement,  which  together  represent  nearly  all 
materials used in public construction. The initiative has already driven the development of over 
17 000 new Environmental Product Declarations and is estimated to reduce emissions in the 
relevant sectors by up to 10% annually, with even greater reductions expected once private-
sector spillovers are included.629  

Canada has followed a similar path, progressively linking access to public contracts to the use 
of  domestic  and  low-carbon  materials.  Its  2025  Interim  Reciprocal  Procurement  and  Buy 
Canadian policies630 prioritise Canadian-produced steel, aluminium, and softwood lumber in 
federally funded projects, using public procurement as a driver of clean and resilient industrial 
capacity.631 

In India, the government strengthened its Domestically Manufactured Iron & Steel Products 
Policy in 2025 to introduce mandatory local-content requirements in public procurement above 
a  set  value  threshold632.  This  complements  the  broader  Public  Procurement  Order  and  the 
Production  Linked  Incentive  (PLI)  Scheme  aimed  at  encouraging  localisation,  technology 
development, and decarbonisation in strategic sectors such as automotive and steel.633 

In May 2024, Indonesia adopted Presidential Regulation No. 46 of 2025 mandating that all 
government entities and state-owned enterprises prioritise domestic products with at least 25% 
local content in procurement and infrastructure projects. The measure seeks to strengthen the 
country’s  manufacturing  base,  reduce  reliance  on  imports,  and  leverage  public  spending  to 
build industrial resilience, addressing the subproblem of weak alignment of public procurement 
with  strategic  autonomy  and  industrial  competitiveness  objectives  under  the  driver  Public 
demand and procurement.634 

Finally,  China’s  subsidies,  price  and  technical  advantage,  and  overcapacity  in  parts  of  the 
industry  keep  Chinese  vehicles  and  components  cost-competitive  despite  shipping  costs, 
localisation advantages, and trade barriers.635 In September 2025, the Chinese State Council 
released  a  notice  outlining  the  implementation  of  domestic  product  standards  and  related 

627 Ibid. 
628 Ibid. 
629 ITA (2024). Green Demand Policy Playbook. 
630 Government of Canada webpage. Interim Policy on Reciprocal Procurement. 
631 Government of Canada webpage. Buy Canadian Policy. 
632 Government of India, Ministry of Steel webpage. Policy for providing preference to domestically manufactured iron and steel products in 
government procurement (DMI&SP). 
633  Government  of  India,  Ministry  of  Finance  (2018).  Department  of  Expenditures;  Government  of  India,  Ministry  of  Heavy  Industries 
webpage. Product Linked Incentive (PLI) Scheme for Automobile and Auto Components Industry. 
634 Petromindo.com (2025). New regulation requires minimum 25% local input in public projects. 
635 Rhodium Group (2025). China and the Future of Global Supply Chains; Pardi, T. et al. (2025). Made in Europe. Local Content Policy for 
the European Automotive Industry. Actes du Gerpisa, Volume 44. Gif-sur-Yvette: Gerpisa – The International Network of Automobile. 

231 

 
 
 
policies in government procurement. This notice grants a 20% price evaluation preference to 
domestic products over non-domestic ones.636 

Taken  together,  these  examples  show  that  major  trading  partners  are  actively  using  public 
procurement and  localisation policies to  stimulate demand for low-carbon and domestically 
produced industrial goods, ensuring that producers are rewarded for cleaner and more resilient 
production even when consumers or markets are unwilling to pay a premium. 

Sub-problem 2: Supply chain vulnerabilities in strategic sectors 

Driver 3: European industry loss of competitiveness due to fierce global competition 

and value chain dependencies 

Clean tech products, such as batteries, as well as certain automotive key components (e.g. clean 
vehicle’s powertrain or connected and flexibility automated driving systems), play a crucial 
role in  advancing  decarbonisation efforts, significantly mitigating GHG emissions linked to 
industrial processes637 by supporting the widespread adoption of EVs, while also enabling the 
integration of renewable energy sources  into the grid, benefitting from  low electricity price 
periods and lowering peak demand at high price periods.  

Section 2 analyses the EU battery ecosystem’s struggle to ramp up production as it remains 
largely  dependent  on  critical  components  from  these  third  countries,  which  have  already 
vertically integrated their value chains. Although the EU has reached a battery cell installed 
capacity of around 188 GWh in 2024, several planned projects totalling 238 GWh have already 
been  cancelled  or  put  on  hold  with  no  confirmed  timeline  for  resumption.638  Europe’s 
technological capacities in the battery value chain are not emerging fast enough, increasing the 
risks of becoming fully dependent on imports, putting at risk the strategic objectives of a net-
zero-emission emissions, strategic autonomy in the energy sector and a competitive automotive 
sector.  

EU  ambitions  to  rebuild  its  domestic  PV  manufacturing  capacity  are  undermined  by  the 
Chinese oversupply and continuously falling prices, exacerbated by higher energy, labour and 
capital costs, smaller factory scales, and limited supply chain integration in the EU.  

Comparing  the  cost  structure,  a  fully  EU-made  PV  module  component  production  from 
Polysilicon  to  is  estimated  at  around  30.8€c/Watt  peak.  The  costs  can  be  reduced  by  25% 
throughout  all  component  manufacturing  stages  if  the  production  is  at  scale  (i.e.  Gigawatt-
scale), reaching a level of 25.5€c/Watt peak and showing that producing at Giga-watt scale in 
Europe is key to reduce the production costs. At the same time, the production costs for fully 
Chinese PV modules are estimated to be at 15.9 €c/Watt peak. This cost difference is driven 
by higher expenses in equipment (+40%), building and facilities (+110%), labour (+280%), 
and materials (+50%). However, the profit margins of the largest Chinese solar manufacturers 
have sharply declined, as firms aggressively compete on price to defend their market share. 
The  EU’s  reliance  on  China  for  supply  of  solar  components  leaves  the  EU  vulnerable  to 
disruption and price shocks. The profit margins of the largest Chinese solar manufacturers have 
sharply  declined,  as  firms  aggressively  compete  on  price  to  defend  their  market  share.  The 

636 State Council General Office, China (2025). Notice of the General Office of the State Council on the Implementation of Domestic Product 
Standards. https://www.gov.cn/zhengce/content/202509/content_7042999.html 
637 Batteries can play a significant role by allowing a constant and reliable clean power supply. Additionally, it can support the electrification 
of industrial logistics and transport.  
638 Similarly, for key battery components such as cathode active materials (CAM) and anode active materials (AAM), a total of 513 GWh and 
110  GWh  of  planned  capacity  have  been  cancelled,  compared  to  an  estimated  current  installed  capacity  of  just  88  GWh  and  6  GWh 
respectively. Source: European Battery Alliance. 

232 

 
 
 
 
 
EU’s reliance on China for supply of solar components leaves the EU vulnerable to disruption 
and price shocks.  

Overall, when examining the levelized cost of production (LCOP) for some selected energy 
intensive materials  and clean technologies across countries and regions (below Figure 31 ), 
China  has  the  lowest  production  costs  for  all  clean  energy  technologies  and  most  materials 
considered.  Regional  cost  differences  are  generally  more  pronounced  for  materials  than  for 
clean  energy  technologies,  with  the  LCOP  being  among  the  lowest  in  China  for  steel  and 
aluminium. Regional variations in the LCOPs, excluding any explicit financial support, result 
mainly  from  differences  in  operational  costs,  notably  energy  and  labour,  which  generally 
constitute the largest share of the total costs.639 

Figure 31: Levelized cost of production for selected clean energy technologies and materials by county/region, 
2023 (IEA, Energy Technology Perspectives2024) 

Figure  32  on  “Demand  for  EU  made  PV  components  stimulated  by  NZIA  and  IAA  vs 
manufacturing capacity, 2030” below shows how much demand is likely to be created by the 
NZIA Access to Markets provisions vs. the proposed IAA provisions in relation to the project 
pipeline  for  2030.  The  introduction  of  EU  content  criteria  through  IAA  would  mean  that  a 
stronger market signal would be sent which would facilitate the EU project pipeline to realise 
and project promoters to reach FID. EU should be able to develop sufficient capacity for all 
components according to the current state of the project pipeline, apart from solar glass. Here 
however, the introduction of such criteria would send a strong market signal for new projects 
to develop.  

Figure 32: Demand for EU made PV stimulated by NZIA and IAA vs. manufacturing capacity, 2030 

639 IEA (2024). Energy Technology Perspectives 2024, p.75. 

233 

 
 
 
 
 
 
 
 
The NZIA is expected to contribute to the expansion of manufacturing capacity in Europe, with 
the  aim  of  reaching  at  least  40%  of  the  annual  deployment  needs  for  net-zero  technologies 
through manufacturing capacity in the Union by 2030. However, there is a risk that for certain 
steps of the battery and PV value chains, the current NZIA provisions are insufficient to fully 
address the scale of the challenges described in Section 2.2.1. and meet the strategic objective 
of building a resilient and competitive domestic value chain. This is because, for certain stages 
of  PV  and  battery  manufacturing,  the  NZIA  resilience  criterion,  which  emphasizes 
diversification,  may  not  lead  to  a  significant  increase  in  domestic  production.  Instead,  it  is 
expected  that  imports  from  Asian  countries  such  as  Vietnam,  Malaysia,  Thailand  and 
Cambodia  –  whose  PV  projects  pipeline  is  largely  owned  and  controlled  by  Chinese 
manufacturers and whose price competitiveness is second only to China. - will rise to offset 
the reduction in solar PV imports to the EU from mainland China.640 While Vietnam, Thailand, 
and Malaysia together account for close to 8% of global manufacturing capacity, most of these 
facilities  are  Chinese-owned  and  were  developed  to  serve  the  US  market  in  response  to  its 
restrictions on imports from China. This indicates that apparent diversification in production 
locations does little to reduce strategic dependence on China and thus, dependence on Chinese 
manufacturers is likely to persist. 

Regarding  batteries,  Asian  manufacturers  are  already  shifting  their  strategies  to  capture 
overseas markets, where profit margins are higher. By 2030, China is projected to maintain a 
dominant position across the entire battery value chain, accounting for 75% of global installed 
battery  cell  capacity.  Additionally,  Chinese  companies  are  actively  diversifying  their 
midstream battery production by expanding into low-risk, cost-competitive countries such as 
Morocco, South Korea, and Indonesia. These three countries are projected to surpass the EU 
in production capacity. Additionally, due to the nature of batteries as components integrated 
into downstream final goods, primarily EVs and BESS, they often fall outside the scope or are 
only marginally impacted by certain resilience measures under the NZIA, such as in auctions 
or public procurement. 

Furthermore, the NZIA framework does not cover the entire spectrum of vehicle components 
that  can  contribute  to  the  decarbonisation  of  road  transport  not  only  in  terms  of  reduced 
vehicle’s emissions, but also in terms of optimised traffic flows.641 Besides, the NZIA does not 
sufficiently address the economic pressure faced by domestic automotive component suppliers 
and the economic security issues attached to it.  

Driver 4: A fragmented EU approach towards foreign investments 

The existing toolbox on inbound foreign investments includes instruments concerning security 
aspects FDI (e.g. FDI Screening Regulation) and other instruments that target specific risks 
(e.g. the Foreign Subsidies Regulation to combat foreign subsidies that distort the EU internal 
market, and the Merger Control Regulation ensuring effective competition for concentrations), 
as well as other policy instruments that may be used to affect foreign investments (e.g. EU 
Funding instruments and the State Aid framework).  

However, the FDI Screening Regulation (EU) 2019/452 does not address the impact of foreign 
investment on the Single Market or allow the EU to impose conditions that maximise economic 
and  strategic  value—such  as  commitments  to  local  R&I,  technology  transfer,  or  skills 
development. Over 60% of foreign-led industrial decarbonisation projects in the EU lack such 
commitments. Despite the EU’s attractiveness for FDI, it lacks tools to ensure that investments 

640 IEA (2024). Energy Technology Perspectives 2024. 
641 NZIA does not cover, for instance, brakes with drag reduction technologies, or thermal management systems), nor either essential connected 
and automated driving (CAD) systems. 

234 

 
 
 
 
support industrial, technological, and environmental goals, particularly given the growing role 
of state-controlled investors. 

By  2024,  24  Member  States  had  national  screening  mechanisms  (up  from  14  in  2021),  yet 
screening  practices  remain  uneven,  with  only  9%  of  cases  subject  to  conditions  and  1% 
blocked. This leaves vulnerabilities across the Single Market. The gap is most acute in strategic 
sectors  such  as  batteries  and  EIIs,  where  the  EU  risks  losing  technological  and  intellectual 
property control and becoming a “low-value assembly location” in clean tech value chains. 

The FDI inflow to Europe, compared to the total global FDI inflow, has seen a decrease in the 
past decade from 23% of all global FDI in 2011 ($408 billion) to only 10% ($168 billion) in 
2021.The year 2022 even witnessed negative FDI inflow to Europe, which means that foreign 
investors  divested  more  FDI  from  Europe  than  they  invested  in  Europe  during  this  period. 
When comparing FDI inflows in 2022 against 2017, it becomes apparent that Europe is the 
only  region  with  major  decreases  in  FDI  inflow  (-31pp),  while  China  (+4pp)  and  the  US 
(+10pp) were able to increase FDI inflow.642 

Figure 33: Overview Europe’s FDI inflow from 2017-2022, ERT Competitiveness of European Energy-Intensive 
Industries (2024) 

While  foreign  investment  is  entering  the  Single  Market,  the  conditions  attached  to  these 
investments differ significantly among Member States. The absence of a harmonised approach 
and standardised conditions allows large investments to “forum-shop” and exploit the specific 
circumstances of individual Member States, ultimately undermining the interests of the Single 
Market. This results in a “race to the bottom,” where public funds are used to attract investors 
without  ensuring  adequate  returns  in  the  form  of  local  economic  development,  skills,  or 
innovation. Other limitations arise under the Foreign Subsidy Regulation, as the Commission 
can only  set  conditions  to  the investment  to  remedy the actual or potential  distortion in  the 
internal  market  stemming  from  a  foreign  subsidy  and  ensure  a  level  playing  field.  Other 
purposes  and  policy  objectives  can  only  be  taken  into  account  in  the  balancing  test,  as  the 
Commission  can  assess  whether  the  negative  distortive  effects  of  the  foreign  subsidy  are 
outweighed by positive effects in relation to policy objective of the Union. Section 2 explained 
that  a  large  part  of  the  leverage  resulting  from  the  EU’s  attractiveness  as  an  investment 
destination cannot be effectively exercised by individual Member States acting on their own. 
As  evidence  to  this  challenge,  Table  643  can  be  seen  as  an  illustration  of  the  more  benefits 
secured to investment in the US vs. the EU battery value chains. 

642 ERT (2024). Competitiveness of European Energy-Intensive Industries. 
643 T&E (2025). Assembly plant or battery powerhouse? Analysis of foreign battery investments in EU. 

235 

 
 
 
 
 
Table 25: T&E Briefing (February 2025) – Assembly plant or battery powerhouse? Analysis 
of foreign battery investments in EU. 

VW +  
Gotion Partnership 
VW holds 26.47% in 
Gotion 
“Limited” 

Ownership 
structure 
IP  or  technology 
transfer 
provisions 
Local 
chain 
Local workforce  Local R&I centre 

supply 

❌ 

Equal  decision-
making 
on 
battery side 

❌ 

Gotion +  
Inobat JV 
Gotion: 80% 
Inobat: 20% 
Some 

Stellantis +  
CATL JV 
Stellantis: 50% 
CATL: 50% 
❌ 

Tesla +  
CATL (US) 
100% owned by Tesla 
(including equipment) 
✓ 

❌ 

❌ 

Some, including 
local schools 
❌ 

No known 
provisions 
❌ 

❌ 

✓ 

✓ 

Sub-problem 3: Industrial decarbonisation technologies are not deployed at scale  

Decarbonisation  requires  large  upfront  capital  costs  (CAPEX)  due  to  the  need  for  new 
equipment,  new  or  upgraded  technologies,  including  electrification  and  flexible  demand, 
hybrid  technologies  and  process  changes.  The  operational  costs  (OPEX)  of  producing  with 
greener technologies for early adopters are uncertain when technologies are not mature and are 
higher than those of traditional technologies644, as long as electricity and low-carbon fuel prices 
remain high in Europe and higher in comparison with fossil fuels prices.  

For instance, estimates suggest that green steel production would be approximately 17% more 
expensive  in  Europe  compared  to  the  US  and  Saudi  Arabia  in  2030.645  The  competitive 
disadvantage  that  certain  EIIs,  like  steel,  suffer  from  would  therefore  remain  even  after 
decarbonising.  

Furthermore,  these  technologies  have  very  long  payback  times  and  are  often  unavailable  at 
large  scale646.  The  unfavourable  price  ratio  between  electricity  and  fossil  fuels  and  the 
uncertainty about future evolution of the price ratio, risk delaying investments in electrification 
and energy efficiency technologies including for industrial processes. See more in Annex 7 

Driver  5:  Lengthy,  fragmented  and  uncertain  permitting  procedures  for  decarbonisation 

projects  

Section  2  assesses  the  issues  revolving  around  the  permit-granting  process  for  industrial 
manufacturing activities.  

The evidence on permitting brought forward by the public consultation can be completed by a 
survey by BusinessEurope, which found that 83% of companies claimed that the complexity 
and  duration  of  permitting  is  an  obstacle  to  investing  in  Europe,  and  53%  consider  it  as  a 
“serious  problem”.  Companies  have  reported  waiting  periods  of  over  a  year  for  permit 

644  ‘First-mover  disadvantage’,  which  generally  refers  to  higher  costs  and  uncertainties  for  early  adopters,  due  e.g.  to  technology  and 
performance  risks,  higher  technology  costs,  smaller  production  scale,  less  developed  infrastructure  (electricity  supply,  hydrogen,  CCS), 
evolving methodologies (including definitions of low-carbon production and low-carbon products), and unrewarded knowledge externalities 
(learning)  that  benefit  later  adopters.  Source:  Draghi,  M.  (2024).  The  future  of  European  competitiveness:  In‑depth  analysis  and 
recommendations (Part B), p. 99. 
645 ERT (2024). Competitiveness of European Energy-Intensive Industries. 
646 For additional background on decarbonisation technologies, see Annex 7. 

236 

 
 
 
 
 
 
 
approvals, with some delays extending up to six years, for more complex projects like carbon 
capture and storage (CCS).647 

Permitting  procedures  for  new  or  modernised  manufacturing  facilities  were  highlighted  as 
time-consuming, costly and requiring the interaction with numerous public administrations648  

More  concretely,  permitting  is  one  of  the  challenges  for  projects  deploying  innovative 
solutions, and on occasion identified as a risk of not meeting financial closure within the four-
year  deadline.  Often,  the  permitting  process  is  highlighted  as  very  demanding  and  time-
consuming. It is an issue for many projects in the Fund portfolio, with 68% identifying it among 
the top challenges and more than 10% of the projects identifying it as their primary challenge. 
About  half  of  the  projects  report  a  concrete  risk  of  being  delayed  because  of  difficulties 
obtaining the required permits or challenging permitting procedures.649 

Addressing  these  procedural  inefficiencies  will  be  essential  to  meet  Europe’s  climate  and 
industrial goals. 

Best practices  

•  EasyPermits  is  a  web-based  digital  permitting  solution  built  on  AWS  cloud.  It 
digitalizes the administrative permitting process end-to-end and functions as a digital 
one-stop-shop by automating workflows, improving and standardizing  the  collection 
and management of information and fosters collaboration and transparency across the 
permitting agents, the project developers and the local community. At its core, it is a 
workflow  management  solution  as  it  can  be  customised  to  match  the  regulatory 
requirements of the permitting process. It is also a document management solution with 
the possibility to  define templates for  specific documents  and the possibility to  have 
version  control  making  it  easier  to  navigate  through  various  versions  of  specific 
documents. Estimates include a 50% reduction in manual effort in repeated low-value 
tasks such as finding the latest version of the document without having to go through 
emails and paper-based folders, keeping all documents for one application organised 
in one place, sharing review comments on specific parts of specific documents. Ability 
to process as many as 3x as many applications concurrently. 
In  the  context  of  the  Single  Market  Enforcement  Taskforce  (SMET),  Member  States 
reported on the progress of introducing five permitting solutions (One stop shops, clear 
deadlines  and  information,  tacit  approvals  and  digital  permitting)  to  improve 
permitting for renewable energy power generation (wind, solar). The report confirmed 
that the permit-granting process had become more efficient in most EU countries, to 
various  extents  depending  on  the  Member  State.  Similar  positive  consequences  are 
shown  through  the  implementation  of  the  Critical  Raw  Materials  Act  permitting 
provisions  (Single  Points  of  Contact,  timelines).  Similarly,  a  good  example  of 
digitalised and unified permitting comes from the Environment and Planning Portal in 
the  Netherlands,  where  promoters  can  see  if  and  what  environment  and  planning 
permits are required. Additionally, the Environment and Planning Portal can be used 
to apply online for an environment and planning permit or submit a notification. All 
these  elements  will  be  better  highlighted  to  more  clearly  justify  the  choice  of  the 
preferred policy measures in the impact assessment. 

• 

647 Business Europe (2024). Licence to transform – SWOT analysis of industrial permitting in Europe. 
648 European Commission (2025). Communication from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of the Regions - The 2025 Annual Single Market and Competitiveness Report. SWD(2025) 11 final 
and SWD(2025) 12 final. 
649  European  Commission  (2025).  2025  Annual  Knowledge  Sharing  Report  of  the  Innovation  Fund  –  Derisking  Innovative  Low-Carbon 
Technologies. 

237 

 
 
 
Driver 6: Difficulty to access resources (e.g. inputs and funding) 

Clean industrial technologies face substantial economic barriers to deployment, primarily due 
to long payback periods driven by high capital expenditure (CAPEX) and elevated operating 
costs (OPEX). These cost burdens are compounded by market uncertainties making large-scale 
industrial decarbonisation investments high-risk. 

The  scale  of  investment  required  is  significant.  Decarbonising  Europe’s  energy-intensive 
industries  (EIIs)  will  require  approximately  EUR  1.7  trillion  by  2050.  In  the  cement  sector 
alone, achieving net-zero targets calls for EUR 94.4 billion in investment, which equates to 
EUR 4.70 for every EUR 1 in annual revenue. More broadly, the decarbonisation of the EU’s 
four  largest  EIIs  (chemicals,  basic  metals,  non-metallic  minerals,  and  pulp  &  paper)  is 
estimated to cost EUR 500 billion over the next 15 years.650 

Despite this urgent need, the financial environment in Europe remains less favourable than in 
competing regions.  

Section 2 demonstrates the limited amount of public funding available to decarbonisation under 
directly  managed  EU  funds  notably,  expect  for  the  Innovation  Fund.  Beyond  the  direct 
decarbonisation prioritisation of the latter, funding for decarbonisation is also available in the 
RRF, InvestEU and cohesion policy funds. Under the Recovery and Resilience Facility (RRF), 
EUR 97 billion are targeted to the decarbonisation of industry and clean tech (incl. EUR 23 
billion for R&I initiatives) and more than EUR 2 billion for developing green skills and jobs 
for the clean economy. The Just Transition Fund (JTF) focuses EUR 19 billion of investment 
specifically for the transformation of the regions with coal and carbon intensive industry most 
affected  by  the  green  transition.  Nevertheless,  the  funding  from  these  sources  is  linked  to 
different criteria and eligibility requirements.  

Additionally,  EU  support  for  clean  technologies  is  often  fragmented  and  limited  in  scope, 
particularly  lacking  in  OPEX  assistance,  which  is  crucial  for  addressing  ongoing  cost 
differentials between green and conventional technologies. In comparison, the U.S. Inflation 
Reduction Act (IRA) has already catalysed $129 billion in private clean tech investments since 
2023, offering significantly more generous and streamlined support. EU clean tech financing 
is  estimated to  be five to  ten times smaller than the U.S.  effort. Global  competition  further 
intensifies these challenges. Chinese clean tech manufacturers benefit from state subsidies up 
to four times greater than those available in the EU, enabling them to offer battery cells 20–
35%  cheaper  and  solar  panels  35–65%  cheaper  than  their  European  counterparts...Some 
Member States have begun piloting Carbon Contracts for Difference (CCfDs), which provide 
15-year subsidies to cover the cost gap for green technologies achieving at least 90% GHG 
reduction.  However,  these  initiatives  remain  limited  in  scale  and  administratively  complex, 
slowing their rollout.651 

Results from the Open Public Consultation conducted a part of this initiative show that only 
a few public funds are considered relevant in supporting industrial decarbonisation projects, 
particularly the Innovation Fund (226, 72%) and Member States funding (238, 76%), with only 
a minority considering other funding instruments such as Horizon Europe, InvestEU, RRF or 
Cohesion Funds relevant.  

Furthermore, access to funding remains a key concern, with 78% (245 out of 314) citing lack 
transition 
of  public 

to  difficulty  accessing 

funding  and  62% 

(196)  pointing 

650 ERT (2024). Competitiveness of European Energy-Intensive Industries. 
651 Deloitte (2024). Carbon Contracts for Difference (CCfDs) as an instrument of choice. 

238 

 
 
 
 
 
finance. Additionally,  77%  (243)  identified  financial  risk  as  a  significant  factor  when 
considering investment in industrial decarbonisation. 

239 

 
 
 
 
Annex 11: Extended information on the impacts (Section 6) 

POLICY OPTION 1 

Economic impacts 

See Section 6 of the Impact Assessment: In addition: 
Impact on companies 

LEAD_EII  1  -  Given  the  significant  number  of  vehicle  registrations  supported  by  public 
support schemes, introducing low-carbon steel and aluminium requirements as an eligibility 
condition  would  likely  create  a  significant  market  signal  -  providing  a  strong  incentive  to 
vehicle manufacturers to source these materials at scale. 

Figure 34 shows estimates of how much the adoption of 100% green steel affects end-product 
pricing across various industries. 652 The targets proposed for low-carbon steel in automotive 
and construction have followed an adjustment for a lower share of low- carbon steel. For more 
information on the calculations for the cost calculation based on the target, see Annex 4 Section 
2.  

Figure 34: Product cost increase after switching to 100% green steel. 

Respondents from the targeted stakeholder consultation have provided estimates of the impacts of low-carbon 
requirements on cost of products: (i) less than a 1% increase in the price of an average car, while enabling CO₂ 
savings of up to 1.5 tonnes per vehicle; (ii) cost increases of 0.1–0.2% for buildings, 0.6–1.2% for industrial sites, 
and 1.6–5.5% for steel-intensive sectors such as household appliances and offshore wind infrastructure; (ii) in the 
defence sector, the reported cost impact for military vehicles ranged from 0.15% to 0.5%. 

LEAD_BAT 1 - Based on the Public Consultation, all 4 respondents from the batteries and 
storage sector strongly support measures to stimulate demand for clean industrial products and 
consider public procurement a significant driver for low-carbon products. 

Similarly,  all  4  respondents  agree  that  the  introduction  of  an  EU  voluntary  label  on  carbon 
intensity  will  support  the  creation  of  lead  markets  for  sustainable  industrial  products. 
RECHARGE, the Advanced rechargeable & Lithium Batteries Association - in its submitted 
position paper - also supports the introduction of Made in EU requirements as a “a powerful 

652 JRC (2024). Draft preparatory study on iron and steel – ecodesign measures under the ESPR. 

240 

 
 
 
 
 
 
 
 
 
 
industrial policy instrument” that can “incentivise production, sourcing, and value creation of 
key  technologies  within  the  EU  (...)  while  reducing  dependence  on  imported  battery 
components and raw materials, helping mitigate supply chain  vulnerabilities”. Furthermore, 
the respondents  to  the consultation  are in  favour of public procurement  as  a driver for lead 
markets,  with  RECHARGE  supporting  “non-price  award  criteria  in  public  tenders,  such  as 
sustainability, resilience, and supply chain security”. 

LEAD_SOL  1  would  boost  EU  local  production,  strengthen  energy  security,  and  decrease 
reliance on imports, especially from China. Consequently, it would help preserve existing EU 
production capacity and strengthen the business case for new manufacturing projects. Chinese 
players are also considering establishing themselves in Europe under the condition that there 
is a favourable policy framework in place to support EU manufacturing and ensure offtake for 
EU made products, for example through Made in EU requirements. This could further support 
bringing advanced capabilities and scaled production systems to Europe. Moreover, it would 
send a strong investment signal, helping to secure financing and accelerate additional capacity 
development.  Made  in  EU  requirements  can  stimulate  the  growth  of  domestic  PV 
manufacturing  by  linking  market  deployment  incentives  to  domestic  production.  E.g.  in 
Türkiye, a local content premium introduced in 2013 and subsequent tenders for full value-
chain capacity led to a rapid expansion of domestic manufacturing, reaching over 9 GW by 
2023.  Similarly,  South  Africa  uses  local  content  requirements  (LCRs)  in  government 
procurement  to  promote  domestic  production  of  PV  components,  helping  to  structure  an 
emerging local PV industry and integrate it into regional and global value chains. In both cases, 
LCRs serve as  a strategic tool to scale up manufacturing capacity while fostering industrial 
development.653 

INV 1 - As regards indirect costs of deterring certain FDI transactions by applying restrictive 
criteria  for  investments,  the  Commission  Evaluation  on  FDI  Screening  Regulation654 
considered  these  to  be  negligible,  despite  the  theoretical  possibility  of  conditions  deterring 
certain  investments.  Accordingly,  it  can  be  assumed  that  the  indirect  impacts  for  voluntary 
conditions established under PO1 would also be negligible. 

Conditionalities  which  might  restrict  supply  or  demand  under  value  added  production  or 
securing critical value chains, could entail raising the price of certain products. 

LEAD_VC  1  (In  the  case  of  LEAD_VC,  the  section  on  companies  refer  to  the  vehicle 
suppliers) 

EU suppliers in the “Internal market reaction” scenario655 

 in EUR billion 

Passenger cars 

  sales increase 

LCVs 

  sales increase 

HDVs 

  sales increase 

2027 

2030 

5.9 

6.0 

0.5 

0.8 

0.192 

0.131 

653 PV Magazine (2024). PV Manufacturing in Europe: Ensuring Resilience through Industrial Policy. 
654 COMMISSION STAFF WORKING DOCUMENT EVALUATION of Regulation (EU) 2019/452 of the European Parliament and of the 
Council  of  19  March  2019  establishing  a  framework  for  the  screening  of  foreign  direct  investments  into  the  Union  Accompanying  the 
document Proposal for a Regulation of the European Parliament and of the Council on the screening of foreign investments in the Union and 
repealing Regulation (EU) 2019/452 of the European Parliament and of the Council - Publications Office of the EU. 
655 The JRC analysis presented an alternative scenario. For comparative analysis, see: Annex 14  

241 

 
 
  
  
  
  
  
  
  
  
  
 
 
 
 
 
As a result of the measure, the introduction of Made in EU requirement for vehicle components 
of  EVs  sold  in  the  EU  will  lead  to  higher  sales  of  EU  components  suppliers  in  all  vehicle 
segments. 

In quantitative terms, this means that:  

•  For passenger cars: the sales of EU suppliers to EV manufacturers are expected to rise 
by EUR 5.9 billion in 2027 and by EUR 6 billion in 2030. This sales increase for EU 
suppliers come from the sales increase of EU made vehicles and the increase of EU 
content in those vehicles. 

•  For the LCV segment: the measure would lead to an increase in the sales of EU suppliers 
to EV car manufacturers would be expected to rise by EUR 0.5 billion in 2027 and by 
EUR 0.8 billion in 2030.  

•  For HDVs: the sales of EU suppliers to EV HDV vehicle manufacturers are expected 

to rise by EUR 192.4 million in 2027 and by EUR 131.1 million in 2030. 

PERM  1  –  Periodical  technical  assistance  from  the  Commission  to  national  authorities  is 
expected to support the permit-granting process for first of a kind and innovative projects, with 
training on emerging  decarbonisation technologies  helping to  clarify procedures and reduce 
uncertainty in permitting. In this context, the Innovation Centre on Industrial Transformation 
and Emissions (INCITE) will identify and evaluate innovative techniques, giving scientific and 
independent information.656 

Moreover,  support  for  further  measures  to  improve  the  permitting  process  was  high  in  the 
Targeted  Consultation,  with  67%  (42)  advocating  for  the  digitalisation  of  the  permitting 
process. 

AREA 1 - Regarding the definition of criteria for projects in relevant areas, the measures would 
recommend  Member  States  to  make  use  of  the  criteria  defined  in  the  IAA  to  decide  which 
decarbonisation  projects  to  support  under  their  national  support  programmes.  In  the  Open 
Public  Consultation,  76%  of  respondents  regarded  Member  States  funds  as  relevant  for 
industrial decarbonisation projects, making it the most relevant category of public funding. 

As it is only a recommendation to Member States, it can be assumed that they use the priority 
criteria lightly. Where they apply them, it is likely to lead to an increase in support for projects 
with strategic importance for the entire EU (which are sometimes underrepresented in current 
support schemes by Member States). However, due to the non-binding nature, the effect on 
companies is likely to be limited and potentially fragmented across the Single Market. 

Impact on downstream sectors 

LEAD_EII 1- The automotive sector is expected to play a significant role in driving demand 
for low-carbon steel. However, public procurement is not a huge market for the automotive 
sector, compared to buildings and infrastructure. Of the approximately 15 million passenger 
cars registered in the EU in 2018, only 0.5% to 3.5% were procured for public sector fleets.657 
Therefore,  measures  targeting  the  public  sector  alone  are  likely  to  have  limited  impact  on 
driving low-carbon demand for steel. The situation is different regarding public incentives and 
support schemes in the Member States. Corporate vehicles registrations make up around 60% 

656  The  revised  Industrial  Emissions  Directive  contributes  to  de-risk  investments  as  it  sets  up  a  new  Innovation  Centre  on  Industrial 
Transformation and Emissions (INCITE). The most effective and viable innovative techniques could be incorporated in the Sevilla process 
for the development of environmental norms. 
657 European Commission (2022). Revision of the EU green public procurement criteria for road transport. 

242 

 
 
 
 
 
of  car  registrations  in  the  EU.658  Regarding  EVs,  there  is  public  support  to  buy  EVs  for 
corporate purchases in all Member States and for consumers in 19 Member States.659 Regarding 
internal  combustion  engine  vehicles,  a  recent  study  estimated  that  subsidies  for  corporate 
vehicles  alone  amounted  to  EUR  42  billion  in  2023.660  Introducing  low-carbon  steel 
requirements  in  a non-discriminatory State-aid  compliant manner  as  an  eligibility  condition 
would  send  a  strong  market  signal,  incentivising  vehicle  manufacturers  to  source  these 
materials  at  scale.  There  is,  however,  a  risk  of  material  substitution,  where  procurement 
requirements  or  support  schemes  could  shift  demand  from  one  material  to  another.  In  the 
automotive sector, low-carbon requirements applied to steel may indirectly increase demand 
for aluminium, and vice versa. While low-carbon requirements for aluminium are not being 
considered as part of this assessment, due to the lack of an existing low-carbon definition, they 
could be defined at a later stage, or as part of other ongoing policy initiatives. 

LEAD_VC  1  (in  the  case  of  LEAD_VC,  downstream  sector  refers  to  automotive 
manufacturers) 

EU EV manufacturers in the “Internal market reaction” scenario 

 in EUR billion 

Passenger cars 

  cost increase  

  sales increase 

LCVs 

  cost increase 

  sales increase 

HDVs 

  cost increase 

  sales increase 

2027 

2030 

0.0 

12.3 

0.0 

1.2 

0.0 

0.41 

1.6 

7.7 

0.2 

1.3 

0.13 

-0.0002 

Given the current 70% made in EU content, the measure would not lead to any further costs 
for EU EV manufacturers in 2027 in either of the vehicle segments, while it would lead to an 
overall increase in sales for these companies. 

In quantitative terms, this means that:  

•  For passenger cars: as an effect of the measure, EU EV manufacturers will benefit from 
an  increase  in  sales  of  EUR  12.3  billion  in  2027.  To  comply  with  the  75%  target 
proposed for 2030, EU EV manufacturers are expected face a relative cost increase of 
EUR 1.6 billion, however this would be offset by the EUR 7.7 billion increase in sales.  
•  For LCVs: EU manufacturers of EV light commercial vehicles would benefit from an 
increase in sales of EUR 1.2 billion in 2027. In 2030, EU manufacturers would face a 
relative cost increase of EUR 0.2 billion, however this is expected to be offset by the 
EUR 1.3 billion increase in sales.  

•  For HDVs: EU EV HDV manufacturers would benefit from an increase in sales of EUR 
414.9 million in 2027. However, in 2030, EU EV HDV manufacturers are projected to 
face a cost increase of EUR 131.4 million. This cost increase may be accompanied by 
a  minor  sales  reduction  (-0.2  million  euro).  The  relative  price  advantage  of  EU  EV 

658 European Commission (2025). Communication from the Commission to the European Parliament, the Council, the European Economic 
and Social Committee and the Committee of Regions, Decarbonise Corporate Fleets, COM(2025)96 final, 5 March 2025. 
659ACEA (2025). Electric cars: Tax benefits and incentives (2025). 
660 ERM (for T&E) (2024). Company car fossil fuel subsidies in Europe.  

243 

 
 
  
  
 
 
 
  
  
 
 
  
  
 
 
 
  
  
 
 
HDVs (as opposed to non-EU EV HDVs) determined by the measure in the initial years 
after its introduction, leads to increased sales in the period between 2027 and 2029, and 
these  increased  sales  are  larger  than  (and  could  potentially  offset)  the  assumed 
increased cost.661  

Global Added Value:  

Value Added in EUR billion 

Internal market reaction scenario 
   automotive 
   intermediate 
   Global value added - Only first round of Value Chain 
   Global value added - Estimated all Value Chain 

2027 
3.0 
2.5 
5.5 
10.5 

2030 
1.9 
2.6 
4.5 
9.7 

Furthermore, the measure is projected to lead to the generation of EUR 5.5 billion Global Value 
Added in 2027 and EUR 4.5 billion in 2030 when assessing the impact, taking into account 
only the first tier of the value chain.662 When considering the entire value chain, the value added 
generated notably from the necessary intermediate inputs for EVs can reach EUR 10.5 billion 
in 2027 and EUR 9.7 billion in 2030.  

Impact on consumers and citizens 

INV 1 would have limited effects on citizens and consumers as it would target investments 
above  a  certain  threshold.  Nevertheless,  condition  (b)  could  affect  citizens  by  securing 
investments  with  a value-added production,  including  R&I, engineering activities, domestic 
processing and manufacturing. This, together with potential staffing requirements prescribed 
under the same condition, could lead to the creation of quality jobs in the EU. Despite PO1's 
potential to harmonise staffing requirements on the single market, its voluntary nature poses 
implementation challenges and may lead to further fragmentation and a race to the bottom in 
staffing conditions across Member States concerning FDI.  

LEAD_VC 1  

EU consumers in the “Internal market reaction” scenario 

Passenger cars 

   EVs price changes (%) 

   EVs sold change (thousand) 

LCVs 

   EVs price changes (%) 

   EVs sold change (thousand) 

HDVs 

   EVs price changes (%) 

   EVs sold change (thousand) 

2027 

2030 

0.4% 

-71.0 

-0.7% 

14.3 

0.5% 

1.0 

1.2% 

-76.3 

0.4% 

2.1 

1.2% 

-1.7 

661 It is important to note that for the calculation, it is assumed that the allocated subsidy is kept constant over time, but as projected sales keep 
increasing, over time, the subsidy may become insufficient to compensate for the cost increase. 
662 Global Value Added (GVA) refers to the total economic value generated by the projected production of EU EV manufacturers and the EU 
suppliers, as well as further intermediate inputs necessary to increase the Made in EU requirement of the measure and increase production of 
EU EVs 

244 

 
 
 
 
 
  
  
 
 
 
  
  
  
 
 
  
  
  
 
 
  
  
 
 
 
  
  
 
As  EV  passenger  cars  produced  by  EU  manufacturers  will  benefit  from  a  relative  price 
advantage following the reduction of price stemming from the reallocated subsidies, this will 
lead consumers to prefer EV passenger cars produced by EU manufacturers (which increase 
their sales) over non-EU EV passenger cars (which reduces their sales).  

In quantitative terms, this means:  

•  For passenger cars: As average prices663 of EVs passenger cars are going to increase 
by 0.4% in 2027 and by 1.2% in 2030, this is expected to lead to a reduction in EV 
passenger cars purchases by 71 000 vehicles in 2027, and 76 300 vehicles in 2030 
if no mitigation measures put in place. The described phenomenon will have two 
different effects:  

•  As EV passenger cars become more expensive for non-EU manufacturers, and ICE 
vehicles,  being  not  affected  by  the  measure,  could  benefit  from  a  relative  price 
advantage (prior application of the bonus schemes or subsidies) over EVs, and this 
could result in partial product substitution of EVs with ICEs.664  

•  For LCVs, the impact is similar: prices of EVs light commercial vehicles are going 
to decrease by 0.7% in 2027 and then slightly increase by 0.4% in 2030, and this is 
expected to lead to an increase in EV light commercial vehicles purchases by 14 
300 vehicles in 2027, and 2 100 vehicles in 2030.  

•  For HDVs: Prices of electric HDVs are going to slightly increase by 0.5% in 2027 
and then increase by 1.2% in 2030. These prices variations are going to have a minor 
effect on EV HDV purchases in 2027, when sales will still slightly increase by 1 
000 units, and lead to a decrease in purchases of EV HDVs by 1 700 units in 2030.  

The impact crucially depends on the bonus schemes and the assumption that only half of the 
total  subsidies  received  by  non-EU  EV  makers  will  be  reallocated.  Hence,  a  counterfactual 
analysis has been performed: 

If all subsidies were reallocated from non-EU to EU EV manufacturers, the average price of 
EVs for consumers would decrease: 

•  For passenger cars: by 0.8% in 2027, and the increase in 2030 would be more muted at 

0.4%. 

•  For LCVs: by 2.4% in 2027 and 0.8% by 2030, with a corresponding larger increase in 

the number of EV LCVs sold. 

•  For HDVs: by 0.3% in 2027 and only increase by 0.8% by 2030, with a corresponding 
larger increase of EV HDVs sold in 2027 and a smaller reduction of sales in 2030. 

Impact on competitiveness  

LEAD_EII  1  -  While  low-carbon  requirements  in  public  procurement  and  support 
programmes  may help  lower the green premium overtime  - thereby improving  the business 
case for industrial decarbonisation investments - for certain products where imports penetration 
is already high, this demand is likely to be partially met by non-EU producers whom, by having 
large overcapacities, will be able to  redirect  their low-carbon production to the EU market, 
limiting the benefits for EU industry.  

663 As a result of the reallocation of subsidies, EU manufacturers reduce the price of their vehicles, but they do not compensate for the high 
price increase that the non-EU manufacturers would face as a result – further incentivising compliance to this measure.  
664 This effect could disappear if ICE vehicles were also made subject to the EU content requirement under LEAD_VC 1 

245 

 
 
 
 
 
 
 
Impact on competition 

LEAD_EII 1 - Regarding the creation of lead markets, low-carbon requirements would apply 
uniformly  to  all  participants  in  public  procurement  procedures  and  beneficiaries  of  public 
support schemes, ensuring that manufacturers of energy-intensive materials and downstream 
producers who bid in public procurement and will have to comply with the target compete on 
equal terms. In some sectors, however, there might be competition between companies that are 
subject to public procurement rules and companies that are not. An example are offshore wind 
auctions, where publicly owned utilities subject to Directive 2014/25/EU compete with private 
developers and investors. In such cases, measure LEAD_EII 1 that targets public procurement, 
but not private procurement, would distort competition between those types of bidders. 

LEAD_SOL 1 - As regards solar PV, applying Made in EU requirements in public tenders 
would  provide  a  strategic  incentive  for  investment  in  EU-based  solar  manufacturing  while 
offering greater supply chain security and alignment with broader industrial policy objectives. 
Without  such  measures,  the  lack  of  willingness  among  consumers  and  offtakers  to  pay  a 
premium for EU-made panels will continue to hinder market uptake, leaving the EU exposed 
to strategic vulnerabilities from over-reliance on a single supplier country. 

A  fully  EU-made  module  amounts  to  manufacturing  costs  at  around  25.5  ct/Wp,  whilst  a 
minimum sustainable PV module price for modules from China is estimated at 15.9 ct/Wp and 
from  Southeast  Asia  at  16.5  ct/Wp665.  However,  PV  modules  from  China  and  SE  Asia  are 
currently sold  at half the minimum  sustainable price, at 8-10  €ct/Wp, below manufacturing 
costs. China is able to maintain a cost advantage due to lower labour, land, and energy costs, 
state subsidies, and rapid efficiency gains.666 Nevertheless, a 30-40% reduction in EU module 
costs by 2030 is considered achievable under favourable conditions, potentially bringing prices 
down to 15–19 ct/Wp, depending on the number of components manufactured in Europe. With 
the right support and enabling conditions, much of the cost gap with China could be closed. 
Key drivers include gigawatt-scale production, vertical integration, automation, access to low-
cost energy, and strong policy backing through instruments such as the NZIA, Innovation Fund, 
CCfDs, and resilience auctions. If realised, these measures could make EU solar manufacturing 
cost-competitive by 2030, strengthening the sector’s resilience and strategic autonomy.  

However, since LCOE calculations exclude taxes, grid tariffs, and retail mark-ups, the final 
cost increase for the consumer would likely be much smaller, estimated at around 1–2%.  

Impact on Member States 

Financial implications 

LEAD_EII 1 - In financial terms, Member States spent an estimated 13.4 billion EUR on steel 
and cement for public construction projects in 2019.667 This represented about 3% of the total 
investment in construction procurement for that year. In the broader context of public spending, 
the  cost  of  steel  and  cement  accounted  for  less  than  1%  of  total  public  procurement 
expenditures across the EU in 2019 - indicating that, on average, the cost of basic materials 
remains  relatively  limited  in  public  budgets.  Steel  accounts  for  only  about  1.8%  of  total 
construction procurement spending, indicating a modest cost share. As for cement, Member 

665 SolarPower Europe (2025). New study reveals path to reshore solar manufacturing in Europe. 
666Fraunhofer ISI (2025). Photovoltaics Report; SolarPower webpage. Rebuilding European solar manufacturing; ESMC (2020). ESMC Policy 
Proposals for the EU Strategy for Solar Energy.  
667  VUB Brussels  School of  Governance  (2024).  Public procurement of  steel  and cement  for  construction,  assessing the potential of lead 
markets for green steel and cement in the EU. 

246 

 
 
 
 
 
States  spent  around  EUR  5  billion  on  procurement  of  cement  as  part  of  the  overall  public 
procurement of construction in 2019. This represents only 1.1% of total construction cost.668  

LEAD_VC 1 – The effects of the policy on total sales and consumer welfare depend on the 
level of market competition on both the supplier and final producer sides. Regarding the EU 
suppliers for EV car manufacturers, if their market is highly competitive, companies will likely 
reduce their prices to capitalise on the increased demand and sales. However, the policy could 
reduce foreign competition for EU suppliers of EVs, as the made in EU- content requirements 
for EVs come into effect.  

Under  LEAD_VC  1,  as  observed  above,  public  support  schemes  currently  used  in  the 
automotive  industry  will  mitigate  the  adverse  effects  of  LEAD_VC. (See  assumptions  in 
Annex  4  Section  2)  To  reach  this  positive  objective,  as  laid  down  in  the  assumptions,  it  is 
important that Member States re-distribute (at least, partially) the public subsidies that are no 
longer accessible to non-compliant, meaning that the Member States would keep the volumes 
allocated to finance the strengthening of the EU industrial value chain. Since the assumptions 
are  based  on  already  existing  schemes,  the  cost  of  public  subsidies  used  for  this  Impact 
Assessment will not represent an increase in cost for Member States. Indeed, estimates indicate 
a saving budget for Member States of EUR 2.7 billion per year from 2027 to 2030, with a net 
present value of EUR 10.3 billion.669  

Administrative burden 

LEAD_SOL  1  -  To  reduce  administrative  burden  for  Member  States  and  ensure  policy 
coherence, relevant NZIA requirements, particularly those relating to non-price criteria such 
as sustainability and resilience in wind energy auctions and public procurement, would need to 
be gradually superseded by corresponding IAA provisions. This transition should account for 
the  time  required  to  adapt  administrative  procedures,  in  addition  to  the  adaptation  time 
necessary for industry. 

Social impacts 

See Section 6 of the Impact Assessment.  

LEAD_EII 1 - The targeted stakeholder consultation found that, across industrial sectors, 
75% of respondents acknowledge long term social benefits. However, 27% warn of short-term 
economic  risks,  i.e.  rising  production  costs  and  investment  pressures,  leading  to  potential 
inflation, job losses or delocalisation.  

•  Cement: all 7 respondents expect positive social impacts, such as job creation. 
•  Steel:  13  out  of  14  responses  expect  positive  impact  such  as  gains  in  skilled 

employment. 

LEAD_BAT 1 / LEAD_SOL 1 send a market signal that stabilises demand giving employers 
and vocational training providers the certainty they need to develop targeted curricula, launch 
apprenticeships and upskilling programmes, and build advanced manufacturing competencies 
across the region. 

INV 1 - Conditions requiring that investments generate value-added activities, such as R&I, 
engineering,  domestic  processing,  and  manufacturing,  could  significantly  increase  EU  skill 

668 Ibid. 
669 Ibid. 

247 

 
 
 
 
capacities  and  create  high-quality  jobs.  Staffing  requirements  and  social  protection 
conditionalities would ensure that FDIs actively recruit, hire, and train local workers, enabling 
local communities to benefit directly from employment opportunities. However, making these 
conditionalities  voluntary  under  PO1  could  reduce  their  potential  impact  as  it  still  allows 
competition among Member States based on weaker employment conditions, despite offering 
some harmonisation compared to the baseline. 

Environmental impacts 

See Section 6 of the Impact Assessment. 

LEAD_BAT 1 - In Producing cells locally in Europe, compared to China, can reduce carbon 
emissions by 20–40% on average. Additionally, onshoring cathode production could deliver a 
further  emissions  reduction  of  up  to  20%.670  Increasing  EU-based  production  is  therefore 
expected to deliver additional indirect climate and environmental benefits. 

Figure 35 Climate benefits of onshoring the battery value chain 

LEAD_VC 1 – In the Internal market reaction scenario, global greenhouse gas emissions from 
vehicle manufacturing decrease by 0.5 Mtonnes CO2e in 2027 and by 0.6 Mtonnes in 2030 due 
to shifts in production; they further decline by 0.1 Mtonnes due to reductions in international 
transport associated with EU imports. In 2027, substitution from EVs to ICEs could lead to 
higher emissions from the fuel use of new passenger cars (1 Mt) this effect almost disappears 
in 2030. 

POLICY OPTION 2 

Economic impacts 

See Section 6 of the Impact Assessment. 

670 Ibid. 

248 

 
 
 
 
Impact on downstream sectors 

INV 2 would have limited short-term impact on the downstream sectors, however in a medium 
to long-term perspective, the faster and more meaningful transfer of know-how, technologies 
and  skills  would  result  in  stronger  EU  based  value  chains.  This  in  turn  would  provide 
downstream sectors with additional supply options and overall higher resilience of the whole 
value  chains  improving  their  competitiveness.  This  is  particularly  true  for  condition  (c) 
ensuring that foreign investors contribute to technological advancement in the EU by making 
their proprietary technologies or IP available to local firms, institutions, or joint ventures. On 
the  other  hand,  it  would  lead  to  administrative  costs  for  businesses.  By  analogy,  the 
Commission  Evaluation  on  FDI  Screening  Regulation671  analysing  the  functioning  and 
effectiveness of thereof identified limited costs for businesses. 
Impact on SMEs 

INV  2  -  The  analysis  under  PO1  remains  valid,  with  no  substantial  costs  for  SMEs  as 
investments not achieving a minimum threshold will be excluded from FDI conditionalities, 
though the indirect benefits listed in PO1 are likely to be more substantial and more predictable 
if mandatory measures are applied. Moreover, establishing a mandatory threshold for Member 
States  to  apply  would  likely  to  promote  a  more  homogenous  Internal  Market  investment 
framework vis-á-vis SME effects. 
Impact on Member States 

PERM 2 - Additionally, a One Stop shop as a sole point of contact for decarbonised energy 
intensive industrial projects does not necessarily introduce an additional burden, since similar 
structures  already  exist  in  the  context  of  the  implementation  of  other  legislation  for  some 
energy-intensive industrial projects (namely, the NZIA). The most efficient decision would be 
to use the same designated authority, which would not entail any additional costs and reduce 
uncertainty over who the designated authority is. 
Impact on international trade 

INV 2 – In addition to what is described in Section 6 of the Impact Assessment, mandatory 
conditionalities would have to consider the international trade obligations undertaken by the 
Union, such as the WTO framework and FTAs. Therefore, any investment conditionality would 
have to  be targeted, proportionate and justified  on legitimate grounds to comply with  these 
obligations, while FTA countries would be exempted from the scope of the conditionalities.  
The  impact  of  conditionalities  on  FDI  inflow  can  be  inferred  from  an  example  of  Chinese 
investments  in  the  EU.  The  analysis  shows  that,  although  there  was  an  initial  reliance  on 
imports from China during the early stages of Chinese greenfield investments, sourcing from 
European suppliers has gradually increased over time. For example, at the BYD electric bus 
factory, local supplier sourcing grew from an initial 20% in 2017 (the year the factory opened) 
to  between  30%  and  50%  by  2019.  BYD  has  also  signed  supply  agreements  with  other 
European  firms,  indicating  a  willingness  to  integrate  local  supply  chains  into  its  strategy. 
Similarly,  staffing  has  gradually  shifted  towards  more  local  employment.  Therefore,  FDI 
conditionalities around Made in EU requirements and staff requirements may be effective or 

671 European Commission (2024). COMMISSION STAFF WORKING DOCUMENT EVALUATION of Regulation (EU) 2019/452 of the 
European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the 
Union Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the screening of foreign 
investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council - Publications Office of the 
EU. 

249 

 
 
 
acceptable  for  foreign  investors,  such  as  Chinese  firms,  as  they  are  already  being  partially 
implemented.672 

Social impacts 

See Section 6 of the Impact Assessment.  

Environmental impacts 

See Section 6 of the Impact Assessment. In addition:  

Positive  impacts  on  CO2  emissions  for  steel  and  aluminium  are  most  notably  seen  in 
residential buildings, primarily due to differing design and construction approaches between 
residential  and  non-residential  sectors.  In  non-residential  construction,  a  steel-concrete 
skeleton  structure  is  commonly  employed  for  load-bearing  functions,  featuring  reinforced 
concrete  ceilings  and  steel  beams,  complemented  by  prefabricated  façade  elements  that 
enhance energy efficiency but do not contribute structurally. In contrast, residential buildings 
tend to use bricks or wood for load-bearing walls, which also enhance energy efficiency, with 
less frequent use of façade elements. As a result, transitioning to more low-carbon and bio-
based solutions is likely to be more appealing and feasible in the residential sector, where these 
materials and methods are already more familiar. 

INV 2 - The environmental effects of mandatory FDI conditions are expected to be similar 
to  those  described  under  PO1,  but  likely  greater  due  to  the  mandatory  implementation  by 
Member States. 

POLICY OPTION 3 

Economic impacts 

See Section 6 of the Impact Assessment. In addition:  

Impact on companies 

LEAD_VC 2 (EU vehicle component suppliers)  

Table 27 Benefits for EU suppliers from LEAD_VC 2 measures 

EU suppliers in the “Internal market reaction” scenario 

 In EUR billion 

Passenger cars 

   sales increase  

LCVs 

   sales increase  

HDVs 

   sales increase  

2027 

2030 

7.0 

7.1 

0.6 

1.0 

0. 23 

0.16 

672 MERICS (2025). Chinese investment rebounds despite growing frictions – Chinese FDI in Europe: 2024 Update; Bruegel (2025). A smart 
European strategy for electric vehicle investment from China. 

250 

 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
Similarly to LEAD_VC 1, the introduction of made in EU requirement for vehicle components 
of  EVs  sold  in  the  EU  will  lead  to  higher  sales  of  EU  components  suppliers  in  the  EV 
manufacturers across all vehicle segments.  

The sales of EU suppliers to EV car manufacturers are expected to rise: 

•  For passenger cars: by EUR 7 billion in 2027 and by EUR 7.1 billion in 2030.  
•  For LCVs: by EUR 0.6 billion in 2027 and by EUR 1 billion in 2030.  
•  For HDVs: by EUR 229.8 million in 2027 and by EUR 156.6 million in 2030.  

The sales increase for EU suppliers come from the sales increase of EU made vehicles and the 
increase of EU content in those vehicles. 

PERM 3  -  Support  for further measures to  improve the permitting  process  was high  in  the 
Targeted  Consultation,  with  72%  (45  respondents)  of  industry  respondents  in  support  of 
facilitating  access  to  grid  and  relevant  energy  infrastructure.  The  creation  of  these  clusters 
would  promote  and  facilitate  integrated  energy  planning  for  industrial  areas  as  well  as  the 
promotion  of  partnerships  and  exchanges  of  best  practices  supporting  the  transition  of 
industrial areas. 

Meanwhile, 64%, 40 respondents to the targeted consultation, expressed the need for targeted 
environmental derogations for industrial clusters and projects. 

AREA 2 - As part of the Open Public Consultation, 63% (197 out of 314 respondents) think 
that  support  the  introduction  of  a  category  of  priority  industrial  decarbonisation  projects, 
supported  by  targeted  benefits,  will  have  a  positive  effect  on  their  decarbonisation  efforts. 
Priority projects are supported by SMEs (61%) and EII sectors such as steel (66%), cement 
(56%), chemicals (79%) and fertilisers (100%). The preferred criteria for identifying priority 
projects were: contribution to industrial decarbonisation (32%, 100 out of 314 respondents), 
contribution to strategic value chains (64, 20%), contribution to industrial electrification (9, 
16%), economic importance (43, 14%) and expected increased demand for outputs (28, 9%). 
Benefits most preferred by the participants were better access to funding (65%  - 117 out of 
175),  faster  permit-granting  procedures  (113,  67%)  and  priority  status  for  administrative 
procedures (113, 65%). Amongst SMEs, 96% (90 out of 94) referred to better access to funding. 

Impact on downstream sectors 

LEAD_VC 2  

EU EV manufacturers in the “Internal market reaction” scenario 

 In EUR billion 

Passenger cars 

   cost increase 

   sales increase 

LCVs 

   cost increase 

   sales increase 

HDVs 

   cost increase 

   sales increase 

2027 

2030 

0.0 

14.7 

0.0 

1.5 

0.0 

0.49 

2.0 

9.2 

0.2 

1.5 

0.16 

-0.0003 

251 

 
 
 
 
  
  
 
 
 
  
  
 
 
  
  
 
 
 
  
  
 
Similarly to LEAD_VC 1, given the current 70% EU content, the measure would not lead to 
any further costs for EU EV manufacturers in 2027 across all segments. 

As an effect of the measure, EU EV manufacturers would benefit from an increase in sales of:  

•  For passenger cars: EUR 14.7 billion in 2027. 
•  For LCVs: EUR 1.5 billion in 2027.  
•  For HDVs: EUR 495.7 million in 2027.  

However, to comply with the 75% target proposed for 2030, EU EV manufacturers will face a 
relative cost increase of: 

•  For passenger cars: In order to comply with the 75% target proposed for 2030, EU EV 
manufacturers will face a relative cost increase of 2 billion, projected to be offset by 
the EUR 9.2 billion increase in sales. 

•  For LCVs: 0.2 billion, expected to be offset by the EUR 1.5 billion increase in sales. 
•  For HDVs: 157 million euro. This cost increase is going to be accompanied by a minor 

sales reduction (-0.3 million euro).  

The relative price advantage of EU EV HDVs (as opposed to non-EU EV HDVs) determined 
by the measure in the initial years after its introduction, leads to increased sales in the period 
between 2027 and 2029, and these increased sales are larger than (and could potentially offset) 
the assumed increased cost.  

Global Added Value:  

Value Added in EUR billion 

Internal market reaction 
   automotive 
   intermediate 
   Global value added - Only first round of Value Chain 
   Global value added - Estimated all Value Chain 

2027 
3.6 
3.0 
6.6 
12.6 

2030 
2.2 
3.1 
5.4 
11.5 

The measure is projected to lead to the generation of EUR 6.6 billion Global Value Added in 
2027 and EUR 5.4 billion in 2030 when assessing the impact, taking into account only the first 
tier of the value chain. Similarly to the first policy option, in LEAD_VC 2 the positive impacts 
can also be perceived throughout the value chain for intermediate inputs, reaching this time 
higher benefits, EUR 12.6 billion in 2027, and EUR 11.5 billion in 2030 in value added.  

Impact on consumers and citizens 

LEAD_VC 2  

EU consumers in the “Internal market reaction” scenario 

Passenger cars 

   EVs price changes (%) 

   EVs sold change (thousand) 

LCVs 

   EVs price changes (%) 

   EVs sold change (thousand) 

252 

2027 

2030 

0.5% 

-84.8 

-0.8% 

17.1 

1.4% 

-91.2 

0.5% 

2.6 

 
 
 
 
 
  
  
 
 
 
  
  
  
 
 
  
  
  
 
 
  
  
HDVs 

   EVs price changes (%) 

   EVs sold change (thousand) 

0.6% 

1.2 

1.4% 

-2.0 

Similarly  to  LEAD_VC  1,  described  phenomenon  will  also  have  the  above  indicated  two 
different effects. 
As average prices673 of EVs passenger cars are going to: 

•  For passenger cars: increase by 0.5% in 2027 and by 1.4% in 2030. This is expected to 
lead to a reduction in EV passenger cars purchases by 84 800 vehicles in 2027, and 91 
200 vehicles in 2030 if no mitigation measures put in place.  

•  For LCVs: decrease by 0.8% in 2027 and then slightly increase by 0.5% in 2030, and 
this is expected to lead to an increase in EV light commercial vehicles purchases by 17 
100 vehicles in 2027, and 2 600 vehicles in 2030. 

•  For HDVs: slightly increase by 0.6% in 2027 and then increase by 1.4% in 2030. These 
prices variations are going to have a minor effect on EV HDV purchases in 2027, when 
sales will still slightly increase by 1 200 units, and lead to a decrease in purchases of 
EV HDVs by 2 000 units in 2030. 

If all subsidies were reallocated from non-EU to EU EV manufacturers, the average price of 
EVs for consumers would decrease: 

•  For passenger cars: by 0.8% in 2027, and the increase in 2030 is more muted at 0.4%. 
•  For LCVs: by 2.4% in 2027 and 0.8% by 2030, with a corresponding larger increase in 

the number of EV LCVs sold. 

•  For HDVs: by 0.3% in 2027 and only increase 0.8% by 2030, with a corresponding 
larger increase of EV HDVs sold in 2027 and a smaller reduction of sales in 2030. 

LCV and HDV sections of the cost on consumers may be considered impact on the downstream 
sector, as most of LCVs and HDVs are purchased by downstream economic operators. 

Social impacts 

See Section 6 of the Impact Assessment.  

Environmental impacts 

See Section 6 of the Impact Assessment.  

LEAD_VC 2 

Global greenhouse gas emissions from vehicle manufacturing decrease by 0.9 Mtonnes CO2e 
in 2027 and by 0.7 Mtonnes in 2030 due to shifts in production; they further decline by 0.1 - 
0.2 Mtonnes due to reductions in international transport associated with EU imports.  

In sum, the environmental effects remain very similar across LEAD_VC 1 and LEAD_VC 2. 

673 As a result of the reallocation of subsidies, EU manufacturers reduce the price of their vehicles, but they do not compensate for the high 
price increase that the non-EU manufacturers would face as a result – further incentivising compliance to this measure.  

253 

 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
Annex 12: Development of a low-carbon product label for steel 

1.  Description of the design elements  

Overview of policy options and policy scenarios used for the analysis 

The  following  table  provides  an  overview  of  the  policy  options  for  the low-carbon  product 
GHG label for steel presented under LAB 2. This annex further describes the policy options in 
this section and retained for assessment in Section 2.  

Table : Overview of policy options assessed 

Baseline 

Determination GHG-
intensity 

Classification 

Development of low-carbon product GHG label for steel 
Existence  of  private  GHG  product  labels,  published  ETS-installation  emissions,  planned 
work under the ESPR  
CALC1 System boundaries and calculation methodologies in line with free allocation rules 
under ETS/CBAM methodology  
CALC2  System  boundaries  in  line  with  ETS  scope,  limited  nr.  of  key  indirect  GHG 
emissions included 
CALC3 Comprehensive life cycle system boundaries, including upstream and downstream 
GHG emissions, via the Product Environmental Footprint (PEF) method 
CLAS1 No classification / carbon footprint information only 
CLAS2 One classification system without (CLAS2.a) or with (CLAS2.b) a sliding scale 
CLAS3 Differentiated classification systems per production route (CLAS3.a) or according 
to the shape of the final product (flat/long) (CLAS3.b) 

Ensuring data quality DATA1 Label for EU steel producers only, based on self-declared emissions and production 

volumes 
DATA2 Label for EU steel producers only, with third-party verification and certification  
DATA3  Label  for  EU  steel  producers  and  importers,  with  third-party  verification  and 
certification  

Determination of the greenhouse gas intensity 

The determination of the greenhouse gas intensity of a product – here defined as t CO2eq/ tonne 
of steel - is the crucial element of any carbon footprint label, as it provides the quantitative base 
upon which the label is built on. For a low-carbon steel product label, this entails the following 
interrelated elements:  

1.  Product in scope of the label: Steel is sold in a wide variety of products forms, ranging 
from flat products like hot rolled coil to long products such as bars and wire rods. The 
chemical composition of these products may vary, by factors such as the inclusion of 
alloys and the electromagnetic properties of the steel. Theoretically, a steel label can 
therefore be applied to different products, leading to different label units (e.g. to of coil, 
flat steel). After feedback from stakeholders and comparison with existing initiatives, 
hot rolled carbon steel was chosen for the current proposal of label. This will ensure 
most of the steel production is covered. High alloy steel would not be covered for now 
as their carbon footprint are significantly impacted by the emissions linked to alloys 
which are mostly imported, and little data is available. 

2.  Covered  processes  and  associated  emissions  under  the  label:  Emissions  from  steel 
production occur at various stages in the value chain.  In addition to the direct GHG 
emissions  from  production  facilities,  there  are  also  indirect  emissions  linked  to,  for 
example,  electricity  consumption  and  to  mining  of  raw  material  inputs,  transport  of 

254 

 
 
 
 
 
 
 
 
 
intermediates and pre-processing (e.g. coal, alloys, scraps) and the end-of-life phase of 
steel products. 

3.  Calculation methodology: The actual calculation of the covered GHG emissions and 
production  volumes  needed  to  determine  the  GHG  intensities  can  be  done  using 
different  methodologies.  The  Monitoring,  Reporting  and  Verification  (MRV)  rules 
developed  in  the  context  of  free  allocation  under  the  EU  ETS  provide  a  detailed 
description of the emission calculation method. CBAM emission calculation methods 
for extra-EU countries are also based on the methodology of the ETS. 

4.  Relevant  baseline  period:  the  relevant  temporal  unit  for  the  determination  of  the 
greenhouse gas intensity need to be chosen, outlining the period used to measure and 
assess the greenhouse gas intensity.  

Different  approaches  can be used to determine the greenhouse gas intensity. The following 
options are assessed: 

Option 1: ETS/CBAM aligned scope and calculation methods, baseline based on annual data 
(CALC1) 

The covered processes and associated emissions are aligned with the product benchmarks being 
developed under the EU ETS free allocation rules for the steel sector. They would typically 
cover the direct emissions associated with the reported emissions under the EU ETS, notably 
related  to  the  relevant  steel  product  benchmarks  (coke,  agglomerated  iron  ore,  hot  metal 
production, EAF carbon steel and EAF high alloy steel.) as included in the table in annex 12.a 
to this document. The total GHG emissions per steel product are determined as the sum of the 
relevant production steps covered by product benchmarks. Since the CBAM methodology is 
also largely based on these product benchmarks, this method also ensures alignment with the 
CBAM rules. 

Option 2: ETS/CBAM scope and methods, complemented by a limited number of additional 
key indirect emissions. Limited flexibility for baseline determination would also be included. 
(CALC2) 

As in Option 1, the covered processes and associated emissions are aligned with the EU ETS 
product benchmarks, while the relevant product units also refer to crude steel production. In 
addition  to  CALC1,  key  indirect  emissions  from  electricity,  hydrogen,  and  heat  use  are 
included within the scope, as well as the emissions from the hot rolling. The baseline period 
can be disaggregated from annual installation-level data to more granular segments, provided 
a clear intertemporal and/or physical unit demarcation can be demonstrated. 

Option 3: LCA scope (CALC3) 

Both the scope of the processes and emissions covered, and the calculation methods are based 
on  the  Product  Environmental  Footprint  (PEF)  method,  extending  the  scope  to  all  relevant 
upstream (e.g., extraction of input materials, pre-processing of scraps, manufacturing of alloys 
and other ancillary chemicals) and downstream (linked to e.g. recycling activities) emissions.  

Classification 

In addition to the robust calculation of GHG intensities per tonne of product, a possible second 
element of a label is the development and use of classification classes based on these GHG 
intensities. In its most basic form, this classification could distinguish between steel that meets 
the requirements for low-carbon steel and all other steel not meeting the requirement. In a more 
advanced  form,  several  performance  classes  could  be  established,  linking  specific  GHG-
intensity thresholds to corresponding performance categories.  

255 

 
 
 
 
These classification classes could be the same for all steel products covered by the label, or 
different labelling “families” could be developed per product group. In the context of a low-
carbon product label for steel, the following elements can be distinguished. 

1.  Possible  distinction  by  production  route:  Steel  can  be  made  starting  from  iron  ore 
(primary route) or by utilising recycled steel scrap (secondary route). Both production 
routes  lead  to  crude  steel,  but  the  production  processes  and  emission  intensities  are 
fundamentally  different.  Based  on  the  production  routes  and  making  use  of  the 
definitions  under  the  product  benchmarks  in  the  EU  ETS,  it  would  be  possible  to 
distinguish between to two broad label categories:  

•  Primary  steelmaking,  covering  both  the  Blast  Furnace/  Basic  Oxygen 
Furnace (BF/BOF) route and the Direct Reduced Iron (DRI) route in line 
with  the  relevant  benchmarks  for  primary  production  under  the  ETS 
(coke, agglomerated iron ore, hot metal production) 

•  Secondary steelmaking in an Electric Arc Furnace (EAF), in line with 
the  relevant  EAF  benchmarks  under  the  ETS  (EAF  carbon  steel/EAF 
high-alloy steel) 

On the other hand, it would also be possible to combine all steel production within one 
label category, irrespective of the production pathway.  As structurally, primary steel 
production is much more carbon intensive than secondary steel production, within this 
approach one would have to decide whether an adjustment for the scrap share would be 
needed,  for  example  via  a  sliding  scale,  where  a  performance  class  become  more 
stringent as the share of scrap increases. Especially if no GHG emissions are allocated 
to the use of scrap in the determination of the GHG-intensity, a well calibrated sliding 
scale for the determination of the performance classes could capture the gradual impact 
of using more or less scrap, reflecting the different starting point of the two production 
routes. Furthermore, the primary and secondary production routes will eventually start 
to overlap when primary steelmaking decarbonises, given that the decarbonisation of 
the  primary  steelmaking  route  will  likely  include  the  use  of  DRIs,  which  typically 
produce sponge iron which needs further treatment in an EAF to produce crude steel. 

2.  Possible  distinction  by  the  quality  of  the  end-product:  the  performance  and  quality 
characteristics  of  steel  vary  according  to  its  chemical  composition.  Adding  alloy 
elements can improve the quality of steel, leading to a differentiation between carbon 
steel,  high  alloy  steel  and  stainless  steel.  As  these  high-alloy  steel  grades,  typically 
produced in an EAF, have a higher emission intensity, a quality-based differentiation 
within  the  label  could  be  considered.  The  EAF  product  benchmarks  under  the  ETS 
account for this difference, given the distinction between EAF carbon steel and EAF 
high alloy steel. 

3.  Possible  distinction  by  the  two  main  products  categories:  Flat  products  and  long 

products have different applications, while also the production processes differ.  

Different approaches can be used for a classification. The following options are assessed: 

Option 1: No classification (CLAS1) 
In this option, the steel label would be limited to one single metric, expressing the tonnes of 
GHG  emissions  per  tonne  of  steel.  There  would  be  no  linked  predefined  performance 

256 

 
 
 
 
 
 
 
 
 
categories linked to this metric, providing flexibility to other policy instruments, such as the 
ESPR, to develop such classes or thresholds to qualify as low-carbon steel. 

Option 2.a: One classification system without a sliding scale (CLAS2.a)  

In this option, one classification system would be developed for the labelling of steel, defining 
specific GHG-intensity thresholds. All steel up to the production step covered by the system 
boundaries would be subject to the same thresholds and classification system, irrespective of 
its production route or quality. 

Option 2.b: One classification system with a sliding scale (CLAS2.b)  

In this option, one  classification system  would be developed for the labelling  of steel  as in 
CLAS2.a, but the more scrap is used, the more stringent (i.e. less t CO2eq/ tonne of steel) the 
thresholds become. As such, this classification could account for the inherent GHG impact of 
scrap,  and  for  the  difference  between  producing  primary  steel  and  steel  via  scrap-based 
technologies. 

Option 3.a: Differentiated classification systems per production route/steel quality (CLAS3.a)  
In this option, differentiated classification systems are developed for primary and secondary 
steel production. It is then further differentiated by steel quality, with the main metric being 
the content of alloy within the steel. Therefore, four distinct low-carbon steel classifications 
are developed, i.e. primary-low alloy, primary-high alloy, secondary-low alloy, secondary-high 
alloy. 

Option 3.b: Differentiated classification systems per production type (CLAS3.b) 

Instead  of  distinguishing  based  on  the  production  route,  this  option  provides  a  different 
classification system according to the final shape of the steel products, categorizing them as 
flat  or  long  steel  products.  Flat  products  include  slabs,  hot  rolled  coil  and  plates  and  are 
predominantly used in automotive, pipes and tubes and constructions. Long products such as 
bars  and  wire  rods  are  typically  used  in  the  construction,  mechanical  engineering  and 
automotive industries.674 

Ensuring data quality 

A  third  aspect  of  a  labelling  system  is  securing  the  credibility,  reliability,  consistency  and 
accuracy of the underlying reported data and resulting GHG-intensities and/or resulting label 
classifications. To prevent greenwashing and ensure the consistent and comparable application 
of the methodology an appropriate level of control should be applied, involving different actors. 
The applicant itself may report the required data and calculate the resulting GHG-intensities 
through self-declaration. A certification body may perform checks on the submitted data, e.g. 
to  avoid  procedural  inconsistencies.  External-third  party  verification  of  the  application  by 
accredit verifiers may be required, assessing the correct use of the methodology and reported 
data. This element of the label is also linked to the eligibility to apply for the label: for steel for 
which  all  production  steps  are  performed  within  the  EU,  detailed  GHG  emissions  for 
production  within  specific  installation  boundaries  and  corresponding  production  data  are 
available and reported in the framework of the free allocation rules under the EU ETS. For 

674 JRC (2020). Production costs from iron and steel industry in the EU and third countries. 

257 

 
 
 
 
  
 
  
 
 
 
 
 
steel imported on the EU market, and for production steps taking place outside EU, the current 
information  availability  is  lower  but  can  increase  as  CBAM  is  implemented,  potentially 
requiring extra procedures to ensure high data quality. Based on these elements three options 
emerge: 

Option 1: Label for EU steel producers only, based on self-declared emissions and production 
volumes (DATA1) 

In this option, only EU steel manufacturers would be allowed to apply for the label. Applicants 
report their GHG-intensities through self-declaration to a certification body, based as much as 
possible  on  validated  data  under  the  ETS,  that  performs  basic  procedural  checks  on  the 
submissions and subsequently certifies the relevant GHG-intensity and/or label classification. 
As the bulk of the data is based on already verified and validated data under the ETS, no further 
verification is needed. 

Option  2:  Label  for  EU  steel  producers  only,  with  third-party  verification  and  certification 
(DATA2) 

As in option 1, only EU steel manufacturers would be allowed to apply for the label. However, 
an  additional  verification  of  the  submitted  applications  and  data  /  calculations  therein  is 
required, performed by an independent third-party verifier. Based on the verified application, 
the  independent  third-party  certification  body  approves  the  reported  GHG-intensity  and/or 
label classification and issues the label. 

Option  3:  Label  open  for  all  sellers  of  steel  on  the  EU  market,  with  in-debt  third-party 
verification and certification (DATA3) 

In this option, the eligibility is linked to whether the steel is placed on the EU market, regardless 
of the place of production. This would allow imported steel on the EU market to be labelled 
under the system. As in option 2, third party-verification and certification are required.  

As mentioned in Section 6.2.1.8, Member States will also have to ensure that the certification 
system in place is properly enforced and monitored for risks of fraud. 

2. What are the impacts of the policy options? 
This section assesses the impacts of the development of an EU voluntary low-carbon product 
label for steel and goes on to assess the impacts on the design aspects: the determination of the 
greenhouse gas intensity, the classification, the verification and certification, and the eligibility.  

Environmental impacts 

Currently over 150 steel label initiatives have been developed worldwide. While these labels 
offer  significant  opportunities  for  producers  to  demonstrate  the  carbon  intensity  of  their 
products, the landscape is highly fragmented. Differences in methodologies, end products and 
scope of emissions considered make it impossible to compare labels. This lack of consistency 
can  undermine  credibility,  leads  to  greenwashing  concerns  and  ultimately  hinder  the 
development of lead markets for low-carbon steel. Introducing a standardised EU-wide label, 
enshrined in EU law, based on a credible and transparent methodology, can help address these 
issues,  boost  the  demand  for  low-carbon  steel  and  therefore  have  a  positive  impact  on  the 
business case for decarbonisation of steel production in the EU. 

258 

 
 
 
 
 
 
 
 
 
Moreover,  the  introduction  of  an  EU-wide  label  based  on  reliable  and  verified  data  and  a 
uniform  methodology  can  improve  the  understanding  of  what  constitute  steel  with  lower 
environmental impact. 

However, the environmental benefits of an EU voluntary low-carbon product label for steel 
depends on its ability to effectively stimulate demand for low-carbon steel. This requires the 
label to provide buyers of steel with credible information about the GHG emissions associated 
with  the  product.  At  the  same  time,  its  impact  also  depends  on  the  ability  of  low-carbon 
producers to differentiate their products from conventional alternatives and to strengthen the 
business  case  for  low-carbon  production.  The  positive  GHG  impact  of  the  different  design 
elements for the low-carbon product label is therefore assessed by: 

1.  The scope of the GHG emission information provided by the label;  
2.  The label’s ability to ensure comparability across products and producers. 

Determination GHG-intensity 

a.  Scope of the GHG emission information 

In  CALC1,  the  GHG-emission  intensity  is  limited  to  the  GHG  emissions  covered  by  the 
productions  steps  of  the  EU  ETS  system.  For  the  production  of  the  steel  via  the  primary 
production route, this includes the processes and covered emissions by the cokes production, 
the production of agglomerated iron and the emissions in the blast furnace and blast oxygen 
furnaces.  For  the  secondary  production  route,  this  scope  covers  the  direct  emissions  in  the 
electric arc furnaces. Based on calculations made by the JRC, this scope covers for average 
production  processes  74%  of  the  direct  GHG  emissions  of  the  total  LCA  of  primary  steel 
production via the classic BF/BOF route. As for secondary steel production, these direct ETS 
reported  emissions  only  cover  18%  of  the  total  LCA  GHG  emissions,  though  the  LCA 
emissions of this route are typically much lower than the classic BF/BOF route.675  

CALC2 provides in particular for the secondary steel production route a much larger share of 
the  total  LCA  GHG  emissions,  demonstrating  in  particular  the  impact  of  electricity  use. 
Furthermore, CALC2 also covers GHG emissions from hydrogen, a key future energy carrier 
and reduction agent for iron production via the (primary) Direct Reduced Iron route, which is 
expected to be one the major low-carbon technologies for steel production for the future.  

CALC3 provides total GHG emissions of the full product life cycle (LCA basis). Compared to 
the  more  limited  scopes of  CALC1  and  CALC2,  for  the  primary  steel  production  route  the 
majority of the GHG emission relate to  emissions related to coal extraction, and to  a lesser 
extent  to  emission  related  to  oxygen  production  needed  for  the  BOF  technology.  As  for 
secondary steel production, the major source of additional emissions is linked to the extraction 
of alloys, which are usually used in EAF secondary steel production. 

Table :Overview of emissions coverage 
Option676 
Processes  and  emissions 
covered 

Direct 
emissions covered by ETS  

industrial  GHG 

CALC1 

CALC2 

CALC3 

CALC1  scope,  and  indirect 
GHG  from  electricity,  heat 
and H2 use  

Cradle-to-gate  LCA  GHG 
emissions 

675 For this calculation, ETS coverage is limited to the scope of the key ETS product benchmarks for the steel sector, excluding for example 
ETS-covered products such as lime that is only used in small quantities in the steel making process. 
676 According to Eurofer’s European Steel in Figures 2025 report, in 2024, 44.6% of EU-manufactured steel was produced via the Electric Arc 
Furnace route, while 55.4% came from the Blast Oxygen Furnace and other routes. 

259 

 
 
 
 
 
 
 
 
 
 
Coverage  of  total  LCA 
GHG  primary  production 
for  crude  steel  (BF-BOF 
route)677 
Coverage  of  total  LCA 
secondary 
GHG 
production 
crude 
steel678 

for 

74% 
1492 kg CO2eq/ t crude 
steel 

78% 
1567 kg CO2eq/ t crude 
steel 

100% 
2017 kg CO2eq/ t crude 
steel 

18% 
86 kg CO2eq/ t crude steel 

60% 
286 kg CO2eq/ t crude 
steel 

100% 
479 kg CO2eq/ t crude 
steel 

The additional hot rolling step is part of 4 out the 6 main current initiative for steel labelling679. 
This can be considered also as a representative steel product and integrating the bulk of GHG 
emissions, which is why the product in scope for the label was chosen as hot-rolled steel. 

b.  Comparability of the GHG-intensities  

CALC1 aligns its scope with the combined scope of the steel product benchmarks under the 
EU  ETS.  Therefore,  the  base  unit  for  the  GHG  intensity  determination  is  crude  steel, 
manufactured  both  via  the  primary  and  the  secondary  route.  The  covered  processes  and 
associated  emissions  to  be  used  for  the  determination  of  the  GHG-intensity  are  well-
documented within the ETS relevant legislation, which ensures comparability across different 
steel  products.  However,  by  excluding  a  key  indirect  emission  source  such  as  the  GHG 
emissions related to electricity consumption, the fairness of the comparison across production 
routes can be questioned and can potentially create an uneven playing field. 

CALC2 builds its methodology on the ETS product benchmarks and CBAM as in CALC1, and 
it adds a limited number of relevant indirect emissions. This approach keeps the high level of 
comparability  and  consistent  system  boundaries  across  products  as  in  CALC1,  while  the 
inclusion of the indirect emissions allows for a more complete assessment of GHG intensities 
across  different  products,  though  this  addition  does  require  a  consistent  methodology  to 
measure electricity related emissions. The emissions not covered, compared to an LCA are in 
majority linked to the extraction of coal, iron ore and alloys where less primary data under the 
control of the steel manufacturer/importer are available. 

CALC3 draws the most complete assessment of the LCA GHG emissions for the steel products 
and enables the most complete comparison in terms of GHG-intensity. However, in contrast to 
CALC1 and CALC2, no direct and verified data from the ETS are used, which may lead to 
lower overall data-quality and accurateness. Any such label will likely need to rely to a much 
larger extent on estimates, assumption and default values, as well on MRV systems that are not 
regulated in a manner as consistent as under the EU ETS. 

Classification 

In  CLAS1,  the  label  information  is  limited  to  indicating  the  GHG-intensity  of  the  product, 
without  attributing it to a specific  performance category. While the GHG-intensity on itself 
provides precise GHG information, the lack of a standardised classification system and a clear 
definition of a low-carbon products, transfers the burden of interpretation to the end-user of the 
product.  This  limits  the  effectiveness  of the label  as  a standalone policy  instrument.  In this 

677 Based on internal Commission calculations. 
678 Based on JRC calculations performed in the framework of ESPR activities. 
679 JRC (2025). Defining low-carbon emissions steel: A comparative analysis of international initiatives and standards. 

260 

 
 
 
 
 
 
 
 
 
 
option,  complementary  policy  instruments  could  be  introduced  to  define  harmonised 
performance categories.  

The uniform approach and broad scope of the label under CLAS 2.a increases its useability and 
usefulness  as a stand-alone policy instrument.  However, given primary  and secondary steel 
production are assessed under the same classification system, it becomes difficult for primary 
steel  producers  to  reach  high  performance  classes,  given  the  actual  difference  in  emission 
intensity between two production routes. As a result, it would reduce the attractiveness of the 
label for primary route steel producers, limiting the uptake and the market information it can 
bring  and  limiting  the  decarbonisation  of  the  primary  production,  which  cannot  be  entirely 
substituted by secondary production. In the latter case it would reduce the information provided 
through the label to end consumers.  

CLAS 2.b addresses this challenge by adjusting the performance class thresholds in line with 
the  amount  of  scrap  used.  As  such,  it  could  serve  as  an  attractive  alternative  classification 
system for both primary and secondary steel producers, and it addresses the complexity of the 
different production routes and the scrap use and addresses the increase interlinkage between 
both routes in the medium term (i.e. new production ways through DRI and EAF). It allows 
primary  producers  to  claim  also  best  of  class  performance.  However,  setting  the  exact 
coefficients  of  the  sliding  scale  performance  classes  could  complicate  the  labelling  system. 
Moreover, following CLAS 2.b the classification is not only solely based on GHG-intensities 
but also recycled content (i.e. scrap use), which may complicate the understanding and thus 
underlying  logic  of  low-carbon  product  labelling  system.  Furthermore,  some  may  claim  it 
rewards the more resource intensive primary production route.  

By having separate classifications systems for primary and secondary steel making, CLAS3.a 
acknowledges the fundamental differences between the production technologies and provides 
both  primary  and  secondary  steel  producers  with  the  opportunity  to  be  categorized  in  high 
performance classes. This system would compare steel products within the different production 
routes. However, CLAS3. A would not compare the two production routes directly, risking that 
the  classification  system  could  be  considered  overly  disaggregated.  This  could  also  risk 
undermining the incentive to use recycled scrap in steelmaking, and it could be considered to 
be not futureproof, as the sharp distinction between primary and secondary production routes 
are  blurring  with  the  introduction  of  DRI-based  steelmaking  that  combines  both  the  use  of 
primary resources, i.e. iron ore, and the need for EAF steelmaking.  

The same reasoning largely goes for CLAS 3.b, which proposes different classification systems 
according  to  the  final  shape  of  the  steel  product.  As  flat  products  are  predominantly 
manufactured through the primary production route while long products are typically produced 
via the secondary production pathway, the resulting classification classes would in practice be 
rather similar to a system based on production routes- in particular in the near future. However, 
the inherent technologically neutral character of this option appears to be more future proof 
than option 3.a. Several existing steel labelling initiatives have introduced 4 to 5 classes and 
sliding scales (see table below) 

261 

 
 
 
 
 
 
Table : Cross comparison matrix of initiatives and standards that set thresholds for the definition of “low-carbon steel”680681 

681 JRC (2025). Defining low-carbon emissions steel: A comparative analysis of international initiatives and standards.  

262 

 
 
 
 
 
Ensuring data quality 

In DATA1, the strong reliance on the responsibility and correct conduct of the applicant may 
undermine the credibility of the label. While the use of previously verified data under the EU 
ETS  could  provide  a  certain  degree  of  assurance  in  terms  of  data  accuracy,  the  lack  of  an 
additional verification of the GHG intensity at product level poses a risk, in particular if the 
scope of the emissions would be extended beyond the ETS product benchmarks. This option 
might therefore increase fraud and greenwashing risks and might undermine the effectiveness 
of the label. DATA2 addresses these risks and provides more certainty and adds credibility to 
the label calculations and underlying data, due to the extra step of the external verification. It 
therefore increases the usefulness and potential effectiveness of the label. DATA3 enlarges the 
scope  of  the  label  beyond  the  EU  borders,  potentially  also  increasing  its  impact  and 
contributing to aligning the EU label with other labelling worldwide initiatives. For extra-EU 
steel  manufacturers,  the  possible  use  of  already  reported  and  verified  data  is  more  limited, 
requiring a more thorough verification and certification to reduce the risks on fraud. CBAM 
will be a source of relevant information for extra-EU applicants from 2026, therefore it should 
be required to be used if option DATA3 is retained.  

Administrative impacts 

The credibility of any label stands or falls with the quality, robustness and transparency of the 
underlying data, allowing for a harmonised representation of GHG intensities of steel products. 
Reporting, verification,  and label  issuance all involve time and  financial costs, for both  the 
applicants, potential verifiers and public authorities. On the other hand, a well-designed label 
can  also  reduce  administrative  burdens,  for  example  by  providing  transparent  market 
information that lowers the information costs for potential buyers of low-carbon products. 
As the label is conceived as a voluntary instrument, its administrative impact for manufactures 
of steel products as whole is expected to be limited. Only interested applicants will perform the 
necessary steps to acquire a label, based on an internal cost-benefit analysis. Furthermore, as 
the label aims to set a credible standard for labelling initiatives, its existence might even avoid 
the need to invest in other labelling initiatives, or in other ways to publicly disclose the lower 
GHG intensities to potential buyers. 

Determination GHG-intensity 

Since CALC1 mainly builds on ETS/CBAM reported data, its additional administrative burden 
to gather data for producers from an EU installation will be limited. Within the framework of 
the  application  for  free  allowances  under  the  ETS,  EU  steel  producers  already  possess  the 
relevant historical data and are familiar with the specific product benchmark boundaries. For 
EU  steel  producers  that  do  not  carry  out  all  relevant  production  steps  themselves,  e.g.  they 
purchase  coking  coal for  use in  their steel  production facility, the label  calculations  will be 
more complex. In these cases, it would be necessary to demonstrate the GHG intensities of the 
purchased input materials. Also, by using annual average GHG emission intensities, consistent 
with  the  reporting  under  the  ETS  free  allocation  rules,  the  additional  cost  impact  of  data 
gathering/calculation of the labelling requirements is limited. Historical data have already been 
verified  under  the  ETS.  The  need  for  control  and  verification  will  be  defined  by  the  label 
verification criteria. The cost of it would be expected to be limited. 

263 

 
 
 
 
 
 
CALC2 also builds on ETS/CBAM data, adding a limited amount of indirect emission sources 
to the calculations of the GHG-intensity. Provided these indirect sources refer to  key inputs 
such as electricity and/or hydrogen use, one could assume that these data are readily available 
for applicants for the label or that reliable default values can be utilised. The possibility to have 
a more segmented baseline period for the determination of the GHG-intensity adds complexity 
to calculation and might require additional verification steps in addition to the information that 
would already be available through the EU ETS free allocation.  

The LCA methodology to be used under CALC3 could rely on ETS/CBAM reported emissions 
and builds on the PEF methodology, requiring detailed data from a very comprehensive scope 
including complexity and variation of the production processes and possibility to use a mass 
balance  approach.  Thus,  the  effort  (time/cost)  of  verification  and  certification  of  the  label 
calculations would be increased versus CALC1/2 which mostly rely on already verified data.  

Classification 

CLAS1, limiting  the label  information  to  stating  a products’  GHG-intensity without  further 
classification,  avoids  the  definition  of  thresholds  within  the  legislation  and  marginally 
simplifies  the  certification  process.  However,  compared  to  other  options  there  may  be 
additional administrative burden that is put on the potential users of the label, if these actors 
should interpret the level of GHG performance themselves based on the reported numbers. It 
is also not a solution to the main problem as it does not provide any threshold/definition of 
low-carbon steel failing to create a reliable label to stimulate its lead market. CLAS2.a and 
CLAS2.b avoids this latter impact, as the clear classification classes increases the usefulness 
for label users. CLAS2.b could allow to report next to the class, also additional information, 
notably the exact carbon intensity as well as the share of scrap input in the steel manufacturing 
process,  adding  an  extra  reporting  element.  Under  CLAS3.a  the  most  disaggregated 
classification system is proposed, also requiring the reporting of more detailed product data 
(such as quality), and the verification of these elements. The additional data need for CLAS 
3.b is more limited. 

Ensuring data quality 

As DATA1 relies on self-declaration of the GHG-intensities by the steel manufacturers without 
an  independent  verification,  the  administrative  burden  is  minimized  compared  to  an  option 
with  more  stringent  verification  and  certification  requirements  as  in  DATA2.  In  this  latter 
option, both setting up the verification rules and nominating the certification body(is), as well 
as  the implementation  of the procedures,  contribute to  the administrative burden. However, 
relying on existing rules, procedures, verifiers and other parties e.g. from the EU ETS, can help 
to minimise this burden. In DATA3, the most stringent verification measures are required to 
ensure data quality, particularly due to the lack of readily available data reported through the 
ETS. For extra-EU manufacturers, some necessary data for determining GHG intensities will 
be collected under CBAM, given its alignment with the ETS product benchmark methodology. 
However,  data  quality  under  this  option  may  vary  among  applicants,  necessitating  a  more 
comprehensive and rigorous verification and certification scheme, which would increase the 
administrative burden both for applicants, as well as for verifiers and regulators. 

264 

 
 
 
 
 
 
 
 
Coherence with other elements of the regulatory framework 

The proposed label has some clear linkages with both existing and future policy instruments, 
with two focus areas.  

The  EU  ETS  is  the  main  climate  policy  instrument  to  reduce  GHG  emissions  in  energy 
intensive industries operating in Europe. By putting a price on GHG emissions, it incentivizes 
manufacturers covered by the system to invest in low-carbon technologies and reduce emission 
in a cost efficiency way, and it is therefore a supply side measure. At the same time, detailed 
and accurate monitoring, reporting and verification of GHG emissions is a cornerstone of the 
system.  Installations  report  annually  their  GHG  emissions  at  installation  level.  In  addition, 
industrial installations applying for free allowances also report periodically on their production 
volumes and associated emissions, following the structure set out under the ETS Free allocation 
rules. The development of a label aims to boost the demand for low-carbon products, and as 
such it complements the focus on the supply-side from the EU ETS. At the same time, the label 
can  make  use  of  similar  calculations  done  under  the  ETS  Free  Allocation  Rules  and  under 
CBAM. Under both policy instruments, installation-wide emissions are attributed to specific 
products: while under the ETS rules these products refer to specific productions steps (‘product 
benchmarks’), under CBAM the GHG emissions are attributed to relevant end products, The 
label can build on these methodologies, ensuring a coherent approach. 

Second, the determination of the GHG intensities for the proposed label can also be a building 
block  itself  for  other  GHG  emission  reporting  initiatives  within  the  broader  EU  regulatory 
framework.  In  particular  the  option  to  include  product  life  cycle  GHG  emissions  as  an 
information or performance requirement under upcoming ESPR product delegated acts such as 
for steel or aluminium and the requirement to include climate data in future mandates under 
the CPR such as for cement can be an opportunity to exploiting synergies, allowing them to 
use the steel label as modular data input being as needed complemented by further LCA data. 
Thereby ensuring consistency and harmonisation with other relevant EU policies. 

Determination GHG-intensity  

In  CALC1,  as  also  discussed  under  0,  the  use  of  the  ETS  calculation  rules  and  system 
boundaries of the Product Benchmarks developed under the Free Allocation Rules, ensures a 
high level of consistency of the proposed label with the ETS and CBAM methodology. While 
the label calculations would imply some extra steps compared to the reporting under the Free 
Allocation Rules, including a more regular reporting of the data, the basic methodology is very 
similar, including the use of average annual data. CALC2 is also broadly coherent with the 
ETS  and  CBAM  methodology,  but  by  adding  additional  covered  processes  it  adds  some 
complexity. In addition, in particular the allowed flexibility to have a more segmented baseline 
period for the determination of the GHG-intensity deviates from the approach under the ETS. 
The use of the LCA calculation methodology proposed under CALC3 is not consistent with 
the current approach under ETS and CBAM but can build on it, as showed by the currently 
ongoing work in the ESPR context. In CALC 3 notably, the delineation of the scope would be 
of importance to ensure comparability of GHG intensity across different production routes. As 
for the role of the low-carbon product label as a building block of other parts of the regulatory 
framework, options covering a larger part of the total LCA GHG emissions (such as CALC2 
and CALC3) have a large potential to be consistent with regulatory initiatives focusing on total 
LCA GHG emissions.  

265 

 
 
 
 
  
 
 
 
Classification 

Regarding classification, the coherence with the regulatory framework is mainly referring to 
its  potential  role  as  a  building  block  for  other  parts  of  the  regulatory  framework.  If  no 
classification  system  would  be  linked  to  the  label,  as  foreseen  under  CLAS1,  other  policy 
instruments need to develop their own classifications, potentially diverging among different 
instruments.  The  establishment  of  classifications  as  under  CLAS2  and  CLAS3  increase  the 
usefulness  of  the  label  with  other  policy  instruments,  for  instance  as  a  criterion  in  public 
tendering,  increasing  its  value  and  potential  coherence  with  the  regulatory  framework  as  a 
whole.  

Ensuring data quality 

By restricting the eligibility to EU manufactured products, that can be expected to report most 
of  the  relevant  data  within  the  EU  ETS  framework,  DATA1  ensures  a  high  level  of 
compatibility with the ETS. This also opens the possibility for further alignment, e.g. by some 
targeted modifications to the Free Allocation Rules under the ETS that improve the reporting 
frequency and data quality for the resulting GHG-intensities, which presently is required to be 
at least every 5 years. However, the limited verification and certification on the self-declared 
GHG-intensities might limit the usefulness of this option for other policy instruments, as e.g. 
for linking to tax or subsidy schemes a high degree of certainty on the exact GHG-intensities 
is needed and risks on fraud increase. DATA2 addresses this latter element, by requiring more 
stringent verification and certification procedures. However, as with DATA1 the restricted EU-
production coverage may limit the relevance of the label for applications such a linking with 
the upcoming ESPR requirements (applying to all products placed on the market) or with public 
procurement criteria. As for DATA3, a direct link with the ETS is not possible, as the extra-
EU producers are not covered by the system. This might however partly be addressed through 
CBAM. At the same time, by extending the scope, DATA3 potentially increases the usefulness 
of the low-carbon product label and allows for aligning it with other policy instruments and 
internationally developed standards. 

3.  How do the options compare? 

Key  differences  between  the  individual  options  to  design  a  low-carbon  product  label  are 
summarised in the following tables The baseline option of having no EU low-carbon product 
label sets the comparison reference for the different options. 

Table : Comparison of impacts for the GHG-intensity options 
Key impacts 

Determination 
GHG-intensity 

Environmental 
impact 

CALC1 

CALC2 

CALC3 

+ 

++ 

Limited GHG coverage, 
good comparability 

Good GHG coverage, good 
comparability  

+++ 

Full GHG coverage 

Administrative 
impact 

++ 

+ 

- 

Based on ETS 
data/verification, but limited 

Comprehensive and more 
complex reporting leads to 

266 

 
 
 
 
 
 
 
 
 
 
Key impacts 

Determination 
GHG-intensity 

CALC1 

CALC2 

CALC3 

Limited data gathering and 
verifications costs as 
based on ETS reporting 

number of indirect emissions 
requires extra reporting 

higher data gathering and 
verification costs 

Coherence with other 
parts 
the 
of 
regulatory 
framework 

++ 

+ 

+ 

Compatible with ETS and 
CBAM  

Largely compatible with ETS 
and CBAM,  

Not linked to ETS/CBAM, 
alignment with other LCA 
based legislation 

Table : Comparison of impacts for the classification options  

Classification 

CLAS1 

CLAS2.a 

CLAS2.b 

CLAS3.a 

CLAS3.b 

Environmental 
impact 

+ 

+ 

++ 

+ 

++ 

Lack of 
classification 
limits the 
effectiveness of 
the label 

Uniform classes 
might 
disadvantage 
primary producers 
and limit uptake 

Sliding-scale 
compares across 
steel production 
methods, remaining 
technologically 
future-proof  

Separate 
primary/secondary 
classification 
might limit future 
proofness 

Flat vs long 
distinction 
remains 
technologic
ally neutral 

Administrative 
impact 

++ 

Separate classes 
increase the 
usability 

- 

Interpretation of 
label on users 

++ 

Separate classes 
increase the 
usability 

+ 

More 
disaggregated 
categories increase 
reporting 
requirements 

+ 

++ 

Coherence 
with 
other  parts  of  the 
regulatory 
framework 

Single metric 
could be useful for 
other policy 
instruments  

Classes increase 
the usability 

++ 

++ 

Classes increase the 
usability 

Classes increase 
the usability 

Table 35: Comparison of impacts for the data quality options 36 
DATA1 

Data quality 

DATA2 

Environmental impact 

0 

+ 

267 

DATA3 

++ 

++ 

Two 
different 
classificati
on systems 
for flat vs 
long 
products 
increase 
the 
usability of 
the label 

++ 

Classes 
increase 
the 
usability 

 
 
 
 
 
 
Data quality 

DATA1 

DATA2 

DATA3 

Risk of greenwashing 

Verification increases 
credibility of the label 

Potential impact beyond EU 
borders 

Administrative impact 

++ 

+ 

- 

Coherence  with  other 
parts of the regulatory 
framework 

Self-declared data minimizes 
admin burden 

Verification and 
certification can build on 
ETS approach 

Rigorous verification and 
certification needs for extra-
EU  

0 

+ 

++ 

Fully compatible with ETS, 
more limited compatibility with 
other instruments 

Compatible with ETS, extra 
verification increases 
usefulness for other 
instruments 

No direct link with ETS, 
label could serve 
procurement and align with 
other labels 

4. Preferred option 
Following the analysis of impacts and comparison of options, the preferred policy option would 
be CALC2, CLAS2b and DATA 2. 
The  development  of  a  low-carbon  product  label  is  one  of  the  initiatives  included  in  the 
communication on the Clean Industrial deal, aimed to allow industrial producers to distinguish 
carbon intensity of their industrial production and to benefit from targeted incentives. As such, 
the development of the label itself and in particular its effectiveness is linked to other elements 
of the regulatory framework, and in the proposal for an Industrial Accelerator Act. At the same 
time, the establishment of the label  will be coherent with ongoing initiatives on developing 
comprehensive  LCAs  (to  be  used  in  ESPR  and  CPR).  The  preferred  option  achieves  the 
objective  at  the  least  costs  by  optimising  its  leverage  of  the  existing  data  sources  and 
frameworks of the ETS and CBAM. The selected system boundaries allow for a meaningful 
comparison  of  the  carbon  intensity  of  most  steel  products  put  on  the  EU  market,  without 
requiring  overly  detailed  data.  The  choice  of  an  adapted  sliding  scale  (see  classification 
paragraph) allows for an effective measure, which can compare all production routes of steel 
and  take  into  account  the  transformation  of  the  sector  in  the  medium  and  long  term  where 
primary and secondary production will be more and more intertwined. 

Determination of GHG intensity 

In  line  with  the  aims  of  developing  a  feasible  and  impactful  product  label,  with  limited 
administrative impact, the GHG intensity of the steel should be as much as possible calculated 
using  relevant  existing  product  benchmarks  established  under  the  EU  ETS  framework.  In 
addition to these direct industrial GHG emissions, a limited number of key indirect emission 
sources should be included, i.e. electricity and hydrogen. The relevant GHG-intensity should 
be  calculated  in  a  straightforward  way,  with  annual  averages  as  the  preferred  approach. 
However,  in  some  cases  a  more  granular  segmentation  might  be  allowed,  provided  a  clear 
intertemporal and/or physical unit demarcation can be demonstrated. 

Classification 

To  maximise  the  effectiveness  of  the  low-carbon  product  label  and  increase  its  possible 
usefulness  for  other  policy  instrument,  classes  of  performances  should  be  integrated  in  the 

268 

 
 
 
 
label, based on clear quantitative GHG-intensity thresholds. To maximise the comparability of 
diverse production pathways and account for the inherent GHG emissions included in scrap, it 
is recommended to adjust the performance class thresholds in line with the amount of scrap 
used. However, the exact shape of the curve and the scrap adjustment should be defined in a 
way that avoids unintended consequences, maximises environmental benefits and still provides 
sufficient incentives for decarbonisation for both technologies. At the same time, it could be 
envisaged  that  the  label  provides  multiple  types  of  information:  in  addition  to  indicating  a 
performance class under the classification system, it could also show the actual GHG emission 
intensity and/or the amount of recycled content used in the product. 

For illustration purposes, the figure below provides an initial indication about what the label 
could look like, at least in its basic elements. The actual levels, the steepness of the curves and 
the  (potential)  flattening  of  the  curve  require  further  analysis.  Besides  the  curves,  some 
reference scenarios are added; the dots reflect the emission intensities of specific technology 
scenarios,  with  calculations  based  on  the  system  boundaries  of  the  preferred  options  of  the 
impact  assessment  and  including  the  hot  rolling  step,  as  this  was  widely  supported  by  the 
industry. 

Figure 36: Sliding scale 

Table 37: Production route details 
Production route kgCO2/ 

ton 
1898 

1547 

1365 

route 

route 

BF-BOF 
AVG emissions 
BF-BOF 
BM emissions 
BF-BOF 
route 
AVG  emissions  + 
CCS 
BF-BOF 
route 
BM  emissions  + 
CCS 
DRI NG EU MIX 842 

1226 

Scrap 
input 
15% 

Scrap 
input 
15% 

15% 

15% 

15% 

15% 

Remarks 

Based  on  average  emissions  from  ETS  installations 
(2016-2017) 
Based  on  ETS  benchmark values,  for  the  period  2021-
2025 
Based on ETS values and scientific literature 

15% 

15% 

Based on ETS benchmark values and scientific literature 

0% 

0% 

Based on information from MIDREX DRI and scientific 
literature 

269 

 
 
 
 
Production route kgCO2/ 

ton 
542 

1405 

247 

170 

DRI NG EU MIX 
CCS 
DRI  FF  H2  EU 
MIX 
DRI RES H2 RES 
ELEC 
50/50  H2  DRI 
RES SCRAP 

256 

312 

207 

EAF  EU  MIX 
(2025) 
EAF  EU  MIX 
(2030) 
EAF  World  MIX 
(2025) 
EAF RES ELEC   164 
72 
EAF  RES  ELEC 
Low 
EAF  World  MIX 
(2025) Low 
EAF  EU  MIX 
(2030) Low  

240 

136 

Scrap 
input 
0% 

Scrap 
input 
0% 

0% 

0% 

0% 

0% 

50% 

50% 

100% 

100% 

Remarks 

Project  with  50%  renewable  hydrogen  DRI  and  50% 
scrap with lower assumptions on fossil fuel injections– 
hot rolling process is assumed to be 0 for this modelling 
exercise 
Own elaboration and 2025 EEA EU mix 

100% 

100% 

Own elaboration with 2030 EU mix 

100% 

100% 

Own elaboration with 2025 World mix 

100% 
100% 

100% 
100% 

100% 

100% 

100% 

100% 

Assumption of lower fossil fuel injections and hot rolling 
emissions  

The sliding scale proposed is slightly adapted, to enable a fair comparison between primary 
and secondary steel producers. While the idea of the sliding scale is to make the threshold of a 
certain class stricter the more scrap is used, primary production usually involves a certain share 
of scrap between 10% to 20% - “pure” primary production (i.e. without any scrap) is unlikely. 
To reflect this, a flat curve is proposed for projects with low amount of scrap input (inferior or 
equal to 20%), with the thresholds staying the same for scrap input of 0% to 20%. This will 
also incentivise primary producers to take higher share of scrap in their production. To have a 
level playing field for secondary producers and encourage overall secondary production, for 
production where most of the input is scrap (>90%), the thresholds for CLASS A and B being 
already very ambitious can also be more lenient. 

Key assumptions include:  

•  RES ELEC means 100% renewable electricity – where emissions from electricity are 
assumed to be 0. The EU MIX (2025) scenario assumes the carbon intensity mix from 
the latest numbers from the EEA682 and the World mix are from the 2025 Global Ember 
electricity review.683 The EU mix of 2030 draws from the Impact assessment on a 2040 
Climate Target684. 

682 European Environment Agency (2025). Greenhouse gas emission intensity of electricity generation in Europe. 
683 EMBER (2025). Global Electricity Review 2025. 
684  European  Commission  (2024).  Commission  staff  working  document  impact  assessment  report,  part  1,  accompanying  the  document 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European  Economic  and  Social  Committee  and  the 
Committee of the Regions: Securing our future, Europe's 2040 climate target and path to climate neutrality by 2050, building  a sustainable, 
just and prosperous society, SWD/2024/63 final 

270 

 
 
 
 
 
  
 
 
•  Renewable hydrogen impact is assumed to be 0. For fossil fuel hydrogen (FFH2), the 
world average of the IEA685 based on steam methane production without CCS is used. 
•  The  Low  scenarios  represent  lower  emissions  linked  to  fossil  fuel  injection  in  the 
electric  arc  furnace  and  lower emissions linked to  hot  rolling. Those scenarios were 
added due to very wide range of possible emissions linked to fossil fuel injection in an 
EAF and lack of diverse sources of specific data on hot rolling. 

•  For BF-BOF, as no project specific data is publicly available, CCS numbers are based 
on  theoretical  potential  capturing  rates686  and  exclude  emissions  linked  to  the 
transformation and transportation of the CO2. It does not consider possible changes to 
the use of waste gases and potential increase in electricity uses due to the use of CCS. 
•  For natural gas DRI (NG DRI), CCS is based on theoretical capture rates687 averaged 
from  information  by  MIDREX,  one  of  the  main  DRI  technology  providers.  It  also 
excludes emissions linked to transformation and transportation of CO2.  

•  All hot rolling numbers are derived from LESS 

Ensuring data-quality 

To ensure credible and reliable data underpinning the GHG intensities, it is recommended to 
require separate verification and certification for the GHG intensities developed as part of the 
label. For data already reported under the EU ETS and CBAM, a simplified procedure could 
be considered. Furthermore, it is recommended to establish a label that is open both for steel 
products manufactured inside and outside the EU, increasing its potential impact and alignment 
with global initiatives and given sufficient data verification rules are in place. 

685 IEA (2023). Comparison of the emissions intensity of different hydrogen production routes, 2021. 
686 Fan, Z., Friedmann, S.J. (2021). Low-carbon production of iron and steel: Technology options, economic assessment, and policy. Joule, 
Volume 5, Issue 4, 21 April 2021, pages 829-862. 
687 IEEFA (2024). Carbon capture for steel? 

271 

 
 
 
 
 
 
 
Annex 12a: Relevant steel production product benchmarks under the ETS  

Primary steel making  

Coke production  
What? Coke-oven coke (obtained from the carbonisation of coking coal, at high temperature) or gas-
works  coke  (by-product  of  gas-works  plants)  expressed  in  tonnes  of  dry  coke,  determined  at  the 
discharge of the coke oven or gas-works plant. Lignite coke is not covered by this benchmark. Coking 
in refineries is not included but covered by the CWT methodology for refineries.  
Which emissions and processes covered? All processes directly or indirectly linked to the process 
units  coke  ovens,  H2S/NH3  incineration,  coal  preheating  (defreezing),  coke  gas  extractor, 
desulphurisation unit, distillation unit, steam generation plant, pressure control in batteries, biological 
water treatment, miscellaneous heating of by-products and hydrogen separator are included. Coke oven 
gas cleaning is included.  

 Agglomerated iron-ore production  
What? Agglomerated  iron-bearing  product  containing  iron  ore  fines,  fluxes  and  possibly  iron-
containing recycling materials with the chemical and physical properties such as the level of basicity, 
mechanical strength and permeability required to deliver iron and necessary flux materials into iron ore 
reduction  processes.  Expressed in tonnes  of  agglomerated  ore  as  leaving  the  agglomerated  iron ore 
production plant. Agglomerated iron ore returned to the production process is not to be considered as 
part of the product.  
Which emissions and processes covered? All processes directly or indirectly linked to the production 
of agglomerated iron ore are included.  

 Hot metal production  
What? Iron produced from iron ores for primary steelmaking including  
(a) liquid iron saturated with carbon for further processing, considered as product of blast furnaces, 
and expressed in tonnes of liquid iron at the exit point of the blast furnace, excluding liquid iron 
produced from sponge iron under (b);  
(b) sponge iron at the exit point of a direct reduced iron reactor and expressed in tonnes of sponge 
iron at the exit point of the direct reduced iron reactor. Similar products such as ferroalloys are not 
covered by this product benchmark. Residual material and by-products are not to be considered as 
part of the product.  
Which emissions and processes covered? All processes directly or indirectly linked to the process 
units blast furnace, hot metal treatment units, blast furnace blowers, blast furnace hot stoves, direct 
reduced iron reactor, electric arc furnace and electric smelting furnace for sponge iron, basic oxygen 
furnace, secondary metallurgy units, vacuum ladles, casting units (including cutting), slag treatment 
unit,  burden  preparation,  BF  and  other  gas  treatment  units,  dedusting  units,  scrap  pre-heating,  coal 
drying for PCI, vessels preheating stands, casting ingots preheating stands, compressed air production, 
dust treatment unit (briquetting), sludge treatment unit (briquetting), steam injection in BF unit, steam 
generation plant, converter BOF gas cooling and miscellaneous are included.  

Secondary steel making  
EAF carbon steel  
What? Steel  containing less  than  8% metallic alloying  elements  and  tramp  elements to such levels 
limiting the use to those applications where no high surface quality and processability is required and 
if none of the criteria for the content of the metal alloying elements and the steel quality for high alloy 
steel are met. Expressed in tonnes of crude secondary steel ex-caster.  
Steel produced from sponge iron already covered under the hot metal benchmark is not covered by this 
benchmark.  All  processes  directly  or  indirectly  linked  to  the  process  units  electric  arc  furnace, 
secondary metallurgy, casting and cutting, post-combustion unit, dedusting unit, vessels heating stands, 
casting ingots preheating stands, scrap drying and scrap preheating are included. Processes downstream 

272 

 
 
  
of casting are not included. For the purpose of data collection, the total electricity consumption within 
the system boundaries shall be considered.  
Which emissions and processes covered? All processes directly or indirectly linked to the process 
units electric arc furnace, secondary metallurgy, casting and cutting, post-combustion unit, dedusting 
unit, vessels heating stands, casting ingots preheating stands, scrap drying and scrap preheating are 
included. Processes downstream of casting are not included. For the purpose of data collection, the total 
electricity consumption within the system boundaries shall be considered.  

EAF high-alloy steel  
What? Steel  containing  8%  or  more  metallic  alloying  elements  or  where  high  surface  quality  and 
processability is required. Expressed in tonnes of crude secondary steel ex-caster. Steel produced from 
sponge iron already covered under the hot metal benchmark is not covered by this benchmark.  
Which emissions and processes covered? All processes directly or indirectly linked to the process 
units electric arc furnace, secondary metallurgy, casting and cutting, post-combustion unit, dedusting 
unit, vessels heating stands, casting ingots preheating stands, slow cooling pit, scrap drying and scrap 
preheating are included. The process units FeCr converter and cryogenic storage of industrial gases are 
not included.  
Processes downstream of casting are not included.  
For the purpose of data collection, the total electricity consumption within the system boundaries shall 
be considered.  

273 

 
 
  
 
 
Annex 13: Overview of third countries conditionalities for FDI 

The impact of FDI conditionalities can be better understood by referring to existing measures 
in  other  economies,  notably  the  United  States’  Inflation  Reduction  Act  (IRA)  of  2022, 
Canada’s  ‘Made  in  Canada  Plan’  of  2023,  and  China’s  long-standing  investment 
conditionalities dating back to the 1990s. Each model shows how linking investment incentives 
to local content, labour, and environmental standards can lead to increased industrial resilience, 
skilled and well-paid employment, and strengthening of local supply chains. 

United States 
The IRA of 2022 in the USA directs nearly EUR 378 billion in federal funding to clean energy, 
with the goal of substantially lowering carbon emissions. The funds are delivered through a 
mix  of  tax  incentives,  grants,  and  loan  guarantees.688  However  the  access  to  these  funds  is 
linked  to  locally  sourced  input  requirements  as  well  as  labour  and  environmental 
conditionalities. Many subsidies require “Made in America” inputs or assembly, for example, 
grid-scale  renewable  projects  using  domestically  produced  steel,  iron,  and  components.689 
Furthermore, projects must meet Prevailing Wage and Apprenticeship (PWA) criteria, where 
workers must be paid local prevailing wages, and a certain percentage of workforce must be 
qualified apprentices.  

As a result, foreign investors are transferring technology, building factories, and cultivating a 
skilled workforce in the U.S. This strengthens innovation in the clean tech sector, including 
batteries  as  well  as  enhances  industrial  security  and  resilience.  These  investments  are  also 
anchoring  full  domestic  supply  chains,  including  raw  materials  mining  and  processing.  For 
example, in 2023, 40% of critical minerals for EVs were sourced and processed in the US or 
permitted  jurisdictions,  and  50%  of  battery  components  were  domestically  produced  or 
assembled.690 Positive social outcomes include the creation of over 26 000 new jobs691 through 
foreign  automotive  and  battery  investments,  with  wage  requirements  ensuring  fair  pay. 
Investments  are also  building  local  production capabilities, including  R&I  centers, meaning 
more knowledge transfer and local supplier linkages. 

Canada 
Similarly, Canada has also introduced conditionalities connected to labour and environmental 
standards,  as  well  as  local  content  requirements  to  support  local  industry.  A  particularly 
noteworthy  example  is  the  environmental  conditionality  put  on  the  production  of  clean 
hydrogen in Canada.692 The 2023 federal budget presented in 2023 earmarks EUR 54 billion 
worth  of  tax  credits  and  infrastructural  investment  to  encourage  investment  in  low-carbon 
electricity,  manufacturing,  and  other  green  industrial activity  (‘Made  in  Canada  plan’).693 
These investments are subject to similar conditionalities as those outlined in the case of the 
United States. As a result, Canada has seen, over EUR 15 billion in announced EV and battery-
related  investments.694  Projects  such  Volkswagen’s  PowerCo695  and  Stellantis  and  LG 

688  European  Commission  (2025).  COMMISSION  STAFF  WORKING  DOCUMENT  Key  Performance  Indicators  (KPIs)/Overview  of 
Resilience Measures by Selected Global Players. 
689 European Parliament (2023). EU’s response to the US Inflation Reduction Act (IRA). 
690 Energy Monitor (2023). Weekly data: US outpaces EU in the race to build EV batteries.  
691 Ibid. 
692 Ibid. 
693  European  Commission  (2025).  COMMISSION  STAFF  WORKING  DOCUMENT  Key  Performance  Indicators  (KPIs)/Overview  of 
Resilience Measures by Selected Global Players 
694 Battery Industry (2025). Canadian government announces $25m of EV investments. 
695 Volkswagen Group (2023). Volkswagen-backed PowerCo SE reaches significant milestone in St. Thomas gigafactory project. 

274 

 
 
 
 
investment  for  a  45  GWh  plant696  created  an  estimated  4  000  direct  and  several  thousand 
indirect  well-paid  jobs.  This  marks  a  big  shift  for  Canada,  which  had  virtually  no  battery 
manufacturing before 2022.  

China 
China has applied FDI conditionalities for decades as a tool for technology acquisition and 
industrial upgrading. Since the 1990s, foreign firms in key sectors such as automotive, rail, and 
energy  were  required  to  meet  local  content  thresholds  (up  to  80–90%)  face  high  tariffs  on 
imports. 697 In wind power, similar requirements mandated at least 70% domestic production 
This resulted in foreign companies like VW, GM, Siemens, and Vestas having cultivated local 
supplier networks and transfer supply chain know-how throughout the years.698 

In  parallel,  technology  transfer  requirements  obliged  foreign  companies  to  share  patents, 
establish R&I centres, and train local engineers. These measures were enforced through joint 
venture rules and licensing conditions.699 This long-term strategy generated vast knowledge 
spillovers, localised supply chains, and propelled China to global leadership in clean energy 
and advanced manufacturing. 

696 Stellantis (2022). Stellantis and LG Energy Solution to Invest Over $5 Billion CAD in Joint Venture for First Large-scale Lithium-ion 
Battery Production Plant in Canada. 
697 F. Scheifele, M. Bräuning, B. Probst (2022). The impact of local content requirements on the development of export competitiveness in 
solar and wind technologies. Renewable and Sustainable Energy Reviews. , 
698 Ado, R., (2013), Local Content Policy and the WTO Rules of Trade-Related Investment Measures.  
699 Railway Technology (2017). The importance of China’s high-speed tech transfer policy. 

275 

 
 
 
 
 
 
Annex  14:  Extended  information  on  the  scenarios  in  the  LEAD_VC  cost 
absorption 

As noted in Annex 4, to assess the potential impact, LEAD_VC looked into 2 scenarios for 
costs absorption to take into account uncertainties regarding the possible reaction of non-EU 
manufacturers: 

In  the  Internal  market  reaction  scenario,  non-EU  vehicle  manufacturers  will  not  be  able  to 
access public procurements or benefit from support schemes. In the latter case, they will not be 
able to cover the loss of subsidies coming from the support schemes and the prices of their 
vehicles will increase by the amount of the lost subsidies. In other words, consumers will face 
a price increase equalling the lost subsidies for non-EU vehicles. This scenario is considered 
the most favourable scenario for EU EV manufacturers and suppliers, but the least favourable 
for the consumers.  

The  non-EU  manufacturers  absorb  the  price  increase  scenario  is  based  on  the  same 
assumptions as Internal market reaction scenario: non-EU vehicle manufacturers will not be 
able to  access  public procurements or benefit  from  support  schemes. However, in  the latter 
case,  the  non-EU  manufacturers  fully  absorb  the  loss  of  subsidies  so  that  the  price  of  their 
vehicles does not increase. In other words, non-EU vehicle manufacturers apply a discount on 
their vehicles for consumers to compensate for the loss of subsidies following the entry into 
force  of  the  measure.  However,  such  a  behaviour  would  inevitably  come  with  significant 
financial challenges for non-EU manufacturers. This scenario is considered the least favourable 
scenario for EU EV manufacturers and suppliers, but the most favourable for the consumers.  

While  the  Internal  market  reaction  scenario  is  the  one  reflected  throughout  the  Impact 
Assessment,  this  Annex  14  retains  the  second  scenario  for  comparison  and  information 
purposes to explore different market possibilities. 

1.  Made  in  EU  requirements  in  vehicle  components  for  public  procurements  and 

support schemes 

Impact on vehicle component suppliers 

EU suppliers in the “non-EU manufacturers absorb the price increase” scenario 

Passenger cars 

   sales increase - billion euro 

LCVs 

   sales increase - billion euro 

HDVs 

   sales increase - billion euro 

2027 

2030 

0.9 

1.6 

0.1 

0.2 

0.026 

0.031 

In  the  non-EU  manufacturers  absorb  the  price  increase  scenario,  the  sales  increase  of  EU 
suppliers is expected to be more limited, rising only by EUR 0.9 billion in 2027 and EUR 1.6 
billion in 2030. Sales of EU suppliers are lower in this than in the Internal market reaction 
scenario because the increase in sales of EU EVs will be lower in the Non-EU manufacturers 

276 

 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
  
 
 
 
 
 
absorb the price increase scenario (see sales increase in the impact on the downstream sector). 
It is because non-EU car makers absorb the price differential, which reduces their margins to 
limit the substitution of consumers from non-EU (with a price increase after the measure) for 
EU (with a price decrease after the measure) that happen in Internal market reaction.  

In this scenario the sales increase of EU suppliers in the LCV vehicle segment is expected to 
be more limited, rising only by EUR 0.1 billion in 2027 and EUR 0.2 billion in 2030.  

Furthermore, the sales increase of EU suppliers is expected to be more limited, rising only by 
EUR 25.6 million in 2027 and EUR 30.9 million in 2030 for HDVs. 

Impact on downstream sector (automotive manufacturers) 

EU EV manufacturers in the “non-EU manufacturers absorb the price increase” scenario 

 In EUR billion 

Passenger cars 

   cost increase 

   sales increase 

LCVs 

   cost increase 

   sales increase 

HDVs 

   cost increase 

   sales increase 

2027 

2030 

0.0 

2.0 

0.0 

0.3 

1.5 

0.1 

0.2 

0.1 

0.0 

0.055 

0.13 

-0.17 

In both scenarios, given the current 70% made in EU, the measure would not lead to any further 
costs for EU EV manufacturers in 2027. 

For  passenger  cars:  under  the  Non-EU  manufacturers absorb the price  increase  scenario,  if  we 
assume  that  non-EU  manufacturers  fully  absorb  the  relative  price  increase,  EU  EV 
manufacturers  will  still  benefit  from  a  sales  increase  of  EUR  2  billion  thanks  to  the  price 
differential between EU and non-EU manufacturers as a result of reallocation of subsidies. In 
this  scenario,  the  proposed  target  for  2030  will  lead  to  a  cost  increase  of  EUR  1.5  billion, 
however, the projected sales increase will be limited to EUR 0.1 billion. The sales increase is 
lower in this scenario because the sales price differential between EU and non-EU cars will be 
zero  as  non-EU  manufacturers  internally  absorb  the  policy.  In  this  scenario,  the  price-
differential is larger than in the Internal market reaction scenario. Under this scenario, the non-
EU EV manufacturers reduce their margins to absorb the price differential, hence it will come 
at a cost for them, hence it comes at a higher cost for non-EU manufactures. However, as there 
are still large positive benefits in 2027 for the EU manufacturers, cumulative gains may still be 
positive even under the Non-EU manufacturers absorb the price increase scenario. 

For LCVs: if we assume that non-EU manufacturers fully absorb the relative price increase, 
EU manufacturers of light commercial vehicles will still benefit from a sales increase of EUR 
0.3 billion in 2027. In this scenario, the proposed target for 2030 will lead to a cost increase of 
EUR 0.2 billion, whereas the projected sales increase will be limited to EUR 0.1 billion because 
non-EU manufacturers would need to reduce their margins to absorb the price differential.  

277 

 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
  
  
 
 
  
  
 
 
 
  
  
Under the Non-EU manufacturers absorb the price increase scenario, if we assume that non-EU 
manufacturers fully absorb the relative price increase, EU EV HDV manufacturers will still 
benefit from a sales increase of EUR 54.9 million. In this scenario, the proposed target for 2030 
will still lead to a cost increase of EUR 129 million, and this is going to be accompanied by a 
projected sales reduction for EU EV HDV manufacturers (-172 million euro) as a worst-case 
scenario.  As  sales  of  electric  HDVs  increase  over  time,  the  amount  of  subsidy  taken  into 
account in the assumptions may be insufficient to offset the negative impact of this measure. 

Global Added Value:  

Value Added in EUR billion 

Non-EU manufacturers absorb the price increase 
   automotive 
   intermediate 
   Global value added - Only first round of Value Chain 
   Global value added - Estimated all Value Chain 

2027 
0.5 
0.4 
0.9 
1.8 

2030 
0.0 
0.7 
0.7 
2.1 

Furthermore, the measure is projected to lead to the generation of EUR 0.9 billion Global Value 
Added in 2027 and EUR 0.7 billion in 2030 when assessing the impact, taking into account 
only the first tier of the value chain.700  

Impact on consumers  

EU consumers in the “Non-EU manufacturers absorb the price increase” scenario 

Passenger cars 

   EVs price changes (%) 

   EVs sold change (thousand) 

LCVs 

   EVs price changes (%) 

   EVs sold change (thousand) 

HDVs 

   EVs price changes (%) 

   EVs sold change (thousand) 

2027 

2030 

-1.6% 

127.7 

-2.0% 

18.5 

-0.4% 

0.6 

-0.2% 

10.1 

-0.6% 

8.2 

0.6% 

-2.0 

Under  Non-EU  manufacturers  absorb  the  price  increase  scenario,  if  we  assume  that  non-EU 
manufacturers fully absorb the relative price increase, the price of EVs is expected to decrease 
by 1.6% by 2027 and by 0.2% by 2030. Consequently, consumers are going to be impacted 
positively, and the sale of EVs is going to increase by 127 700 vehicles in 2027 and by 10 100 
vehicles in 2030.  

For LCVs, prices are going to decrease by 2% in 2027 and by 0.6% in 2030. The sales of EVs 
are going to increase by 18 500 vehicles in 2027 and by 8 200 vehicles in 2030.  

700 Global Value Added (GVA) refers to the total economic value generated by the projected production of EU EV manufacturers and the EU 
suppliers, as well as further intermediate inputs necessary to increase the Made in EU requirement of the measure and increase production of 
EU EVs 

278 

 
 
 
 
 
 
 
 
  
 
 
 
  
  
  
 
 
  
  
  
 
 
  
  
 
 
 
  
  
 
 
 
 
For HDVs, prices are going to slightly decrease by 0.4% in 2027 and then increase by 0.6% in 
2030. The sales of EV HDVs are going to slightly increase by 600 vehicles in 2027 and then 
decrease by 2 000 units in 2030.  

Impact on emissions 

In  the  Non-EU  manufacturers  absorb  the  price  increase  scenario,  production  and  transport 
emissions are almost unchanged compared to the Reference. In 2027, substitution from EVs to 
ICEs could lead to higher emissions from the fuel use of new passenger cars (1 Mt) in Internal 
market  reaction,  but  to  lower  emissions  (2.8  Mt)  in  Non-EU  manufacturers  absorb  the  price 
increase; this effect almost disappears in 2030. 
In sum, the environmental effects remain limited and are very similar across LEAD_VC 1 and 
LEAD_VC 2. 

2.  Introduce  Made  in  EU  requirements  in  automotive  components  for  public 
procurement, public support schemes and all vehicles placing on the market. 

Impact on EU vehicle component suppliers 

EU suppliers in the “Non-EU manufacturers absorb the price increase” scenario 

 In EUR billion 

Passenger cars 

   sales increase 

LCVs 

   sales increase 

HDVs 

   sales increase 

2027 

2030 

1.1 

1.9 

0.2 

0.3 

0.031 

0.037 

In LEAD_VC 2, the impacts are similar as under LEAD_VC 1: 

•  For passenger cars, In the Non-EU manufacturers absorb the price increase scenario, the 
sales increase of EU suppliers is expected to be more limited, rising only by EUR 1.1 
billion in 2027 and EUR 1.9 billion = in 2030.  

•  For LCVs: the sales increase of EU suppliers is expected to be more limited, rising only 

by EUR 0.2 billion in 2027 and EUR 0.3 billion in 2030. 

•  For HDVs: the sales increase of EU suppliers is expected to be more limited than the 
alternative scenario, rising only by EUR 30.6 million in 2027 and EUR 37 million in 
2030. 

 Impact on downstream sectors 

EU EV manufacturers in the “Non-EU manufacturers absorb the price increase” scenario 

 in EUR billion 

Passenger cars 

   cost increase 

   sales increase  

LCVs 

2027 

2030 

0.0 

2.4 

1.8 

0.1 

279 

 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
  
 
 
 
 
 
 
 
 
  
  
 
 
 
  
  
 
 
   cost increase 

   sales increase 

HDVs 

   cost increase 

   sales increase 

0.0 

0.4 

0.0 

0.066 

0.2 

0.2 

0.15 

-0.21 

Under  Non-EU  manufacturers  absorb  the  price  increase,  if  we  assume  that  non-EU 
manufacturers  fully  absorb  the  relative  price  increase,  for  passenger  cars,  EU  EV 
manufacturers will still benefit from a sales increase of EUR 2.4 billion. In this scenario, the 
proposed target for 2030 will lead to a cost increase of EUR 1.8 billion, however, the projected 
sales increase will be limited to EUR 0.1 billion. The sales increase is lower in this scenario 
because the sales price differential between EU and non-EU cars will be lower.  

For LCVs: manufacturers will still benefit from a sales increase of EUR 0.4 billion in 2027. In 
this  scenario,  the  proposed  target  for  2030  will  lead  to  a  cost  increase  of  EUR  0.2  billion, 
whereas the projected sales increase will be limited to EUR 0.2 billion.  

For HDVs: EV manufacturers will still benefit from a sales increase of EUR 65.6 million. In 
this scenario, the proposed target for 2030 will still lead to a cost increase of EUR 154.1 million, 
and  this  is  going  to  be  accompanied  by  a  projected  sales  reduction  for  EU  EV  HDV 
manufacturers (EUR -206 million).  

Global Value Added 

Value Added in EUR billion 

Non-EU manufacturers absorb the price increase 
   automotive 
   intermediate 
   Global value added - Only first round of Value Chain 
   Global value added - Estimated all Value Chain 

2027 
0.6 
0.5 
1.1 
2.1 

2030 
0.0 
0.8 
0.8 
2.5 

Furthermore, the measure is projected to lead to the generation of EUR 1.1 billion Global Value 
Added in 2027 and EUR 0.8 billion in 2030 when assessing the impact, taking into account 
only the first tier of the value chain. 

Impact on consumers and citizens 

EU consumers in the “Non-EU manufacturers absorb the price increase” scenario 

Passenger cars 

   EVs price changes (%) 

   EVs sold change (thousand) 

LCVs 

   EVs price changes (%) 

   EVs sold change (thousand) 

HDVs 

   EVs price changes (%) 

280 

2027 

2030 

-1.9% 

152.6 

-2.4% 

22.1 

-0.2% 

12.1 

-0.7% 

9.8 

-0.5% 

0.8% 

 
 
  
  
 
 
 
  
  
 
 
 
 
 
 
 
 
  
 
 
 
  
  
  
 
 
  
  
  
 
 
  
  
 
 
 
  
   EVs sold change (thousand) 

0.7 

-2.4 

Under  Non-EU  manufacturers  absorb  the  price  increase,  if  we  assume  that  non-EU 
manufacturers fully absorb the relative price increase, the price of passenger and LCV EVs is 
expected to decrease:  

For passenger cars: by 1.9% by 2027 and by 0.2% by 2030. Consequently, consumers are going 
to be impacted positively, as the sale of EVs is going to increase by 152 600 vehicles in 2027 
and by 12 100 vehicles in 2030.  
For LCVs: by 2.4% in 2027 and by 0.7% in 2030. The sales of EVs are going to increase by 
22 100 vehicles in 2027 and by 9 800 vehicles in 2030.  

For HDVs: by 0.5% in 2027 and then increase by 0.8% in 2030. The sales of EV HDVs are 
going to slightly increase by 700 vehicles in 2027 and then decrease by 2 400 units in 2030.  

Impact on emissions 

In Non-EU manufacturers absorb the price increase, production and transport emissions are 
almost unchanged compared to the Reference. In 2027, substitution from EVs to ICEs could 
lead to higher emissions from the fuel use of new passenger cars (0.8 Mt) in Internal market 
reaction, but to lower emissions (2.2 Mt) in Non-EU manufacturers absorb the price increase; 
this effect almost disappears in 2030. 

281 

 
 
  
 
 
 
 
Annex 15: Sensitivity analysis: costs and benefits 

Where  uncertainties  are  identified  regarding  the  impact  of  cost  and  benefits  of  different 
measures, this annex presents a sensitivity analysis and provides ranges of estimates to present 
the  order  of  magnitude.  This  Annex  builds  on  the  main  data  sets  outlined  in  Annex  4  but 
presents  a  wider  depiction  of  impacts.  The  values  used  in  Annex  4  for  the  total  costs  and 
benefits  calculations  are  also  reflected  below  for  information,  while  the  sensitivity  analysis 
ranges are presented in italics.  
However,  for  LEAD  EII  the  sensitivity  analysis  differs  from  adjustment  costs  modelled  by 
FIDELIO and presented throughout the Impact Assessment. The analysis below are theoretical 
maximum costs based on the expected vehicle deployment of 2030, and the average price of a 
vehicle in the EU. Both results, those from FIDELIO and sensitivity analysis below, use the 
same price increase from using low-carbon steel as a starting point, but are analysed differently.  

Administrative savings 

•  PERM:  The  cost  savings  from  implementing  a  digitally  integrated  permit  granting 
process are calculated based on a study on business procedures carried out to underpin 
the Single Digital Gateway impact assessment701. It concluded that for 9 procedures, 
the  cost  savings  for  all  EU  businesses  (EU  business  in  2023  represented  33  million 
enterprises702), - if e-procedures were introduced where missing - would be in the order 
of magnitude of EUR 6.5 billion for domestic users (i.e. 433.3 million for 2.2 million 
businesses  in  the  manufacturing  sector).  Following  an  adjustment  calculation  to  the 
EUR 6.5 bn to assume an average of 5 permit- granting procedures, and assuming the 
costs for all procedures is equal, this could translate into savings of EUR 240 million 
specifically for the manufacturing sector for an average of 5 procedures. 

•  The  sensitivity  analysis  is  carried  out  with  the  assumption  that  only  a  third  of  the 
manufacturing industries can  carry out  their transformation  process  by 2030.  In that 
range, the savings are reduced to 80 million as shown below. 

PERM 

Difference to the baseline 

PO1 

PO2 

PO3 

Businesses 

Administrative 
savings 

(one-off)  

Adjustment costs 

Digitalisation of permitting procedures 

EUR 240 million 

Sensitivity: EUR 80 million – EUR 240 million 

701 SWD/2017/0213 final - 2017/086 (COD) 
702 Eurostat (2024). Large businesses make up only 0.2% of EU enterprises. 

282 

 
 
 
 
 
 
 
 
 
 
 
 
Assumptions taken for adjustment costs for the automotive sector:  

LEAD_EII Low-carbon provisions (steel costs only):  

Price increase:  

•  The adjustment cost for a midsize passenger vehicle is estimated to range from 0.3% to 
0.7% of the final price, with a 100% low-carbon steel depending on the decarbonisation 
pathway.703 A 25% low-carbon steel target would  see  a price increase ranging  from 
0.075% to 0.175% (EUR 28 – 65 per passenger vehicle).  

•  Heavy duty vehicles will see a price increase  calculated as EUR 25.89 increaser per 
tonne of steel times 7.2 704 (amount of steel in tonnes present in a heavy weight vehicle). 

Cost distribution:  

•  The  number  of  passenger  cars  and  light  commercial  vehicles  purchased  in  2030  is 
projected to reach 12.8 million. This total is made of 11 million passenger cars, plus 1.8 
million  light  commercial  vehicles.  Additionally,  heavy  duty  vehicles  will  reach  382 
000. 705 

•  By  2030,  passenger  vehicles  sales  are  expected  to  break  down  as  follows:  60% 
corporate  36.5%  private  purchases  by  citizens,  and  3.5%  public  procurement.  It  is 
assumed that heavy-duty vehicles are procured only by businesses and Member States. 
Costs are therefore split between “impacts to downstream sectors” for corporate and 
“impacts on citizens” for private households throughout Section 6 and the breakdown 
of costs in the individual tables. The distribution of the different market segments is as 
follows:  

o  3.5% through public procurement 
o  70.1% through public support schemes  
o  26.4% through private purchases.  

• 

In the context of this exercise’s cost distribution, it is assumed that the market share, 
including the split between corporate fleets and private purchases, as well as the share 
covered by public support schemes, remains unchanged for 2030 

•  As the exact amount of subsidies that will potentially cover the green premium cannot 
be estimated in this analysis, nor the absorption of costs by the manufacturer’s, these 
figures represent a theoretical maximum cost.  

LEAD_EII 

Member States 
administrations  
Adjustment costs 
(recurring)  

Difference to the baseline  
PO1  

PO2  

PO3  

Sensitivity analysis:  
Vehicle fleet EUR 14.04 
million – EUR 32.59 million706 

Sensitivity analysis:  
Vehicle fleet EUR 14.04 
million – EUR 32.59 
million707 

Sensitivity analysis:  
Vehicle fleet EUR 14.04 
million – EUR 32.59 
million708 

Citizens/Consumer     

703 BCG (2022). Transforming the Steel Industry May Be the Ultimate Climate Challenge. 
704 Based on JRC modelling of LEAD_VC impacts. 
705 Based on JRC modelling of LEAD_VC impacts. 
706 A 25% low-carbon steel target would see a price increase ranging from 0.075% to 0.175% (EUR 28 – 65 per passenger vehicle). 
707 A 25% low-carbon steel target would see a price increase ranging from 0.075% to 0.175% (EUR 28 – 65 per passenger vehicle). 
708 A 25% low-carbon steel target would see a price increase ranging from 0.075% to 0.175% (EUR 28 – 65 per passenger vehicle). 

283 

 
 
 
 
 
 
 
  
  
  
  
  
  
 
  
 
  
  
 
Difference to the baseline  
PO1  

PO2  

PO3  

Sensitivity analysis : Passenger 
cars: EUR 91.7 million – EUR 
212.87 million 

Sensitivity analysis : 
Passenger cars: EUR 91.7 
million – EUR 212.87 
million 

Sensitivity analysis :  
Passenger cars:  
EUR 130.8 million – EUR 
303.68 million 

LEAD_EII 

Adjustment costs 
((recurring)  

Businesses  

Adjustment costs 
(recurring)  

Sensitivity analysis: corporate 
fleets EUR 179.6 million – 
EUR 417.125 million 

Sensitivity analysis: 
corporate fleets EUR 
179.6 million – EUR 
417.125 million 
Automotive: 
million 
– 
million  

285 
662.6 

Sensitivity analysis: 
corporate fleets EUR 
256.3 million- EUR 595.04 
million 
Automotive: 
million- 931 million 

401 

TOTAL 
(sensitivity) 

Automotive: 285 million – 
662.6 million 

LEAD_SOL 

Two different price scenarios compare the cheapest alternative for PV (e.g. Chinese imports) 
to a European NZIA- compliant PV with polysilicon and wafers / ingots from China.  

•  65 GW of Chinese modules: EUR 10.335 billion. For 58 GW EUR 9.222 billion. 
•  65 GW of European products with poly-wafer come from China: EUR 12.35 billion. 

For 58 GW EUR 11.02 billion.  

The delta between them is EUR 2.015 billion for 65 GW of solar PV, which is broken down 
per market segment as follows: 

•  Public procurement: 0.03 × 2.015 = EUR 0.06045 billion 
•  Auctions: 0.19 × 2.015 = EUR 0.38285 billion 
•  Schemes: 0.12 × 2.015 = EUR 0.2418 billion 
•  Rest of the market: 0.66 × 2.015 = EUR 1.3299 billion 

The sensitivity delta following the more conservative estimate of deployment, is 1.798 billion 
for 58 GW which is broken down per market segment as follows: 
•  Public procurement: 0.03 × 1.798 = EUR 0.05394 billion 
•  Auctions: 0.19 × 1.798 = EUR 0.3416 billion 
•  Schemes: 0.12 × 1.798 = EUR 0.2157 billion 
•  Rest of the market: 0.66 × 1.798 = EUR 1.18 billion 

58 GW is based on solar capacity deployment projection in 2030709. Although there is no low 
scenario for 2030, it has been extrapolated from the low scenario of years 2026-2028. 

LEAD_SOL  

Member States  
Adjustment costs 
(recurring)  

Difference to the baseline  
PO1  

PO2  

PO3  

Public procurement: EUR 60.45 million  

Public procurement: EUR 60.45 
million  

709 SolarPower Europe (2025). Reshoring Solar Manufacturing to Europe. A cost gap analysis and a policy impact simulation. 

284 

 
 
 
 
 
  
 
  
 
  
 
  
 
 
 
 
 
 
 
 
  
  
  
  
  
 
LEAD_SOL  

Citizens/Consumer  
Adjustment costs 
(recurring) 

Difference to the baseline  
PO1  
PO2  
Auction margins decrease by: EUR 382.85 
million  

Sensitivity: 
Public Procurement: EUR 53.04 million- 
60.45 million  

Auction margins decrease by: EUR 341.6 
million -EUR 382.85 million  

PO3  

Auction margins decrease by: 
EUR 382.85 million  

Sensitivity: 
Public Procurement: EUR 53.04 
million- 60.45 million  

Auction margins decrease by: 
EUR 341.6 million -EUR 382.85 
million  

Public support schemes: EUR 241.8 
million  

Public support schemes: EUR 
241.8 million  

Sensitivity: 
Public support schemes: EUR 215.7 million 
- EUR 241.8 million  

Other PV placed on the market : 
EUR 1.3299 billion  

Sensitivity: 
Public support schemes: EUR 
215.7 million - EUR 241.8 million 

Other PV placed on the market : 
EUR 1.18 billion - EUR 
1.3299 billion  
EUR 1.79 billion – EUR 2.01 
billion 

TOTAL sensitivity 

EUR 610.34 million – 685.1 million 

LEAD_BAT  

Assumptions taken for adjustment costs:  

•  The total adjustment costs compare the average cost of manufacturing the same battery 
chemistries (i.e., localised battery cells, cathodes and anodes) in the current cheapest 
market, China, with those manufactured in the EU with a cost differential ranging from 
26% to 50%. These costs do not take into account the phased approach, which would 
reduce the impact on prices during the first years of entry into force.  

o  Battery cell manufactured in China by Tier 1 manufacturers (i.e., 60 EUR/kWh 

in 2024),  

o  Battery cell manufactured in in the EU with localised CAM and AMM, (i.e., 

75.6-90 EUR/kWh).  

•  Additionally, global price decreases in batteries have been accounted for, as these are 
expected to drop significantly in the upcoming years. As battery cell costs decline over 
time, the total cost differential with China is expected to decrease, ranging between 11-
21 EUR/kWh in 2028, 9-17 EUR/kWh in 2030, and between 6-12 EUR/kWh in 2035. 

285 

 
 
  
 
  
 
  
 
  
 
  
  
  
 
 
 
 
  
 
 
 
LEAD_BAT 

Difference to the baseline 

PO1 

PO2 

PO3 

Member States 
administrations 

BESS: average EUR 46 million 

BESS average EUR 46 million) 

EVs: average EUR 231.5 

EVs: average EUR 231.5 

Adjustment costs 
(recurring) 

Sensitivity: 

Sensitivity: 

Auctions for BESS: EUR 26 – 66 
million  

Auctions for BESS: EUR 26 – 66 
million  

Public procurement for EVs: EUR 
132 – 331 million  

Public procurement for EVs: EUR 132 
– 331 million  

Citizens/Consumer 

Adjustment costs 
(recurring) 

EVs: average EUR 511 million 

Sensitivity EVs710: EUR 292-730 
million  

Businesses[5] 

Adjustment costs 
(recurring) 

EVs: average EUR 1.55 billion  

Sensitivity EVs : EUR 0.9-2.2 
billion  

EVs: average EUR 0.9 billion 

BESS average: EUR 494 million 

Sensitivity: 

EVs : EUR 0.5 – 1.3 billion  

BESS : EUR 282-706 million  

EVs average : EUR 1.55 billion 

BESS : EUR 187.5 million 

Sensitivity : 

EVs: EUR 0.9-2.2 billion  

BESS : EUR 107-268 million 

710 We assume that there is public support to buy EV vehicles in Europe for corporate purchases. In contrast, public support is only available 
for consumers in Austria, Belgium, Croatia, Cyprus, Czechia, Estonia, France, Greece, Hungary, Ireland, Lithuania, Luxembourg, Malta, the 
Netherlands, Poland, Slovenia, Spain, and Sweden (ACEA, 2025). Against this background, we estimate that LEAD_VC 1 would affect 80.2% 
of EV registrations, including 60.0% from corporate purchases, and 20.2% from consumers. 

286 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LEAD_BAT 

Difference to the baseline 

PO1 

PO2 

PO3 

TOTAL sensitivity 

EVs 1.3 billion – 3.26 billion 
BESS: EUR 26 – 66 million 

EV : 1.5 billion- 3.8 billion 

BESS : 415 million – 1.04 billion 

LEAD_VC 

In the LEAD_VC analysis, the most critical parameters are the elasticities governing consumer 
behaviour.  We  consider  the  demand  elasticity  of  vehicles  to  capture  the  effect  of  prices  on 
quantities (price effects), the cross-product elasticities to capture substitution between ICE and 
EV, and the cross-region elasticities to capture substitution between EU- and non-EU-made 
EVs. These elasticities determine EV demand, the type of purchased vehicles (ICE vs. EV), 
the source of those vehicles (EU vs. non-EU), and their evolution in the aftermath of a policy 
intervention that alters relative prices. We define these elasticities more formally and provide 
the  preferred  values  used  in  the  impact  assessment  in  Annex  4.  In  what  follows,  we  do  a 
sensitivity analysis on the set of elasticity parameters, decreasing and increasing them by 0.1, 
one by one: 

•  Demand elasticity ranges from -0.4 to -0.6, with a preferred value of -0.5. 
•  Cross-product elasticities:  

▪  EV vs. ICE ranges from 0.2 to 0.4, with a preferred value of 0.3. 
▪  EV vs. EV ranges from -1.6 to -1.4, with a preferred value of -1.5. 
•  We adjust the other two elasticities (ICE vs. ICE and ICE vs. EV) that are not 
critical for the analysis to preserve the demand elasticity in its preferred value 
of -0.5. 
•  Cross-region elasticities:  

•  Non-EU vs. EU ranges from 0.9 to 1.1, with a preferred value of 1.0. 
•  EU vs. EU ranges from -1.1 to -1.3, with a preferred value of -1.2. 
•  EU vs. non-EU ranges from 0.9 to 1.1, with a preferred value of 1.0. 
•  We adjust the non-EU vs. non-EU elasticity to preserve the preferred demand 

elasticity of -0.5. 

The following table summarises the results of this sensitivity analysis for LEAD_VC 1 under 
the “Internal market reaction” scenario in 2030. 

Demand 

Cross-
product 

Cross-
region 

Overall 

Sales (billion euro) 

Impact on EU EV manufacturers 
Passenger 
cars  
LCVs 
HDVs 
TOTAL 

Sales (billion euro) 
Sales (billion euro) 
Sales 
(billion 
euro) 

6.0-6.0 

0.8-0.8 
0.12-0.14 
6.9-7.0 

5.9-6.0 

5.6-6.3 

5.6-6.3 

0.8-0.8 
0.13-0.14 
6.9-7.0 

0.8-0.8 
0.12-0.14 
6.5-7.3 

0.8-0.8 
0.12-0.14 
6.5-7.3 

Impact on vehicle component suppliers 

Passenger 
cars 

Cost (billion euro) 
Sales (billion euro) 

1.6-1.6 
7.6-7.7 

1.6-1.6 
7.6-7.7 

1.6-1.6 
7.0-8.3 

1.6-1.6 
7.0-8.3 

287 

 
 
 
 
 
 
LCVs 

HDVs 

Cost (billion euro) 
Sales (billion euro) 
Cost (billion euro) 
Sales (billion euro) 
TOTAL  Cost (billion euro) 
(billion 
Sales 
euro) 

Automotive (EV manufacturers 
and component suppliers) 
Intermediate (out of automotive 
sector) 
Global value added - Only first 
round of Value Chain 
Global 
added 
value 
Estimated all Value Chain 

- 

Passenger 
cars 

LCVs 

HDVs 

TOTAL 

EVs  price  changes 
(%) 
EVs  sold  change 
(thousand) 
EVs  price  changes 
(%) 
EVs  sold  change 
(thousand) 
EVs  price  changes 
(%) 
EVs  sold  change 
(thousand) 
EVs 
changes (%) 
EVs  sold  change 
(thousand) 

price 

Demand 

0.2-0.2 
1.3-1.3 
0.13-0.13 
(–0.01)-0.01 
1.9-2.0 
8.9-8.9 

Cross-
product 
0.2-0.2 
1.2-1.3 
0.13-0.13 
(–0.01)-0.01 
2.0-2.0 
8.9-9.0 

Cross-
region 
0.2-0.2 
1.1-1.3 
0.13-0.13 
(–0.02)-0.02 
2.0-2.0 
8.1-9.5 

Overall 

0.2-0.2 
1.1-1.3 
0.13-0.13 
(–0.02)-0.02 
1.9-2.0 
8.1-9.5 

Value Added 

1.9-1.9 

1.9-1.9 

1.8-2.0 

1.8-2.0 

2.6-2.6 

2.6-2.6 

2.3-2.8 

2.3-2.8 

4.5-4.5 

4.5-4.5 

4.1-4.8 

4.1-4.8 

9.7-9.7 

9.6-9.8 

8.8-10.3 

8.8-10.3 

Impact on consumers 

1.2%-1.2% 

1.2%-1.2% 

1.2%-1.2% 

1.2%-1.2% 

(–88.4) -(–64.3)  (–76.4) -(–76.2)  (–77.8) -(–74.9)  (–88.4) -(–64.3) 

0.4%-0.4% 

0.4%-0.4% 

0.4%-0.4% 

0.4%-0.4% 

2.0-2.3 

2.1-2.5 

0.0-4.3 

0.0-4.3 

1.2%-1.2% 

1.2%-1.2% 

1.2%-1.2% 

1.2%-1.2% 

(–1.8) -(–1.5) 

(–1.7) -(–1.7) 

(–1.8) -(–1.6) 

(–1.8) -(–1.5) 

1.2%-1.2% 

1.2%-1.2% 

1.2%-1.2% 

1.2%-1.2% 

(–88.2) -(–63.5)  (–75.4) -(–75.9)  (–72.2) -(–79.5)  (–72.2) -(–79.5) 

The  cross-region  elasticity  is  the  parameter  that  most  affects  the  results  for  EU  EV 
manufacturers, vehicle component suppliers, and the value added generated. Demand elasticity 
is the parameter that most affects consumer behaviour. However, the sensitivity analysis shows 
the robustness of the results presented in the impact assessment, with values falling within a 
small range and not significantly affecting the policy's economic effects. 

Environmental benefits  

LEAD_EII,  LEAD_BAT,  LEAD_SOL  and  LEAD_VC:  In  relation  to  the  monetisation  of 
GHG emissions, a cost of carbon is used711. Figures underpinning the analysis are below, and 
the 2030 value used of EUR 60-189 per tCO2eq used to give an estimation of the benefit range. 

711 European Commission (2019). Handbook on the external costs of transport. 

288 

 
 
 
 
 
 
 
 
This is an approximation, and no variation is made to reflect the time profile of when emissions 
will occur.  

Values in current EUR per tCO2 

Up to 2030 
Post 2030 

Low 
60 
156 

Central 
100 
269 

High 
189 
498 

LEAD_EII (low-
carbon steel and 
cement) 

PO1 

PO2 

PO3 

Total steel, cement and 
aluminium: 4.28 
Mtonnes CO2 (EUR 428   
million) 

Total steel, cement and 
aluminium: 4.28 
Mtonnes CO2 (EUR 428 
million) 

Total steel, cement and 
aluminium: 13.58 
Mtonnes CO2 (EUR 1 
358 million) 

Sensitivity: EUR 256 
million to EUR 809 
million 

Sensitivity: EUR 256 
million to EUR 809 
million 

Sensitivity: EUR 814 
million to EUR 2 566 
million 

Similar question 
LEAD_BAT 

25.6 Mtonnes CO2 (EUR 
2 560 million) 

25.6 Mtonnes CO2 (EUR 
2 560 billion) 

34.17 Mtonnes CO2 
(EUR 3 400 million) 

Sensitivity: EUR 1 530 
million to EUR 4 830 
million 

Sensitivity: EUR 1 530 
million to EUR 4 830 
million 

Sensitivity: EUR 2 050 
million to 6 450 million 

LEAD_VC 

TOTAL 

0.7 Mtonnes CO2 (EUR 
70 million) 

0.7 Mtonnes CO2 (EUR 
70 million) 

0.9 Mtonnes CO2 (EUR 
90 million) 

Sensitivity: EUR 42 
million to EUR 132 
million 

Sensitivity: EUR 42 
million to EUR 132 
million 

Sensitivity: EUR 54 
million to EUR 170 
million 

30.58 Mtonnes CO2  

30.58 Mtonnes CO2  

48.65 Mtonnes CO2  

(EUR 3 058 million) 

(EUR 3 058 million) 

(EUR 4 865 million) 

Sensitivity: EUR 1 830 
million to EUR 5 780 
million 

Sensitivity: EUR 1 830 
million to EUR 5 780 
million 

Sensitivity: EUR 2 910 
million to EUR 9 195 
million 

289 

 
 
 
 
 
 
 
 
Annex 16: Net-Zero Technologies 

While  the  impact  assessment  report  focuses  on  batteries  and  PV  technologies,  this  Annex 
expands the scope of the analysis to the additional net-zero technologies for which Made in EU 
requirements  have  been  proposed.  Specifically,  it  provides  detailed  information  and  a 
comprehensive  cost-benefit  analysis  that  includes  wind  energy,  nuclear  fission  energy 
technologies,  heat  pumps,  electricity  grid  technologies,  solar  thermal  technologies  and 
electrolysers. This expanded assessment not only illustrates the rationale behind the design of 
Made  in  EU  requirements  for  each  of  these  technologies  but  also  evaluates  a  range  of 
socioeconomic impacts. It considers factors such as manufacturing capacity availability and 
geographic variations in production costs and other pertinent dimensions, offering insights into 
the feasibility and impact on consumers. By delving into these pertinent dimensions, the Annex 
aims to provide a more nuanced understanding of both the potential benefits and challenges 
associated with regional manufacturing mandates for emerging net-zero technologies. 

Identification  of  NZIA  main  specific  components  to  be  covered  by  Made  in  EU 
requirements 

The Net-Zero Industry Act defines main specific components of net-zero technologies as those 
components essential for manufacturing the final product. To ensure the EU is resilient in the 
deployment of net-zero technologies, it is fundamental to develop a diversified supply of main 
specific  components.  A  further  level  of  ambition  that  also  aims  at  leveraging  the  energy 
transition as an industrial opportunity to create jobs and create added value within the EU – 
which is a necessary factor to gain broad consensus on the energy transition – entails that the 
EU produces some of these essential components domestically. Reshoring the entire supply 
chain at once is impractical; it must be carefully managed to avoid supply-demand imbalances 
that could hinder technology deployment. 

A strategic and gradual approach to reshoring is essential, which prioritizes components for 
which the EU is best fit to compete. This has been the guiding element in the definition of the 
draft ‘Made in EU’ requirements in the Industrial Accelerator Act (IAA). The methodology 
relied on two steps: first identifying competitively producible components and then verifying 
sufficient  manufacturing  capacity  is  available.  The  degree  of  competitiveness  of  the  EU  in 
producing net-zero technologies main specific components has been analysed comparing the 
levelized  cost  of  production  (and  its  underlying  drivers  such  as  capital  costs,  labour  costs, 
operational costs and energy costs) in the EU and overseas. Such assessment aimed at ensuring 
that the proposed made in EU requirements are tailored and guarantee proportional investments 
without  excessive  expense  (see  Section  ‘Assessment  of  socioeconomic  implications  of  IAA 
provisions  related  to  net-zero  technologies’).  Once  the  strategic  components  have  been 
identified, the status and projected evolution on manufacturing capacity in the EU has been 
assessed vis-à-vis expected demand to ensure realistic made in EU ambitions (see section ‘EU 
capacity to supply its demand for net-zero technologies’). When manufacturing capacity falls 
short of demand, made in EU requirements have been either postponed or adjusted to prevent 
demand-supply  imbalances  and  longer  lead  times.  In  such  cases,  requirements  may  be 
generalized to promote flexibility: rather than stipulating that specific components like PV cells 
must be EU-made, the requirement could be "one component should be made in the EU." This 
flexibility encourages the industry to produce competitively viable components while adapting 
to capacity constraints. 

This section outlines for various net-zero technologies how strategic components that should 
feature Made in EU requirements have been identified. 

290 

 
 
 
PV 
Cells and modules are crucial stages in the PV value chain, offering significant added value 
and job creation opportunities712, making them strategic priorities for EU industries to leverage 
the benefits of PV adoption. Additionally, cells and modules have the lowest energy intensity 
in the PV value chain. With EU energy prices higher than those of many competitors, the EU 
is most likely to be competitive in producing components of lower energy intensity, such as 
PV cells and modules. 

The PV inverter industry in  the EU is well-established but  faces growing  competition  from 
third  countries.  Inverters  are  also  a  crucial  component  from  a  cybersecurity  standpoint.  As 
such,  PV  inverters  should  be  prioritized  as  a  strategic  component,  ensuring  they  are 
manufactured within the EU. 

Therefore, building on the analysis on the design of policy measure conducted in Annex 9 of 
this report, Made in EU requirements for solar PV could initially target inverters, modules, and 
cells.  However,  due  to  capacity  constraints,  as  determined  by  conservative  assessments  of 
projected manufacturing capabilities, this requirement would be adjusted to: "inverters and at 
least two main specific components." This flexible approach prioritizes strategic components 
while allowing for the production in the EU of other main specific components (e.g. solar glass, 
PV trackers, and polysilicon) to meet demand effectively. 

Heat pumps 
Heat pumps assembly is neither energy-intensive nor labour-intensive, indicating that the EU 
can undertake this phase domestically without significantly increasing costs713. The majority 
of heat pump production costs stem from the manufacturing of key components, particularly 
compressors,  which  make  up  approximately  70%  of  the  cost  differential  across  countries. 
Producing  affordable  heat  pumps  requires  large-scale  compressor  production  to  achieve 
economies of scale, ideally in locations with lower energy costs. Consequently, Made in EU 
requirements are proposed only for the final assembly of heat pumps, excluding other main 
specific components. 

The current heavy reliance on compressors from China will be addressed through the NZIA's 
resilience  contribution,  aiming  for  supply  chain  diversification  toward  third  countries  with 
lower energy costs than the EU. Thus, Made in EU requirements for heat pumps could initially 
focus on final assembly. However, due to limited manufacturing capacity for air-to-air heat 
pumps,  the  focus  will  be  on  hydronic  heat  pumps,  which  have  sufficient  manufacturing 
capacity  that  risks  underutilization  if  proposed  measures  in  the  IAA  are  not  implemented. 
While manufacturing capacity for hydronic heat pumps already exists (see Section‘EU capacity 
to supply its demand for net-zero technologies’), the Made in EU requirements are suggested 
to take effect three years post-adoption to level the playing field and allow companies with less 
presence in Europe to adapt. 

Electrolysers 
In hydrogen electrolysers, the stack is the most strategic component because it houses the core 
elements essential for the electrochemical process. The assembly of the stack is characterized 
by relatively lower energy and labour costs, making the EU competitive in this stage of the 
value chain. Moreover, there is already ample manufacturing capacity in the EU (see Section 
‘EU capacity to supply its demand for net-zero technologies’), which risks being underutilized 

712 Bruegel (2024). Smarter European Union industrial policy for solar panels 
713 International Energy Agency (2024). Energy Technology Perspectives 2024 

291 

 
 
 
if the proposed measures in the IAA are not executed. Therefore, Made in EU requirements are 
explicitly established for the electrolyser stack. 
The bipolar plate ranks next to the stack in terms of production cost share for electrolysers714. 
This plate, made from metal, graphite, or composite materials, does not offer significant added 
value in its production. Due to its energy-intensive manufacturing process, the EU is unlikely 
to produce it competitively, thus it should not be regarded a strategic component necessitating 
Made in EU requirements. 

Separators, membrane electrode assemblies, electrodes, gaskets,  and porous transport layers 
constitute a relatively small portion of electrolyser production costs. Therefore, also in light of 
the fact that Made in EU requirements for bipolar plates are excluded, setting such requirements 
for these components would not lead to the cost increase presented in Figure EL for ‘non-stack 
equipment’. Given that these components should be subject to Made in EU requirements, and 
given the existing EU manufacturing capacity to meet current demand - with the potential for 
quickly scaling up to meet the 2030 demand (see Figure EL in Section ‘EU capacity to supply 
its  demand  for  net-zero  technologies’)  -  the  IAA's  proposed  requirements  could  have  been 
framed  to  explicitly  include  these  components.  However,  this  presents  challenges  due  to 
differing main specific components across various electrolyser types covered in NZIA, making 
explicit references complex. Instead, stating “stack and at least two additional main specific 
components of the electrolyser originate within the Union” offers needed flexibility. 

While  the  proposed  Made  in  EU  requirements  align  with  the  number  of  components  to  be 
diversified  away  of  the  dominant  supplier  in  the  NZIA,  EU  electrolyser  producers  have 
consistently warned that the NZIA's ambition is insufficient and diminishes the protection that 
was provided in the second Innovation Fund hydrogen auction. 

Batteries 
As  analysed  in  Section  5.2  and  subsequent  Annex  9  of  this  impact  assessment  report,  the 
LEAD_BAT policy measure proposes Made in EU requirements for up to six main specific 
components  among  the  ten  listed  in  the  Commission  Implementing  Regulation  2025/1178. 
While  there  is  flexibility  regarding  which  main  specific  components  may  comply  with  the 
requirements,  three  of  them  are  explicitly  mentioned  as  mandatory,  meaning  they  shall  be 
originated from the EU: the battery cell, the cathode active material (CAM) and the Battery 
Management System (BMS).   

Battery cells are the fundamental components of a battery, where chemical energy is stored and 
transformed  into  electrical  energy.  This  component  is  key  for  battery  innovation,  as  it 
continually enhances energy density and safety. Furthermore, battery cells make up for around 
70% of the total battery price. For Electric Vehicle (EV) batteries, a conservative assessment 
of  operational  and  under  construction  manufacturing  capacity  in  the  EU  indicates  that  it  is 
possible to satisfy the made in EU requirements for battery cells one year of entry into force of 
the IAA. For stationary battery energy storage systems (BESS), the Made in EU requirements 
are proposed to kick in three years after the entry into force of the IAA, when a robust EU-
based battery cell manufacturing capacity for stationary storage is expected to be established. 
Additionally,  although  battery  cell  production  in  the  EU  is  more  expensive  than  in  Asian 
countries,  an  increase  in  the  scale  of  production  and  an  improvement  in  the  manufacturing 
processes is expected to bring down battery cell manufacturing costs in the EU, closing the 
competitiveness gap considerably715. 

714 Bloomberg New Energy Finance (2024). Electrolyzer Price Survey 2024: Rising Costs, Glitchy Tech 
715 International Energy Agency (2025). What Next for the Global Car Industry 

292 

 
 
 
The BMS is essential for ensuring the safety  and efficiency of batteries by overseeing their 
overall  state  and  controlling  factors  such  as  charge  balance  and  temperature.  BMS  systems 
often include connectivity features for real-time monitoring, which make them important for 
energy security to protect data integrity and prevent tampering. Therefore, for BESS Made in 
EU requirements are proposed to kick in one year after the entry into force of IAA. For EV 
batteries,  the  requirements  are  proposed  from  three  years  after  the  entry  into  force  of  IAA, 
giving more flexibility and time to battery manufacturers. 

The Cathode Active Material (CAM) in a battery significantly influences its performance, as 
the type of material used affects energy density, cycle life, and thermal stability. Besides, the 
CAM accounts for the largest cost share of the battery cell. Given the importance of the CAM, 
both technologically and economically, Made in EU requirements are proposed for both EV 
batteries and BESS. Such requirements are proposed to apply from three years after entry into 
force of the IAA recognising that although some manufacturing capacity of CAM in the EU is 
already operational, this has to expand to fully meet the expected demand. 

Besides the Made in EU requirements explicitly to battery cells, BMS and CAM, requirements 
have also been set for an additional number of generically defined main specific components. 
This is meant to provide flexibility to manufacturers to choose which components are better 
off manufactured in the EU. Given that the Made in EU requirements are set for battery cells, 
it is expected that battery modules, battery packs, and battery thermal management systems 
will  be  also  made  in  the  EU  (as  there  is  already  sufficient  manufacturing  capacity)  thus 
complying with the requirements of “three additional main specific components originating in 
the EU”. When it comes to other downstream main specific components, it is worth noting that 
the EU already has operational manufacturing capacity in separators, electrolytes and Anode 
Active Materials, and there are announcements to expand these capacities (see Annex 9).  

Wind 
The  manufacturing  of  wind  turbines  is  highly  adapted  to  the  specific  project,  i.e.  far  less 
commoditised than other net-zero technologies like solar PV and batteries. At the same time, 
quality requirements are very high, and the production of wind turbines and their components 
is very knowledge-intensive. The energy intensity is high for the manufacturing of components 
like  blades  or  permanent  magnets.  For  most  other  components  like  e.g.  gearboxes  or 
drivetrains, a higher share of energy is required for producing the primary materials than for 
producing the components out of the primary materials. Generally, the material cost accounts 
for more than half of the cost of the final turbine. The labour intensity varies by component, 
with e.g. the blade being a main specific component of wind turbines with relatively high labour 
intensity. 

These aspects – high material intensity, high knowledge intensity, varying labour and energy 
intensity – determine how the supply chains that shape the EU’s wind energy deployment look 
today:  a strong  footprint in  the EU with  international  supply chains  for input  materials  and 
specific components. At the same time, China has wind manufacturing overcapacities and is 
pushing  further  into  international  markets.  Looking  at  deployment,  the  EU’s  current 
deployment can for most components (except e.g. permanent magnets and foundations, while 
the capacity to produce foundations will be expanded) be supplied from producers in the EU, 
while the deployment needed to reach the 2030 renewable energy goals could not be met by 
domestic production, except for nacelles and towers (see Figure W in Section ‘EU capacity to 
supply  its  demand  for  net-zero  technologies’).  Currently,  high  dependencies  from  a  single 

293 

 
 
country  of  supply  exist  for  permanent  magnets  (China,  93%)  which  require  access  to  the 
necessary input materials and energy716. 

The high dependency on permanent magnets needs to be addressed gradually, as it is done in 
the NZIA. Further to that, based on the above considerations it is deemed appropriate to require 
that one year after the IAA’s entry into force one main specific components of the wind turbine 
originates in the EU, and two years later two main specific components. This maintains EU 
value  chains,  as  well  as  ensuring  high  flexibility  to  source  in  a  way  that  aids  the  overall 
competitiveness of the European wind industry and ensures the necessary deployment. 

Nuclear fission energy technologies 
Europe possesses world‑class expertise in nuclear fission energy technology, yet the EU supply 
chain  has  been  eroded  by  decades  of  under‑investment.  To  meet  the  growing  demand  for 
nuclear  power  while  advancing  the  broader  goals  of  European  autonomy  and  technology 
sovereignty, the supply chain must be revitalised. Targeted Made in EU requirements can, over 
the  long  term,  contribute  to  rebuild  a  competent,  resilient  and  autonomous  nuclear‑sector 
supply  base  without  compromising  the  availability  of  critical  components  or  the  overall 
functioning of the market, especially at a time when nuclear generation is expected to expand. 
Therefore, a rather cautious strategy is proposed that (i) limits the scope to a reduced set of 
main  specific  components  and  (ii)  introduces  a  sufficient  transition  period.  This  approach 
minimises short‑term cost spikes and gives manufacturers sufficient time to adapt, ensuring a 
smooth and sustainable upgrade of the EU nuclear supply chain that is crucial for the upcoming 
years to properly address the electrification challenges of the European economy. 

Made‑in‑EU content requirements are, in principle, vital for every main specific component 
because of the sensitivity of nuclear assets and the need to revitalise the European supply chain. 
However, to avoid supply‑chain bottlenecks, preserve fair competition among the few existing 
players, and compensate for the absence of detailed data on cost differences across regions, the 
proposed  requirements  have  been  deliberately  softened  and  framed  in  a  way  that  eases 
compliance.  As  a  result,  the  Made  in  EU  obligations  apply  to  only  four main  specific 
components out of seven, without explicitly referring to any of those components - to provide 
extra flexibility to manufacturers - and will become operative three years after the IAA enters 
into force. 

The  proposed  Made  in  EU  obligations  are  fully  achievable,  as  the  EU  has  sufficient 
manufacturing  capacity  to  meet  its  immediate  deployment  needs  for  all  main  components, 
except two in the short term, and is projected to fully satisfy its needs by 2030 (see Figure NU 
in Section ‘EU capacity to supply its demand for net-zero technologies’). 

Solar thermal 
In  solar  thermal  systems,  the  solar  thermal  collector  is  the  most  strategic  main  specific 
component, responsible for capturing and converting solar energy into heat. Its manufacturing 
process involves the highest added value and highest job creation opportunities within the solar 
thermal sector. The production of solar thermal technologies is primarily driven by material 
costs,  which  tend  to  be  consistent  across  regions,  indicating  that  the  EU  can  competitively 
manufacture  these  products.  As  explained  in  Section  ‘Assessment  of  socioeconomic 
implications of IAA provisions related to net-zero technologies’, regional cost differences in 
producing complete solar thermal systems are limited and are largely offset once transportation 

716  European  Commission  (2025).  Communication  from  the  Commission  providing  updated  information  to  determine  the  shares  of  the 
European Union supply of final products and their main specific components originating in different third countries under Regulation (EU) 
2024/1735  on establishing  a  framework of  measures  for  strengthening  Europe’s net-zero  technology manufacturing  ecosystem  (Net-Zero 
Industry Act). 18.6.2025 C/2025/3236 

294 

 
 
 
costs  are  considered.  Therefore,  limiting  Made  in  EU  requirements  exclusively  to  the  solar 
thermal  collector  further  reduces  risks  of  cost  disparities.  Given  the  already  ample 
manufacturing capacity in the EU (refer to Figure ST in Section  ‘EU capacity to supply its 
demand for net-zero technologies’), these requirements could be enforced immediately upon 
entry into force. 

Electricity grid technologies 
EU grid technology and cable manufacturers are global leaders in their fields. However, rising 
component  costs,  extended  procurement  lead  times,  and  a  backlog  of  orders  have  created 
supply  chain  voids  that  China  is  strategically  positioned  to  fill.  This  dynamic  intensifies 
national security risks due to the growing reliance on China, including potential vulnerabilities 
to  espionage,  economic  coercion,  and  military  threats.  The  significance  of  this  risk  is 
heightened given that certain electricity grid technologies are complex electronic systems that 
communicate, can be remotely controlled and updated by software throughout their lifetime. 
These devices can be compromised during production, as cybersecurity vulnerabilities can be 
introduced  through  supply  chain  breaches  with  hardware  or  software  tampered  during 
production, testing, or distribution. Such breaches are included via "hardware Trojans" or pre-
installed  backdoors  that  enable  remote  exploitation  without  the  need  for  external  network 
access, and cyber attackers might use them to manipulate power flows and disrupt grid stability. 
For instance, around 80% of all new PV systems in Europe are now equipped with inverters 
from China717. Companies like Huawei and Sungrow control 170 GW of solar PV capacity 
remotely, totalling over 200 GW when accounting all Chinese brands - equivalent to the output 
of 200 nuclear power plants. 

Ensuring  EU  origin  for  electricity  grid  technologies  significantly  mitigates  the  risk  of 
compromised hardware or software being exploited in cyberattacks and thus safeguards the EU 
energy  security  and  ensure  strategic  autonomy.  In  line  with  the  Joint  Communication  on 
strengthening Economic Security718, Made in EU requirements for net-zero technologies aim 
to support the development of trustworthy suppliers of critical subcomponents within the EU. 
Technologies like inverters, converters, electric cabinets, and other technologies to digitalize 
the grid are connected grid electricity technologies critical for the energy system and must be 
protected from risky software and firmware updates, remote access vulnerabilities, and supply-
chain  dependencies.  Similarly,  electric  charging  technologies  for  transport  are  crucial  for 
cybersecurity due to their connectivity and integration with broader power grids and payment 
systems.  Power  cables  are  especially  critical  as  they  form  the  backbone  of  electricity 
transmission and distribution, ensuring the stable and  efficient  delivery  of electricity across 
regions,  and  any  compromise  can  have  widespread  impacts  on  energy  security  and 
infrastructure integrity. Therefore,  the  IAA proposes targeted Made in  EU requirements  for 
these electricity grid technologies to enter into force three years after adoption. Acknowledging 
the lack of precise data on EU manufacturing capacity and production cost differences across 
regions for some of these devices, this cautious timeline is intended to provide manufacturers 
flexibility  to  adapt  to  the  requirements  and  prevent  supply  bottlenecks,  the  formation  of 
oligopolies and disproportionate cost increases. Besides, for electricity grid technologies where 
shortages of supply have been identified Made in EU requirements have not been proposed. 

717 European Solar Manufacturing Council (2026). Updated Recommendation for the Commission to publish Guidance on improving Cyber 
Security for Solar PV and Battery Storage 
718 European Commission (2025). Joint Communication to the European Parliament and the Council – Strengthening EU economic security. 
3.12.2025  

295 

 
 
 
 
EU capacity to supply its demand for net-zero technologies 

Net-zero technologies in the EU face manufacturing challenges posed by global competition, 
and particularly by China. European producers often struggle to remain cost-competitive: solar 
PV modules imported from China are sold at prices that are roughly half the production cost 
and only about one-third of the break-even level needed for EU firms to sustain their operations. 
Chinese  wind  turbines  are  10–45%  cheaper  than  European  equivalents.  In  batteries,  China 
dominates 86% of global cell supply and controls over 90% of key materials, while Chinese 
electrolysers are sold 33–50% cheaper than EU equipment. 

EU manufacturing in solar PV is limited primarily to modules, inverters, and polysilicon, while 
the battery manufacturing landscape is heavily dominated by Asian companies. At the same 
time, several technologies reveal a problem of overcapacity within Europe itself. Heat pump 
factories  can  deliver  more  than  6  million  units  per  year,  exceeding  the  estimated  5  million 
needed annually by 2030, leaving many lines idle. Electrolyser plants likewise suffer from low 
utilisation,  running  at  just  below  20%  of  their  nameplate  capacity  in  2024.  In  batteries, 
announced projects could boost capacity from 188 GWh in 2024 to 872 GWh by 2030, yet 
more than 250 GWh of planned projects have already been cancelled due to weak demand for 
EU  batteries.  This  reflects  the  volatility  of  EU  policy  signals  and  the  limited  coordination 
between deployment needs and industrial production capacity. 

Electrolysers 
The deployment of electrolysers in the EU is characterised by a significant gap with ambitions, 
primarily due to delays in renewable hydrogen projects. Currently, EU manufacturing capacity 
can  sufficiently  meet  deployment  demands  for  most  elements  within  the  electrolyser  value 
chain,  except  for bipolar plates and diaphragms  (see Figure EL). These components can be 
swiftly  scaled  up  once  market  signals  are  established.  The  Made  in  EU  requirements  for 
electrolysers can be met already in the short-term and would contribute to develop a resilient 
and robust hydrogen economy. 

Figure EL: Manufacturing capacity of hydrogen electrolyser components vis a vis deployment 
needs, 2025 and 2030 

Source: European Commission (2026)719  

Heat pumps 

719 European Commission (2026). Net-Zero Technology Monitoring Dashboards 

296 

 
 
 
 
Following  the  RepowerEU  initiative,  numerous  industry  stakeholders  have  proactively 
increased  heat  pump  manufacturing  capacity  across  the  EU  to  accommodate  anticipated 
demand  surges.  Although  the  EU  heat  pump  assembly  ecosystem  is  now  characterized  by 
overcapacity,  particularly  for  hydronic  heat  pumps,  there  remains  a  notable  deficit  in 
manufacturing  essential  components  such  as  compressors  and  four-way  valves,  which  are 
predominantly imported from China (see Figure HP). To enhance supply chain resilience and 
reduce dependency on external sources, it is critical to strategically diversify the supply of these 
components. The resilience contribution in the context of the Net-Zero Industry Act (NZIA) is 
the main measure to achieve such diversification. In addition, encouraging the assembling of 
heat pumps within the EU will minimize the risk of national initiatives fragmenting the Single 
Market,  ensuring  a  more  cohesive  and  robust  approach  to  heat  pump  deployment  across 
Member States.  

Figure HP: Manufacturing capacity of heat pump components vis a vis deployment needs, 2025 and 2030 

Source: European Commission (2026)688 

Nuclear fission energy technologies 
Throughout  this  decade,  the  EU  is  poised  to  satisfy  its  nuclear  fission  energy  technologies 
deployment  needs  with  sufficient  manufacturing  capacity  (see  Figure  NU).  For  each  main 
specific component of nuclear fission energy technology, at least five suppliers exist across the 
EU. However, short-term fulfilment of demands for nuclear fuel elements and steam generators 
with  domestic  production  might  be  challenging.  The  nuclear  component  manufacturing 
ecosystem is not as developed as it was thirty years ago, due to a three-decade shortage of new 
nuclear fission energy projects that resulted in many original equipment manufacturers for the 
EU nuclear fleet disappearing. The EU nuclear supply chain relies heavily on a limited number 
of suppliers concentrated in a handful of countries, principally France, Germany, Italy, Spain, 
Sweden, Romandia, Slovakia and the Czech Republic, each hosting specialized factories for 
nuclear components. Besides, the production market's limited appeal—arising from high costs, 
technological  barriers,  and  limited  deployment—creates  an  environment  that  does  not 
encourage the entrance of new market actors. Therefore, Made in EU requirements should not 
be introduced before 2030 to guarantee a level playing field in a sector that demands adherence 
to  specific  nuclear  codes.  Moreover,  these  requirements  should  apply  only  to  new  nuclear 
plants,  ensuring  there  is  adequate  time  to  align  the  compatibility  of  reactor  designs  with 

297 

 
 
 
components  developed  in  Europe,  while  thereby  avoiding  disruption  of  established  supply 
chains with limited flexibility.  

Figure NU: Manufacturing capacity of nuclear components vis a vis deployment needs, 2025 and 2030 

Source: NuclearEurope 

Solar thermal technologies 
The  EU  has  robust  manufacturing  capacity  for  solar  thermal  collectors  (see  Figure  ST).  In 
2024,  the  capacity  significantly  exceeded  current  deployment  needs,  with  EU  companies 
planning expansions to boost exports. The European industry specializes in flat plate collectors, 
while has limited capacity to manufacture vacuum tube collectors, which are largely imported 
from  China.  Notably,  the  absorber  (the  part  of  the  collectors  that  absorbs  the  solar  heat)  is 
predominantly produced in Europe.  

Figure ST: Manufacturing capacity of solar thermal components vis a vis deployment needs, 2025 and 2030 

Source: European Commission (2026)688 

Wind technologies 
According to WindEurope, the EU currently has adequate manufacturing capacity across the 
wind technology value chain to meet its current deployment needs inside the EU (see Figure 
W),  which  are  however  not  meeting  the  deployment  needs  to  comply  with  the  2030  goals. 

298 

 
 
 
 
Hence,  further  capacity  expansion  beyond  present  plans  is  needed.  Chinese  wind  turbine 
manufacturers are working towards expanding in the EU market, exemplified by MingYang's 
collaboration with  Italian firms.  The NZIA's resilience contribution  has prompted some EU 
companies to receive manufacturing requests from Chinese OEMs.  

Figure W: Manufacturing capacity of wind components vis a vis deployment needs, 2025 and 2030 

Source: Wind Europe (2025), How much can Europe manufacture and install? 

Electricity grid technologies 
EU electricity grid technologies are projected to witness substantial expansion to enable the 
clean energy transition. Significant developments and massive investments are needed across 
manufacturing and infrastructure enhancement to ensure readiness for future energy demands. 

The  EU  has  a  sizable  production  base  for  electricity  transmission  and  distribution  cables, 
enabling it to closely meet deployment needs. For high voltage, extra-high voltage and medium 
voltage  array  subsea  cables,  the  EU  and  the  United  Kingdom  combined  currently  have  a 
conservative estimate of manufacturing capacity of about 7 700 km/year720. This is measured 
against an average projected demand from 2026 to 2040 of about  8 200 km/year721, largely 
based on political decisions rather than committed orders, suggesting a potential shortage of 
about 550 km/year. However, this short-term deficit is expected to be swiftly addressed by the 
planned manufacturing capacity expansions. Existing EU cable manufacturers have committed 
to invest over EUR 4 billion to expand their manufacturing capabilities, aiming to significantly 
increase  manufacturing  capacity  of  subsea  cables  by  2030.  With  these  investment  plans 
expected to be realized in the next few years, manufacturing capacity will reach about 12 500 
km/year698, thus significantly exceeding deployment needs, which are projected to increase by 
40%  in  2030722.  For  high  voltage  direct  current  underground  cables,  the  EU  has  a 
manufacturing capacity of about 3 500 km/year. This is measured against an average projected 
demand from 2026 to 2040 of about 2 300 km/year, which suggests that the EU has sufficient 
capacity to fully meet its domestic deployment needs.  

In addition, Europe is already home to several well-established companies in the subsea cable 
manufacturing industry, along with even more in the onshore cable sector, fostering healthy 

720 4c Offshore (2025). Transmission and Cables Outlook Q3 2025 
721 4c Offshore (2025). Database 
722 DSO Entity (2025). ENTSO-E, Europacable, DSO Entity and T&D Europe publish Joint Roadmap for Future Proof Grids 

299 

 
 
 
 
competition. In niche markets where oligopolies might arise due to Made in EU requirements, 
the geographic scope of the Made in EU concept serves to mitigate such risks.  

The  EU  also  has  a  robust  power  electronics  sector  with  capabilities  in  design,  production, 
software  development,  and  maintenance.  Where  EU  manufacturing  capacity  related  to 
electricity grid lags behind is in transformers: domestic supply of transformers is tight because 
of  limited  manufacturing  capacity,  which  causes  long  lead  times  for  transformers  to  be 
installed723. 

Socioeconomic implications of IAA proposed measures related to net-
zero technologies  

Electrolysers 
Today, entirely EU-made electrolysers have a CAPEX 50% more expensive than electrolysers 
imported  from  China,  and  by  2030  they  are  projected  to  be  twice  as  expensive  (see  Figure 
ELY2). While this presents a cost challenge, EU-made electrolysers offer higher efficiency and 
lifecycle performance724. Despite higher CAPEX, the superior efficiency and longer durability 
of  entirely  EU-made  electrolysers  translate  into  smaller  differences  in  hydrogen  production 
costs:  a  conservative  analysis  finds  that  from  now  until  2050  hydrogen  produced  with  EU-
made  electrolysers  will  cost  less  than  10%  more  than  hydrogen  produced  using  Chinese 
electrolysers725.  Moreover,  as  explained  in  Section  ‘Identification  of  NZIA  main  specific 
components to be covered by Made in EU requirements’, the IAA proposes to set Made in EU 
requirements  only  for  a  subset  of  electrolysers’  main  specific  components,  which  will 
significantly  minimise  impact  on  cost.  Procurement  decisions  favour  lower  upfront  costs, 
which risk accelerating market share losses for EU manufacturers in a critical phase up scale, 
which highlights the importance of strategic investments and policy initiatives that emphasize 
quality and performance. 

Figure EL: Price of stack and non-stack components of electrolysers based on origin 

Source: BloombergNEF690 

Heat pumps 
The International Energy Agency indicates that producing heat pumps in the EU is generally 
more costly compared to other countries (see Figure HP2). Specifically, a hydronic heat pump 
entirely manufactured in the EU can cost twice as much as one made in China and 10% more 

723 BloombergNEF(2025). Power Transformer Trends 2025 
724 Bloomberg New Energy Finance (2025). Electrolysis System Cost Forecast 2050: Higher for Longer 
725 The levelised cost of hydrogen produced with EU-made electrolysers is estimated at 5.8 EUR/kg, whereas for electrolysers with components 
sourced from China to an extent that fulfils the IAA requirements, the cost is calculated to be at 5.3 EUR/kg. 

300 

 
 
 
 
 
 
than one manufactured in Japan. Similarly, air-to-air heat pumps produced in the EU cost about 
twice  as  much  as  their  Chinese  and  Japanese  counterparts.  However,  when  considering 
installation costs and ancillary services, the price difference for consumers purchasing a heat 
pump is smaller, thereby having limited influence on consumer choice. Moreover, as explained 
in  Section  ‘Identification  of  NZIA  main  specific  components  to  be  covered  by  Made  in  EU 
requirements’, the IAA proposes to set Made in EU requirements only for the final assembly 
of heat pumps, excluding other main specific components, which will significantly minimise 
impact on cost. 

Figure HP2: Levelised cost of production for heat pumps in selected countries/regions by type, 2023 

Source: International Energy Agency726 

In response to the slower deployment of heat pumps and increased imports, EU manufacturers 
have had to cut jobs or starting partial unemployment, affecting more than 1000 employees in 
2023 and more than 7000 in 2024 (European Heat Pump Association, 2025). Implementing 
Made in EU requirements can play a crucial role in safeguarding existing jobs, fostering new 
employment opportunities, and encouraging investment. According to the EHPA, the sector 
employs approximately 430 000 people in the EU, with a significant portion of direct jobs tied 
to manufacturing. Given that the manufacturing ecosystem consists of around 250 sites across 
the EU, often in rural areas and constituted by SMEs, encouraging EU production would bolster 
local economies and small businesses. 

Nuclear fission energy technologies 
According to trade statistics from 2025, fuel elements imported from Russia were about 10% 
cheaper than those produced in the EU, while those imported from the US were 30% cheaper727. 
In contrast, fuel elements imported from the UK were 70% more expensive than those made in 
the EU. The cost of producing nuclear fission energy technologies main specific components 
in the EU differs from other regions due to several key factors. For instance, compared to Asian 
manufacturers, EU labour costs today are generally higher because the salaries of the highly 
qualified professionals required for specialised engineering tasks are higher. Compliance with 
stringent  regulatory  and  safety  standards  adds  another  layer  of  expense,  as  significant 
investment is needed for specialized testing and certification processes. Furthermore, energy 
prices  in  the  EU  are  generally  above  the  EU  average,  impacting  the  energy  costs  of 
manufacturing processes especially for some nuclear main specific components. Consequently, 
for a limited transitional period imposing Made in EU requirements is expected to increase the 
production  cost  of  these  components.  However,  labour  costs  in  Asia  are  already  trending 
upward, and energy prices are expected to stabilise at levels comparable to those in the EU, 
which will narrow the cost gap over time. Moreover, while in the short‑term energy and labour 
costs play against the EU competitiveness in producing nuclear fission energy technologies, 

726 International Energy Agency (2024). Energy Technology Perspectives 2024 
727 EUROSTAT (2026). COMEXT database 

301 

 
 
 
 
this  will  partially  be  offset  by  the  Union’s  emphasis  on  technological  innovation  and 
advanced‑manufacturing techniques. These innovations boost production efficiency and enable 
the delivery of components that meet the highest standards of quality and safety. In addition, 
any  cost  premium  should  be  weighed  against  the  long‑term  benefits  of  investing  in  safety, 
reliability and the overall resilience of the nuclear‑energy supply chain. 

The nuclear sector in the EU employs approximately 500 000 people, including 230 000 in 
direct  positions  within  the  sector.  Notably,  many  of  these  jobs  are  highly  specialised  and 
require advanced skills, underscoring the importance of maintaining such expertise in the EU 
- especially to effectively manage strategic assets like nuclear fission power plants. 

Solar thermal technologies 
Manufacturing solar thermal technologies within the EU is generally more expensive than in 
many other global regions. As per Solar Heat Europe, the complete solar thermal system with 
flat  plate  collectors  has  a  production  cost  in  the  EU  about  40%  higher  than  in  China  and 
approximately  20%  higher  than  in  Turkey.  Similarly,  the  entire  solar  thermal  system  with 
vacuum tubes has a production cost in the EU about 35% higher than in China and 20% higher 
than in Turkey. These cost differences primarily stem from regional variations in the prices of 
materials such as glass, copper, and aluminum. Despite these disparities, the bulky nature of 
solar thermal products often eliminates the price advantage of imported products due to the 
higher  transportation  costs,  historically  enabling  EU  producers  to  remain  competitive. 
However,  these  dynamics  are  shifting  as  fierce  competition  from  third-country  producers 
begins  to  affect  certain  EU  Member  States.  By  improving  key  competitiveness  drivers  and 
implementing policy measures such as local content requirements, the EU can better maintain 
its  competitive  edge  while  supporting  domestic  industry  growth  and  stability.  Finally,  as 
explained in Section Identification of NZIA main specific components to be covered by Made 
in EU requirements, the IAA proposes to set Made in EU requirements only for solar thermal 
collector, excluding other main specific components, which will significantly minimise impact 
on cost. 

The industrial ecosystem for solar thermal technologies is widespread across the EU, with a 
high  concentration  of  companies  located  in  Greece  and  in  Cyprus728.  Around  90%  of  such 
companies are SME. The sector employs around 10000 people in the EU729. 

Electricity grid technologies 
Manufacturing  high  voltage  and  extra-high  voltage  subsea  and  underground  cables  is  not  a 
labour-intensive process, instead materials costs account for the lion share of total production 
costs.  Since  these  materials  are  globally  traded  and  typically  exhibit  limited  price  variation 
across regions, differences in production costs are expected to be relatively small. Although 
some  Asian  countries  may  benefit  from  lower  energy  and  CAPEX  costs,  these  advantages 
should largely be offset by transportation costs to Europe, especially considering the need for 
specialised vessels with high operational costs. However, trade statistics indicate that in 2025 
high-voltage power cables imported from China were 20% cheaper than those manufactured 
in the EU730. This price differential is unlikely to be solely attributed to production cost drivers, 
suggesting  the  possible  presence  of  direct  or  indirect  State  aid  compensations  and/or  price 
dumping practices by extra-EU producers.  

728 Solar Heat Europe (2026). Market Data 
729 Roca Reina, J.C., Taylor, N., Volt, J., Carlsson, J., Georgakaki, A. et al., Clean Energy Technology Observatory: Solar Thermal Energy in 
the  European  Union  -  2025  Status  Report  on  Technology  Development,  Trends,  Value  Chains  and  Markets,  Publications  Office  of  the 
European Union, Luxembourg, 2025, https://data.europa.eu/doi/10.2760/8841716, JRC143924. 
730 EUROSTAT (2026). COMEXT database 

302 

 
 
 
For  other  electricity  grid  technologies,  trade  statistics  depict  a  mixed  picture.  Devices 
manufactured in the EU are generally more expensive than imports from China but are cheaper 
compared to imports from other third countries. Specifically, for converters, devices imported 
from China in 2025 were about 30% cheaper than their EU-manufactured counterparts, while 
devices imported from Thailand were about 20% more expensive than EU-manufactured ones. 
Similarly, electric cabinets imported from China in 2025 were almost 40% cheaper than those 
manufactured in the EU, while devices imported from Turkey were slightly more expensive 
than EU-manufactured ones.  

Wind technologies  
The price gap between Chinese wind turbines and Western turbines ranges between 10% and 
45%.  Interest  for  Chinese  turbines  in  diverse  markets  is  hence  growing,  and  Chinese 
manufacturers use strategic pricing (including deferred payment) to enter new markets. In that, 
the  price  difference  is  also  due  to  market  entry  strategies  and  might  not  remain  this  high. 
Additionally,  Chinese  manufacturers  offer  larger  wind  turbines  than  those  produced  and 
offered by EU manufacturers.  

On  the  other  hand,  wind  turbine  production  and  the  broader  wind  energy  industry  deliver 
substantial economic benefits to the EU: according to WindEurope, the sector had an annual 
turnover of EUR 60 billion, 65% of this adding value to the EU economy, in 2019. The sector 
represents 300.000 jobs in the EU. A strong European wind supply chain, with roughly 250 
factories and major turbine OEMs holding a large global market share, boosts local industry, 
high-value  jobs,  and  regional  development  while  generating  taxes  (EUR  5  bn  in  2019)  and 
supporting exports. According to WindEurope, wind farms pay €2.3/MWh in local taxes on 
average. 

Impact on electricity prices 
Assessing the impact of establishing Made in EU requirements on solar PV, wind, and nuclear 
sectors on electricity prices is challenging. Although the previous paragraphs indicate that these 
requirements could lead to not-negligible CAPEX increases, their effect on the levelized cost 
of electricity is  mitigated. For instance, if  a PV module is  assembled in  the EU, using EU-
produced  PV  cells  and  solar  glass,  along  with  three  main  specific  components  diversified 
according to the NZIA resilience requirements, its levelized cost of electricity (LCoE) would 
be 6 EUR c/kWh. This represents a modest increase from the levelized cost of electricity of 5.2 
EUR c/kWh for PV modules at current market prices731. An onshore wind turbine with two 
main  specific  components  produced  in  the  EU  would  have  a  LCoE  4%  higher  than  an 
equivalent  turbine  with  those  components  supplied  from  China  (i.e.  48  EUR/MWh  and  46 
EUR/MWh  respectively).  Similarly,  a  nuclear  fission  power  plant  with  four  main  specific 
components produced in the  EU is  expected to  have a LCoE 1% higher than an  equivalent 
power plant with those components supplied from extra-EU countries (i.e. 79 EUR/MWh and 
78  EUR/MWh  respectively).  Despite  this  rise,  the  impact  on  the  merit  order  in  the  power 
market is minimal. PV, wind or nuclear would only set the electricity price during limited hours 
of exclusive clean energy production. Even then, the resulting price increase would be limited 
and overall, electricity costs would remain significantly lower than those determined by fossil 
fuel generators. 

Although Made in EU requirements might lead to higher costs in renewable energy auctions, 
as explained in the impacts Section of the report, understanding the extent to which these costs 
might be transferred to consumers through additional levies or surcharges on electricity bills is 
complex.  This  depends  on  various  factors,  including  auction  types  (such  as  feed-in  tariffs 

731 SolarPower Europe and Fraunhofer ISE (2025). Reshoring Solar Manufacturing to Europe. 

303 

 
 
 
versus  contracts  for  difference),  specific  auction  designs,  the  level  of  renewable  energy 
penetration, wholesale market conditions, and cost allocation mechanisms. In 2024, taxes and 
levies  -  the  typical  means  for  recovering  the  cost  of  renewable  auctions  -  accounted  for 
approximately 20% of total electricity prices on average in the EU732, indicating that any pass-
through effects on consumers would remain limited. 

Similarly,  while  Made  in  EU  requirements  for  electricity  grid  technologies  are  expected  to 
result in increased costs in public procurement, determining how the potential higher CAPEX 
is passed on to consumers is not straightforward. Once the additional costs associated to the 
fulfilment  of  Made  in  EU  requirements  for  electricity  grid  technologies  are  taken  into 
consideration, the levelized cost of the electricity network is expected to increase from 22.7 
EUR/MWh  to  23-23.4  EUR/MWh  (an  increase  between  1%  and  3%)733.  To  put  this  in 
perspective, for an average household such an increase translates into an additional EUR 1-3 
per year in network charges on the electricity bill.  

The  role  of  public  procurement,  auctions  and  public  schemes  in 
deploying net-zero technologies  

Electrolysers 
Public procurement,  auctions  and public support  schemes to  households account  for  almost 
none of the deployed electrolyser capacity. Most of the current capacity has been supported 
through State Aid, while programs such as Horizon Europe and the Innovation Fund have also 
contributed. Although auctions for hydrogen have been conducted, no capacity has yet been 
deployed through this method.  

Heat pumps 
While  precise  data  on  the  share  of  heat  pump  deployment  covered  by  public  procurement, 
auctions, and public support schemes is unavailable, it is evident that public support schemes 
currently play the most significant role in heat pump deployment. Though auctions are not yet 
implemented, they are anticipated to gain relevance, also as part of the Innovation Fund auction 
to decarbonise industrial heat734. Public procurement, although presently modest in scale, is 
expected to become increasingly significant, especially in light of the Energy Performance of 
Building Directive, which aims to bolster energy efficiency and heat pump use. 

Nuclear fission energy technologies 
Though exact data is lacking, the deployment of nuclear fission power plants typically includes 
various forms of State aid, mainly through Article 107 of the TFEU. Public procurement is 
pivotal in this sector, as utilities are mandated by Procurement Directive 2014/25/EU to follow 
public procurement procedures when sourcing nuclear components. In practice, public utilities 
and partially public utilities often regard public procurement rules overly restrictive, especially 
for  critical  products  and  equipment,  possibly  leading  them  to  seek  exemptions  based  on 
national security or technology exclusivity.  

Solar thermal technologies 
While  precise  deployment  data  through  public  procurement,  auctions,  and  public  support 
schemes is not available, public support schemes are evidently the primary in solar thermal 

732 EUROSTAT (2026). Electricity price statistics 
733 Calculated including, beyond the EUR 1.2 trillion investment required in electricity grid by 2040 (as outlined in the European Commission’s 
European  Grids  Package,  COM(2025)  1005  final),  the  additional  investment  necessary  to  deploy  power  cables,  inverters,  converters  and 
Electric Vehicle Supply Equipment manufactured within the EU instead of imported from third countries.  
734 European Commission (2025). Commission publishes Terms and Conditions for the first pilot auction for industrial heat decarbonisation 
with a budget of €1 billion 

304 

 
 
 
technologies  deployment. Though auctions are not  yet  implemented, they are anticipated to 
gain relevance, also as part of the Innovation Fund auction to decarbonise industrial heat695. 
Public procurement, although presently modest in scale, is expected to become increasingly 
significant, especially in light of the Energy Performance of Building Directive, which aims to 
bolster energy efficiency and solar thermal systems. 

Wind technologies 
Auctions are the predominant allocation mechanism for wind energy in the EU, accounting for 
about  60%  of  total  wind  energy  deployment  depending  on  the  year.  Exact  data  on  public 
procurement  of  wind  energy  is  not  available,  but  while  Denmark  prominently  uses  it  and 
Finland makes limited use of it, other Member States reliance on public procurement to deploy 
wind energy is negligible. Publicly owned utilities are also found to apply public procurement 
to deploy wind energy, however no data is available on the size of that market. Member States 
other than Denmark generally rely on auctions to deploy wind energy. Public support schemes 
hold little relevance for onshore and offshore wind energy deployment. 

Electricity grid technologies 
In the EU, most deployment of electricity grid technologies is done by Transmission System 
Operators  (TSOs),  which  are  normally  public  undertakings  that  operate  through  public 
procurement processes abiding to Regulation 2014/25/EU. Notably, over 70% of new transmission 
cables are expected to comply with these public procurement rules. 

At  the  European  distribution  network  level,  approximately  two-thirds  of  the  European 
electricity grid infrastructure is operated by 19 corporate groups from the energy sector. Of 
these, 11 are majority publicly owned and eight are privately owned. At present, this means 
that approximately 2.837 million kilometers of distribution networks are operated by the 11 
public operators and 4.813 million kilometers by private suppliers. 

EU trade balance 

Electrolysers 
In  2024,  nearly  90%  of  electrolysers  deployed  in  Europe  were  domestically  manufactured. 
Nevertheless, there is a significant risk of increased reliance on Chinese imports, which could 
jeopardize the EU’s security of supply. This concern is underscored by comparing current and 
projected global supply and demand trends, alongside China's dominance. Chinese production 
capacity exceeds 50% of global production, its projected production significantly exceeds its 
domestic  deployment  targets  and  foreseeable  demand,  which  could  influence  international 
markets and trade dependencies735. To mitigate these risks, the EU must strategically bolster 
local production to develop a robust domestic supply chain. 

Heat pumps 
The EU is a net importer of hydronic heat pumps (EUR 580 million in 2024), mainly from 
China. However, this EU trade deficit does not yet indicate concerning dependencies: the EU 
relied on third countries for 22% of the total EU supply in 2023736. In contrast, the EU exhibits 
pronounced dependency for air-to-air heat pumps (EUR 560 million of trade deficit in 2024), 
mainly from China, due to limited domestic manufacturing capacity.  

735 International Energy Agency (2024). Energy Technology Perspectives 2024 
736  European  Commission  (2025).  Communication  from  the  Commission  providing  updated  information  to  determine  the  shares  of  the 
European Union supply of final products and their main specific components originating in different third countries under Regulation (EU) 
2024/1735  on establishing  a  framework of  measures  for  strengthening  Europe’s net-zero  technology manufacturing  ecosystem  (Net-Zero 
Industry Act). 18.6.2025 C/2025/3236 

305 

 
 
 
Nuclear fission energy technologies 
The EU is a net importer of nuclear fission fuel elements (EUR 63 million in 2024), mainly 
from Russia. Imports of other fission nuclear components to the EU remain limited, correlating 
with the restrained nuclear deployment within the region.  

Solar thermal technologies 
The EU is a net exporter of solar thermal technologies (EUR 170 million in 2024), mainly to 
Switzerland. This positive trade balance highlights the quality and innovation within the EU's 
solar thermal sector, suggesting opportunities to further expand export markets. 

Wind technologies 
The global market share of EU manufacturers is declining rapidly: from 30% in 2022 it fell to 
23%  in  2023,  while  Chinese  manufacturers  increased  their  share  from  46%  to  55%.  EU 
companies continue to dominate in the EU with a market share of 89% in 2023.     

The  EU  is  still  a  net  exporter  of  wind  turbines  and  many  of  its  underlying  components. 
However,  it  faces  a  severe  dependency  for  permanent  magnets  (used  in  wind  turbine 
generators), which are almost entirely imported from China. 

Electricity grid technologies 

The EU  faces a trade deficit for inverters  and converters, importing  large volumes of  these 
products from China. For most other electricity grid technologies, the EU has a positive trade 
balance, exporting mostly to the Unites States and the United Kingdom. However, for certain 
electricity grid technologies there is a significant risk of increased reliance on Chinese imports, 
which  could  jeopardize  the  resilience,  reliability  and  cyber-security  of  the  EU  electricity 
system. For instance, for high voltage, extra-high voltage and medium voltage array subsea 
cables China has developed  a manufacturing capacity  (about  11 000 km/year737)  more than 
twice higher than its foreseeable domestic demand (about 4 700 km/year738). Moreover, this 
surplus  in  Chinese  production  closely  matches  the  total  EU  annual  demand,  suggesting  a 
possible  strategic  positioning  by  China  to  potentially  expand  its  presence  in  the  European 
market. 

Administrative costs 

The assessment of administrative costs incurred by Member States and businesses due to the 
implementation of the Made in EE requirements for electrolysers, heat pumps, nuclear fission 
energy  technologies,  solar  thermal  technologies,  wind  technologies  and  electricity  grid 
technologies has estimated recurring costs to be approximately EUR 5 million. Most of such 
administrative  costs  is  associated  to  Member  States  (EUR  4.95  million),  while  businesses 
account for about EUR 45 000. 

Table ADMS offers a detailed breakdown of administrative costs for Member State by net-
zero technology, while Table ADBU provides a similar overview for businesses.  

Table ADMS – Administrative costs for Member States associated to the implementation of the IAA Made in EU 
requirements for net-zero technologies beyond batteries and solar PV 

Net-zero technology 

Electrolysers 

Administrative costs (recurring) 
¼ FTE x 27 Member States 

737 4c Offshore (2025). Transmission and Cables Outlook Q3 2025 
738 4c Offshore (2025). Database 

306 

 
 
 
 
 
Heat pumps 

Nuclear fission energy technologies 

Solar thermal technologies 

Wind 

Total cost: EUR 412 800 
¼ FTE x 27 Member States 
Total cost: EUR 412 800 
¼ FTE x 27 Member States 
Total cost: EUR 412 800 
¼ FTE x 27 Member States 
Total cost: EUR 412 800 
¼ FTE x 27 Member States 
Total cost: EUR 412 800 
1 FTE x 27 Member States 
Total cost: EUR 1 651 100 

Electricity grid technologies 
Table ADBU – Administrative costs for Businesses associated to the implementation of the IAA Made in EU 
requirements for net-zero technologies beyond batteries and solar PV 

Net-zero technology 

Electrolysers 

Heat pumps 

Nuclear fission energy technologies 

Solar thermal technologies 

Wind 

Electricity grid technologies 

Administrative costs (recurring) 
½ week FTE 
Nr companies affected: 4 (20 large companies x 
18%) 
Total cost: EUR 2 100 
½ week FTE 
Nr companies affected: 29 (160 large companies 
x 18%) 
Total cost: EUR 16 900 
½ week FTE 
Nr companies affected: 4 (20 large companies x 
18%) 
Total cost: EUR 2 100 
½ week FTE 
Nr companies affected: 22 (120 large companies 
x 18%) 
Total cost: EUR 12 700 
½ week FTE 
Nr companies affected: 4 (20 large companies x 
18%) 
Total cost: EUR 2 100 
½ week FTE 
Nr companies affected: 8 (40 large companies x 
18%) 
Total cost: EUR 4 200 

Full  Time  Equivalents  and  number  of  affected  companies  are  estimated  using  the  same 
methodology and assumptions described in Annex 4 Section 2.1. 

307