More state aid for green industry: the Clean Industrial State Aid Framework

1. State aid and the Clean Industrial Deal

Under EU law, state aid to undertakings is, in principle, prohibited. When national governments wish to grant state aid, they must notify the European Commission and await its approval. This control mechanism prevents state aid from distorting the internal market. For industrial decarbonisation, however, the Commission has now created new possibilities.

The concept of state aid also covers subsidies granted to undertakings to support, for example, the switch from fossil to renewable energy. Government support for industrial decarbonisation therefore falls under the state aid control regime. To facilitate such aid, the Commission adopted a brand-new framework in the summer of 2025. This framework sets out the conditions under which (very substantial) state aid for industrial decarbonisation can be approved by the Commission. Smaller amounts of aid may rely on the exemptions provided by the Commission, particularly under the General Block Exemption Regulation, which do not require prior approval.

2. Clean Industrial State Aid Framework

The Clean Industrial Deal, announced by the Commission in late February 2025 as part of the Green Deal strategy, aims to support European industry in its transition towards climate neutrality, with innovation and competitiveness at its core. In this context, the Commission has introduced the CISAF. The CISAF establishes the conditions under which Member States may provide financial support for specific green investments, including decarbonisation measures and the rollout of renewable energy.

The CISAF entered into force on 25 June 2025, replacing the Temporary Crisis and Transition Framework (TCTF). The TCTF was introduced in response to the war in Ukraine and allowed aid to offset additional costs caused by high energy prices. Under this framework, large energy transition projects were recently approved by the Commission in Germany (SA.107936 (2023/N)) and the Netherlands (SA.112112 (2024/N)).

The CISAF now allows similar – and even broader – support measures for industrial decarbonisation. For instance, in August a French aid scheme with a budget of €11 billion was approved to finance three offshore floating wind farms (SA.115764). The overarching goal of the CISAF is also to make the European Union less dependent on (foreign) fossil fuels.

Below, we discuss the CISAF in more detail.

2.1 General requirements for compatible state aid

Paragraph 3 of the CISAF first sets out two cumulative conditions that must be met for state aid to be approved: (i) the aid must stimulate economic activity and (ii) must not harm the common interest. According to the Commission, these conditions are generally met for all categories of aid under the CISAF.

The permitted aid is, in principle, form-neutral and can be combined with other forms of state aid, de minimis aid, or centrally managed EU funds. The main rule is that combinations are permitted provided they relate to different eligible costs. If (partly) the same costs are involved, the highest applicable aid intensities and amounts must not be exceeded. The CISAF also allows cumulation with other aid that has no identifiable eligible costs (see paragraph 3.3).

2.2 Requirements for specific aid measures

Paragraphs 4 to 8 of the CISAF lay down the specific requirements for different categories of aid, which include the following.

2.2.1 Deployment of renewable energy and low-carbon fuels

The CISAF allows aid for the production and storage of Renewable Fuels of Non-Biological Origin (RFNBOs) (paragraph 4.1). RFNBOs are synthetic fuels produced using renewable energy but not derived from biological sources such as biomass. Instead, they are made through electrolysis and other processes powered by renewable electricity – for example, renewable hydrogen (‘green hydrogen’).

Paragraph 4.2 introduces a specific aid scheme for accelerating the rollout of low-carbon fuels. This allows both investment aid and direct price support schemes for the production (and possibly storage) of such fuels, including RFNBOs. At least 30% of the scheme’s budget must be reserved for RFNBO production.

Both types of aid require implementation within 48 months – meaning that supported energy projects must become operational within this timeframe. The CISAF permits full cost coverage if beneficiaries are selected through a competitive bidding process.

2.2.2 Flexibility measures, capacity mechanisms, and temporary electricity price reductions for energy-intensive users

Paragraph 4.3 introduces a new form of aid for “non-fossil electricity flexibility”.

This measure recognises that intermittent renewable energy from wind and solar requires flexibility solutions to ensure security of supply. Typically, flexibility is provided by fossil fuel-based generation. The CISAF, however, encourages non-fossil alternatives by enabling aid for “flexibility sources” and “capacity mechanisms” through contracts that grant subsidies in return for providing non-fossil flexible capacity – such as demand response and energy storage (e.g. battery storage).

This aid must be granted on the basis of an aid scheme with a pre-estimated volume and budget. The allocation is made in the form of contracts that provide subsidies in return for flexible capacity. The amount of aid is determined through a competitive bidding procedure, and there is no maximum aid amount.

Paragraph 4.4 addresses capacity mechanisms, which have attracted considerable attention. Recently, the ACM published a note on capacity mechanisms, explaining that “a capacity mechanism means that market parties are remunerated in advance for keeping generation capacity, storage or demand response available, independent of and usually in addition to a remuneration for the electricity they supply. This moves away from the Energy Only Market, where suppliers, apart from a few services, only receive compensation for the electricity they deliver. The cost of the capacity mechanism is borne by electricity consumers.”

The Commission provides a framework for such aid by referencing Articles 21 and 22 of the Electricity Regulation, which require capacity providers to be selected through transparent, non-discriminatory and competitive procedures. In addition, detailed conditions are set out in Annex I of the CISAF. Support for capacity mechanisms may be approved for up to ten years.

Paragraph 4.5 covers aid to undertakings in sectors highly dependent on international trade and electricity (‘energy-intensive users’). The CISAF offers support options in this context that are not subject to absolute maxima but do impose proportionality requirements. Aid may cover up to 50% of the market price for 50% of annual electricity use and must not result in a price lower than 50 euros per MWh. The duration of the aid is limited to a maximum of three years, with no payments allowed after 31 December 2030. With this aid, Member States can reduce electricity costs for energy-intensive undertakings that face higher costs than competitors in regions with less ambitious climate policies. In return, beneficiary undertakings must invest at least 50% of the aid amount in new or modernised decarbonisation technologies, which are not eligible for other state aid. The aid is granted under a scheme with an estimated budget. Beneficiaries must be selected based on objective, non-discriminatory and transparent criteria.

2.2.3 Aid for industrial decarbonisation

Paragraph 5 addresses aid for decarbonisation projects and projects aimed at improving energy efficiency in industry. This paragraph differs from those discussed above in that it is not primarily concerned with energy generation or storage, but with making industrial processes themselves more sustainable. Energy generation or storage may be supported when it forms an integral part of the broader decarbonisation project being aided. The aid is granted under an aid scheme, but ad hoc aid for individual projects is also possible under certain conditions.

The CISAF sets clear parameters for these projects. The implementation period is a maximum of 60 months, while the minimum reduction in greenhouse gas emissions must, in principle, be 40% for existing installations. An important condition is that this reduction must not lead to higher emissions elsewhere. Additional, stricter requirements apply to low-carbon technologies and carbon capture, as laid down in paragraphs 5.2.2 to 5.2.4. No minimum requirement applies to the absolute reduction in greenhouse gas emissions.

The maximum aid amounts may be substantial and are determined using three different methods. Under the first method, the aid intensity is based on (administratively established) eligible costs, with a maximum of 200 million euros and aid intensities between 20% and 60%, depending on the technology used. The second method involves establishing the funding gap of the eligible investment. Where the calculated gap exceeds 200 million euros or more than 10% of the scheme’s budget, the measure must be notified to the Commission. The third method offers the greatest flexibility: through a competitive bidding procedure, the aid amount can be determined, with no maximum aid amount or intensity.

Aid is granted under a scheme with an estimated budget and may be provided in the form of direct grants, repayable advances, loans, guarantees or tax advantages.

2.2.4 Aid for clean technology production capacity and Innovation Fund projects

Paragraph 6 provides for aid aimed at ensuring sufficient production capacity for clean technologies. To enable the aforementioned industrial decarbonisation and expansion of renewable energy generation, critical raw materials are required.

Investment aid is therefore possible for the production of an extensive list of end products and specific components included in Annex II of the CISAF. End products may include onshore or offshore wind turbines, and specific components include, among others, blades and towers for wind turbines.

Aid is also made available for the production or recovery of critical raw materials needed for those end products and components. These include technologies such as solar panels, wind turbines, battery and energy storage, heat pumps, geothermal energy, hydrogen technologies, CCS technologies, grid technologies, transformative industrial decarbonisation technologies and nuclear technologies such as fusion. The aid intensity varies from 15% to 35% with maximum amounts between 150 and 350 million euros, depending on the project’s location. More favourable conditions apply to smaller enterprises (paragraph 6.1 CISAF). Although aid is, in principle, granted under a scheme, ad hoc aid for individual projects is also possible, provided that additional conditions are met (paragraph 6.2 CISAF). Beneficiaries must contribute at least 25% of their own financing. Support is also possible in the form of accelerated depreciation for the purchase or leasing of the end products on the list, allowing undertakings to move more quickly towards clean technology.

Paragraph 7 provides for support for projects under the European Innovation Fund that have received a sovereignty seal and are designed to support climate-neutral technology.

2.2.5 Aid to mitigate private investment risks under the Clean Industrial Deal

Whereas the aid measures discussed above involve direct support from Member States to undertakings, projects or products, paragraph 8 of the CISAF enables aid to reduce the risks of private investments. This aid is intended for private investors investing in projects falling within the scope of paragraphs 4.1, 4.2, 4.3, 5 and 6 of the CISAF, as well as energy infrastructure (in the context of a monopoly) and projects supporting the circular economy.

This aid takes the form of equity, loans (including subordinated loans) and/or guarantees provided to a specific fund or Special Purpose Vehicle (SPV) holding a portfolio of eligible projects. The aid aims to provide private investors with risk and/or return incentives to invest in that fund or SPV, for example through first-loss guarantees or equity investments with different share classes. The fund or SPV may then invest in individual projects through newly issued equity, quasi-equity, loans or guarantees, with a maximum of 250 million euros per project. The aid must be granted under a scheme and implemented through a financial intermediary that receives a market-based fee and bears its own risk.

Private investors must, in principle, be selected through an open, transparent and non-discriminatory procedure to ensure that aid is limited to the ‘necessary minimum’. If such a procedure is not followed, specific investor protection rules must apply. Private investors must also present an investment plan in order to participate.

3. Key takeaways and next steps

The CISAF is a complex set of rules with many different aid intensities and maxima and offers unprecedented opportunities under state aid law for greening Europe’s energy production and industry. The CISAF is therefore an important development in European sustainability and energy policy. It creates a framework that, if properly utilised, can provide a powerful boost to the transition of the European economy.

At present, no aid scheme or ad hoc aid has been approved in the Netherlands under the CISAF by the European Commission. It is expected that the (new) government will develop and submit a framework or scheme for approval, under which aid in line with the CISAF can be granted (similar to the Framework for Calls for Proposals for Additional CO₂ Reduction through Electrification approved under the TCTF). Undertakings will be able to apply for aid under those schemes, or, in consultation with the relevant ministries, obtain ad hoc aid under the CISAF.

The first concrete efforts are expected from the Ministry of Climate and Green Growth (KGG), which has commissioned research into the possibilities under the CISAF for Contracts for Difference (long-term financial contracts intended to stabilise prices for energy producers or consumers). The Industrial Electrification Action Agenda (September 2025) of KGG shows that the aim is to lower electricity costs and that, based on the CISAF, follow-up steps will soon be announced.

The Parliamentary Committee on Infrastructure and Water Management has also examined the possibilities under the CISAF and concludes that it creates opportunities in particular to strengthen the circular economy.

We will provide further information on the opportunities under the CISAF and on how governments and undertakings can make use of them in our webinar on 11 November 2025 at 12:00. Valerie van 't Lam will participate in the webinar and will explain the environmental law aspects related to the aid measures. Please note that the webinar will be held in Dutch.