Challenges, opportunities, and risks of the new European state aid framework

The new State Aid Framework for the Clean Industrial Deal (CISAF) is a key initiative through which the European Commission seeks to accelerate the energy transition and decarbonise European industry. Faced with climate change and global competition, particularly from the United States and China, the objective is to ensure that Europe maintains its leadership in clean technologies.

The European Commission has launched a public consultation to gather opinions on the draft of the CISAF, open until 25 April 2025. The final version of the CISAF—which is set to replace the Temporary Crisis and Transition Framework (TCTF)—is expected to come into force in June 2025. Its three main areas of support include accelerating the deployment of renewable energy, driving the decarbonisation of the industrial sector, and encouraging investments to strengthen manufacturing capacity in clean technologies.

The CISAF is designed to provide a planning horizon until 2030. Greater regulatory stability will offer more predictability and security regarding investments in clean technologies for Member States and businesses. However, the effectiveness of the CISAF will depend on its implementation at the national level and competition from other countries’ aid schemes. The difference with initiatives such as the United States’ Inflation Reduction Act, which has a horizon until 2035, is clear and could pose direct competition for Europe. Therefore, the CISAF addresses the following four major challenges.

More transparency and monitoring

Member States will be required to publish relevant information on each individual aid grant exceeding €100,000 under this framework, and over €10,000 in the primary agriculture and fisheries sectors. Another key element of the CISAF is the mandatory bidding process, either through competitive or administrative procedures, aimed at ensuring transparency and efficiency in the allocation of aid. This system, however, may prove counterproductive, particularly in sectors such as energy storage or renewable hydrogen, where technologies are still at an early stage of development.

In such cases, bidding procedures could slow down access to aid and hinder adaptation to market needs. Additionally, the bureaucracy associated with these processes could limit the participation of SMEs or innovative startups, which lack the necessary resources. Another risk is that some countries may design bidding regimes that favour national players, potentially causing distortions in the European Single Market and harming competitiveness between countries.

Greater autonomy in the manufacturing of clean technologies

The CISAF includes aid for the production of clean technologies such as batteries, solar panels, heat pumps, wind turbines, and electrolysers, with aid intensities ranging from 15% to 75% and a cap of €175 million in grants, €350 million in loans, and €525 million in guarantees per project, not per company. Although these aid measures aim to strengthen European manufacturing capacity, concerns remain as to whether they will truly contribute to Europe’s industrial development or simply attract component manufacturing for assembly, particularly if raw materials are predominantly sourced from countries such as China.

To ensure that the CISAF does not solely benefit the final stages of the value chain, it is essential that Member States promote the integration of the entire supply chain within Europe. This includes the manufacturing of raw materials and intermediate components, which would strengthen the European industrial ecosystem. It will be crucial for state aid schemes to be ambitious enough to foster this long-term integration.

Funding, regional inequalities, and global competition

A fundamental factor will be determining the budget allocations of Member States and regions to launch aid calls under the CISAF. The upcoming expiration of the Next Generation EU funds raises concerns that, unless new financing mechanisms are created, countries with greater financial capacity, such as Germany and France, will be the main beneficiaries of the CISAF. This could create imbalances in fund distribution, disadvantaging countries with less developed or transitioning regions.

The CISAF also allows Member States to offer aid exceeding that of countries such as the United States and China to prevent investment outflows. However, this could trigger a subsidy war, distorting competition within the European Single Market. The European Commission will need to establish clear criteria to ensure that aid benefits projects with the greatest transformative potential, avoiding market distortions.

Global competition in the clean technology sector is fierce, meaning the agility of the CISAF’s implementation will be crucial. While the process of designing and approving aid schemes by Member States could be slow, the framework’s flexibility will be key for Europe to remain competitive against more dynamic markets.

A fair and inclusive transition

The CISAF must ensure a fair and inclusive transition, guaranteeing that aid does not only benefit large companies but also SMEs and startups, which are essential for technological disruption in the sector. Moreover, the transition to a low-emission economy must consider regions heavily reliant on carbon-intensive industries.

Although the European Commission has announced measures to promote inclusion, it remains unclear whether they will be sufficient to ensure that all actors, regardless of size or location, can access aid equitably.

Towards a future with new opportunities and more attractive aid schemes

The CISAF has the potential to be a key instrument for the green transition in Europe, but its effectiveness will depend on how it is implemented in each Member State. For it to be successful and genuinely incentivise investment, the European Commission must ensure that the framework is transparent, flexible, inclusive, and agile, allowing it to adapt quickly to emerging challenges and changes. The success of the CISAF will be crucial for Europe to maintain its competitiveness in the global race for innovation and decarbonisation.

At Zabala Innovation, we will continue working to provide our clients with the most up-to-date information on the evolving landscape of public funding at regional, national, and European levels. The over €5.3 billion secured for our clients since 2021—through national aid programmes (including Next Generation EU funds) and European Commission initiatives such as Horizon Europe and the Innovation Fund—positions us as one of the leading consultancies capable of delivering a comprehensive service to companies and organisations looking to maximise access to financial or tax-based aid to drive all types of projects.

Check here the proposal for the new State Aid Framework (CISAF).

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