The European Union’s just published Clean Industrial Deal attempts to balance energy security and decarbonization with renewed competitiveness. It aims to mitigate the continent’s high energy costs by streamlining permits for renewable energy projects and subsidizing clean-tech manufacturing. 

Yet, as the saying goes, the road to hell is paved with good intentions. While the plan acknowledges existential threats facing European industry — high energy prices, tough competition from the US and China, and fragmented industrial policies — it offers few tangible solutions. Instead of tackling the root causes of Europe’s industrial decline, the Clean Deal relies on incremental, bureaucratic reforms and vague financing promises.  

A true fix requires deepened EU integration in energy, taxation, and industrial policy. 

European manufacturing suffers from persistent high energy costs. Steel, cement, and chemical industries, among others, have either shifted production abroad or drastically scaled back European investments. ArcelorMittal has delayed its €1.7 billion investment citing regulatory uncertainty while Germany’s BASF is contemplating listing one of its major divisions in the US. Global firms prioritize expansion in the US, where energy prices are significantly lower than in Europe due to abundant cheap natural gas.  

Europe’s climate bazooka is a carbon trading program which goes by the dreary acronym CBAM. It imposes a tariff on imported carbon intensive products such as steel and cement. The plan encourages adoption of power purchase agreements to stabilize electricity prices for industrial consumers.  

Not surprisingly, the Trump administration equates CBAM with protectionism, making it a transatlantic flashpoint. Under the Biden administration, Europe and the US shared the common aim of fighting climate change and de-risking from China. Biden rejoined the Paris climate agreement. Upon moving into the White House, US President Donald Trump moved in the opposition direction. He repealed regulations aimed at promoting electric vehicles, opened vast areas of public land and federal waters for oil drilling and mining, and ordered the withdrawal from the Paris Agreement. 

Back in Europe, CBAM faces its own hurdles. It fails to address the fundamental problem: the EU’s electricity market remains tied to the volatile cost of natural gas through the merit order mechanism. This exposes European industry to unpredictable price swings and prevents long-term stability needed for large-scale investments. A reformed pricing model — such as capacity markets rewarding reliability — would provide a much needed predictable investment environment. 

While the EU’s new Clean Deal calls for accelerating grid interconnection to improve electricity price stability, it ignores the political and technical barriers that have long hindered progress. National resistance—such as France’s reluctance to expand interconnectors with Spain—continues to delay full market integration. The Clean Deal acknowledges the importance of interconnectors but does little to advance their development beyond reiterating past commitments.  

Another major flaw is the EU’s fragmented energy taxation system. Electricity prices vary between member states due to differing tax regimes — Germany’s heavy industrial levies contrast with Poland’s coal subsidies. The Clean Deal fails to propose concrete steps to harmonize energy taxation. Similarly, the EU lacks a unified energy exchange that could pool liquidity and reduce volatility.  

The plan’s financial incentives remain too vague. A TechEU investment program designed to “bridge the financing gap” for disruptive innovation fails to specify how private investors will be lured into participating. Without clear incentives — such as state-backed risk guarantees, preferential tax treatment, or regulatory exemptions — the private sector will not pour capital into high-risk European industrial ventures. 

Although a Competitiveness Fund, promises “strong support” for innovative industries and simplified access to EU financing, the Clean Deal fails to specify this fund will introduce new financial tools or simply consolidate existing programs under a single application process. If it merely repackages existing funding, it will do little to address the severe investment gap between the EU and its global competitors.  

Another glaring omission is the absence of export credit guarantees. While China and the US offer aggressive subsidies and state-backed financing for clean tech firms, European companies like Siemens and Vestas receive no comparable support. European exporters will continue to rely on national credit agencies and commercial banks for backing, as seen with Siemens Gamesa securing a €1.3 billion guarantee from Spanish and French banks and Spain’s export credit agency. 

Demand-side reforms are missing, too. Although Europe’s energy-intensive industries could reduce consumption through efficiency upgrades like hydrogen-ready steel furnaces, the Clean Deal offers no clear incentives. Fragmented national policies discourage shifting operations to off-peak hours to stabilize prices. 

The verdict is somber: the Clean Deal is a political compromise that stops short of meaningful action. A fully integrated electricity market, a centralized strategic energy reserve, and a harmonized industrial policy are needed to restore European competitiveness. Thes require deep EU integration. What was billed as a groundbreaking initiative to revive EU industry threatens instead to turn Europe into a museum of climate virtue, admired for its good intentions but empty of factories. 

Maciej Bukowski is a non-resident fellow with the Tech Policy Program at the Center for European Policy Analysis (CEPA). Maciej is a climate diplomacy and energy security expert, and a PhD candidate at the Institute of Political Science and International Relations at the Jagiellonian University in Cracow. 

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.

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