CISAF misses an opportunity to learn from the IRA to create a framework that could leverage public money to unleash hundreds of billions in private money over the next few years, at a time when there is a clear window of opportunity for Europe. Despite some positive steps, new state aid rules will repeat structural failures of the past rather than enabling Europe to invest and compete smartly.  

Executive Summary

The Clean Industrial Aid Framework (CISAF), adopted by the European Commission on 25 June 2025, falls short of expectations and requirements to strengthen European economic security and competitiveness and address strategic geopolitical and macroeconomic risks.

Encouragingly, CISAF empowers Member States (MS) to include European preference and resilience criteria in bidding processes and clean tech manufacturing support. It also acknowledges the macroeconomic challenges and global uncertainty facing European clean tech producers, particularly in the battery sector. CISAF allows equity and quasi-equity alongside private investors to support both investment and operating costs.

Yet, critical elements are either missing or distorted in the EC’s adoption. Production support, conditionalities, and harmonised rules should be at the heart of CISAF, which overlooks key lessons from the US Inflation Reduction Act (IRA), particularly the need for production (output)-based support that directly incentivises clean tech output.

Production support should improve cost competitiveness by lowering marginal costs of manufacturing, which is essential in a market where price pressures from foreign producers are intense. Production-linked support would be better suited to the needs of cleantech companies facing global competition than the additional equity capital now permitted for MS. CISAF also maintains the flawed funding gap-based approach and clawback mechanisms, which undermine the financial viability of scaling clean tech manufacturing across Europe.

EIES continues to back the explicit inclusion of production-based support mechanisms. The next Multiannual Financial Framework could also address these issues by creating a strong EU-level output-based funding mechanism and linking funding support to clear conditionalities. However, the next MFF will only be introduced in 2028, and action is needed now.

Europe risks falling behind in the race for clean technologies 

Clean technologies are vital to the EU’s industrial transformation and energy security. Yet, Europe’s clean tech ecosystem remains vulnerable, facing intense global competition, particularly from China. Without decisive action on aid, procurement, product regulation and trade, Europe risks repeating past mistakes. Solar manufacturing has already shifted to China, and Europe faces the risk of losing its limited battery production due to the same trend. Nevertheless, EIES is pleased to see some of its recommendations recognised by the Commission, including:

• CISAF allows the application of NZIA conditionalities, which include resilience and cybersecurity risk management criteria, when MS provide state aid, including for manufacturing support.

• CISAF encourages MS to include European preference criteria (“Made in Europe”) in bidding processes. MS are also empowered to include resilience criteria when supporting clean tech manufacturing, particularly criteria that would contribute to reaching the 40% NZIA manufacturing target for net-zero technologies by 2030.

• CISAF seems to endorse MS’ ability to recover the aid should the conditions not be met, thus giving them stronger enforcement power.

• CISAF recognises the macroeconomic issues and global uncertainty faced by European clean tech manufacturers, particularly the battery industry. CISAF allows MS to provide funding on market terms, including equity and quasi-equity, alongside private investors under equal risk and reward conditions (pari passu). This support is crucially allowed to cover both investment and operating costs.

• CISAF aims to support the energy-intensive industry through targeted electricity price relief measures. Under CISAF at least half of this type of aid should go in energy modernisation such as energy storage, electrification, renewables or energy efficiency. This has the potential to reduce Europe’s energy dependence on third-country fossil fuel imports in the long-term through the measure’s decarbonisation objective.  

Despite this, CISAF falls short of what Europe needs to strengthen its long-term competitiveness and enabling it to compete globally. In its current form, European state aid will repeat structural failures of the past rather than enabling Europe to invest and compete smartly.

Critical elements are either missing or are distorted in the EC’s adoption. EIES encourages the EC to revise:

• CISAF ignores key lessons from the US Inflation Reduction Act. State aid should support clean tech production, not just capacity. It remains a missed opportunity to promote production-based support for cleantech manufacturing. It does not go far enough in simplifying aid, making it more predictable, and tied to performance and outcomes.

• Production support should improve cost competitiveness by lowering marginal costs of manufacturing, which is essential in a market where price pressures from foreign producers are intense. Instead, production-linked support is better suited to the needs of cleantech companies facing global competition than the additional equity capital now permitted for MS.

• CISAF does not take appropriate steps to prevent further fragmentation of the European market, making it difficult for companies operating across jurisdictions. Existing fragmentation results in a high cost of doing business and disadvantages smaller companies. Harmonisation and standardisation of notifications, aid rules and procedures across Member States are crucial. CISAF encourages MS to use all available state aid guidelines, including the older Guidelines on State aid for Climate, Environmental protection and Energy (CEEAG). This, however, risks maintaining guidelines window-shopping by MS.

• CISAF remains based on complex, project-by-project and opaque aid procedures.

• CISAF maintains the funding gap-based approach and clawback mechanisms, and misses the opportunity to better support clean tech manufacturing. CISAF states that where ‘aid amount exceeds EUR 30 million per undertaking per project, a claw-back mechanism must be put in place to ensure that the Member State receive an appropriate share of any additional surpluses generated by an aided project.’

• Operational costs (OPEX) are not supported in the rollout of renewables and low-carbon fuels.