This article was the Topic of the Week in the newsletter for week 27 of 2025.

The international subsidy competition is in full swing – as demonstrated by programmes like China's "Made in China 2025," the American "CHIPS and Science Act," and South Korea's "Chips Act." EU Member States also support their economies in various ways through investments. To combine the objectives of decarbonisation and global competitiveness, the Commission plans to present a new framework for national subsidies this week: the "Clean Industrial State Aid Framework" (CISAF).

Moderate Use is Key

To ensure fair competition conditions in the EU single market, the European Commission only permits national state aids under certain conditions. Over recent years, it has developed a toolbox with various instruments that allow Member States to provide financial support to their businesses. These include the temporary crisis framework for aids and the so-called "Important Projects of Common European Interest" (IPCEI).

The guiding principle is that public funds should primarily improve general site conditions that benefit the broader economy. Subsidies for specific industries or target groups should only be used sparingly, efficiently, and for a limited time. Close coordination with the economy and between EU states is indispensable.

Design CISAF to be Technology-Neutral

Given state subsidies and favourable energy prices in other global regions, the EU Commission plans to significantly expand the current crisis framework with CISAF. The aim is to promote industrial decarbonisation while enhancing competitiveness – especially in foundational industries.

For a successful reform, it is essential to have technology-neutral funding criteria that consider different approaches to CO₂ reduction in businesses – such as electrification or CO₂ capture (CCS). Equally critical are strong incentives for genuine innovations: Every euro spent on established technologies is missing for the development of future-oriented but not yet competitive solutions and their market ramp-up. Examples of meaningful incentives could include construction cost subsidies for hydrogen grid connections or simple and SME-friendly climate protection contracts. It is crucial that entrepreneurial freedom in choosing decarbonisation technologies is not distorted by state aid regulations.

Simplify IPCEIs

The Commission also plans to simplify IPCEIs and expand them to more areas. Especially for small and medium-sized enterprises (SMEs), they could offer an opportunity to benefit from national subsidies in the future – provided that the bureaucratic effort is significantly reduced.

Fundamentally, IPCEIs aim to bring cutting-edge technologies to market maturity, build large infrastructures, and prevent distortions in the single market.

Strengthen Europe as a Business Location

The EU and its Member States should focus on sustainably strengthening Europe's competitiveness through structural investments in digital infrastructure, energy grids, and transport axes. At the same time, favourable conditions for innovations and disruptive technologies "made in Europe" are needed: less bureaucracy and more trade agreements. Such measures strengthen Europe's entire economic location permanently – and are more sustainable than short-term subsidies.