Design and implementation of ‘Industrial Decarbonisation Bank’

Achieving the EU's climate targets for 2040 and 2050 will require substantial investment in the decarbonisation of all energy- and emission-intensive industrial sectors. Carbon price signals from the EU Emissions Trading System alone are not sufficient to drive this level of investment, requiring targeted public support instruments to reduce risk and mobilise private capital.

Against this backdrop, the European Commission has announced the Industrial Decarbonisation Bank as part of the Clean Industrial Deal. The project supports DG CLIMA in the conceptual design of this new EU-wide funding instrument. The consortium led by Fraunhofer ISI provides scientifically sound expertise in the selection of suitable funding mechanisms, the development of the legal and governance structure, and the development of the first funding instrument. The aim is to create an efficient, competitive and coordinated funding architecture that accelerates industrial decarbonisation while ensuring competitiveness.

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Background

The European climate targets for 2040 and 2050 require a profound restructuring of energy- and emission-intensive industries. For many key technologies, the necessary investments are capital-intensive, long-term and associated with considerable market and price risks. At the same time, industrial companies are under strong international competitive pressure, which makes the implementation of large-scale decarbonisation projects even more difficult.

EU emissions trading system provides a key economic incentive to reduce emissions, but in most cases, it is not enough on its own to enable profitable business models with new industrial decarbonisation technologies. Supplementary regulatory measures often take time to unfold an effect. Without additional, specifically designed support instruments, there is therefore a risk that climate targets will not be achieved due to a lack of investment, relocation or the loss of industrial value creation within the EU.

Against this backdrop, the European Commission has announced the ‘Industrial Decarbonisation Bank’ as part of the Clean Industrial Deal. This is intended to complement existing EU funding instruments, mobilise significant volumes of private capital and bundle various funding mechanisms, such as competitive mechanisms and ‘carbon contracts for difference’. The aim is to efficiently support industrial decarbonisation investments across the EU, mobilise private capital and, at the same time, limit distortions of competition between Member States.

Objectives and Approach

The aim of the project is to support the European Commission (DG CLIMA) in the design, legal establishment and operational preparation of the Industrial Decarbonisation Bank. The focus is on developing an effective and EU-wide coherent funding framework that enables investment in industrial decarbonisation, mobilises private capital and, at the same time, ensures the economic efficiency and competitiveness of European industry.

Methodologically, the project combines economic analyses, comparative assessments of existing funding instruments and the development of concrete design options for funding mechanisms. These include, in particular, competitive procedures, carbon contracts for difference and other risk-hedging instruments suitable for large-scale industrial applications.

Building on this, the project supports the Commission in designing the governance and legal structure of the bank and in developing the first funding instrument. This also includes the involvement of Member States, coordination with existing EU funding programmes and structured exchange with relevant stakeholders in order to prepare for a practicable, scalable and legally secure implementation.

Results

The project is still ongoing, so there are no results that can be published yet.

Duration

September 2025 – August 2027

Clients

European Commission (DG Climate Action)

Project