On 25 June 2025, the European Commission adopted a new State aid framework accompanying its Clean Industrial Deal, a plan to accelerate decarbonisation, reindustrialisation and innovation within the EU (see our earlier briefing on the Clean Industrial Deal here). The adoption of this new State aid framework will support the objectives of the Clean Industrial Deal by making it easier for Member States to grant aid compatible with its objectives.
Previous Framework
The Clean Industrial Deal State Aid Framework (“CISAF”) replaces the Temporary Crisis and Transition Framework 2023 (“TCTF”), which was initially established to enable Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s war against Ukraine. The TCTF was subsequently amended to allow Member States to, amongst other things, grant State aid to foster the transition to a net-zero economy. Aid was granted to:
- accelerate the roll-out of renewable energy, storage and renewable heat;
- decarbonise industrial production processes; and
- accelerate investments in key sectors for the transition towards a net-zero economy.
The TCTF was adopted in March 2022 and by the end of 2023 a total of €164.08 billion in State aid was approved under the TCTF by the European Commission. Some significant examples of State aid schemes approved under the TCTF include a €10.82 billion French State aid scheme to support offshore wind energy and a €1 billion Portuguese State aid scheme to support investments in strategic sectors, both necessary to foster the transition to a net-zero economy. Ireland runs onshore and offshore renewable energy auctions but, according to the State aid scoreboard 2024, Ireland spent less than 25% of its approved budget by the end of 2023.
Clean Industrial Deal State Aid Framework
The TCTF was replaced on 25 June 2025 with the commencement of the CISAF, which will remain in place until 31 December 2030. The CISAF simplifies State aid rules by establishing parameters under which Member States can grant support for certain investments and objectives, while ensuring any State aid granted is necessary, suitable and fair.
The CISAF supports the Clean Industrial Deal (and, in so doing, energy intensive and clean-tech industries) by simplifying State aid rules in a variety of ways:
- It allows Member States to grant aid that supports investment in renewable energy development, thereby accelerating its rollout. Such aid will facilitate industry decarbonisation by supporting various eco-friendly technologies, including electrification, hydrogen, and carbon capture, utilisation and storage.
- It allows for temporary electricity price support for energy-intensive users. Such aid can be provided for a maximum of three years and, in return, beneficiaries will be required to invest in decarbonisation.
- It provides for aid to ensure sufficient manufacturing capacity in clean technologies recognised in the Net-Zero Industry Act, including for critical raw materials.
- It allows Member States to grant aid to incentivise private investment in clean energy, decarbonisation, clean tech manufacturing, energy infrastructure and the circular economy. Such aid will take the form of equity, loans (including subordinated loans) and/or guarantees provided to a dedicated fund or special purpose vehicle (“SPV”) that will hold the portfolio of eligible projects and aims to achieve return incentives and reduce the risk of investment for private investors to invest in that fund or SPV.
The overall aim is to facilitate faster adoption of innovations, increase access to clean energy and reduce bureaucratic hurdles for businesses, including SMEs.
Tax Incentives: Accelerated Depreciation and Tax Credits
The CISAF recognises the key strategic role Member States’ fiscal policy can play in driving private green investment. The Commission recommends[1] leveraging tax incentives such as accelerated depreciation and tax credits to support further decarbonisation. The aim of these measures is to increase cash flow for companies and reduce tax liabilities in a given tax year in order to free up funds for investment.
Accelerated Depreciation
The CISAF allows for State aid in the form of accelerated depreciation to be granted to incentivise acquisition or lease of clean technology equipment. Accelerated depreciation may take the form of ‘immediate expensing’, whereby the taxpayer is entitled to deduct the whole depreciable amount in the tax year in which the investment is made, or ‘flexible’ depreciation, which allows companies to depreciate the assets at a time that is convenient to them. The CISAF specifies conditions that must be met in order for accelerated depreciation to be permitted, such as the asset being new, depreciable and retained for at least five years.
Tax Credits
The Commission further recommends that Member States provide tax relief in the form of tax credits for investment projects related to decarbonisation. Such projects should be focused on reducing greenhouse gas emissions, improving the energy efficiency of industrial activities, and creating additional manufacturing capacity in clean technologies.
The credits should be designed to operate primarily in the corporate income tax system with the amount of the credit calculated in relation to the expenditure actually incurred in making the relevant investment. In order to allow companies to take full advantage of these credits, Member States are encouraged to allow companies to carry forward losses and unused tax credits for four years.
Additional Measures
Other State aid rules that exist will continue to apply in parallel to the CISAF and can be used to advance the Clean Industrial Deal for different and more complex support measures. Such rules include the General Block Exemption Regulation, the Climate, Energy, and Environmental Aid Guidelines and the Regional Aid Guidelines.
Next Steps
The CISAF affords Ireland a valuable opportunity to accelerate the roll-out of renewable energy and make clean energy production more accessible and attractive for industrial users through the simplified State aid rules. The full potential of the CISAF should be used to contribute to Ireland’s competitiveness at a global level.
For more information, please contact a member of the Competition and Regulated Markets, Infrastructure, Construction and Utilities or Tax groups.
Many thanks to Sarah McKeon and Rebecca Kerins Brett for their contributions to this article
