Accelerating the clean transition

As part of the EU's ambitious climate agenda, including the newly announced 2040 target of a 90 percent reduction in emissions, the European Commission has issued recommendations on tax incentives to support the Clean Industrial Deal (CID). The following provides a detailed analysis of these recommendations and their alignment with other strategic frameworks and mechanisms, including the recently adopted Clean Industrial Deal State Aid Framework (CISAF).

The EU has issued comprehensive recommendations aimed at enhancing tax incentives to accelerate investments in clean technologies and industrial decarbonization. Key technical details include:

General principles: The recommendations stress the importance of tax incentives being cost-effective, targeted and straightforward, excluding investments in fossil fuel infrastructure. Suggested measures include accelerated tax depreciation and loss carry-forward rules for clean investments. Additionally, making tax credits refundable or applicable to a broader range of taxes is advised.

Tax credits: Member states are encouraged to offer tax credits for projects that expand manufacturing capacity for clean technologies and support industrial decarbonization. These credits should adhere to the compatibility conditions outlined in the Clean Industrial Deal State Aid Framework (CISAF), which specifies aid ceilings and intensities based on project location and size.

Accelerated depreciation: Relief through accelerated depreciation, potentially up to full and immediate expensing, is recommended for costs associated with acquiring or leasing clean technology equipment. Member states are encouraged to provide flexibility in depreciation schedules and consider zero-emission vehicles for corporate fleets as eligible for accelerated depreciation.

Enhanced tax credits and depreciation: Proposals for enhanced tax credits and depreciation for projects that contribute to resilience are highlighted, ensuring alignment with Union law and international obligations.

Implementation and reporting: Member states are invited to inform the Commission of the measures they have introduced to implement these recommendations by the end of 2025 and to regularly evaluate their effectiveness.

On 25 June 2025, the European Commission adopted CISAF, a new state aid framework accompanying the Clean Industrial Deal. CISAF is designed to help member states easily support the development of clean energy, industrial decarbonization and clean technology. It replaces the Temporary Crisis and Transition Framework (‘TCTF’) and remains in effect until 31 December 2030.

CISAF includes provisions for various aid measures, such as:

• Accelerating the rollout of clean energy.
• Supporting electricity costs for energy-intensive users.
• Facilitating industrial decarbonization.
• Ensuring sufficient manufacturing capacity in clean technologies.
• De-risking private investments.

These tax incentives complement the Clean Industrial Deal State Aid Framework (CISAF), which supports clean energy transition investments. The Carbon Border Adjustment Mechanism (CBAM) has been simplified to exempt 90 percent of importers, reducing administrative burdens and paving the way for a comprehensive review and legislative proposals expected later this year to address export carbon leakage.

Guidance documents have been presented to optimize new EU renewables rules, targeting the expansion of renewable energy sources and reducing energy costs. Initiatives for affordable energy and industrial decarbonization include scaling up manufacturing of grid components and supporting Power Purchase Agreements. The recently announced Multiannual Financial Framework outlines EU budget support for the clean transition and proposes new EU own resources, which might take the form of a fee on uncollected e-waste, a tobacco excise duty and a new corporate resource for Europe.

It is crucial to monitor national legislation changes in response to these recommendations. Understanding how member states implement these measures will enable timely and relevant action, ensuring compliance and maximizing incentive benefits.

For more information on these recommendations, please refer to our Euro Tax Flash or contact Ruth Guerra and Weronika Zurawska.