- Accelerated depreciation and targeted tax credits will reduce upfront costs and enhance cash flow for companies investing in clean tech and decarbonization.
- Aligned with the Clean Industrial State Aid Framework (CISAF), the measures allow for compatibility with EU funds and state aid without complex grant calculations.
- Supports the EU’s 2050 net-zero goal by creating a fair, investable industrial ecosystem focused exclusively on clean technologies.
The European Commission has released a new Recommendation on Tax Incentives to support the Clean Industrial Deal (CID), a key pillar of the EU’s climate-neutral strategy. This initiative outlines a robust framework for Member States to deploy targeted, cost-effective tax tools aimed at driving clean technology investment and industrial decarbonisation.
Unveiled as part of the CID implementation package, the Recommendation focuses on two central instruments:
1. Accelerated Depreciation — Including Immediate Expensing
This provision enables companies to deduct the full cost of eligible clean technology investments — such as renewable energy systems and energy-efficient machinery — in an accelerated timeframe, potentially in the same year the investment is made. This reduces upfront tax liabilities and improves liquidity.
“Where possible, accelerated depreciation should be accompanied by appropriate rules for carrying losses forward.”
These incentives are designed to work in tandem with the Clean Industrial State Aid Framework (CISAF), ensuring compatibility with other EU funds and removing the need for gross grant equivalent calculations.
2. Targeted Tax Credits
Direct reductions in corporate tax obligations will stimulate investment in priority sectors like clean technology manufacturing and industrial decarbonisation. These credits may be refundable or offset against other national taxes, where feasible.
“Under CISAF, tax credits for projects are capped at a specific amount per project, and subject to maximum aid intensities.”
Key Design Principles
To ensure effectiveness and alignment with broader EU climate goals, the Recommendation establishes foundational principles for all tax measures:
- Targeted Use: Applicable only to clean technology and decarbonisation investments — fossil fuel-related projects are explicitly excluded.
- Simplicity and Certainty: Clear eligibility criteria and ease of implementation are required for both taxpayers and tax authorities.
- Timeliness: Measures must provide immediate support to influence ongoing investment decisions.
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Regulatory Alignment
All tax incentives must comply with EU state aid rules. Where the measures fall under the CISAF, compatibility criteria are defined in:
- Section 5 for industrial decarbonisation, and
- Section 6 for clean technologies.
For incentives not covered by CISAF, Member States can rely on Commission Regulation (EU) No 651/2014 (GBER), which includes support mechanisms for projects like zero-emission vehicles.
Strategic Vision and Economic Impact
Launched in February 2025, the Clean Industrial Deal seeks to build a resilient, investable clean tech ecosystem across Europe. This Recommendation advances that objective by using tax policy as a lever to:
- Stimulate private investment in decarbonisation and sustainable manufacturing,
- Level the playing field for companies shifting to greener models,
- Enhance industrial competitiveness in line with the 2050 net-zero goal.
“By leveraging tax incentives, the EU empowers businesses to lead the clean transition while ensuring fair competition.”
What’s Next?
Member States are now expected to adopt relevant measures and report progress. The Commission will facilitate best-practice sharing, monitor outcomes, and publish regular assessments to measure how these tax policies are accelerating clean investment.
“This will help evaluate the effectiveness of tax incentives and their contribution to the broader goals of the Clean Industrial Deal.”
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