"The challenge of financing the clean industrial deal"
The world is entering a new era of global competition, and cleantech manufacturing is at its heart. Reindustrialisation has brought industrial policy back into the mainstream, with China’s Made in China 2025 programme, and the American Inflation Reduction Act (IRA) investing billions of public funds to capture a share of a global market likely to reach $650 billion by 2030.

The European Union (EU) has also made its own strides forward, with its Green Deal Industrial Plan creating the regulatory framework for a faster build-up of cleantech factories across Europe. This looks set to continue under a new Clean Industrial Deal, which Ursula von der Leyen announced as she was voted to her second term as Commission President.
However, creating the right market conditions is only part of the answer. If anything is to be learned from the US and China, it is that competition requires public finance. Building a cleantech factory in Europe is both risky and capital-intensive, and private investors are at times unwilling to support European companies on the difficult journey to scale. Public finance has an important role to play by both de-risking those investments and providing the necessary “patient capital” to allow promising, innovative companies to grow.
It is encouraging, therefore, that in addition to the Clean Industrial Deal, President von der Leyen has put forward a European Competitiveness Fund. This Fund would be part of the next EU budget, the negotiations around which have begun in 2025. The hope is that the Competitiveness Fund can succeed where the Sovereignty Fund (which has since become the Strategic Technologies for Europe Platform, or STEP) has failed —and deliver a significant injection of public funds targeted at manufacturing strategic clean technologies.
However, even if the Competitiveness Fund can live up to its potential (the negotiations with Member States are far from easy), it will not be able to do so until at least 2028, when the next EU budget comes into force. Three years from now is a long time in this global cleantech race, and Europe cannot afford to wait. Finding interim public financing solutions, both at EU and Member State level, is therefore key.

Fortunately, the EU already has many tools at its disposal to bridge this gap —whether support to companies through the European Investment Bank (which has backed success stories such as battery manufacturer Verkor and green steel leader Stegra), or the channelling of state aid through Important Projects of Common European Interest (IPCEIs).
One of Europe’s most promising tools is the EU Innovation Fund. Funded by revenues from the EU’s carbon market, the fund is capable of disbursing €4 billion annually, with that figure —according to Institute for Climate Economics calculations— set to rise to over €20 billion by the end of the decade, mirroring the increase in carbon prices. The Fund has already been productively used to support competitive EU cleantech, whether through the Hydrogen Bank auction, the manufacturing call under REPowerEU, or the recently announced Battery Fund (supporting the industry which represents the lion’s share of public and private cleantech investment needs).
As the EU’s largest fund targeted at cleantech innovation and scale-up, the Innovation Fund should remain the cornerstone of our future green industrial policy. Its impact can be expanded by replicating the Hydrogen Bank model in other sectors, or combining grants with guarantees and venture debt received from the EIB.
In the words of President von der Leyen, “the race is on”. European cleantech manufacturing is at a critical juncture. Only by making the best use of the EU’s available funds, and particularly the Innovation Fund, can Europe build a cleantech industry ready to face the challenges of the decades to come.