EU Industrial Acceleration Act: Energy transition, green industry, and economic sovereignty

Through the Industrial Acceleration Act (IAA), the EU aims to promote the production of clean energy technologies within the internal market while reducing dependence on external supply chains. For decades, the European Union has been seen as a model of an open economy based on market rules, with climate policy primarily driven by environmental standards or carbon markets. However, global economic fluctuations since 2020 have unsettled this model’s foundation. Higher energy costs following geopolitical shocks, competition pressures from major industrial economies—especially China—along with a downturn in heavy industry have forced Europe to rethink its development strategy. Strategy of transformation and a turning point in economic thinking: In this context, the European Commission’s March 2026 proposal of the Industrial Acceleration Act can be seen as a watershed in the bloc’s economic thinking. Unlike climate policies that focused on curbing emissions through regulation and carbon pricing, the IAA aims to restructure Europe’s industrial base to both reduce emissions and strengthen domestic production capacity. In other words, the law seeks to address two major issues at once: industrial capacity constraints and the urgent energy transition requirements. The IAA reflects a shift from a “standards-based climate” model to a green industrial policy model. This shows the EU increasingly recognizes that the climate fight is not only an environmental issue but also a contest in technology, supply chains, and economic power in the 21st century. The IAA is not an isolated initiative but the result of a policy-planning process within the EU. The idea first appeared in the EU’s 2024 political guidelines, highlighting the need to build a new framework to support industries during the transition to a low-carbon growth model. The basis of the proposal rests on the fact that heavy industries such as steel, cement, and chemicals currently account for about one-fifth of EU emissions. Therefore decarbonizing these sectors is essential to achieve climate neutrality in the coming decades. However, the transition faces obstacles including high investment costs and the risk of losing competitiveness to international rivals. Thus, when the European Commission published the “Clean Industrial Deal” strategy in 2025, one pillar was to create “lead markets” for low-carbon products. The basic idea is to use public procurement power and financing mechanisms to stimulate demand for clean industrial products, encouraging long-term investment by businesses. During drafting, the initial bill was named the “Industrial Decarbonisation Accelerator Act.” However, the term “decarbonisation” was removed from the official title to broaden the policy’s scope. This change reflected internal EU debates between environmental objective supporters and those prioritizing economic competitiveness. Key policy tools include the use of combined measures: public procurement, investment support, foreign investment conditions, and administrative reform. The act sets minimum requirements for “Made in Europe” products in public procurement and state aid; for example, at least 70% of electric vehicles in public sector projects should be manufactured in Europe, while building and industrial projects must use a certain share of EU-produced steel, aluminum, or cement. The aim is to create stable demand for clean industrial products within the bloc and encourage long-term investment. The IAA also targets key technologies essential to the energy transition, including battery production, energy storage, solar panels, wind turbines, heat pumps, and hydrogen electrolysis equipment. These are foundational for a carbon-light energy system and are sectors Europe worries about relying on global supply chains. The Act also introduces new rules on foreign investment in strategic sectors: projects over €100 million in batteries, EVs, or renewables may need to satisfy technology transfer, job creation, and European ownership participation requirements. This shows Europe’s growing emphasis on economic security in the energy transition. Role in EU’s climate policy: The IAA is designed as a complementary tool to existing EU emission-reduction policies. The Commission estimates its implementation could cut about 30 million tonnes of CO2 by 2030. Much of this reduction comes from shifting production of clean energy technologies to Europe. For example, producing EV batteries in the EU instead of importing from China could significantly reduce emissions related to the electricity system, and increasing the use of low-carbon steel in construction and automotive sectors would also cut emissions in the supply chain. However, the more important impact of the IAA lies in its potential to alter the structure of decarbonization by ensuring the bloc maintains or expands domestic production. If successful, it could serve as a model for energy transition in other developed economies. Internal EU disagreements: Some countries, notably France, strongly support a Made-in-Europe policy arguing Europe must safeguard industrial capacity against competition from larger economies. Others, like Germany and the Netherlands, fear overly strict rules could raise production costs and trigger trade tensions. The question of whether close partners like the UK, Japan, or Switzerland should be included in the Made-in-Europe scope was debated; the EU proposed a compromise allowing these countries to participate if they open their markets to European firms on a reciprocal basis. In a broader geopolitical economic context, the IAA reflects a rising trend among large economies: combining climate policy with industrial policy. In the past decade, climate policy relied largely on market tools, such as carbon pricing. But rising competition in clean technologies has pushed countries to use more direct industrial policy tools. The US under President Biden has pursued this with the Inflation Reduction Act, and China has long used large subsidies to build its renewable energy supply chain. The IAA could be viewed as Europe’s response to a new global order where competition in technology and production becomes central to climate policy. 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