European Commission proposes industrial expansion measures to boost decarbonisation and competitiveness

On 4 March 2026 the European Commission tabled a legislative package designed to accelerate the expansion of industrial capacity in sectors deemed critical to decarbonisation and economic resilience. Branded the Industrial Accelerator Act, the proposal seeks to reverse decades of industrial decline by directing more public demand towards European producers, tightening the conditions attached to large foreign investments in clean-technology supply chains, and speeding approvals for major manufacturing projects.

The Commission frames the measure as a response to industry warnings that the EU is losing competitiveness. According to the Commission the goal is to raise the manufacturing share of EU gross domestic product from roughly 14.3% today to at least 20% by 2035 while supporting the bloc’s net-zero ambitions and safeguarding skilled jobs. To reach those objectives the IAA sets four pillars: preferential demand signalling through origin and low-carbon requirements in procurement and support schemes; a pre-approval screening regime for certain foreign direct investments; a single, accelerated permitting process for large industrial projects; and the creation of designated industrial manufacturing acceleration areas to cluster activity.

The demand-side rules would impose Union-origin and/or low-carbon content thresholds for a defined list of products used by public authorities and supported through public funding. For construction and automotive steel the draft mandates that at least 25% of procured steel volumes must be low-carbon. Aluminium purchases would face a 25% Union-origin and low-carbon floor, while concrete and mortar would carry a 5% Union-origin and low-carbon minimum. Vehicles bought or supported by public programmes would be required to be assembled within the EU and to contain at least 70% EU-origin components excluding the battery. Member States would still be able to carve out exceptions where only one supplier exists, tenders are unsuitable, or compliance would cause disproportionate cost or delay.

The proposal also foresees selective equivalence for trusted partners: procurement rules may recognise content originating in countries party to certain free trade or procurement agreements, but the Commission reserves the right to exclude third countries where dependency risks are judged unacceptable. For public support schemes the equivalence window is narrower, limited to states with free-trade or customs-union arrangements with the EU.

The IAA would amend the existing Net-Zero Industry Act to align public procurement and support for key clean technologies , including batteries, solar PV, heat pumps, wind, hydrogen and nuclear components , with the new origin and low-carbon requirements. The Commission further links those provisions to emerging cybersecurity safeguards by excluding ICT suppliers classed as high risk under the proposed Cybersecurity Act 2 from some auctions and support mechanisms for critical control components.

On inbound investment, the IAA would introduce a pre-approval requirement for foreign direct investments above €100 million in selected manufacturing segments where a single third country controls more than 40% of global capacity. The initial list covers battery technologies, categories of electric vehicles, solar PV, and critical raw-material value chains including extraction, processing and recycling. Transactions already covered by binding commitments in EU free-trade or economic partnership agreements would be exempted.

To tackle administrative bottlenecks, Member States would be obliged to implement a single-permit procedure, with compressed timelines and a designated coordinating authority for projects falling within the scope of the act. Within a year of entry into force each Member State must also identify at least one industrial manufacturing acceleration area where streamlined permitting and other incentives are concentrated to catalyse investment.

Industry and policy groups have offered a mixed reception. Agora Energiewende and Agora Industry issued a supportive statement, welcoming the move to strengthen demand for low-carbon materials and calling for rapid delivery of a low-carbon steel labelling system that was pledged under the Clean Industrial Deal. By contrast, commentators in the broader European press flagged concerns that the measure could be seen as protectionist and risk complicating relations with key partners such as the United Kingdom and the United States, particularly because the rules embed preferences tied to origin and impose stricter conditions on large non-EU investors.

For businesses across supply chains the immediate implications are practical and compliance-driven. Companies supplying public authorities or reliant on national support programmes will need to trace and verify both the provenance and carbon intensity of inputs, revise procurement strategies and reassess investment plans. The FDI chapter, if maintained in its current form, may alter deal dynamics for large cross-border transactions in battery, PV and vehicle manufacturing ecosystems.

The Commission’s proposal now moves into the co-legislative phase where the European Parliament and Council will negotiate changes. Observers expect substantial debate on scope , earlier drafts included additional high-tech sectors such as semiconductors but those were omitted from the March text , as well as on the balance between strategic autonomy and open trade. Amendments to related EU instruments, including the FDI Screening Regulation and the public procurement directives, are also in train and could reshape the final package.

If adopted in its present structure the IAA would apply directly across Member States as a Regulation, creating uniform obligations for procurement, public support and permitting. That uniformity is intended to prevent regulatory fragmentation, but it will also concentrate political contention at EU level as capitals, trading partners and investors test how far industrial policy can be used to accelerate decarbonisation while maintaining external market access.