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The European Commission has taken a major step towards decarbonising industry. On 10 October 2025, it published final Terms and Conditions (T&Cs) for its first pan-European pilot auction focused on the decarbonization of industrial process heat (IF25 Heat Auction). This initiative, implemented through the Innovation Fund and announced as part of the Clean Industrial Deal, aims to support the market deployment of electrified technologies and direct renewable heat solutions in industry.

The auction represents an important a stepping stone towards the establishment of an Industrial Decarbonisation BankThis bank is a new initiative that aims to provide €100 billion to finance the decarbonization of industry.

Financing and technology

The IF25 Heat Auction has an initial budget 1 billion eurosThese funds are financed by the revenues of the EU Emissions Trading System (EU ETS), one of the world's largest funding programmes for innovative low- and zero-carbon technologies. The auction budget can even be increased by national contributions through the "Auction-as-a-Service" mechanism, which has already proven successful in previous hydrogen auctions.

The pilot auction will support innovative projects that electrify industrial process heat using technologies such as heat pumps, boilers, plasma torches, resistance heating and induction heatingProjects using the following technologies may also receive support: direct renewable heat, such as solar thermal or geothermal energy. Hybrid projects combining different electrification technologies and direct renewable heat technologies are also eligible.

Why is process heat key?

This auction focuses on one of the largest sources of CO2 emissions in EU industry: process heat. Process heat is the energy needed to achieve high temperatures in production activities in sectors such as the chemical, steel or cement industries. It is the heat used to convert raw materials into products, from melting metals and plastics to chemical reactions. Today, these processes are largely powered by fossil fuels.

The aim of the auction is overcome the cost difference between clean solutions (electrification or direct renewable heat) and fossil fuel-based alternatives. Mitigating the risk associated with these innovative projects increases the competitiveness of clean industries in Europe, reduces greenhouse gas emissions, strengthens energy security and brings the EU closer to achieving its climate neutrality objectives by 2050.

Main conditions and timeframe

IF25 Heat Auction is open to projects of all sizes from all industrial sectors across the European Economic Area (EEA). It focuses mainly on projects that use continuous industrial processes, but also motivates flexibility solutionsto avoid electricity consumption during peak hours.

Successful applicants will receive fixed premium subsidyThis subsidy will be tied and proportionate to each tonne of direct CO2 emissions avoided and will be paid over a maximum period of five years.

The publication of the final terms on October 10, 2025 provides interested parties with the opportunity to prepare their offers before the bidding window opens. The new pilot auction is expected to open to bidders in early December 2025.The Director of the Directorate-General for Climate Action, Kurt Vandenberghe, called on industry leaders to join in and prepare their bids, thereby tapping the huge potential for cost-effective emission reductions through electrification. JRi

For questions regarding the final conditions, bidders may contact CLIMA-AUCTIONS@ec.europa.eu.

 

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