The European Commission has proposed a Regulation establishing a framework of measures for the acceleration of industrial capacity and decarbonization in strategic sectors, also known as the Industrial Accelerator Act (IAA). The proposal follows urgent calls from EU industry to improve the European Union's competitive position. If adopted, the IAA would introduce local and low-carbon content requirements for public procurement and funding schemes in certain sectors. The IAA would also impose significant conditions in relation to foreign direct investment (FDI) in clean tech sectors. Several EU Member States, trade partners, and foreign investors have raised concerns about the IAA's impact, foreshadowing complex legislative negotiations.
Key Objectives
The IAA is designed to support the competitiveness, development, and resilience of the EU's manufacturing sector, with a focus on selected strategic sectors, while contributing to the EU's climate objectives, economic security, and the creation and retention of high-quality jobs. As a concrete industrialization objective, the IAA sets the goal of ensuring that by 2035 the manufacturing industry of the EU accounts for at least 20% of EU GDP, up from its current level of 14.3%.
To achieve these aims, the IAA would introduce four key measures targeting selected strategic sectors:
- Channeling demand for products in strategic sectors to EU industry through the introduction of Union origin and / or low-carbon requirements, applicable to public procurement and public support schemes;
- Establishing a screening and pre-approval regime for FDI in selected emerging strategic sectors;
- Accelerating permit-granting procedures for industrial manufacturing projects, including energy-intensive industry decarbonization projects; and
- Designating industrial manufacturing acceleration areas to boost and cluster industrial activities in strategically significant locations across the Union.
This alert describes these draft measures in greater detail below. As a Regulation, the IAA would, if adopted, apply directly in all EU Member States.
Scope of the Act
The IAA is designed to support three primary sectors:
- Energy Intensive Industries (EIIs), including steel, cement, chemicals, aluminum, and related sectors;
- Net-Zero Technology Manufacturing as defined in Regulation 2024/1735 (the Net-Zero Industry Act, NZIA), being technologies pivotal to achieving the EU's energy and climate targets by reducing greenhouse gas emissions and enabling the decarbonization of a wide range of economic sectors; and
- the Automotive Industry.
However, some measures proposed under the IAA, such as in relation to permitting, would apply horizontally across the EU manufacturing sector, and other measures would be product or sector specific.
Earlier drafts of the IAA proposal also extended its scope to a wide range of high-tech sectors (for example, semiconductors), but this was removed in the final version of the proposal. As noted below, however, further modifications to the scope are possible in the legislative process.
Key Provisions
EU content and Low-Carbon Requirements in Public Procurement and Support Schemes
The IAA would introduce "Made in EU" conditions by requiring EU Member State contracting authorities, contracting entities, and public support scheme administrators to apply Union origin requirements, low-carbon requirements, or both, to a defined set of products in strategic sectors.
For public procurement, the IAA's EU origin and low-carbon content requirements would apply to procurement procedures falling within the scope of the Public Procurement Directive, the Utilities Directive and the Concessions Directive.1 For public support schemes, the requirements would apply to financial support or incentives to beneficiaries (i.e., subsidies, grants, or demand-stimulation mechanisms) by EU Member States to encourage investment in or uptake of the relevant products or technologies. Not every public support scheme in a Member State needs to comply with the "Made in EU" rules — but Member States must apply the requirements to schemes accounting for at least 45% of the total national budget allocated to EII-related public support schemes and to 100% of the total national budget allocated to vehicle-related public support schemes.
EU origin is generally defined in line with relevant principles in the Union Customs Code,2 which excludes all non-EU countries for purposes of determining the origin of a product. However, for procurement purposes, the draft follows a broad trusted partner's approach, as the IAA extends EU origin to content originating from countries that have concluded an agreement establishing a free trade area or customs union agreements with the EU or are parties to the WTO Agreement on Government Procurement and to the extent those agreements contain relevant procurement related obligations for the EU. The Commission would however be able to exclude these countries, if, e.g., the exclusion is justified to avoid dependencies of the EU. For public support schemes, the scope is narrower: equivalence would extend to countries with which the EU has concluded an agreement establishing a free trade area or a customs union.
The product-specific requirements would be as follows:
- Steel (construction and automotive sectors): A minimum of 25% of the total volume of steel procured would have to be low-carbon steel, as a requirement applicable to both public procurement and support schemes.
- Concrete/mortar and aluminium (buildings, infrastructure, transport): A minimum of 5% of the total volume of concrete and mortar, and a minimum of 25% of the volume of aluminium would have to be of Union origin and low-carbon, as a requirement applicable to both public procurement and support schemes.
- Vehicles: In public procurement and support schemes, vehicles would have to be assembled in the EU, and minimum 70% of the components, excluding the battery, would have to be of EU-origin, among other requirements.
Certain exceptions would apply. For procurement, contracting authorities and contracting entities may disapply the requirements where only a single source of supply exists, where no suitable tenders are submitted, or where compliance would entail disproportionate costs or technical incompatibility. Likewise, EU Member States would be allowed to disregard the EU origin- and low carbon content requirements where compliance would cause significant delays or disproportionate costs.
Amendments to the Net Zero Industry Act
The proposal also introduces a series of significant amendments to the NZIA:
- For public procurement of certain net-zero technologies, including battery storage, solar PV technologies, heat pumps, and wind, hydrogen and nuclear technologies, the NZIA would mirror the provisions of the IAA. As such, EU origin (or equivalent) requirements would be imposed in public procurement relating to those technologies, at escalating thresholds over time. EU-origin requirements would also apply in even stricter form to public support schemes and auctions under the NZIA.
- Notably, the amendment also connects NZIA to cybersecurity requirements. The recently published draft for a revised Cybersecurity Act3 provides for the classification of ICT-suppliers as high-risk. Under the amended NZIA, these suppliers would be excluded from auctions and public support schemes for critical components such as control systems.
Foreign Direct Investments Conditions
The IAA would impose conditions relating to foreign direct investments in specific strategic manufacturing sectors where the transaction value exceeds EUR 100 million and more than 40% of global manufacturing capacity is held by the third country of which the foreign investor is a national or undertaking, with such investments requiring explicit pre-approval by a designated Investment Authority from 12 months after the IAA's entry into force. The four initially covered sectors are (i) battery technologies, (ii) pure electric vehicles, off-vehicle charging hybrid electric vehicles and fuel-cell electric vehicles, (iii) solar PV technologies, and (iv) the extraction, processing, and recycling of critical raw materials, though the IAA's FDI chapter4 would not apply to investments covered by existing EU free trade agreements or economic partnership agreements to the extent that relevant commitments exist therein, nor to services or portfolio investments.
Streamlined Permitting
The IAA would require Member States to establish a single permit-granting procedure with short timelines, coordinated by a designated competent authority and covering all permits required for industrial manufacturing projects, unless the rules to streamline the administrative and permit-granting processes are established in other EU legislative acts for specific industrial manufacturing sectors.
Industrial Manufacturing Acceleration Areas
Within 12 months of entry into force, Member States would be required to designate at least one industrial manufacturing acceleration area (IMAA) in one or more of the strategic sectors listed in Annex I to the IAA, reducing the permitting burden and providing other incentives for businesses located within these areas.
Impact on Businesses and outlook
The IAA would have significant implications across a wide range of stakeholders, industries, and supply chains. Companies supplying products to public authorities or relying on public support schemes would need to audit and document the EU origin and carbon intensity of their products to verify compliance with applicable thresholds.
For the EU's trading partners, the IAA's EU origin requirements and third-country exclusion provisions represent a notable development in EU industrial policy. The IAA's implementation may prompt a reassessment of existing supply chain relationships, investment flows, and bilateral trade dynamics with the EU.
In the next steps of the legislative process, the proposed Regulation will be negotiated in the European Parliament and Council of the European Union. Further discussions and modifications to the current draft can be expected.
Viktoria Farkas (Legal Trainee, Brussels) contributed to the development of this publication.
1 Directive 2014/24/EU on public procurement; Directive 2014/25/EU on procurement by utilities; and Directive 2014/23/EU on the award of concession contracts. Notably, a revision of the EU public procurement directives is pending.
2 Regulation (EU) 952/2013 laying down the Union Customs Code.
3 Proposal for Cybersecurity Act 2, 2026/0011 (COD), published 20 January 2026.
4 Notably, a revision of the EU FDI Screening Regulation is pending.
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