Commission publishes Terms and Conditions for the first pilot auction for industrial heat decarbonisation with a budget of €1 billion

On 10 October 2025, the Commission published the final Terms and Conditions (T&Cs) for its first European-wide auction for decarbonising industrial process heat (IF25 Heat Auction). Process heat refers to the energy used to generate high temperatures for manufacturing activities in sectors such as chemicals, steel, or cement. Implemented via the Innovation Fund and announced in the Clean Industrial Deal, this auction aims to support the market uptake of electrified and direct renewable heat technologies in industrial process heating, advancing the decarbonisation of the European industry.

Funded by revenues from the EU Emissions Trading System, the auction has a budget of €1 billion to support innovative projects that electrify industrial process heat using technologies such as heat pumps, boilers, plasma torches, resistance heating and induction heating. It can also back projects harnessing direct renewable heat - for example solar thermal or geothermal - as well as hybrid projects that combine different electrification and direct renewable heat technologies.

Building on the success of the Innovation Fund auctions for renewable hydrogen production, under the European Hydrogen Bank, the final T&Cs were prepared following collaborative public consultations with industry and stakeholders. The auction's budget may also be topped up by national contributions via Auction-as-a-Service, an approach that has already proven successful in previous hydrogen auctions.

The new pilot auction is expected to open to bidders in early December 2025. The publication of the final T&Cs provides the opportunity for interested applicants to review the requirements and prepare their bids ahead of the opening of the bidding window. Any questions on the final T&C can be sent to CLIMA-AUCTIONSec[dot] europa[dot] eu(CLIMA-AUCTIONS[at]ec[dot]europa[dot]eu)

Principal features outlined in the Terms and Conditions include:

• Fixed premium subsidy: Successful bidders will receive a fixed premium subsidy that is linked and proportional to each tonne of direct CO₂ emissions abated for a maximum period of five years.
• Wide scope: The IF25 Heat Auction is open to projects of all sizes from every industrial sector across the European Economic Area.
• Focus: It serves projects that use continuous industrial processes but also incentivises extra flexibility solutions to avoid electricity consumption in peak hours.

Why industrial process heat?

This auction targets one of the biggest sources of EU industrial CO₂ emissions: process heating. This refers to the heat used to transform raw materials into products; from melting plastics and metals to driving chemical reactions. Today, these processes are largely powered by fossil fuels. All industrial sectors have such processes and can bid in the pilot auction.

The IF25 Heat Auction aims to close the cost gap between direct renewable heat or electrification solutions and fossil fuel-based alternatives. By de-risking these innovative projects, it not only enhances the competitiveness of clean industries in Europe, but also reduces greenhouse gas emissions, boosts energy independence and security, improves energy price affordability, and brings our continent closer to achieving its climate neutrality goals by 2050. With this auction, the Commission continues to deliver on the Clean Industrial Deal and takes a key step toward establishing the Industrial Decarbonisation Bank.

Kurt Vandenberghe, Director-General, Directorate-General for Climate Action, said:

"This auction is a crucial stepping stone toward the establishment of the Industrial Decarbonisation Bank. It opens the door to scaling investments in industrial electrification technologies driving industrial decarbonisation. I call on industry leaders to join us in tapping into the vast potential for cost-effective emission reductions through electrification and prepare their bids for the auction that will open early December."

Background

The Innovation Fund is one of the world's largest funding programmes for commercialising and deploying innovative low-carbon and net-zero technologies. Financed by revenues from the EU Emissions Trading System, it helps businesses invest in clean energy and bring market-ready solutions to scale - driving industrial decarbonisation and strengthening European competitiveness. The Fund has already allocated around €12 billion to around 200 innovative projects across the European Economic Area.

The IF25 Heat Auction follows the announcement made in the Clean Industrial Deal of a pilot Innovation Fund auction under the Industrial Decarbonisation Bank. The bank is a new initiative which aims to provide €100 billion in funding for industrial decarbonisation.

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