EU Launches Pilot Auction for Industrial Heat Decarbonisation with €1 Billion Budget
The European Commission has published the final Terms and Conditions (T&Cs) for its inaugural European-wide auction dedicated to decarbonising industrial process heat, known as the IF25 Heat Auction. Scheduled to open in early December 2025, this initiative marks a significant step in advancing industrial decarbonisation and supporting the EU's climate neutrality goals by 2050.
Industrial process heat is a major contributor to EU CO₂ emissions, powering sectors such as chemicals, steel, and cement. These processes, traditionally reliant on fossil fuels, are a key target for emissions reductions. The auction aims to promote electrified and renewable heat technologies, including heat pumps, boilers, plasma torches, resistance heating, induction heating, as well as direct renewable heat sources like solar thermal and geothermal energy.
Funded by revenues from the EU Emissions Trading System (ETS), the auction has a dedicated budget of €1 billion. It also allows for potential top-ups from national contributions through an innovative Auction-as-a-Service approach, which has previously proven successful in hydrogen sector auctions. Successful bidders will receive a fixed premium subsidy proportional to the CO₂ emissions they abate, for up to five years, thereby incentivizing reductions in greenhouse gases and fostering market uptake of clean technologies.
The scope of the IF25 Heat Auction is broad and inclusive, welcoming projects of all sizes across all European industrial sectors. It also emphasizes flexibility by encouraging solutions that optimize electricity consumption, especially outside peak hours, to improve grid stability and energy efficiency. This focus aligns with the broader objective of closing the cost gap between renewable heat and fossil fuel options, making clean solutions more economically competitive.
The significance of this auction extends beyond emissions reduction. It aims to boost energy independence, improve energy affordability, and enhance Europe's industrial competitiveness. The initiative is also seen as a stepping stone toward establishing the Industrial Decarbonisation Bank, a proposed €100 billion funding mechanism that will further accelerate industrial decarbonisation efforts.
According to Kurt Vandenberghe, Director-General of the Directorate-General for Climate Action, this pilot auction is essential for scaling investment in industrial electrification technologies and supporting the transition toward a sustainable, low-carbon industrial sector. Industry leaders are encouraged to prepare bids in anticipation of the auction opening early December 2025.
Built upon the success of previous Innovation Fund auctions for renewable hydrogen and other low-carbon technologies, this initiative continues the EU's commitment to innovation-driven decarbonisation. The Innovation Fund has already allocated about €12 billion to around 200 projects, helping to bring market-ready solutions to deployment and strengthen Europe's leadership in clean energy technologies.
Overall, the IF25 Heat Auction represents a strategic move by the EU to transform industrial heating, foster innovation, and meet climate targets, marking a new chapter in Europe's industrial decarbonisation journey.