EU Awards €400 Million for Industrial Heat Decarbonisation

The European Commission has awarded around €400 million (US$465 million) to 65 industrial decarbonisation projects across 10 European countries under its first Innovation Fund Heat Auction. The initiative aims to reduce industrial heat emissions by replacing natural gas-based systems with cleaner technologies including heat pumps, solar thermal systems, resistance heating and hybrid solutions.

The selected projects are expected to avoid more than 6.6 million tonnes of CO2 emissions over the next decade while generating around 16.3 terawatt-hours of decarbonised heat in their first five years of operation. Sectors benefiting from the funding include steel, glass, ceramics, construction materials, textiles, pharmaceuticals and food processing.

The grants will be financed through revenues generated by the EU Emissions Trading System (ETS), reinforcing the bloc’s strategy to link carbon pricing with industrial sustainability investments. The European Commission has also announced a second Heat Auction worth €1 billion for 2026 as Europe accelerates efforts to strengthen energy security, industrial competitiveness and climate resilience.

Industrial heat represents roughly one-quarter of global energy use and is one of the harder-to-abate segments of industrial emissions, given the high temperatures and continuous operation many processes require. The €400 million Innovation Fund Heat Auction - funding 65 projects across 10 countries with expected 6.6 million tonnes CO2 avoided over a decade - targets exactly this segment across steel, glass, ceramics, construction materials, textiles, pharma and food processing.

The financing structure - using EU ETS revenue - creates a virtuous cycle between carbon pricing and industrial decarbonisation investment. Companies pay for ETS allowances, and that revenue funds the technology deployment that reduces future allowance needs. The €1 billion second auction planned for 2026 signals sustained commitment to scaling industrial heat decarbonisation infrastructure across European industry.

For industrial operators, technology providers, financial institutions and their supply chain partners, Cognitud's energy transition, climate action and market intelligence teams help clients evaluate Innovation Fund opportunities, structure heat-decarbonisation investment cases, and prepare disclosures aligned with CSRD, ISSB and EU taxonomy expectations that increasingly determine access to sustainable-finance and preferred-supplier positioning in European industrial value chains as industrial heat decarbonisation accelerates.