Key Takeaways On The Proposed Industrial Accelerator Act

The European Commission (Commission) on 4 March 2026 published its proposal for a Regulation establishing a framework of measures for the acceleration of industrial capacity and decarbonisation in strategic sectors, the Industrial Accelerator Act (IAA) (see proposal and annexes; see also the accompanying press release, Q&A and factsheet). The proposal has been delayed several times since it was originally scheduled for December 2025, reflecting internal disagreements within the Commission, particularly over the proposed "Made in Europe" sourcing rules. This Commission proposal will now need to pass through the legislative process with the Council and the Parliament, where it will certainly be further modified.

For decades, industrial policy in the EU was largely the preserve of the Member States, with the EU's primary function being defensive: ensuring that Member State measures did not distort competition through State aid control and antitrust enforcement (see our previous blogpost here). The IAA would represent a decisive shift. Originally conceived as the Industrial Decarbonisation Accelerator Act, the initiative was rebranded in 2025 to broaden its scope and now forms a central pillar of the EU's industrial architecture under the Clean Industrial Deal.

The proposal sets a goal of increasing the contribution of manufacturing in EU GDP to 20% by 2035 from 14.3% currently. It seeks to do this on the one hand through the acceleration of permitting procedures and the designation of "national industrial manufacturing acceleration areas" for strategic sectors and on the other hand by introducing concrete requirements relating to "low carbon" products and content of "Union origin". It also requires foreign direct investment (FDI) to contribute to its industrialisation and competitiveness goals.

1. PUBLIC PROCUREMENT

A central feature of the proposal is the introduction of low-carbon and Union-origin requirements in certain public procurement procedures. Contracting authorities would be required to include minimum requirements in tender documentation for products in scope, applying not only to supply contracts but also to works contracts and concessions.

For energy-intensive industry products (covering, under the proposal, paper, refined petroleum, chemicals, rubber and plastics, other non-metallic minerals such as cement and glass, and basic metals including steel and aluminium), the proposal introduces specific thresholds:

• At least 25% of steel would need to be low-carbon;
• At least 5% of concrete and mortar would need to be both low-carbon and of Union origin; and
• At least 25% of aluminium would need to be both low-carbon and of Union origin.

Special rules will also apply for electric vehicles, as described further below (see the section on vehicles).

The proposal would also amend the Net-Zero Industry Act to introduce Union-origin requirements for additional clean technologies including battery energy storage systems, solar PV, heat pumps, wind, hydrogen and nuclear.

Importantly, and in a significant departure from earlier drafts, "Union origin" is deemed to include content from countries with a free trade agreement or in a customs union with the EU and also parties to the WTO Agreement on Public Procurement (GPA). However, these countries can subsequently be excluded, in whole or in part, by Commission delegated act where the Commission finds that the country has not provided "national treatment" to the EU or the exclusion is justified to avoid the creation of dependencies or under a provision in the relevant agreement.

Further derogations are also available on a case-by-case basis in particular where a product or service is not available or where application of the requirement would entail disproportionate costs (which is presumed at 25%).

2. PUBLIC SUPPORT SCHEMES

Under the proposal, Member States would be required to design support schemes in a manner consistent with the Union-origin and low-carbon requirements applicable to products in scope. These obligations would apply to schemes covering at least 45% of the relevant national budget for energy-intensive industry products and 100% for vehicle-related schemes. The eligibility thresholds would mirror those in the procurement provisions. Derogations would be available where compliance would cause significant delays (with delays exceeding seven months presumed to be significant under the proposal) or disproportionate costs (presumed where compliance would increase the final product cost by more than 30%).

The proposal provides that the IAA would operate without prejudice to existing EU State aid rules, overlaying additional industrial policy conditionalities on top of existing compatibility assessments rather than replacing them.

3. FDI IN EMERGING STRATEGIC SECTORS

The proposal also envisages a sector-specific approval regime for certain FDIs in emerging strategic sectors. These cover:

• Battery technologies and related value chains;
• Electric vehicles (including electrification and digitalisation components);
• Solar photovoltaic technologies; and
• Critical raw materials

This would operate alongside the existing EU FDI Regulation but, unlike traditional screening which focuses on security and public order, the IAA framework would be explicitly tied to economic security and internal market objectives.

Based on the proposal, the regime would apply to investments exceeding EUR 100 million where the third country of the investor holds more than 40% of global manufacturing capacity in the relevant sector. However, the regime would not apply to FDI from countries with a free trade agreement or economic partnership agreement with the EU which include "relevant commitments". Nor would it apply to investments targeted at the provision of services, including by Union subsidiaries of foreign investors (since this could be inconsistent with the WTO Agreement on Trade in Services).

Notification would be required where the investment would result in 30% or more of share capital, voting rights or ownership of a Union asset. This threshold would be calculated on the basis of aggregated interests held directly or indirectly, including affiliates, chains of ownership or by investor acting in concert. Each EU Member State would be required to designate an investment authority responsible for reviewing notified transactions, and investments could not be implemented before that authority grants approval. Portfolio investments and investments targeted at providing services would be exempt, as would investors and investments covered by economic partnership and free trade agreements in force or provisionally applied, to the extent relevant commitments have been made under those agreements.

The proposal contemplates six categories of conditions:

• A 49% cap on foreign ownership;
• A joint venture obligation with Union partners;
• IP licensing and know-how transfer arrangements;
• A commitment to direct at least 1% of gross annual revenue to R&D in the Union;
• A requirement that at least 50% of the workforce be Union workers; and
• A requirement that at least 30% of inputs be manufactured within the Union.

Under the proposal, the relevant Member State's investment authority would approve investments fulfilling at least four of these six conditions and could grant exemptions from up to two, subject to Commission confirmation. The Commission would also have the power to assume jurisdiction over an assessment instead of the Member State's investment authority, including where the investment is of particular strategic importance or has cross-border impact. This marks a significant shift from the current EU FDI screening regime, where the substantive assessment of FDIs is reserved for the Member States.

The stated rationale for these requirements is to ensure that FDI in the covered sectors "adds value to the Union's economy and society, while enhancing the long-term competitiveness of the Union's industry". They are nonetheless controversial. The EU has in the past opposed similar measures when introduced in other jurisdictions. Given the prescriptive nature of the conditions in the current text, this aspect of the proposal is likely to attract particularly close attention as the legislative process advances.

4. VEHICLES

The automotive sector would be among the most heavily affected by the proposal, which contemplates requirements operating across the vehicle-specific origin provisions, the energy-intensive industry rules and the FDI regime.

Vehicle-specific origin requirements would cover pure electric vehicles, off-vehicle charging hybrid electric vehicles and fuel cell vehicles, with thresholds set at the component level. Conventional hybrids and internal combustion engine vehicles would not be in scope. The proposal envisages two phases:

• From six months after entry into force, vehicles would need to be assembled in the Union, meet a 70% Union-origin ratio by ex-works price for non-battery components, and contain at least three Union-origin battery main specific components including battery cells.
• From three years after entry into force, more stringent requirements would apply, including to cathode active material, the battery management system, e-powertrain components and main electronic systems.

All Member State support budgets for vehicles would need to comply with the origin requirements (compared to 45% for energy-intensive industries), and the origin criteria would also serve as the "made in the EU" benchmark under the proposed Clean Corporate Vehicles Regulation and the proposed amendments to CO2 emission performance standards for new light duty vehicles and vehicle labelling.

Vehicle manufacturers would also be caught by the proposed 25% low-carbon steel requirement, which would apply to steel intended for use in motor vehicles.

Both electric vehicles (including electrification and digitalisation components) and batteries would be separately classified as emerging strategic sectors under the FDI provisions, meaning non-EU investments in EU EV production and EU battery manufacturing could both independently be subject to the proposed prior notification and approval requirements.

5. COMMENTS

If the final version of the IAA is adopted in broadly the form described above, it would have practical implications for businesses across a range of sectors. Key areas to consider include:

• Bid composition and strategy in EU public procurement, where compliance with origin and low-carbon criteria could become a prerequisite for participation;
• Supply chain configuration and origin traceability, as Union-origin content thresholds take effect;
• For businesses active in emerging strategic sectors, a new FDI framework could introduce a further layer of conditionality with potential implications for deal structuring and ownership arrangements; and
• Location decisions for manufacturing and R&D could be influenced by the advantages flowing from the support scheme provisions.

While much of the political debate to date has focused on the origin requirements, the low-carbon requirements may prove more commercially significant. In particular for steel, where no Union-origin condition applies, they are arguably non-discriminatory, in that they would direct public procurement and public support toward low-carbon products regardless of where they are produced. The definition of "low-carbon" for these purposes has not yet been set, however, and would depend on delegated acts to be adopted under the Construction Products Regulation and the Ecodesign for Sustainable Products Regulation.

It is important to stress that these are early days. The subsequent legislative process with the Council and Parliament could result in further significant changes to the thresholds, sector definitions and substantive conditions discussed above. Even once the principal Regulation is adopted, the proposal envisages broad delegated and implementing powers, meaning that important elements of the regime would continue to be shaped through secondary legislation.

We will continue to monitor developments and provide further analysis as the proposal progresses through the legislative process.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.