In February 2025, the EU Commission launched the Clean Industrial Deal, an ambitious initiative to align industrial strategy with climate goals. Targeting energy-intensive sectors and clean technologies, the Deal aims to drive innovation, support sustainable production, and mobilise over EUR 100 billion in funding. However, its implementation faces challenges, including how to address market distortions caused by public subsidies originating from non-EU countries.
This is a challenge the Foreign Subsidies Regulation (FSR) was designed to tackle. Introduced to scrutinise financial contributions from non-EU governments, the FSR aims to ensure a level playing field in the internal market.
However, two years after its implementation, the FSR's application has proven broader than intended. While it was envisioned as a tool to address significant distortions, enforcement data reveals that the majority of cases involve transactions with minimal risk. By mid-2025, over 2,000 public procurement cases and 169 merger notifications had been filed, yet only a small fraction led to in-depth investigations or substantive outcomes. This overreach has created procedural burdens, often capturing transactions with no real threat to the internal market.
The FSR's broad scope poses challenges for the EU's industrial ambitions. As the Clean Industrial Deal emphasises the importance of mobilising global capital for the green transition, the FSR's current framework risks deterring much-needed investment. A recalibrated, risk-based approach could refocus the FSR on genuinely problematic cases, reducing unnecessary obstacles while maintaining Europe's strategic autonomy. For the EU to lead the global green industrial race, its regulatory tools must strike a careful balance between vigilance and flexibility.
The full version of this article was published on EU Law Live; please read it on the following link.
