EU Regulatory Updates

 

 

On 25 June, the European Commission adopted the Clean Industrial State Aid Framework (CISAF), a new policy tool designed to accelerate the EU’s transition to clean energy and industrial decarbonization. CISAF replaces the Temporary Crisis and Transition Framework (TCTF) and will remain in force until 31 December 2030. TCTF is an EU state aid tool that allows member states to provide targeted financial support to businesses and industries affected by crises or undergoing green and digital transitions, with relaxed rules to speed up aid approvals and facilitate investments in clean energy and industrial decarbonization.

 

CISAF, on the other hand, enables Member States to provide targeted financial support for investments in renewable energy production, clean technology manufacturing, and industrial decarbonization projects, with a particular emphasis on electrification and clean heating and cooling solutions. By simplifying and relaxing state aid rules, CISAF facilitates public funding mechanisms such as grants, tax advantages, guarantees, and direct price support schemes that can help scale up the deployment of electrified heating, ventilation, and air conditioning (HVAC) technologies and energy-efficient heat pumps, crucial for decarbonizing buildings and industry. The framework also supports measures to reduce electricity costs for energy-intensive industries and to de-risk private investments in clean technologies, thereby fostering the uptake of electrification in the heating and cooling sector. CISAF’s provisions aim to accelerate the rollout of clean energy infrastructure and technologies, reinforcing the EU’s commitment to phasing out fossil fuels in buildings and promoting sustainable, electrified HVAC systems as part of the broader Clean Industrial Deal.

 

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On 2 July, the European Commission released its proposal to amend the EU Climate Law by setting a legally binding target to reduce net greenhouse gas emissions by 90% by 2040 compared to 1990 levels. This intermediate target aims to provide long-term certainty for investors and industry, accelerating the EU’s transition to renewable energy and clean technologies while reinforcing its commitment to climate neutrality by 2050. Unlike the 2030 target, the 2040 goal is binding at the EU level but does not impose direct obligations on individual Member States; instead, its implementation will rely on existing and future legislative instruments such as the EU Emissions Trading System (EU ETS).

 

The proposal introduces several flexibility mechanisms to support Member States in achieving the target in a cost-effective and socially balanced way. These include allowing the use of up to 3% of high-integrity international carbon credits from 2036, integrating permanent domestic CO₂ removals (such as direct air capture and improved land use) into the EU ETS, and enabling cross-sectoral flexibility to offset emissions reductions between sectors.

 

The 2040 target builds on the EU’s existing 55% emissions reduction goal for 2030 and reflects current economic, security, and geopolitical realities, aligning with initiatives such as the EU Competitiveness Compass and the Clean Industrial Deal. It aims to boost European industrial leadership, create future-proof jobs, strengthen energy security, and guide investments towards a fully decarbonised economy. The proposal follows extensive consultations with stakeholders, Member States, and civil society, and will now undergo discussion and adoption by the European Parliament and Council under the ordinary legislative procedure.

 

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On 12 June, at the International Energy Agency’s Global Energy Efficiency Conference in Brussels, the EU Energy and Housing Commissioner Dan Jørgensen highlighted a strengthened focus on industrial electrification and the recovery of waste heat as key components of the EU’s energy efficiency strategy. He highlighted the significant potential of waste heat recovery to improve energy efficiency in industrial processes, emphasizing its role in reducing emissions and enhancing Europe’s energy security. Commissioner Jørgensen underlined that integrating waste heat recovery with electrification technologies, such as heat pumps, is essential to decarbonizing industry and achieving the EU’s climate goals. This approach aims to harness unused heat streams within industrial sites, thereby lowering fossil fuel dependence and supporting the transition to cleaner energy systems.

 

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On 30 June, the European Commission published Annex 11 to the draft Commission Notice providing guidance on the implementation of new or substantially modified provisions under the recast Energy Performance of Buildings Directive (EPBD), specifically concerning fossil fuel boilers (Article 13, Annex II). The document clarifies the definition of ‘fossil fuel boilers’ and outlines Member States’ obligations to plan for a complete phase-out of such boilers by 2040. It confirms that the classification of a boiler as fossil-fuelled depends on the type of fuel used in 2040, and not on the technology itself. The guidance details how Member States should design National Building Renovation Plans (NBRPs), including pathways for replacing boilers or transitioning to renewable fuels. It also underscores the role of gas grid decarbonisation and coherence with other national energy and climate planning instruments, such as National Energy and Climate Plans (NECPs) and local heating plans.

 

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On 30 June, a coalition of leading European industry associations, including the European Heat Pump Association and the Association of the European Heating Industry, published a joint statement reaffirming their strong support for the EU Emissions Trading System for buildings and transport (EU ETS 2) as a key instrument for decarbonizing Europe’s building stock. In their statement, the associations cautioned against reopening the EU ETS 2 Directive, warning that such a move could delay its implementation or even risk its withdrawal. They emphasized the importance of ensuring that revenues from both the Social Climate Fund and EU ETS 2 are strictly earmarked for measures that contribute to the decarbonization of heating and cooling in buildings, as outlined in Article 30d, including support for consumers to purchase and install efficient and renewable-based heating appliances.

 

The coalition also called on the European Commission to establish a temporary lending facility from 2026, enabling Member States to borrow against future ETS 2 revenues to accelerate building decarbonization and renovation, with a particular focus on supporting low- and middle-income households. The statement further stressed the need for close coordination between ETS 2 implementing authorities and those responsible for National Building Renovation Plans (NBRPs), to ensure aligned timelines, data sharing, and effective outreach, especially for the worst-performing buildings. The industry associations argued that the EU ETS 2 is vital for boosting demand for clean heating technologies, such as heat pumps and renewable fuels. Ultimately, the signatories warned that any delay or weakening of ETS 2 would undermine the business case for clean heating technologies and slow down Europe’s energy transition.

 

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On 27 June, the European Environment Agency (EEA) published its report “Renewables, Electrification and Flexibility: For a Competitive EU Energy System Transformation by 2030.” The report provides a comprehensive assessment of the EU’s progress and challenges in transforming its energy system, with a strong focus on the electrification of the heating, ventilation, and air conditioning (HVAC) sector, as well as heating and cooling more broadly.

 

The EEA highlights that electrification is central to achieving the EU’s 2030 and 2050 climate targets, particularly through the rapid deployment of renewable electricity and the integration of flexible solutions in buildings and industry. The report notes that while the electricity sector has already achieved significant emissions reductions, much greater efforts are needed to extend electrification to end-use sectors such as heating and cooling, which remain heavily dependent on fossil fuels.

 

In the HVAC sector, the report stresses the importance of scaling up the deployment of heat pumps and other electric-based heating and cooling technologies. These solutions are identified as key to decarbonising buildings and industry, reducing energy demand, and enhancing energy security by lowering reliance on imported fossil fuels. The EEA calls for targeted policy measures to accelerate investment in electrified HVAC systems, including fiscal incentives, the phasing out of fossil fuel subsidies, and the alignment of energy taxation to favour clean electricity over fossil fuels.

 

Additionally, the report underlines the need for modernising and digitalising energy infrastructure, including power grids, to support the increased demand for electricity from heating and cooling applications. It also points to the importance of demand response, energy storage, and smart control systems in ensuring that electrification contributes to both efficiency and flexibility in the energy system.

 

The EEA concludes that a successful energy transition will require coherent and ambitious policy frameworks at both the EU and national levels, strong cross-sectoral coordination, and continuous monitoring of progress.

 

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On 30 June, the REDI4HEAT project, co-funded by the EU LIFE programme, concluded its three-year initiative aimed at aligning National Energy and Climate Plans (NECPs) with EU heating and cooling targets. The project supported five countries, Greece, Portugal, Poland, Croatia, and Germany, by providing guidance, workshops, and tools to improve policy design for renewable heating systems. In Greece and Portugal, the NECPs now reference measures such as direct heat production from renewable systems, local heating and cooling planning, and thermal energy as a service. In Poland, REDI4HEAT's Key Success Factors contributed to aligning the Clean Air Program with renewable energy targets. In Croatia, the project’s findings were integrated into the transposition of the Renewable Energy Directive (RED III) and NECP updates, with national workshops serving as consultation platforms. Meanwhile, in Germany, REDI4HEAT supported municipal heat planning through stakeholder networking and technical guidance.

 

The project also conducted in-depth assessments of the NECPs, identifying policy gaps and helping integrate improvements into the revised national strategies. To further support policymakers, open-access tools like the Policy Tracker, Heat Transition Toolbox, and Knowledge Sharing Centre were developed. Over 1,000 stakeholders across the five countries participated in capacity-building events, including technology designers, heating and cooling experts, energy agencies, municipalities, industry associations, and end users, fostering enhanced regulatory clarity, coordination, and local engagement in decarbonising heating and cooling systems.

 

As the project concludes, its findings remain available to assist national authorities as they finalize NECP updates and work towards the EU’s 2030 climate and energy objectives.

 

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United Kingdom National Updates

 

 

On 27 June, the UK government released its new Advanced Manufacturing Sector Plan as part of the UK Modern Industrial Strategy. Industrial Strategy sets out a long-term vision to radically increase the UK’s manufacturing competitiveness by 2035. It aims to drive innovation, secure high-quality jobs, and strengthen national resilience by supporting key sectors, including automotive, aerospace, batteries, advanced materials, agri-tech, and the built environment, through regulatory reform, targeted investment, and skills development.

 

Within this framework, the HVAC (heating, ventilation, and air conditioning) sector is recognised as a critical enabler of industrial and building decarbonisation. The strategy calls for accelerating the electrification of heating and cooling systems to reduce emissions and energy demand across both industry and the built environment. Key measures include supporting the scale-up of energy-efficient heat pumps, advanced ventilation systems, and smart building controls, as well as addressing barriers such as high electricity prices for manufacturers and supply chain constraints for HVAC components.

 

The plan also prioritises workforce development, with targeted upskilling and reskilling programmes to ensure the sector can deliver advanced, low-carbon HVAC solutions. Up to £4.3 billion in funding is earmarked for advanced manufacturing, including dedicated support for clean energy innovation and the adoption of electrified HVAC technologies. Overall, the strategy positions the HVAC sector at the heart of the UK’s ambitions for net zero, energy security, and global competitiveness, making electrification and decarbonisation key pillars of the country’s industrial future.

 

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Events

 

 

On 16 July, Energy Cities will host a webinar “Decarbonizing heating and cooling in the EU: an analysis of national energy and climate plans”.

 

More information is available here.

 

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On 7 – 10 September 2025, VITO and EnergyVille will organize the 19th International Symposium on District Heating and Cooling in Genk, Belgium.

 

More information is available here.

 

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On 23 – 24 September 2025, European Heat Pump Association will host its flagship heat pump forum.

 

More information is available here.

 

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Glossary