The unveiling of the EU’s Industrial Accelerator Act (IAA) marks a significant shift in European industrial policy.
By: Alessandro Pecorari, Policy & Public Affairs Manager | 6–8-minute read
The Industrial Accelerator Act (IAA), unveiled on 4th March in Brussels by Executive Vice-President Stéphane Séjourné, reflects a growing concern among policymakers about Europe’s long-term competitiveness, and a determination to strengthen domestic industrial capacity in sectors critical to the energy transition.
At its core, the proposal aims to raise the share of manufacturing in EU GDP from 14.3 per cent today to 20 per cent by 2035. That ambition reflects growing concern in Brussels about Europe’s long-term competitiveness, particularly following the landmark report led by Mario Draghi in 2024; The report warned that without a more assertive industrial strategy, Europe risks falling behind the United States and China in key strategic sectors— from clean energy technologies to advanced manufacturing. Strengthening domestic industrial capacity, while maintaining Europe’s openness to global capital and trade, has therefore become a central objective of EU economic policy.
For investors in infrastructure and industrial supply chains, the Act signals a new phase in Europe’s economic strategy: one that blends openness to global capital with a stronger emphasis on industrial resilience, localisation and strategic autonomy. Yet the legislation also highlights the delicate balancing act the EU faces as it seeks to strengthen its industrial base without undermining its longstanding commitment to open markets and global trade— a paradox that will inevitably play out in the legislative process over the coming year.
A compromise between competing visions
The final legislative proposal reflects a political compromise between two different visions for Europe’s industrial future:
One approach, often characterised as “Made in EU”, has emphasised the need for stronger localisation requirements and greater protection for domestic industry. The other, framed as “Made with EU”, has focused on maintaining integration with global supply chains and preserving Europe’s attractiveness to international investment.
In practice, the final text sits somewhere between the two. While the Act introduces new localisation requirements and investment screening mechanisms, it remains anchored in the EU’s broader trade framework and continues to allow participation from international investors and partners.
For many global infrastructure investors, that balance will be welcome. Europe is signalling a stronger industrial policy, but not a retreat from international capital. Europe is signalling a stronger industrial policy, but not a retreat from international capital.
New conditions for large-scale foreign investment
Perhaps the most significant structural change for investors is the introduction of conditionality for large foreign investments in strategic technologies. Under the proposed framework, investments exceeding €100 million may face additional requirements when the investing company controls more than 40% of global manufacturing capacity in the relevant technology; The provision will inevitably affect companies with dominant global market positions in sectors such as solar photovoltaics and batteries such as Chinese-headquartered companies. Where triggered, approval may require a combination of localisation measures, including minimum EU workforce levels, technology transfer commitments and greater integration with European supply chains. In many cases, projects may need to be structured through joint ventures with European partners.
One notable change during the legislative process was the removal of advanced digital technologies such as artificial intelligence, robotics and semiconductors from the Act’s scope. These sectors remain governed by separate EU frameworks, including the Artificial Intelligence Act. Early drafts had considered applying the same foreign investment thresholds to these technologies, which would have notably affected companies from the United States. The exclusion reflects the geopolitical sensitivities with the current U.S. administration.
Local content requirements reshape clean energy supply chains
The Act also introduces a new layer of localisation requirements tied to public procurement and subsidy schemes. This is a significant step given the central role that public support plays in clean-energy markets.
For example, electric vehicles supported by public funding will be expected to meet EU component thresholds, while corporate fleet procurement may increasingly require vehicles assembled within the EU or the European Economic Area. Similar provisions extend across key industrial supply chains, including batteries, solar photovoltaics and low-carbon materials such as steel and cement. In battery energy storage systems, projects receiving public support will progressively need to demonstrate EU-based assembly, EU-manufactured battery management systems and, eventually, EU-produced battery cells. For solar power, the requirements are somewhat more gradual, focusing initially on key components such as inverters and solar cells.
These provisions are designed to support the growth of domestic manufacturing capacity, but they also underline the importance of careful implementation to ensure that localisation objectives do not inadvertently slow the deployment of critical clean energy infrastructure.
Procurement access linked to trade reciprocity
Importantly, the Act does not close European procurement markets to international partners; instead, access will increasingly depend on ‘reciprocity’. Countries participating in the WTO Government Procurement Agreement or holding free trade agreements (FTAs) with procurement commitments may continue to compete for EU-funded projects. In practice, this still covers around 40 international partners.
However, the European Commission aims to assess by June whether partner countries provide genuine access to their own procurement markets. Where significant domestic preference rules remain in place, eligibility for EU procurement programmes may be restricted.
Permitting reform: the most bankable element?
While attention will be drawn toward investment screening and localisation requirements, the most transformative aspect of the Act for infrastructure investors may lie elsewhere. The proposal introduces a “one project, one process” approach to permitting, designed to streamline approvals across multiple administrative authorities and reduce the long development timelines that have historically slowed industrial projects in Europe. It also proposes the creation of Industrial Acceleration Areas, outlining that projects in strategic sectors could benefit from faster permitting and clearer regulatory timelines.
For capital-intensive projects, from battery manufacturing facilities to renewable supply-chain components, permitting delays are often one of the greatest sources of investment risk; If implemented effectively across Member States, these reforms could significantly improve Europe’s attractiveness for large-scale industrial investment.
Flexibility where costs and supply constraints bite
Recognising the potential challenges of localisation requirements, the Act also includes important flexibility provisions. Member States may waive certain requirements where compliance would significantly increase project costs, supply chains are highly concentrated, or component availability could delay project delivery. Cost increases exceeding 25%, or delays exceeding seven months, may justify exemptions. These safeguards are likely to prove critical in ensuring that industrial policy objectives remain compatible with commercial viability.
The raw materials question
One unresolved challenge remains Europe’s access to critical raw materials. While the Industrial Accelerator Act sits alongside broader efforts to strengthen supply chains for key minerals and industrial inputs, Europe continues to face structural constraints. This includes limited domestic resources and lengthy permitting processes for mining projects. Without progress on this front, raw material availability could become a bottleneck for the very industrial expansion the legislation seeks to promote.
A new phase of European industrial policy
The Industrial Accelerator Act still faces negotiations between the European Council, and the European Parliament, a process likely to take at least a year given the complexity of the issues involved. Some provisions may yet be simplified or adjusted during that process. Additionally, Europe may even seek to use this legislation as leverage within upcoming FTA discussions with third countries.
But the direction of travel is already clear. Europe is entering a new phase of industrial policy. For infrastructure and industrial investors, the message is not that Europe is closing its doors: rather, the expectation is shifting. The projects that succeed in this new environment will be those that combine global capital and expertise with a clear contribution to Europe’s industrial resilience, supply-chain security and economic growth.