Climate change / Sofía Lazcano /
European Union recommends the use of tax incentives to reconcile sustainability with competitiveness
Following on with bringing flexibility to the rules on tax incentives to achieve decarbonization of the economy while staying competitive, the European Commission has approved the State Aid Framework to support the Clean Industrial Deal and published Recommendation (EU) 2025/1307 on tax incentives.
The European Green Deal, launched in December 2019, was designed as a response to climate and environmental challenges in the European Union (EU), with the ultimate goal of achieving climate neutrality by 2050 and an interim target of a net reduction in greenhouse gas emissions by at least 55% (compared with 1990 levels) by 2030. Because achieving this goal could take a toll on the competitiveness of European companies, the Letta and Draghi reports have pointed to the need to combine the fight against climate challenges with maintaining or recovering that competitiveness. In line with the recommendations in these reports, in its Competitive Compass for the EU, the European Commission proposed in January 2025 the creation of a joint roadmap for decarbonization and competitiveness, which was introduced in February 2025 and is built around the so-called Clean Industrial Deal. This roadmap charts business incentives for European industry to decarbonize and specifically mentions corporate income tax incentives (including accelerated depreciation or tax credits for investments in industrial decarbonization and clean technology projects).
