What is the Industrial Decarbonisation Bank?

Born from the Clean Industrial Deal (CID), the IDB aims to boost economic competitiveness by investing in crucial innovation and technologies. It will drive projects that significantly reduce carbon emissions across various industrial sectors in Europe.

The IDB will draw its funding from four primary sources, with an estimated allocation of EUR 20 billion from the Innovation Fund, EUR 25 billion from InvestEU, EUR 25 billion from additional ETS revenues, and EUR 30 billion through co-financing from member states.

How will the Industrial Decarbonisation Bank work in practice?

The IDB aims to maximise emission reductions through a fair and competitive distribution of support. Funding will be based on the carbon emission reduction potential of projects, rather than favouring certain technologies or industries. Carbon contracts for difference (CCfCs) – agreements between a public administration and private companies that set a fixed carbon price over a specified period – are a key tool in de-risking and incentivising decarbonisation projects. Financial support mechanisms such as CCfDs, loan guarantees and blended finance complement the ETS by providing additional financial incentives for adopting clean technology, going beyond what carbon pricing alone would achieve.

 How does carbon dioxide removal fit in the Industrial Decarbonisation Bank?

 The IDB could support carbon dioxide removal (CDR) by offering financial tools that create stable revenue despite market volatility, lower borrowing costs and lender risk, and attracting commercial investment. To fully leverage the IDB’s potential for CDR, clear integration strategies and guidelines are necessary. Concretely, the IDB could support CDR through: Explicitly including CDR in the IDB’s mandate, establishing a pilot project dedicated to CDR, linking with existing funding instruments such as Horizon Europe, engaging national development banks, and establishing an EU task force to develop a financing toolkit for CDR.