• The European Commission selected 65 projects across 10 European Economic Area countries under its first EU-wide Innovation Fund Heat Auction.
• The projects are expected to avoid more than 6.6 million tonnes of CO2 emissions over 10 years by replacing natural gas-based industrial heat systems.
• Around €400 million in grants will be funded through the EU Emissions Trading System, with a second €1 billion Heat Auction planned for 2026.

The European Commission has awarded around €400 million ($465 Million) to 65 industrial heat decarbonisation projects, using revenues from the EU Emissions Trading System to push clean heat technologies into factories across Europe.

The projects were selected under the Innovation Fund Heat Auction, the first EU-wide auction aimed specifically at accelerating innovative clean heat technologies for European industry. They span Austria, Belgium, Czechia, Denmark, France, Germany, Hungary, Portugal, Slovenia and Spain.

The move targets one of Europe’s hardest energy challenges: industrial heat. Many heavy industries still rely on natural gas for heat production, especially in sectors where electrification has moved more slowly than in power or transport.

Clean Heat Moves Into Heavy Industry

The selected projects will use a range of technologies to replace natural gas-fuelled heat production systems. These include direct and indirect resistance heating, heat pumps, solar thermal systems, electromagnetic and dielectric heating, and hybrid technologies.

Together, the projects are expected to produce around 16.3 terawatt-hours of decarbonised heat during their first five years of operation. Their combined thermal capacity is 766 megawatts.

That output is equivalent to replacing more than 1.5 billion cubic metres of natural gas over five years. The Commission said this is roughly comparable to the annual consumption of 4 million EU households.

For industry leaders, the auction offers a direct policy signal. Brussels is using carbon market revenues to lower the cost of deploying clean heat in sectors where energy demand is high and emissions are difficult to cut.

ETS Revenues Back Industrial Competitiveness

The grants will come from the Innovation Fund, financed by the EU Emissions Trading System. This structure ties carbon pricing directly to industrial decarbonisation investment.

The Commission said the support will help the projects contribute to the EU’s clean transition, energy independence and security, and industrial competitiveness.

That matters for companies exposed to energy price volatility, carbon costs and tightening climate regulation. It also aligns with the EU’s broader push to reduce reliance on imported fossil fuels while keeping manufacturing capacity in Europe.

The auction included projects in pulp and paper, glass, ceramics, construction materials, iron and steel. These sectors have been less represented in the Innovation Fund portfolio so far.

Other beneficiaries include food and beverage, textiles and pharmaceuticals. The spread shows how clean heat is moving beyond pilot markets and into a broader industrial base.

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Funding Split Across Three Heat Categories

The auction was structured around three topics, based on temperature level and installation capacity.

Five projects were selected under the high-temperature heat topic, with €62.1 million in support.

Another 44 projects were selected under the medium-temperature heat topic above 5 megawatts capacity, with a total budget of €286.5 million.

A further 16 projects were selected under the medium-temperature heat topic with 3 to 5 megawatts capacity, receiving €47.9 million.

This structure gives the Commission a way to support both larger industrial systems and smaller installations. It also helps compare projects with similar technical requirements, rather than forcing all heat technologies into one funding pool.

Grant Agreements Expected In Late 2026

The European Climate, Infrastructure and Environment Executive Agency will now begin formal grant agreement preparation with the selected projects.

That process will confirm the final conditions for financial support. Grant agreements are expected to be signed in the second half of 2026.

Selected projects must reach financial close within two years of grant signature. They must also enter operation within four years. These commitments are backed by a completion guarantee provided to the Commission.

CINEA will monitor implementation to ensure projects are delivered as planned and that support is used according to the agreed terms. The final list of signed projects under the Innovation Fund Heat Auction is expected in the fourth quarter of 2026.

What Executives Should Watch Next

The Commission is already preparing the next round. A second Heat Auction for 2026 will carry a €1 billion budget, announced at the 2026 Cleantech Conference on Tuesday.

The Commission plans to publish draft Terms and Conditions for the IF26 Heat Auction by the end of May 2026. A general Innovation Fund stakeholder consultation event is scheduled for 19 June 2026.

For C-suite leaders, investors and industrial operators, the message is clear. Clean heat is becoming a financeable category in Europe’s industrial transition, backed by carbon market revenues and structured deadlines.

The auction also shows where EU policy is heading. Industrial competitiveness will increasingly depend on the ability to decarbonise process heat, reduce gas exposure and align capital plans with Europe’s tightening climate framework.