The European Commission is preparing to launch the first pan-European auction for the decarbonisation of industrial process heat under the Innovation Fund – the IF25 Heat Auction. The call opened on 4 December 2025, with a total budget of up to EUR 1 billion.
The objective of the initiative is to accelerate the deployment of electrification and direct renewable energy technologies in industrial process heating, to close the cost gap compared to fossil fuels, and to reduce emissions in energy-intensive sectors. The auction serves as a pilot for the Industrial Decarbonisation Bank and focuses on the measurable avoidance of CO₂ emissions as the basis for pricing and disbursement of support.
We invite you to participate in the call and encourage you to cooperate with KPMG in order to become familiar with the full terms and conditions of the call and to support the preparation of applications.
In the context of the accelerating industrial transformation in Europe, the European Union is launching a new auction aimed at decarbonising industrial process heat in energy-intensive sectors and strengthening industrial competitiveness.
Innovation Fund 25 Heat Auction
The European Commission is preparing the first pan-European industrial process heat auction – the IF25 Heat Auction. The call opened on 4 December 2025, with a total budget of EUR 1 billion.
Scope and objective
The auction supports projects that electrify industrial process heat (e.g. heat pumps/MVR, electric boilers, resistive heating, induction, plasma and shockwave heating) as well as projects using direct renewable heat (solar thermal and geothermal) in industrial processes. The objective is to achieve cost-effective reductions in greenhouse gas emissions and to accelerate the market uptake of industrial process heat decarbonisation technologies.
The auction covers two thematic areas (temperature baskets):
- Low-temperature basket: 100–400°C, indicative budget of EUR 500 million.
- High-temperature basket: >400°C, indicative budget of EUR 500 million.
Unused funds may be reallocated between the baskets.
Monitoring, reporting and verification (MRV) must be carried out within an energy management system compliant with ISO 50001 or EMAS, including the measurement of temperature and heat flow.
Support structure
Support will be granted in the form of a fixed premium per tonne of CO₂ avoided through the production of eligible industrial process heat (EUR/tCO₂). The premium will be paid on a semi-annual basis for a maximum period of five years from the date the installation enters the Entry into Operation phase, in proportion to the verified output.
Projects meeting the eligibility requirements will be ranked solely on the basis of the bid price per tonne of CO₂ avoided.
The application must declare the thermal capacity and the annual volume of avoided CO₂ emissions, aggregated over the entire five-year support period.
The maximum grant amount is up to EUR 100 million for projects in the 100–400°C basket and up to EUR 250 million for high-temperature projects (>400°C).
Key project requirements:
- Project location: The installation must be located within the EEA and implemented at a single physical site (no “virtual” aggregation of capacity from different locations).
- Scale and process parameters: The project must achieve at least 3 MWth of eligible process heat capacity and operate at a temperature of ≥100°C, in line with the relevant temperature basket.
- Eligible scope: Support is limited strictly to industrial process heat. Space heating, heat sales to district heating networks, and electric arc furnaces are excluded. Processes that are already largely electrified may also be excluded from eligibility..
- New production capacity: Only new low-emission heat capacity is eligible for support. Projects involving the construction of new fossil-fuel-based capacity are, as a rule, not eligible, except in cases explicitly permitted under the call documentation. The use of heat pumps recovering waste heat from existing fossil-fuel-based installations may be allowed.
Strategic importance of the programme
The IF25 Heat Auction supports the objectives of the Clean Industrial Deal and serves as a pilot for the Industrial Decarbonisation Bank, enhancing cost transparency and directing funding towards verified and measurable climate outcomes.
Through the Auctions-as-a-Service (AaaS) model, EEA countries may co-finance projects using national funds based on a common procedure; data on winning bids will be made public.
Indicative timeline:
- Call opening: 4 December 2025
- Call closure: 19 February 2026.
- Announcement of results (projects invited to sign grant agreements): May–June 2026
- Signature of grant agreements: by November 2026
How can we help?
KPMG advisors from the Innovation, Incentives and Grants team have extensive experience in supporting clients in the successful acquisition of financial support for projects, including grants, incentives and public subsidies. We would be pleased to provide you with further information on the conditions for obtaining funding, as well as to:
- assess your activities, in particular with regard to opportunities to obtain public funding, including the identification of appropriate funding sources;
- advise on how to structure your activities from an organisational and legal perspective in order to optimise access to grants;
- prepare the application for project funding;
- monitor the application throughout the evaluation procedure;
- provide support with the proper settlement and documentation of incurred costs in order to obtain their reimbursement, as well as with the implementation of appropriate accounting and tax recording principles.