Industrial Accelerator Act raises the stakes for South-East Europe’s low-carbon investment calculus

The European Commission’s proposed Industrial Accelerator Act (IAA) is being pitched as an industrial competitiveness framework, yet its real impact may be felt in boardrooms and financing committees across South-East Europe. As European industry faces parallel pressure from decarbonisation mandates, global competition and geopolitical fragmentation, the IAA functions less like a neutral rulebook and more like a capital allocation signal—pointing where large-scale investment should flow.

For economies in the region—from Serbia and Montenegro to Romania and Bulgaria—the policy matters because these countries sit at the intersection of EU supply-chain resilience, CBAM exposure, and ongoing industrial relocation dynamics. The way the IAA is structured will not only influence Western Europe’s decarbonisation pathways; it will also affect whether SEE becomes a core industrial extension of the EU or continues primarily as a source of raw materials and lower-value processing.

A shift toward strategic steering—and new discretion risk

The proposal represents a departure from the EU’s historically market-led industrial policy model. While it maintains a formal commitment to open markets, it adds mechanisms that effectively steer capital toward “strategic” industrial activities through procurement rules, funding frameworks and regulatory prioritisation.

The IAA is positioned as a cornerstone of the Clean Industrial Deal, explicitly tying climate policy to industrial competitiveness and economic security. That linkage creates both potential upside—such as more predictable demand signals for low-carbon inputs like steel, aluminium and cement—and additional risk: political discretion embedded in market access.

In particular, provisions on foreign investment screening and delegated decision-making powers could influence how easily projects can qualify for preferred treatment. For SEE economies that often rely on foreign capital—whether EU-based, Chinese, Turkish or Gulf-backed—the change could alter FDI flows, project bankability and ownership structures.

“Made with Europe” rules put origin under scrutiny

A central feature of the IAA is a Union-content requirement, reframed through a “Made with Europe” concept rather than strict localisation. Under the proposal, products originating from countries that have EU free trade agreements can qualify as equivalent to Union content if safeguards are met.

This distinction is especially consequential for SEE states outside the EU but integrated into its industrial ecosystem. Countries such as Serbia and Montenegro could potentially position themselves as “quasi-EU manufacturing zones,” depending on how equivalence criteria are applied.

The document also flags an important uncertainty: the European Commission retains scope to exclude countries through delegated acts using broadly defined criteria. That unpredictability would feed directly into how cross-border projects are structured—along with long-term power purchase agreements tied to output—and even financing choices connected to export eligibility under CBAM. In practical terms described by the proposal logic, export access for CBAM-exposed production—such as steel supplied to EU markets under an adjusted framework—could be reclassified if definitions around “strategic partner” status evolve.

Compliance tightened: carbon performance plus origin

The IAA makes another notable improvement by applying low-carbon and Union-content criteria together, rather than treating them as alternatives. This approach aims to eliminate an earlier draft risk that broader industrial-policy objectives could override climate-performance requirements.

The result is a two-dimensional compliance framework for investors: carbon intensity per unit of output alongside supply-chain origin and localisation considerations. For assets located in SEE, this reinforcement increases emphasis on capabilities that support both dimensions—on-site renewable generation (solar, wind or hydro), battery storage integration, long-term structured power procurement and plant-level MRV systems for emissions monitoring.

This dual requirement is particularly relevant for sectors exposed to CBAM such as steel, aluminium and cement because electricity sourcing choices and process emissions can directly determine export viability.

Demand signals exist—but fall short for FIDs

If there is one structural weak point highlighted in the proposal design, it lies on the demand side. The IAA introduces procurement quotas for low-carbon materials—25% for steel, 25% for aluminium, and just 5% for cement. Yet those levels are widely considered insufficient to drive investment at scale.

The document itself warns that such quotas may fail to generate the market certainty needed for Final Investment Decisions (FIDs) in capital-intensive projects. The concern is framed not as theoretical: hydrogen-based steel initiatives referenced in major European projects require materially higher CAPEX compared with conventional routes while also carrying significantly higher operating costs.

The emissions differential described underscores why investors still view transformation technology as essential but financially challenging: traditional BF-BOF steel ranges around 1.8–2.2 tCO₂ per tonne; gas-based DRI-EAF sits near 1.1–1.3 tCO₂ per tonne; hydrogen-based DRI-EAF ranges about 0.1–0.4 tCO₂ per tonne. Even with lower-emissions pathways offering transformational benefits environmentally, bridging that gap remains difficult without stronger commercial certainty.

The report argues this creates an opening for SEE: lower labour costs, available land and proximity to EU markets could allow next-generation facilities at lower CAPEX intensity—provided demand signals become strong enough over time.

Ecosystems via Industrial Acceleration Areas—but key criteria remain non-binding

The most strategically relevant component identified in the framework is the creation of Industrial Acceleration Areas (IAAs). These zones are intended not only to deliver permitting fast-tracks but also function as integrated industrial ecosystems enabling access to low-carbon energy; industrial symbiosis such as waste heat reuse; circular material flows; and infrastructure clustering.

However, critics within the text note that key criteria are currently non-binding. Without clearer commitments embedded in implementation requirements, site selection could default back toward traditional logic rather than delivering transformative industrial planning.

The implications for South-East Europe are therefore immediate: if designed effectively while capturing strategic sectors beyond legacy industries—including recycling—the region could develop hydrogen-linked clusters (Serbia and Romania), circular metals hubs (Bulgaria and Bosnia) or integrated RES plus industrial parks (Montenegro coastal zones). If instead recycling and secondary materials are not explicitly recognised as strategic sectors, IAAs risk reinforcing high-carbon asset patterns rather than redirecting them towards lower-emissions production models.

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