The EU Sets Terms for a €1bn Industrial Heat Auction

Final Terms Published for IF26 Heat Auction

On 24 September 2026, the Commission published the final Terms and Conditions for its second Europe-wide auction for projects decarbonising industrial process heat (IF26 Heat Auction). The auction has a planned budget of €1 billion coming from EU Emissions Trading System revenues and is expected to open to bidders in early December 2026.

Today, these processes are largely powered by fossil fuels and represent three-quarters of industrial emissions, according to the Climate Action Directorate.

What the €1bn Covers and Who Can Bid

The €1bn programme will be financed from EU Emissions Trading System revenues. Electrification, direct renewable heat and nuclear technologies are eligible. Successful EU industrial heat auction projects can receive fixed-premium support for up to five years.

The European Commission has finalised terms for a €1 billion auction supporting lower-carbon industrial process heat, widening eligibility to lower-temperature applications and adding nuclear technologies alongside electrification and direct renewable heat.

Why Heat Is the Hardest Industrial Decarbonisation Problem

Process heat refers to the energy used to generate high temperatures for manufacturing activities in sectors such as chemicals, steel, or cement. Unlike power generation which is already largely decarbonised, heat remains fossil-locked. The first pilot auction IF25 proved demand: the auction attracted 85 applications requesting a total of €1.4 billion, more than three times the available budget.

The Commission described the Heat Auction as a pilot for the future Industrial Decarbonization Bank, a planned funding vehicle under the Clean Industrial Deal. A second round with a budget of €1 billion has been announced for 2026.

Changes From IF25 to IF26

The European Commission published the final terms and conditions for its second Europe-wide auction dedicated to the decarbonisation of heat in industrial processes on 24 September 2026. The key change is scope. HEAT IF26 is a €1 billion European auction, open to nuclear power for the first time. Widening to lower-temperature heat means food, paper and parts of chemicals can participate, not just high-temperature steel and cement.

For steel, the terms explicitly note steel projects are eligible. The European Commission has published final terms for an Innovation Fund auction worth approximately $1.14 billion aimed at decarbonising industrial process heat, with the steel industry explicitly included.

Funding Model and Duration

Projects selected under the auction will receive support in the form of a fixed premium payment upon verified and certified production. For heat, support runs up to five years, shorter than the hydrogen auction's ten years, reflecting faster payback on heat pumps, e-boilers and waste-heat recovery.

The EU awards €400 million to 65 industrial heat projects in the first auction, showing the Commission is willing to fund smaller distributed projects, not just mega-plants. This matches BASF's warning that most assets in Europe are competitive against imports but need efficiency measures, not just mega-subsidies.

Connection to Wider EU Climate Architecture

The heat auction sits between two other pillars. The EU's first full-scale CO2 storage site Greensand began operating on September 18, 2026 in the Danish North Sea, providing the storage sink for unavoidable process emissions. Brussels also kept battery recycling targets unchanged on September 11, pushing for more EU treatment capacity.

Together, heat electrification plus CO2 storage plus circular materials forms the Clean Industrial Deal triad. The Innovation Fund's hydrogen auction remains parallel, with the third hydrogen auction opening in December 2025.

Implications for Industry Bidders

For chemical parks that saw LAB prices spike 6.67% in May 2026 and for food or paper makers facing high gas costs, IF26 offers a way to de-risk electrification. Electrification, direct renewable heat and nuclear technologies eligible means a heat pump using sewage-source heat, like Wanhua's Taozi Bay system that cut 56,620 tonnes CO2, could theoretically qualify if located in the EU.

Bidders should prepare for December 2026 opening, with emphasis on verifiable emissions savings, additionality and project readiness, as over-subscription is expected again.

Working Source Links:

Commission publishes terms and conditions for €1 billion industrial heat decarbonisation auction - Official EU Climate Action - https://climate.ec.europa.eu/news-other-reads/news/commission-publishes-terms-and-conditions-eur1-billion-industrial-heat-decarbonisation-auction-2026-09-24_en

EU Sets €1bn Industrial Heat Auction Terms, Brussels - https://eurotoday.org/eu-sets-e1bn-industrial-heat-auction-terms-brussels/

EU Industrial Heat Auction Secures Major €1bn Boost - https://brusselsmorning.com/eu-industrial-heat-auction-rules/104283/

EU sets €1bn industrial heat auction terms - widening eligibility - https://industrialnews.co.uk/eu-sets-e1bn-industrial-heat-auction-terms/

HEAT IF 26: €1 billion European auction, open to nuclear power for first time - https://transitions.newstank.eu/en/article/view/454912/heat-if-26-1-billion-european-auction-open-nuclear-power-for-first-time.html

EU awards €400 million to 65 industrial heat projects in auction - https://www.pv-magazine.com/2026/05/25/eu-awards-e400-million-to-65-industrial-heat-projects-in-auction/