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From heat pumps to electric car charging points: the subsidies provided for under the EU energy clause

As expected, the EU has clarified that subsidies for the purchase of fossil fuels are excluded

by Lorenzo Pace

18 August 2026

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3' min read

Translated by AI

Versione italiana

3' min read

Translated by AI

Versione italiana

Households will be able to invest in solar panels, geothermal systems, home energy storage batteries and heat pumps to replace fossil fuel-fired boilers, as well as in moderate or extensive home renovations. For businesses, on the other hand, the focus will be on industrial decarbonisation technologies and measures to improve the energy efficiency of buildings. Furthermore, public authorities will be able to invest in the on-site generation and storage of renewable energy and in the refurbishment of public buildings. In all three cases, however, subsidies will be available for electric cars – not for the vehicles themselves, but for charging points.

This is set out in the European Commission’s communication, which has just been published in the Official Journal of the EU, and which explains the criteria for triggering the national safeguard clause – now extended to cover energy security measures – by way of derogation from the constraints of the Stability Pact.

As the document emphasises, this flexibility applies only to measures decided upon after 28 February 2026, to prevent Member States from using it to cover budgetary decisions already taken previously.

No subsidies for excise duty cuts

A document which makes it clear – though this was already known – that there will be no flexibility to subsidise the purchase of fossil fuels. This issue will once again take centre stage in Italia as early as next week, when the Government will have to work out how to continue the fight against high fuel prices (there is currently a 17-cent reduction per litre on diesel), with prices currently hovering around 2.1 euros per litre for diesel and 2 euros for petrol. As regards the excise duty cut, therefore, no deviation will be permitted.

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Including nuclear power stations

It will, however, be possible to invest in public transport infrastructure, such as trams, underground railways and railway rolling stock. The energy sector in the strict sense – which is listed as a separate item in the table – includes investments in renewables, battery and storage technologies, electricity grids, hydrogen production via electrolysis, system-wide energy efficiency, sustainable renewable fuels and – amongst the less obvious items – nuclear power stations as well.

The ceiling set by the EU

In budgetary terms, the Commission is leaving the overall ceiling of 1.5 per cent of GDP for additional expenditure – already provided for under the defence safeguard clause – unchanged, whilst introducing two specific ceilings for energy: 0.3 per cent of GDP per year and 0.6 per cent of GDP cumulatively over the three-year period 2026–2028.

Monitoring will be carried out via an ‘extended control account’: first, it will be checked whether any overspend in net expenditure compared with the recommended path is due to an increase in defence spending; if there is any remaining margin, it will be checked to ensure that it falls within the energy ceilings.

Only deviations not covered by either of the two flexibility mechanisms are recorded as debt under EU Regulation 2024/1263. Member States that risk exceeding the overall 1.5 per cent limit due to defence expenditure may request a temporary exemption so as not to lose the margin allocated to energy, provided that fiscal sustainability is not compromised.

Dates

On the procedural front, Member States are invited to submit requests to extend the clause by the end of July/mid-August 2026, with the possibility of subsequent applications. The Commission’s recommendations could be issued in September, with the Council’s approval expected at the October Ecofin meeting. The request must include an initial list of planned measures with an estimate of the budgetary costs, demonstrating that these are targeted and effective interventions, prioritising the most vulnerable households and businesses, including those with high energy consumption. This will be followed by obligations to report periodically on the eligibility, additionality and effectiveness of the costs, to be updated by 15 April and 15 October each year.

The clause remains in force until 2028: after that date, energy measures still in force will need to be funded through a reallocation of priorities in national budgets, and the increased deficits accumulated as a result of this flexibility will weigh on subsequent medium-term budgetary adjustment plans.

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