Written by IngChang Tan
[Update]
The European Commission’s Industrial Accelerator Act (IAA), published on 4 March 2026, signals a pivot towards more stringent control over trade in sectors deemed strategic for the Union’s decarbonisation and economic security. Worries of trade partners being excluded in public procurement has been addressed under Chapter 3, Article 8 of the text. In it, trade partners with existing Free Trade Agreements (FTAs) are categorised as ‘trusted partners’ for the purpose of meeting ‘Union origin’ requirements. However, the legislative language remains ambivalent, granting the Commission delegated powers to exclude specific FTA partners if their involvement creates strategic dependencies or if they fail to offer reciprocal market access.
While the Act primarily focuses on net-zero technologies and the automotive supply chain—specifically identifying battery production as a critical vulnerability—it also highlights the strategic importance of the bioeconomy. In order to promote and safeguard these industries, the IAA seeks to address three identified core issues:
- Supply chain vulnerabilities in net-zero technologies.
- Limited lead markets for European low-carbon industrial products.
- The failure to deploy industrial technologies at scale.
As a result of the IAA, the potential implications for ASEAN are multifaceted. The direct impact may initially be contained as these strategic industries are not currently the primary export markets for most ASEAN economies. However, the ‘Made in EU’ procurement requirements and new foreign investment conditions could pose challenges for Thailand’s automotive hub and Indonesia’s nickel and battery industry ambitions.
Conversely, the emphasis on the bioeconomy presents potential opportunities for Malaysia and Indonesia to integrate their palm oil sectors into European low-carbon value chains. Nevertheless, this remains contingent upon their ability to navigate increasingly rigorous Indirect Land-Use Change (ILUC) risk certifications. Success will depend heavily on the capability of regional producers to satisfy the EU’s low-carbon criteria and provide robust evidence of sustainable land management.
At this stage, making definitive predictions regarding the impact on regional trade is difficult, as many of the qualifying criteria and technical calculation methodologies are yet to be defined through delegated acts. Consequently, ASEANcham will continue to monitor these legislative developments and provide further updates as the technical specifications are released.
[initially published on 11.02.2026]
Amidst political and economic pressure from both Europe’s eastern and western flanks, the European Union is working to maintain its lead in green innovation and secure its industrial capacity. The Industrial Accelerator Act (IAA)—often associated with “Made-in-Europe” objectives—seeks to address these challenges.
What is the Industrial Accelerator Act?
Concerned by the risks of deindustrialisation and the need to remain competitive in green innovation, the EU introduced the IAA to secure local manufacturing capabilities. A primary goal is to reduce dependency on single trade partners for key technologies. The Act proposes a “Made-in-Europe” framework that integrates specific resilience and sustainability criteria into public procurement, encouraging the sourcing of strategic industrial goods from within the Union.
While dependency risks persist, the solution lies in diversifying supply chains rather than total “on-shoring”, which will increase costs by bypassing the competitive advantages of global trade. Not mentioning the bureaucratic weight associated with such implementation. The Act places a particular focus on decarbonising energy-intensive sectors, such as green steel and cement production, alongside securing the supply of solar photovoltaics (PV).
The proposal comes amidst the increasing weariness of China`s dominant position in the PV and rare earths market. However, it places undue burden on European companies and tax payers. Said solution must be diversification and not protectionism. Not only will it increase Europe`s resilience, it does so while saving costs. ASEAN with its significant production facilities offer comparable products and established supply chains in mitigating economic shocks. Diversification must be emphasised rather than strict protectionism.
The Industrial Accelerator Act (IAA) centers on three strategic pillars designed to catalyse the decarbonisation of energy-intensive industries while maintaining economic resilience.
1. Strategic Public Procurement: Green Steel and Cement
The IAA aims to create “lead markets” by integrating mandatory sustainability and resilience criteria into public tenders for construction and solar photovoltaics.
- Creating Stable Demand: To offset the higher production costs of green materials, public procurement will serve as a reliable offtake mechanism. This provides the investment security needed for innovation in low-carbon steel and cement.
- Open vs. Local Tenders: While the Act emphasizes European sourcing to reduce strategic dependencies, it includes provisions for “trusted partner” participation. How such partners are defined has been to be revealed and will be crucial in ensuring that cost stays low.
- Geopolitical Context: By adhering to transparent, rules-based procurement, the EU reinforces its commitment to multilateralism, distinguishing its industrial policy from more unilateral global trade actions.
2. Strategic Sourcing and After-Sales for PV Panels
Recognising the high labor costs associated with large-scale solar manufacturing and solar panels as fixed assets lasting decades, the EU’s strategy focuses on a balanced trade model rather than total “on-shoring.”
- Diversified Supply Chains: Rather than shifting all manufacturing to Europe, the EU prioritizes diversifying suppliers — identifying regions like ASEAN as key partners—to avoid over-reliance on a single market.
- Service-Oriented Growth: The focus shifts toward high-value after-sales services, maintenance, and grid integration. This model generates sustainable, long-term employment and tax revenue within the EU, leveraging European technical expertise without the risks of a manufacturing “glut” once PV capacity within the EU is reached.
3. Protection of Critical Infrastructure and IP
To safeguard economic security, the IAA introduces stricter oversight for investments in critical sectors (green steel, cement, and renewables).
- Ownership Caps: The Act empowers member states to screen and potentially restrict foreign majority stakes in strategic companies, often capping ownership at 49% for non-EU entities.
- Intellectual Property (IP): Stricter conditions for IP sharing are implemented to prevent involuntary technology transfers, a move particularly relevant for mergers and acquisitions involving third-party states. Adding an additional layer of screening to FDI.
- GHG Labeling: A new voluntary Greenhouse Gas (GHG) labeling system for cement, steel, and aluminum informs consumers and industrial buyers of a product’s carbon footprint, facilitating “green premiums” for cleaner manufacturers.
Impact on ASEAN Companies
The immediate economic impact on ASEAN member states is expected to be limited, as cement and steel are not the primary exports from the region to the European Union. While ongoing Free Trade Agreement (FTA) negotiations could alter this trade dynamic, the current volume remains secondary to electronics and machinery.
However, the framework of the Industrial Accelerator Act (IAA) presents a strategic pivot point. If public procurement remains open to non-EU sources that meet high sustainability standards, it could incentivize ASEAN manufacturers to invest in green production technologies to remain competitive. Showing the bloc as not a unilateral actor but committed in fostering greener production and higher sustainability standards among its trade partners. By pivoting towards domestic production, the European Union risks positioning itself as protectionist amidst its effort in safeguarding multilateralism and international trade.
GHG Labeling and Compliance
While currently voluntary for steel and cement, Greenhouse Gas (GHG) labeling may eventually be expanded to a broader range of industrial products. Such an expansion would likely increase operational costs for ASEAN exporters due to the technical requirements of carbon accounting and labeling compliance. This potential shift mirrors the digital product passports already emerging in other sectors, requiring enhanced transparency in global supply chains.
Conclusion
The IAA represents a significant step in the EU’s transition toward a carbon-neutral economy. To maximise its global and domestic impact, the Act must balance local industrial support with the principles of fair and open public tenders. Restricting procurement solely to the single market may lead to long-term inefficiencies and higher costs for taxpayers. A more resilient approach would involve fostering international partnerships — particularly with emerging green manufacturing hubs like ASEAN — to ensure a diverse and competitive supply of clean technologies.
