EU Heat Auction Backs Pulp and Paper Decarbonisation Projects With €400 Million Funding

The European Commission has awarded around €400 million in funding to 65 industrial heat decarbonisation projects, including several focused on the pulp and paper sector, as part of the first Innovation Fund Heat Auction.

The initiative is aimed at accelerating the replacement of natural gas-based industrial heat systems with electrified and renewable alternatives across Europe’s energy-intensive industries. The Commission identified pulp and paper among the sectors expected to benefit from the deployment of new clean heat technologies, alongside glass, ceramics, construction materials, and iron and steel manufacturing.

The selected projects span 10 European Economic Area countries — Austria, Belgium, Czechia, Denmark, France, Germany, Hungary, Portugal, Slovenia, and Spain — and will use technologies including direct and indirect resistance heating, heat pumps, solar thermal systems, and hybrid heat solutions.

For pulp and paper producers, the programme targets one of the sector’s largest operational challenges: decarbonising process heat used in drying, pulping, and paper production. Industrial heat demand in the sector has traditionally relied heavily on fossil fuels, making electrification and renewable heat integration a key part of broader emissions reduction strategies across European paper mills.

According to the Commission, the funded projects are expected to prevent more than 6.6 million tonnes of CO2 emissions over 10 years. Collectively, the projects are projected to generate around 16.3 terawatt-hours of decarbonised heat during their first five years of operation, replacing more than 1.5 billion cubic metres of natural gas.

The auction attracted 85 applications, with successful projects ranging from 3 MWth to 45 MWth in size and grant requests between €444,000 and €37.1 million.

The European Climate, Infrastructure and Environment Executive Agency (CINEA) will now prepare grant agreements with the selected projects, which are expected to be signed in the second half of 2026. The Commission has also announced plans for a second Heat Auction in 2026 with a prop