The European Commission has proposed the Net-Zero Industry Act to scale up manufacturing of clean technologies in the EU and make sure the Union is well-equipped for the clean-energy transition. This initiative was announced on March 16, 2023, by President von der Leyen as a part of the Green Deal Industrial Plan.
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The European Green Deal, presented by the Commission in December 2019, sets the goal of making Europe the first climate-neutral continent by 2050. The EU’s commitment to climate neutrality and the intermediate goal of reducing net greenhouse gas emissions by at least 55 percent by 2030, relative to 1990 levels, are made legally binding by the European Climate Law.
The legislative package to deliver on the European Green Deal provides a plan to put the European economy firmly on track to achieve its climate ambitions, with the REPowerEU Plan accelerating the move away from imported Russian fossil fuels.
Alongside the Circular Economy Action Plan, this sets the framework for transforming the EU’s industry for the net-zero age.
Strengthen resilience and competitiveness
According to the Commission, the proposed Net-Zero Industry Act (NZIA) will “strengthen the resilience and competitiveness of net-zero technologies manufacturing in the EU, and make our energy system more secure and sustainable.”
It will create better conditions to set up net-zero projects in Europe and attract investments, with the aim that the Union’s overall strategic net-zero technologies manufacturing capacity approaches or reaches at least 40 percent of the Union’s deployment need by 2030.
This will accelerate the progress towards the EU’s 2030 climate and energy targets and the transition to climate neutrality, while boosting the competitiveness of EU industry, creating quality jobs, and supporting the EU’s efforts to become energy independent.
We need a regulatory environment that allows us to scale up the clean energy transition quickly. The Net-Zero Industry Act will do just that. It will create the best conditions for those sectors that are crucial for us to reach net zero by 2050: technologies like wind turbines, heat pumps, solar panels, renewable hydrogen as well as CO2 storage. Demand is growing in Europe and globally, and we are acting now to make sure we can meet more of this demand with European supply, said Ursula von der Leyen, President of the European Commission.
Reduce reliance on concentrated imports
Together with the proposal for a European Critical Raw Materials Act (ECRMA) and the reform of the electricity market design, the NZIA sets out a clear European framework to reduce the EU’s reliance on highly concentrated imports.
Drawing on the lessons learned from the Covid-19 pandemic and the energy crisis sparked by Russia’s invasion of Ukraine, it will help increase the resilience of Europe’s clean energy supply chains.
Our dependency on Russian gas has taught us a number of lessons. Let’s not replace that dependency with a reliance on others to produce solar panels and other technologies we rely on. With the Net-Zero Industry Act, we are building a strong manufacturing base in Europe along the clean technology value chain. To ensure our security of supply and remain an industrial leader that exports its products and technologies – not its jobs, said Thierry Breton, Commissioner for Internal Market.
The proposed legislation, which now needs to be discussed and agreed upon by the European Parliament and the Council of the European Union before its adoption and entry into force, addresses technologies that will make a significant contribution to decarbonization.
These include solar photovoltaic and solar thermal, onshore wind and offshore renewable energy, batteries, and storage, heat pumps and geothermal energy, electrolyzers and fuel cells, biogas/biomethane, carbon capture, utilization and storage (CCUS), grid technologies, sustainable alternative fuels technologies, advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle, small modular reactors (SMRs), and related best-in-class fuels.
The Strategic Net Zero technologies identified in the Annex to the Regulation will receive particular support and are subject to the 40 percent domestic production benchmark.
Clean energy is at the heart of the European Green Deal, and it will be the lifeblood of Europe’s Green Deal Industrial Plan and today’s Net Zero Industrial Plan. By supporting more domestic investments in production, we will build the products that Europe and the world need, generate valuable jobs for European citizens, and boost our industry. We have already shown what Europe can achieve with the REPowerEU plan, which is ending our dependence on Russian fossil fuels. This is the next step to a sustainable and green energy transition, said Kadri Simson, Commissioner for Energy.
The NZIA is built on the following pillars:
- Setting enabling conditions: the Act will improve conditions for investment in net-zero technologies by enhancing information, reducing the administrative burden to set up projects, and simplifying permit-granting processes. In addition, the Act proposes to give priority to Net-Zero Strategic Projects, which are deemed essential for reinforcing the resilience and competitiveness of the EU industry, including sites to safely store captured carbon dioxide (CO2) emissions. They will be able to benefit from shorter permitting timelines and streamlined procedures.
- Accelerating CO2 capture: the Act sets an EU objective to reach an annual 50Mt injection capacity in strategic CO2 storage sites in the EU by 2030, with proportional contributions from EU oil and gas producers. This will remove a major barrier to developing CO2 capture and storage as an economically viable climate solution, in particular for hard-to-abate energy-intensive sectors.
- Facilitating access to markets: to boost diversification of supply for net-zero technologies, the Act requires public authorities to consider sustainability and resilience criteria for net-zero technologies in public procurement or auctions.
- Enhancing skills: the Act introduces new measures to ensure there is a skilled workforce supporting the production of net-zero technologies in the EU, including setting up Net-Zero Industry Academies, with the support and oversight of the Net-Zero Europe Platform. These will contribute to quality jobs in these essential sectors.
- Fostering innovation: the Act makes it possible for Member States to set up regulatory sandboxes to test innovative net-zero technologies and stimulate innovation, under flexible regulatory conditions.
- A Net-Zero Europe Platform will assist the Commission and Member States to coordinate action and exchanging information, including around Net-Zero Industrial Partnerships. The Commission and Member States will also work together to ensure the availability of data to monitor progress toward the objectives of the Net-Zero Industry Act. The Net-Zero Europe Platform will support investment by identifying financial needs, bottlenecks, and best practices for projects across the EU. It will also foster contacts across Europe’s net-zero sectors, making particular use of existing industrial alliances.
Supporting the uptake of renewable hydrogen
To further support the uptake of renewable hydrogen within the EU as well as imports from international partners, the Commission is also presented its ideas on the design and functions of the European Hydrogen Bank. This sends a clear signal that Europe is the place for hydrogen production.
As announced in the Green Deal Industrial Plan, the first pilot auctions on renewable hydrogen production will be launched under the Innovation Fund in Autumn 2023.
Selected projects will be awarded a subsidy in the form of a fixed premium per kg of hydrogen produced for a maximum of 10 years of operation.
This will increase the bankability of projects and bring overall capital costs down. The EU auction platform can also offer “auctions-as-a-service” for Member States, which will also facilitate the production of hydrogen in Europe.
The Commission is further exploring how to design the international dimension of the European Hydrogen Bank to incentivize renewable hydrogen imports. Before the end of the year, all elements of the Hydrogen Bank should be operational.
Net zero technologies and renewable energy are crucial to reaching climate neutrality. Cleantech is a booming market, and the more we enhance our competitive advantage, the more quality jobs can be created in Europe. The Hydrogen Bank will aim to close the current investment gap in the development of renewable hydrogen and ensure the EU maintains its global lead in this critical technology. In the global race to net zero, we want to put the EU industry in the best possible position to compete. Today’s proposals do just that, said Frans Timmermans, EVP for the European Green Deal.