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The EU legislative institutions adopted recently the Net-Zero Industry Act, NZIA which is aimed at strengthening the member states’ manufacturing capacities in key clean technology sectors. By creating a unified and predictable business environment for the clean-tech manufacturing, the NZIA increases the competitiveness and resilience of the EU’s industrial base, supports quality jobs creation and skilled workforce.
Background
The EU political guidance has committed to achieve climate neutrality by 2050; however, there are some stumbling blocks, e.g. most EU states are presently net importers of several (ordinary and net-zero) technologies and components that could hamper the objective’s achievement.
The NZIA (as part of the Green Deal Industrial Plan) ensures that the green transition is not at risk by strategic dependencies. By setting an aggregate manufacturing capacity objective for 2030 and simplifying the regulatory framework for net-zero technologies, the NZIA allows the EU member states to become industrial leaders in this market. Besides, learning from the lessons of the pandemic and the energy crisis, this act makes sure that supplies chains are no longer face disruptions and that the clean-energy transition is underpinned by the domestic manufacturing capacities.
The NZIA was agreed by the EU co-legislators (as part of the Green Deal Industrial Plan, GDIP) in February 2024, more than a year after it was drafted by the Commission. The GDIP sets out the ways the EU states proceed in “sharpening” the sector’s competitive edge by scaling up the member states’ manufacturing capacity for net-zero technologies, and the products are supposed to meet the EU’s ambitious climate targets.
The Commission presented the NZIA’s draft in March 2023, alongside the Critical Raw Materials Act, CRMA and the reform of the electricity market design. The European Parliament and Council reached a provisional agreement in February 2024 and the Parliament voted on the legislation in April 2024; finally the Council made a concluding step in the legislative process this May. The act enters into force the day after the publication in the Official Journal which is expected towards the end of June.
Net-zero industry in Europe
The NZIA is an initiative stemming from the Green Deal Industrial Plan which aims to scale up the manufacturing of clean technologies in the EU; it means increasing the EU’s manufacturing capacity of technologies that support the clean energy transition and release extremely low, zero or negative greenhouse gas emissions during operation. It is expected that the NZIA will attract investments and create better conditions and market access for clean tech in the EU member states as the Union’s overall net-zero technologies manufacturing capacity approaches at least 40% of annual deployment needs by 2030. This will accelerate the progress towards the EU’s 2030 climate and energy targets and the transition to climate neutrality by 2050 and will also boost the competitiveness of EU industry, create quality jobs and support the EU’s efforts to become energy independent.
The NZIA addresses technologies that will make a significant contribution to decarbonisation: it supports, in particular, strategic net-zero technologies that are commercially available and have a good potential for rapid-scale up. Such technologies strengthen the EU’s industrial competitiveness and energy system’s resilience while allowing the clean energy transition.
Presently strategic net-zero technologies in Europe include: – solar photovoltaic and solar thermal devisees; electrolysers and fuel cells; onshore wind and offshore renewables; sustainable biogas/biomethane facilities; batteries and energy storage; carbon capture and storage; heat pumps and geothermal energy; and grid technologies.
Source: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan/net-zero-industry-act_en
Main NZIA’s components
In order for the EU to become a leader in the clean tech sector, NZIA serves as a benchmark for the manufacturing capacity of strategic net-zero technologies to meet at least 40% of the EU’s annual deployment needs by 2030. The benchmark provides predictability, certainty and long-term signals to manufacturers and investors and allows progress to be tracked. For example, to support carbon capture and storage projects and increase the availability of CO2 storage sites in Europe, NZIA also sets a target of 50 million tones of annual injection capacity in EU geological CO2 storage sites by 2030.
In addition to setting objectives, the new law improves the conditions for investment in net-zero technologies by simplifying and accelerating permitting procedures, reducing administrative burden and facilitating access to markets. Public authorities will have to consider sustainability, resilience, cybersecurity and other qualitative criteria in procurements procedures for clean technologies and auctions for the deployment of renewable energy. Thus, the EU states will be able to support a set of net-zero technologies such as solar photovoltaic, wind, heat pumps, nuclear technologies, hydrogen technologies, batteries and grid technologies by establishing ‘strategic projects’ which would benefit from priority status at national level, shorter permitting timelines and streamlined procedures.
Energy-intensive industries such as steel, chemicals or cement that produce components that are used in these net-zero technologies (and form part in decarbonisation) can also be supported via the adopted legal measures: hence the creation of Net-Zero Acceleration Valleys will further facilitate the establishment of clusters of net-zero industrial activity in the EU states.
The act removes a major barrier to developing CO₂ capture and storage as an economically viable climate solution, in particular for hard-to-abate emissions in energy-intensive industries, in line with the aims of the Industrial Carbon Management Communication.
In addition, the EU Emissions Trading System, EU ETS puts a price on CO2 emissions and, since 2013, has incentivized the capture of CO2 for permanent storage; it also helps fund industrial carbon management projects through the Innovation Fund, which already supports the capture of 10mt of CO2 per year from 2027 for permanent storage. In 2022, the Commission adopted a proposal for an EU-wide voluntary framework to certify carbon removals to boost in particular innovative industrial carbon removal technologies, such as bioenergy with carbon capture and storage (BioCCS) or direct air carbon capture and storage (DACCS).
More on carbon management in: https://ec.europa.eu/commission/presscorner/detail/en/IP_24_585
Besides, the NZIA includes measures for investment in education, training and innovation with the establishment of Net-Zero Industry Academies to train 100,000 workers within three years and support the mutual recognition of professional qualifications. Regulatory sandboxes will be established for testing innovative net-zero technologies under flexible regulatory conditions.
Finally, the Net-Zero Europe Platform will serve as a central coordination hub, where the Commission and EU countries can discuss and exchange information as well as gather input from stakeholders.
Source: Commission press release at: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_2309
Commission’s opinion on the NZIA:
= “With the Net-Zero Industry Act, the EU has now a regulatory environment that allows us to scale up clean technologies manufacturing quickly. The Act creates the best conditions for those sectors that are crucial for us to reach net-zero by 2050. Demand is growing in Europe and globally, and we are now equipped to meet more of this demand with European supply.”
Ursula von der Leyen, President of the European Commission
= “With the final adoption of the Net-Zero Industry Act, we further simplify and accelerate permitting procedures and reduce administrative burdens. This will equip the EU with a robust framework to foster innovation and enhance competitiveness in the transition to a sustainable economy, for the benefit of all Europeans.”
Margrethe Vestager, Executive Vice-President for European Digitalization
= “The European Green Deal is our growth strategy, and it needs competitive European industries to thrive in the clean tech markets of the future. The Net Zero Industry Act will guarantee European support to a wide range of strategic and critical sectors, helping them to develop their markets, train and recruit European workers, and compete on a level playing field with international competitors. The rapid negotiation and adoption of this Commission proposal shows that Europe is ready to react to global challenges and support its industry and workers to deliver together the European Green Deal.”
Maroš Šefčovič, Executive Vice-President for European Green Deal
= “With the Net Zero industry Act, the EU aims to lead in the booming clean tech market – for the sake of our climate neutrality, but also for European competitiveness, jobs, energy security, and economic and political resilience. The NZIA sets ambitious objectives to multiply our clean tech manufacturing capacity by 2030. Because without industrial production, we risk becoming net importers, losing jobs, and re-creating dependencies that we do not wish to reproduce after the Russian gas experience. The strategy was the easy part – what matters now is implementation and results on the ground. And I am confident, based on my on-site visits across European regions and discussions with Member States, financial institutions and industry, that Europe is ready to attract and accelerate investment. The Commission is determined to offer all support to make NZIA a success story.”
Thierry Breton, Commissioner for Internal Market
= “The energy crisis taught us a key lesson: we must avoid any dependency on a single supplier. With the Net-Zero Industry Act, Europe will be well equipped with a stronger industrial base to achieve the clean energy transition. Through easier and faster permitting for manufacturing projects, support for innovation and skills and better market access for high-quality clean tech products, we will make sure European clean tech manufacturers can compete on a level playing field. This will ensure we can reach our ambitious renewables and energy efficiency targets for 2030 while maintaining our industrial competitiveness.”
Kadri Simson, Commissioner for Energy
Citations from: https://ec.europa.eu/commission/presscorner/detail/en/ip_24_2309
Hydrogen sector
Hydrogen is one of the key technologies of Europe’s Net-Zero Industry Act; hydrogen is indispensable to decarbonise European industry and reach the EU’s 2030 climate targets and 2050 climate neutrality. By scaling up its production, the EU states will reduce the use of fossil fuels in industrial development and serve the needs of hard-to-electrify sectors.
The European Hydrogen Bank will support the uptake of renewable hydrogen within the EU as well as imports from international partners: it aims to unlock private investments in hydrogen value chains by efficiently connecting renewable energy supply to demand and addressing the initial investment challenges.
The Bank will create an emerging European hydrogen market, offer new growth opportunities and quality job creation and help reach the EU’s hydrogen goals, in line with REPowerEU and the path to climate neutrality. The first pilot auctions was launched under the Innovation Fund in autumn-2023 supporting renewable hydrogen production; the auctions sent clear signal that Europe is the place for hydrogen production.
On the EU Hydrogen Bank in: https://ec.europa.eu/commission/presscorner/detail/en/fs_23_1610