Net Zero Industry Act: European Commission unveils vision for green industrial revolution

Net Zero Industry Act: European Commission unveils vision for green industrial revolution

Plan to ramp up support for strategic net zero technologies comes in response to generous subsidies launched in US through Inflation Reduction Act

The European Commission has this afternoon published its much-anticipated Net Zero Industry Act, setting out plans to turbocharge production of clean energy technologies across the EU, entice more green investment to the bloc, and reduce member states’ reliance on imports from China and other nations.

The headline target of the proposed regulation is a goal for 40 per cent of the bloc’s demand for a raft of “strategic” clean technologies to be met with products, services, and materials sourced within the region by 2030, with the goal backed by a promise to “create better conditions to set up net zero projects in Europe and attract investments”.

The proposed regulation is the European Union’s response to the massive incentives being rolled out for clean technologies and projects in the US as part of the White House’s Inflation Reduction Act (IRA).

Solar, wind, and geothermal energy are singled out in the Net Zero Industry Act as “strategic net zero technologies” that should benefit from faster permitting and easier access to funding, alongside storage and battery technologies, heat pumps, electrolysers, fuel cells, sustainable biogas and biomethane, carbon capture and storage, and grid technologies.

Small modular reactors, “sustainable alternative fuel technologies”, advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle, and “related best-in-class fuels” are also included in the EU’s definition of net zero technologies, but are not part of the group of “strategic” technologies eligible for fast-tacked permitting and funding, or subject to the proposed 40 per cent target.  

The Commission today also published proposals for a Critical Raw Materials Act, which sets 2030 targets for the region to mine 10 per cent of “critical raw materials” it consumes and meet a further 15 per cent of demand through recycling. Raw materials deemed strategic by the EU include lithium, nickel, copper, and cobalt, which are key building blocks for solar, wind, energy storage, and electric vehicle technologies.

European Commission President Ursula von der Leyen said the Net Zero Industry Act would “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,” she added.

The text commits EU states to lowering the administrative burden for developing net zero manufacturing projects and simplifying permit-granting processes for strategic technologies.

It also proposes an EU-wide target to rapidly boost carbon capture capacity across the bloc, setting out an aim  for member states’ to collectively achieve an annual 50Mt injection capacity in strategic carbon storage sites by 2030, which would be funded by “proportional contributions” from EU oil and gas producers.

And the Act would require public authorities to consider sustainability and resilience criteria for net zero technologies in public procurement and auctions.

In order to build up the net zero technology manufacturing workforce, the Act proposes the establishment of Net Zero Industry Academies, which would be backed by a Net Zero Europe Platform. 

A separate document published by the Commission today also sets out more detail about its plans for how a European Hydrogen Bank would work in practice. The Bank is to be designed to address the initial financial challenges that prevent investment in renewable hydrogen so as to create a market for it that will ultimately help the bloc reach its target of producing 10Mt of ‘green’ hydrogen by 2030.

“Net zero technologies and renewable energy are crucial to reaching climate neutrality,” said Frans Timmermans, executive vice-president for the European Green Deal. “Clean tech 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 on 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 EU industry in the best possible position to compete.”

Analysts from environmental think tank E3G predicted the Net Zero Industry Act would significantly bolster clean tech value chains across the bloc. But they warned it suffered from a lack of clear safeguards for ensuring carbon storage projects deliver promised emissions savings and failed to tackle the bottlenecks in installing grid connections or provide support for solutions for the decarbonisation of energy-intensive industries beyond CO2 storage.

“The EU’s climate and clean energy targets had made it clear it would need renewables, heat pumps, and batteries in quantity,” said Manon Dufor, head of E3G in Brussels. “Today the Commission is clearly telling manufacturers ‘produce them here’. This call would be all the more credible with a new push on deploying these technologies and training up people to install them”

They also warned that it did not include adequate provisions for scaling up the green energy workforce and might in its current form hamper climate cooperation with developing countries.

The proposals set out today will add yet more urgency to warnings from British businesses, politicians, and investors that the UK is at risk of falling significantly behind in the race to attract green investment and capture rapidly-growing markets critical to the clean energy transition.

“The EU Commission’s proposals, in response to US billions in green subsidies, represent something of a race to the top,” said Gareth Redmond-King, head of international programme at the Energy and Climate Intelligence Unit (ECIU). “The economic, health, and climate benefits of the clean transition appear to be driving two of the biggest economies in the world to compete on who can invest most and move fastest.”

The Critical Raw Materials Act and Net Zero Industry Act will now go before the European Parliament and EU member states, which are likely to demand some reforms to the wide-ranging package before it can come into force. However, the bloc is expected to move relatively quickly to pass the new legislation as it looks to respond to the competitive threat presented by the US IRA, which has already led to a surge in investment in clean tech supply chains on the other side of the Atlantic. 

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