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EU unveils Net Zero Industry Act to boost competitiveness in Europe

The European Commission has unveiled a new regulatory proposal which aims to boost Europe’s industrial policy amidst increasing global competition, energy supply concerns and the ongoing climate crisis.

The Net Zero Industry Act sets a headline target for net-zero manufacturing capacity in the EU to be sufficient to meet 40% of the EU’s annual deployment needs for technology by 2030.

The new Act proposes increased investment and improved permitting procedures for eight strategic net-zero technologies: solar PVs, onshore wind and offshore renewable technologies, battery and storage technologies, heat pumps and geothermal energy, electrolysers and fuel cells, sustainable biogas and biomethane, carbon capture and storage (CCS), and grid technologies.

The proposal comes at a time of heightened trade tensions between the EU and its competitors. The US and its $369 billion subsidy-rich Inflation Reduction Act, Russia’s war in Ukraine and China’s dominance in green industry supply chains are forcing the EU to reduce its reliance on third counties and boost domestic production of clean tech.

Faster permitting

A net-zero strategic project in the EU complies with specific criteria, e.g. it involves one of the eight net zero technologies; contributes to the technological and industrial resilience of the EU’s energy system (by increasing the manufacturing capacity of a component or part in the net-zero technology value chain); adds to manufacturing capacity generally in the EU; and improves sustainability performance.

To get manufacturing projects up-and-running quickly, projects are considered by law to be of overriding public interest and will be granted, where applicable, the highest status of national significance possible under Member State law. These projects will therefore benefit from faster permitting and better financing provisions.

Permitting for net zero strategic projects will not exceed 12 months for facilities with a yearly output of more than 1GW, or nine months for facilities with less than 1GW. Each Member State will designate one sole point of contact responsible for facilitating and coordinating the permitting process for projects, a so-called ‘One-Stop Shop’.

Key plans for each technology

By 2030 the EU wants:

Solar panels: to make 30 GW of solar panels. Scaling up supply chains in Europe and reducing Chinese dominance in the production of parts such as ingots and wafers will be key.
Wind: to main its relatively strong wind power production sector, so that 36 GW of wind turbine manufacturing per year is done inside the EU.
Heat pumps: to manufacture 31 GW of heat pumps per year.
Hydrogen: reach an installed capacity of 100 GW, for which only electrolysers using renewable energy and water to produce hydrogen will be counted.
Batteries: to produce 90% of its own electric vehicle battery consumption, reducing dependency on Asian producers.
CCS: an annual injection capacity of at least 50 million tonnes of CO2 in storage sites across the EU. Oil and gas producers will need to make individual contributions to reaching these targets.

Interestingly, although not included in the official list of net zero strategic technologies, under the definition of ‘net zero technologies’, advanced technologies to produce energy from nuclear processes with minimal waste from the fuel cycle, small modular reactors, and related best-in-class fuels are mentioned. This means small nuclear projects, a controversial topic at EU level, can benefit from improved permitting but will not be counted towards the overall 40% target.

Financing

No new finance to boost production was announced. The EC expects Member States to advise projects on additional private sources of financing and relevant EU funding programmes. That said, the new State Aid Temporary Crisis and Transition Framework, which we reported on here, will provide financial incentives to companies.

This ambitious proposal came on the same day the EC published a Critical Raw Materials Act. Other proposals published this week by the EU’s executive include a reform of the EU Electricity Market Design, and a communication establishing a European Hydrogen Bank. Please contact our EU Regulatory and Public Affairs team if you would like to know more about these proposals or the Net Zero Industry Act and how they might impact your business.

"The Net Zero Industry Act sets a headline target for net-zero manufacturing capacity in the EU to be sufficient to meet 40% of the EU’s annual deployment needs for technology by 2030."