It is reported that the European Union may soon release the Net Zero Industry Act, which is seen as the EU's direct response to the US Inflation Reduction Act, so it has high hopes from Europe.
grassIt refers to targets to be achieved by 2030
1. The objectives stated in the draft shall be to achieve all of the following by 2030:
(a) the net zero technology manufacturing capacity within the Alliance is sufficient to meet at least 40% of the Alliance's annual deployment needs and the corresponding technologies required to achieve REPowerEU and Green Deal objectives,
(b) the following specific indicative targets for strategic net-zero technology products:
- (i) solar PV manufacturing capacity within the EU can meet at least 40% of deployment needs;
- (ii) the EU's wind turbine manufacturing capacity can meet at least 85% of the deployment needs;
- (iii) the heat pump manufacturing capacity within the Alliance can meet at least 60% of the annual deployment needs;
- (iv) Battery manufacturing capacity within the EU is able to meet at least 85% of demand.
- (v) Electrolyzer manufacturing capacity within the EU to meet at least 50% of annual deployment needs for renewable and fossil-free hydrogen
2.If the Committee is ultimately satisfied that the EU has not achieved or is likely to fail to achieve the overall objectives referred to in points (a) and (b) of paragraph 1, it shall immediately propose additional measures aimed at filling the identified gaps.
Establishing a framework of measures to strengthen the manufacturing ecosystem of net-zero technology products in Europe (Net Zero Industrial Law)
(1) The EU has committed to accelerating the decarbonization of its economy and ambitiously deploying low-carbon energy sources to achieve climate neutrality or net zero emissions (emissions after removals) by 2050. The target is at the heart of the European Green Deal and is in line with the EU's commitment to global climate action under the Paris Agreement. In order to achieve climate neutrality, Regulation (EC) 2021/1119 of the European Parliament and of the Council3 sets binding Union climate targets to reduce net greenhouse gas emissions by at least 55% by 2030 compared to 1990. The proposed "fit for 55" package aims to achieve the EU's 2030 climate targets and revise and update EU legislation in this regard.
(2) To fulfil these commitments, the EU must accelerate the transition to low-carbon energy, in particular by increasing the share of energy efficiency and clean energy. The EU should expand its grid at both transmission and distribution levels.
(3) Higher energy prices since the second half of 2021, coupled with increased Russian improper and illegal military intervention in Ukraine, have given a strong impetus to the accelerated implementation of the European Green Deal: accelerating the clean energy transition and ending dependence on Russian fossil fuels. The REPowerEU program played a key role in responding to the difficulties caused by Russia's invasion of Ukraine and the chaos in global energy markets. The plan aims to accelerate the EU's energy transition, reduce the EU's gas and electricity consumption, and increase investment in the deployment of energy-efficient and low-carbon solutions. The plan sets, among other things, the goal of doubling solar PV capacity by 2025 and installing 600GW of solar PV capacity by 2030; Double the deployment rate of heat pumps by 2030 to produce 10 million tons of domestic renewable hydrogen; and significantly increase the production of biomethane. The plan also stipulates that achieving REPowerEU will require diversification of low-carbon energy equipment and critical raw material supplies, reduced sectoral dependence, overcoming supply chain bottlenecks, and expanding the EU's clean energy technology manufacturing capacity.
(4) As the world's decarbonization efforts advance, economic and geopolitical changes on a global scale will become more pronounced. The path to net zero presents huge opportunities for the expansion of the EU's net-zero industries, including solar, onshore and offshore wind, heat pumps, electrolyzers, battery technology and their supply chains, decarbonising sectors of our economy from energy supply to transport, buildings and industry. A strong net-zero industry within the EU can effectively meet the EU's climate and energy goals while creating jobs and growth.
(5) The EU's decarbonization targets, security of energy supply, digitalization of energy systems and electrification of demand require a massive expansion of the EU grid, which is necessary at both the transmission level (including HVDC transmission systems connected to offshore renewable energy) and the distribution level, smart grids enable demand-side response of consumers and absorption of renewable energy. Connecting net-zero technology to the EU network will require a significant expansion of the grid's manufacturing capacity in areas including high-voltage direct current (HVDC) submarine and onshore cable manufacturing, offshore and onshore substations and transformers.
(6) CCUS points to add.
(7) The Alliance has helped build a global economic system based on open trade that promotes respect for and advancement of social and environmental sustainability standards. At the same time, some of the EU's major trading partners have adopted policies to provide significant economic support to their companies, including those operating in net-zero sectors. These trading partners include the United States through its Inflation Reduction Act, Japan's Green Transition Program, India's Production Incentive Program for Solar PV Panel and Cell Manufacturing, and China's formulation of relevant targets set out in its new five-year plan. Several of these measures, deployed as part of the Green Technology Manufacturing Industry Plan, have dragged investment in relevant supply chains away from the EU.
(8) The EU is heavily dependent on, or is likely to become dependent on, the centralized import of certain net-zero technologies and their components. For solar PV technology and its components, the alliance relies heavily on imports from China, and even more than 90% of the product is imported from some upstream links in the supply chain, including ingots and wafers. Even in the field of heat pumps and wind energy technology, which are well positioned in the EU market, the EU's competitiveness is deteriorating. Moreover, of the nuclear reactor design projects under construction or planning in the EU and globally, only one comes from within the EU.
(9) Increasing the manufacturing capacity of EU net-zero technologies will also help the EU increase its export capacity, thereby contributing to the global transition to net-zero energy. At the same time, net-zero technology products will contribute to the resilience and security of the EU's clean energy supply. Given the EU's dependence on energy, the secure supply of clean energy is an important prerequisite for economic development, public order and national security.
(10) To remain competitive and reduce the current dependence on imports of key net zero technology products and their supply chains, while avoiding the formation of new net zero technologies, the EU needs to continue to strengthen its net zero industrial base and make the EU more conducive to investment and innovation. The EU needs to promote the development of manufacturing capacity within the EU in a faster, simpler and more predictable way.
(11) Member States should submit an updated draft of their National Energy and Climate Plan (NECP) for 2021-2030 in June 2023. As highlighted in the Guidelines adopted by the Committee on 15 November 2022, these updated plans should describe the objectives and policies of Member States to promote the expansion of the manufacture of energy-efficient and low-carbon technologies, equipment and components for commercial use within their territories. The plans should also indicate the objectives and policies of member States to achieve such expansion through the diversification efforts of third countries.
(12) The Green Trading Industry Program proposes a comprehensive approach to support the scale of clean energy technologies based on four pillars. The first pillar aims to create a regulatory environment that streamlines and fast-tracks the licensing of new net-zero technology manufacturing and assembly sites, and facilitates the scaling up of the EU's net-zero industry. The second pillar of the plan is to promote investment and financing for clean-tech production. This includes temporary adjustments to state aid rules to speed up and simplify financing while ensuring that unfair competition distortions are minimized, and the establishment of a European sovereign fund to provide resources for upstream research, innovation and strategic industrial projects in the context of a review of the multi-year financial framework. The third pillar involves developing the skills needed to make the transition and increasing the number of skilled workers in the clean energy technology sector. The fourth pillar focuses on trade and diversification of supply chains for key raw materials. This includes creating a key raw materials club, working with stakeholder partners to strengthen supply chains and diversify from a single supplier.
(13) Security of energy supply is essential for the competitiveness of the EU, the protection of public order and national security. To ensure energy supply while achieving its ambition of climate neutrality, the EU must develop and sustain an industrial base that provides clean-tech solutions. To support this objective and avoid potential disruptions and shortages of clean technology supply that could delay the EU's carbon reduction efforts or jeopardize the security of energy supply, Contracting Authorities and Contracting Entities should give due consideration to the security of supply of net-zero technologies when awarding contracts for net-zero technology products through public procurement.
(14) In order for the Union industry to adjust its production in a timely manner, Contracting Authorities and Contracting Entities should inform their markets in advance of their estimated procurement needs for net-zero technology products.
(15) As noted in the Net Zero Era Green Trading Industry Plan published on 1 February 2023, the market share of the EU industry is under great pressure as subsidies in third countries undermine the level playing field. This pressure calls for expanding and accelerating access to finance for net-zero industries.
(16) Adequate access to financing is key to ensuring the strategic independence of the Alliance and establishing a solid manufacturing base for cleantech and its supply chain across the Alliance. A number of alliance grant programs are available to fund such investments, including cleantech manufacturing projects.
At the same time, most of the investment needed to achieve green trading targets is likely to come from private capital attracted by the growth potential of net-zero ecosystems. In addition to public finance, the sustainable finance agenda (and blended finance) plays a key role in scaling up investment in net-zero technologies while guaranteeing the sector's competitiveness.
(17) There is a need to establish or expand net-zero technology manufacturing projects as soon as possible while minimizing administrative burden. To this end, Member States should simplify licensing procedures for such projects, but at the same time ensure that zeronet manufacturing projects are safe, reliable and meet environmental, social and safety requirements. Federal environmental legislation establishes common conditions for the procedure and content of state approval of permits, thus ensuring a high degree of environmental protection. Therefore, it is necessary to grant zero net resilience status to projects that comply with EU environmental legislation. However, this status shall not affect any applicable licensing conditions for the project, including those set out in Directive 2011/92/EU of the European Parliament and of the Council, Council Directive 92/43/EEC7, Directive 2000/60/EC of the European Parliament and of the Council, Directive 2004/35/EC of the European Parliament and of the Council and of the Council of the European Parliament and of the Council 2010/75/EU. At the same time, unpredictability, complexity, and sometimes overly lengthy state licensing procedures undermine the investment security required to effectively develop net-zero technology manufacturing projects. Therefore, in order to ensure and expedite its effective implementation, Member States should adopt streamlined and predictable licensing procedures. In addition, net-zero flex projects should be given priority at the national level to ensure expedited administrative and urgent processing in all judicial and dispute resolution proceedings associated with them, without preventing authorities from simplifying licensing of other net-zero technology manufacturing projects for non-net-zero flex projects.
(18) Given its role in ensuring the security of supply of net-zero technology to the EU, and its contribution to the EU's strategic autonomy and green and digital transformation, the licensing authority should consider that net-zero resilient projects are in the public interest. Strategic projects that have adverse effects on the environment shall be authorized, provided that the responsible licensing authority considers that the public interest served by the project should override these impacts, provided that all relevant conditions set out in Directive 2000/60/EC and Directive 92/43/EEC are met.
(19) To reduce complexity, improve efficiency and transparency, project sponsors of net-zero technology manufacturing projects should be able to interact with a single national body responsible for coordinating the entire licensing process and issuing consolidated decisions within the applicable time frame. To this end, Member States shall designate a single competent national authority. Depending on the internal organizational needs of member States, the tasks of the competent national authorities should be able to be delegated to different bodies under the same conditions. In order to ensure the effective discharge of their responsibilities, Member States shall provide adequate personnel and resources to their competent national authorities or to any authority acting on their behalf.
(20) To ensure clarity on the licensing status of net-zero flex projects and limit the validity of potential abuse proceedings without prejudice to effective judicial review, Member States should ensure the timely resolution of any disputes relating to the licensing process. To this end, national authorities should ensure that applicants and project sponsors have access to simple dispute resolution procedures, and that net-zero flex projects are dealt with urgently in all judicial and dispute resolution proceedings related to them.
(21) In order for citizens and businesses to directly enjoy the benefits of the internal market without incurring unnecessary additional administrative burdens, Regulation (EU) 2018/1724 of the European Parliament and of the Council establishing a single digital gateway sets out the general rules for the online provision of information, procedures and assistance services related to the functioning of the internal market. The information requirements and procedures covered by this Regulation shall comply with the requirements of Regulation (EU) 2018/1724. In particular, it should be ensured that project sponsors of net-zero resilience projects have full online access to and complete any procedures related to the licensing process, in accordance with Article 6(1) and Annex II of Regulation (EU) 2018/1724.
(22) Net zero technology manufacturing projects require a lengthy and complex licensing process of 2-7 years, depending on the Member State, technology and value chain sector. Given the scale of the investment required, especially for megafactory-sized projects required to achieve the expected economies of scale, inadequate permits create additional and often harmful barriers to increasing the EU's cleantech production capacity. To provide project sponsors and other investors with the security and transparency needed to increase the development of net-zero technology manufacturing projects, Member States should ensure that licensing procedures associated with such projects do not exceed pre-set time frames. The length of the permit granting process should not exceed 12 months for projects with an annual production of more than 1 GW for net-zero resiliency projects and 9 months for projects with an annual production of less than 1 GW. For all other net-zero technology manufacturing projects, the licensing process must not take longer than 18 months for companies with an annual output of more than 1GW and 12 months for businesses with less than 1GW per year.
(23) [Environmental assessment — to be developed]
(24) Member States may designate Cleantech Valleys, i.e. areas particularly suitable for the development of cleantech manufacturing projects. When designating clean technology valleys, member states should avoid establishing protected areas... Member States may designate cleantech valleys for one or more cleantech manufacturing projects and shall indicate the types of projects suitable for production in each cleantech valley.
(25) Hydrogen valleys with industrial end-uses play an important role in decarbonizing energy-intensive industries. REPowerEU has set a goal of doubling the number of hydrogen valleys in the EU. To achieve this, Member States should accelerate licensing and regulation in a controlled environment and prioritize access to funding. To enhance net-zero resilience, member states should ensure hydrogen valley connectivity across EU borders.
(26) Regulation [x Amendment Regulation] clarifies an additional €20 billion of gratuitous support to Member States to improve energy efficiency and replace fossil fuels, including through EU net-zero industrial projects. As noted in the European Commission's guidance on the REPowerEU chapter, Member States are encouraged to include measures to support investment in cleantech manufacturing and industrial innovation in their recovery and resilience plans, in accordance with Regulation (EU) 2021/241...
(27) In hard-to-reduce industries, including energy-intensive ones, there is currently a limited number of commercial and scalable net-zero technologies. For net-zero technologies that are already in use or are in the early stages of development, significant cost reductions and performance improvements are required. Therefore, investment in research and innovation at EU and national levels remains important. Joint and coordinated efforts by research and innovation activities with Member States, in particular through the Strategic Energy Technology Programme, have increased the resilience of the EU's clean energy sector. In addition, net-zero technologies, which are currently in the demonstration or prototype phase, also make a long-term contribution to the EU's realization of net-zero industries. With half of greenhouse gas emissions expected to require technologies that are not yet on the market by 2050, research and innovation activities are a key component of enhancing the EU's technological sovereignty and global competitiveness.
(28) To help address import dependence and vulnerability, and to ensure that EU climate and energy targets are met, EU targets and indicative targets for the manufacture of key net-zero technology products have been proposed.
(29) It is not possible to enhance industrial production of key net-zero technology products in the EU without a significant skilled workforce, so measures are necessary to increase the availability of skills required for net zero technology products in the EU. The objective is to mobilize all actors: Member State authorities, including regional and local levels, education and training providers and industry, to identify skills needs, develop education and training programs, and deploy them at scale in a rapid and operational manner. Net Zero Resilience Projects and Net Zero Industry Valleys play a key role in this regard. Member States and the Commission should ensure financial support, including through the European Social Fund, the Just Transition Fund, the European Regional Development Fund and the Single Market Plan.
(30) Building on past experience, including the European Battery Alliance skills work, the Net Zero Industrial Institute should develop and deploy education and training content to upgrade and retrain the skills of workers needed in key net-zero technology value chains. This content should be developed and deployed with the educational and training institutions of Member States, the authorities of relevant Member States and social partners. Education and training institutions should provide content produced by the Academy that is appropriate to the needs of the sector and local industry. The Commission shall support the establishment of the Academy and the initial production and delivery of educational and training content, in particular through the Single Market Program. Member States should support continuous retraining and upskilling through academies and relevant education and training providers in their territories, including the European Social Fund, the Recovery and Resilience Fund, the European Regional Development Fund, the Just Transition Mechanism, etc. To ensure policy alignment with the objectives of the Act, the European Net Zero Platform should guide the work of the academies and provide oversight.
(31) [Statement on governance to be determined] At the EU level, a European cleantech platform should be established, composed of representatives of Member States and chaired by the Commission. The European Cleantech Platform shall advise and assist the European Commission on specific issues, coordinate the actions of Member States and facilitate the exchange of information on issues related to this Regulation, in particular in relation to the granting of Net Zero Resilience Projects. The European Cleantech Platform should convene a meeting to discuss the challenges and bottlenecks to achieving its goals, possibly with high-level representatives of varying compositions, including from the cleantech industry. If necessary, the Committee may further establish panels.
(32) In order for this Regulation to fit its purpose, the authority to act under Article 290 of the Treaty on the Functioning of the European Union ("the Treaty") shall be delegated to the Commission to update the list of net-zero technologies in the light of the latest technological developments. It is particularly important that the Committee undertake appropriate consultations during its preparatory work, including at the expert level, and in accordance with the principles set out in the Inter-Agency Agreement on Better Legislation of 13 April 2016. In particular, in order to ensure equal participation in the elaboration of enabling acts, the European Parliament and the Council receive all documents at the same time as experts from member states, whose experts systematically participate in the meetings of the Commission's expert groups on the drafting of enabling acts.
(33) In order to ensure uniform conditions for the implementation of this regulation, the Commission shall be granted partial implementation powers to reflect technological changes and market developments in order to achieve the objectives of this initiative. In addition, the Committee should be delegated partial executive powers. These powers shall be exercised in accordance with Council Regulation (EU) No 182/2011.
(35) [We need a statement justifying the extension of the provisions of this draft bill (see last article). ]
(36) Since Member States are unable to fully achieve the objectives of this Regulation and [some] of the objectives of this Regulation can be better achieved at EU level because of the scale or effect of the action, the EU may take measures in accordance with the principle of subsidiarity set out in Article 5 of the Treaty. In accordance with the principle of proportionality provided for in this article, this regulation does not go beyond what is necessary to achieve this objective.
The draft may be risky
Niclas Poitiers, a commentator at Bruegel, a European professional research economics think tank, was critical of the bill's proposed policies. Niclas Poitiers noted:
First, the draft could hinder, rather than accelerate, the EU's green transition. International trade in the commodities needed to produce clean energy can help achieve this goal. Over-reliance on specific exporters (reliance on Russian gas is a cautionary tale) should be avoided and industrial policy justified. But full import substitution, including from diversified trading partners, is meaningless and would make the EU's energy transition more costly.
Second, efforts to improve the EU's competitiveness could be hampered. In the EU, energy prices remain high and there is a lack of a true single market, including slow progress in the Capital Markets Union. The NZIA draft will not address these obstacles, it will only give special treatment to specific projects.
Finally, the methods in the leaked NZIA send a scary signal. Like China and the US, the EU will now make it clear that it is not interested in cleantech imports, even from partners who may be able to produce at a lower cost. EU allies such as the United States and Japan will not fail to realize that import substitution targets are as hostile to them as they are to China. From the perspective of EU policymaking, this would send a signal that when an industry is labeled "strategic," regulatory fairness and market-based outcomes – the backbone of the single market and the EU's economic strength – may be cast aside, even if this does not assess any trade-offs between economic efficiency and geopolitical resilience.
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