EU Finalizes Net-Zero Industry Act, Boosts Green Technology Deployment

EU Finalizes Net-Zero Industry Act, Boost Green Technology Deployment

The Council and the European Parliament recently reached a provisional deal on the regulation establishing a framework of measures for strengthening Europe’s net-zero technology products manufacturing ecosystem, better known as the ‘Net-Zero Industry Act’ (NZIA).

Under the agreement, there will be a single list of net-zero technologies, with criteria for selecting strategic projects in those technologies that will contribute better to decarbonisation. Jo Brouns, Flemish Minister for Economy, Innovation, Work, Social Economy and Agriculture stated, “With the Net-Zero Industry Act we want to support our industry in its transition. The NZIA is an important step in creating the necessary ecosystem to boost the manufacturing of clean technologies. Europe launched a pathway towards a cleaner and sustainable future for the European industry. Now the time is ripe for Europe to take back the lead on the global scene for clean technologies and to build a competitive, green, and job-creating industrial sector.”

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The net-zero industry act aim to ease conditions for investing in green technologies, by simplifying permit-granting procedures and supporting strategic projects. It also proposed to ease market access for strategic technology products, enhance the skills of the European workforce in these sectors (notably through the launching of net-zero industry academies) and create a platform to coordinate EU action in this area.

To foster innovation, the net-zero industry act proposed favorable regulatory frameworks for developing, testing and validating innovative technologies (known as regulatory sandboxes). Progress towards the objectives of the net-zero industry act is measured by two indicative benchmarks: reaching 40% of the production required to cover EU’s needs in strategic technology products, and their evolution in comparison to world production for products such as solar photovoltaic panels, wind turbines, batteries and heat pumps. The proposal also set a specific target for CO2 carbon capture and storage, with an annual injection capacity of at least 50 million tones to be achieved by 2030.

The main element of the agreement included a provisional agreement that support the main objectives of the net-zero industry act that were proposed by the Commission less than a year ago. It also introduced several improvements, such as streamlined rules on construction permit procedures, creation of net-zero industrial valleys, and more clarity on criteria for public procurement and auctioning.

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The new regulation included the scope and list of technologies to provide easier conditions and certainty to investors and promoters of net-zero technology manufacturing projects. The projects identified as having a greater potential for decarbonisation will benefit from fast-track permit procedures for construction or expansion and guidance in accessing finance. Given that member states have the right to choose between different energy sources, they will not be obliged to recognise as strategic projects those related to a technology that is not accepted as part of their energy mix.

Fast permit-granting processes

The time limit for delivering a permit for constructing or expanding large net-zero technology manufacturing projects (more than 1 gigawatt), as well as those not measured in gigawatts, are extended to a maximum period of 18 months. For smaller projects (less than 1 gigawatt), the time limit for delivering the permit is set to be 12 months. 

Industrial Valleys

The future regulation plans to promote the development of net-zero acceleration ‘valleys’ (territories that concentrate several companies involved with a certain technology). The objectives of those valleys are to create clusters of net-zero industrial activity so as to increase the attractiveness of the EU as a location for manufacturing activities and to further streamline the administrative procedures for setting up net-zero manufacturing capacity. They are expected to contribute towards reindustrialization of regions.

Public Procurement

The rules are designed to better ensure that requirements are transparent, implementable, and harmonized and that the supply of those technologies to the EU is diversified, while safeguarding sufficient flexibility for contracting authorities. The act is expected to regulate the use of schemes incentivizing the purchase of net-zero technology products and define sustainability and resilience contributions in public procurement procedures. The regulation sets the environmental sustainability contribution to a mandatory minimum requirement, while the resilience contribution will be applied if there is a third-country dependence of more than 50% for a specific strategic net-zero technology (or for its components). This criterion will only be considered if the Commission has first assessed the level of dependence of each technology from a particular third country.

If the application of the resilience and sustainability contribution results in a disproportionate cost difference or if no suitable tenders or requests have been submitted, contracting authorities may decide to not apply these criteria. Auctions to deploy renewable energy sources. The provisional agreement establishes that when a member state designs an auction for the deployment of renewable energy technologies, they will be able to apply both pre-qualification and award criteria which are not price-related, such as environmental sustainability, contribution to innovation or integration of energy systems. These criteria will have to apply to at least 30% of the volume auctioned every year per member state. The Commission will define the criteria for procurement and auctioning and will revise the volume auctioned in the light of an assessment of the functioning of the system. In the next step the provisional agreement reached with the European Parliament now needs to be endorsed and formally adopted by both institutions.