EU co-legislators agree on Net-Zero Industry Act

In March 2023, the European Commission proposed two main components of the Green Deal Industrial Plan, the Net-Zero Industry Act (NZIA) and the Critical Raw Materials Act (CRMA) in an effort to keep pace with the clean tech race triggered by the U.S. Inflation Reduction Act (see our previous blog post for more details). 

The CRMA is designed to ensure Europe's clean technology sectors don't depend too much on supplies from non-EU competitors. It supports mining and recycling of key raw materials inside the EU and promotes variety of supply sources by offering economic incentives and speeding up approval processes. The Parliament and the Council agreed on the CRMA in November 2023 (see our previous blog post for more details). 

The NZIA’s goal is for the EU to make 40% of its own clean technology by 2030. Instead of providing subsidies like the U.S., the NZIA aims to boost investment in key technologies by simplifying permitting procedures and prioritizing strategic technologies. The Act also introduces non-price criteria - such as resilience and sustainability - into public procurement rules that might exclude projects which rely too heavily on a single non-EU supplier. 

On 6 February 2024, the Parliament and the Council reached a provisional agreement on the NZIA. The details aren’t public yet but according to the press releases from the Council, the Parliament and the Commission, the compromise text includes the following:

• Targets: The NZIA sets a goal for Europe to produce 40% of its net-zero technologies locally by 2030, based on National Energy and Climate Plans (NECPs) and to grab 15% of the global market value for these technologies. In line with the EU Industrial Carbon Management Communication, it also includes objectives for CO2 carbon capture and storage, aiming for an annual injection capacity of at least 50 million tonnes by 2030. 
• Technologies: The co-legislators agreed on one list of net-zero technologies that can be supported via strategic projects. These include solar photovoltaic (PV), onshore and offshore wind, fuel cells, electrolysers, batteries, grid technologies, sustainable alternative fuels, biotech as well as nuclear and carbon capture and storage. Energy intensive industries such as steel, chemicals or cement that produce components used in these net-zero technologies and that invest in decarbonisation can also be supported as strategic projects. Member States will have the right to choose between different energy sources and 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: Permits for constructing or expanding large net-zero technology manufacturing projects (more than 1 gigawatt), as well as those not measured in gigawatts, should be granted within 18 months; smaller projects (less than 1 gigawatt), will have a 12-months limit. Shorter deadlines are provided for strategic projects.  
• Public procurement: The NZIA sets up rules to encourage the buying of net-zero technology products and defines sustainability and resilience contributions in public procurement procedures. The environmental sustainability contribution will be 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 assessed the level of dependence of each technology from a particular third country. If the application of the resilience and sustainability contributions results in a disproportionate cost difference, or if no suitable tenders or requests have been submitted, contracting authorities may decide not to apply these criteria. The Commission will define the criteria for procurement and auctioning.
• CO₂ capture and storage: These net-zero strategic projects will be implemented with contributions from EU oil and gas producers based on their pro-rata production. The agreed details of such contributions are not disclosed yet.
• Special zones: The Act provides for the creation of “Net-Zero Acceleration Valleys” (territories that concentrate several companies involved with a certain technology) where administrative procedures would be further streamlined. 
• Funding: The NZIA has been criticised for not offering new funding. Funding will be encouraged from national Emission Trading System (ETS) revenues and, for most strategic projects, through the Strategic Technologies for Europe Platform (STEP). The Council and the Parliament reached a political agreement on the STEP on 7 February 2024 (see Council press release). Under STEP, a “Sovereignty Seal” will be granted to projects contributing to STEP objectives that will help them to get EU funding and other investments. A Sovereignty Portal will also be set up as a one-stop-shop for funding opportunities for STEP-related projects.
• Training academies: “Net Zero Industry Academies” will be set up to support training of workers for these growing net-zero industries. The NZIA also encourages businesses to invest in the EU workforce education and training. Additionally, the new rules will empower Member States to create regulatory sandboxes for testing innovative net-zero technologies more easily.

The NZIA now awaits formal approval from the Parliament and the Council. It will then be published in the Official Journal of the EU and will enter into force. It will be directly applicable in all Member States.