Net Zero Industry Act is Europe’s answer

Net Zero Industry Act is Europe’s answer

Dhe European Commission wants to counter the American billion-euro support package for green technologies with ambitious expansion targets: The EU is to produce two-fifths of the green key technologies required annually for its climate goals itself by 2030. 85 percent of the wind turbines, 85 percent of the batteries, 60 percent of the heat pumps, 40 percent of the solar panels and enough electrolysers to produce half of the green hydrogen will then come from domestic production. This emerges from a draft for a Net Zero Industry Act (“Net Zero Industry Act”), which the Commission intends to present next week. The draft is available to the FAZ.

The law is said to be a key part of Europe’s response to the Inflation Reduction Act (IRA), with which the US government is investing $369 billion in green technologies. The IRA has raised concern in Europe that companies are shifting their investments in key green technologies to the US – especially since the support for these is largely linked to local production (“local content”). In a first step, the Commission reacted to the IRA by significantly relaxing the state aid rules. For the summer, Commission President Ursula von der Leyen also announced a proposal for a “European Sovereignty Fund”.

The heads of state and government are to discuss the law to promote green technologies at their summit at the end of March. The draft that has now been leaked is from an early stage. It is dated February 23. The final version could therefore deviate from this. However, hardly anything is likely to change on the basic line. It then has to be decided by the European Parliament and the Council of Ministers.

French success: nuclear fission is explicitly mentioned

With the law, the Commission defines which green technologies are considered strategically important. This also includes the production of biomethane, the energy grids, the capture, use or storage of CO2 (CCUS) and – this can be seen as a French success – nuclear energy. Nuclear fission is explicitly mentioned. The two-fifths target should apply as a mandatory minimum target for all technologies. However, the sub-goals for the individual branches of technology such as heat pumps and solar panels are intended as benchmarks.

The Commission also justifies the requirements with the high dependency on imports from certain countries, above all China. So it’s not just about an answer to the IRA, but also about security of supply, as was the case with the “Chips Act” presented a year ago. The EU Commission mentions in particular the dependence on Chinese imports for the solar systems, which is more than 90 percent for some key elements. According to the draft law, heat pumps and wind turbines, where the EU is in a better position, are also losing competitiveness. In addition, of the nuclear reactors planned or under construction in Europe and the rest of the world, only one comes from the EU.

In order to achieve the goals, the Commission relies on state aid. To this end, the Commission and the Member States should assume the main risk of projects, as with the so-called Juncker Fund, in order to attract private investors. The Commission wants to use money from the innovation fund, which is fed from the income from emissions trading. In addition, the states should use part of the income from emissions trading to which they are entitled to make the EU less dependent on imports from third countries. How high the percentage should be is left open in the draft.

Furthermore, the Member States should take into account the issue of security of supply in the EU both in public tenders and in support programs for private households. In the case of public contracts, this aspect should account for between 15 and 40 percent of the evaluation of a bid. Last but not least, they should include whether a third country restricts trade in green technologies or otherwise distorts competition. This passage could be used against both China and the US rules on “local content”. In a way, the requirements are a slightly slimmed-down version of the French demand for a “Buy European” rule, i.e. a targeted preference for European products.

Accelerating the approval process plays an important role in the EU draft law. All technologies covered by the law, including nuclear power plants and the highly controversial projects for capturing and storing CO2, are to be classified as being of “overriding public interest”, which makes objections, for example from environmentalists, more difficult. The environmental assessment should be completed after 30 days at the latest. The entire approval process for new buildings or the expansion of existing projects should take a maximum of one and a half years. Shorter approval periods are provided for smaller projects and factories. The EU states are also to designate “Net-Zero Industry Valleys”, in which the permits are to be granted six months faster.

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