European Commission targets home-grown clean tech with net zero act

LONDON (ICIS)–The European Commission on Thursday set out a challenge to decarbonisation technology stimulus frameworks in other regions, with plans to produce at least 40% of the equipment needed for net zero projects locally by 2030.

The region currently imports a large proportion of the technology needed to decarbonise the EU economy, prompting the Commission to develop new measures to encourage local production in the face of stronger ecosystems and more generous subsidy frameworks elsewhere.

The Net Zero Industry Act (NZIA) seeks to grow European technology production for the solar, wind, battery, geothermal, electrolyser and grid sectors.

Carbon capture and storage is also a key target, with the European Commission setting out targets to increase the deployment of carbon capture and storage (CCS) in the region to 50m tonnes/year capacity. As of 2021, total global CCS storage capacity stood at 36.6m tonnes, according to the Global CCS Institute.

The Commission expects to galvanise the development of local decarbonisation technology equipment by streamlining permitting processes and zeroing in on a single point of contact for firms in each member state, and strengthening sustainability criteria in public procurement.

“Europe is currently a net importer of net-zero energy technologies, with about one-quarter of electric cars and batteries, and nearly all solar PV modules and fuel cells imported, mostly from China,” the Commission said in the draft text of the NZIA.

Attempts to spur local production of decarbonisation technologies follow criticisms from senior Commission officials of the US Inflation Reduction Act.

Speaking in late 2022, Commission President Ursula von der Leyen characterised the IRA as “America first”, due to the way the subsidy framework favoured producers that opted to develop within the US.

“There is a risk that the IRA can lead to unfair competition, could close markets, and fragment the very same critical supply chains that have already been tested by COVID-19,” she said, speaking in Belgium in December 2022.

The new net zero technology industrial act is intended to enhance Europe’s competitive position for the growth of these sectors, according to the Commission.

“The EU is currently a net importer of several net-zero technologies and components. However, it has the potential and assets required to become an industrial leader in this market,” it said on Thursday.

The competitive centre of gravity has started to shift for some still-developing cleantech sectors, with German automaker VW this week signalling its intent to expand its electric vehicle technology footprint in North America.

Europe is currently on track to become middle of the pack globally when it comes to sectors such as battery technology, according to LANXESS CEO Matthias Zachert this week.

““Over the last one or two years, we talked about battery chemical substances and we assumed the European market would develop faster than the American market, but this is the other way around now,” he said, speaking on 15 March.

“There will be a battery market in Europe for sure but the question is whether will be second or third [globally],” he added.

The NZIA signals a stronger shift towards encouraging local production through speeding permissions and creating markets, but still lacks the kind of support that the IRA offers for ongoing production expenses, as opposed to development costs, according to Cefic.

The new framework is unlikely to be a game-changer, according to Cefic director general Marco Mensink, who claimed the bill “reads more like a zero industry act”.

“[The NZIA] focuses too much on capital expenditures ignoring incentives to reduce day-to-day operational expenses, which is the “carrot” the US Inflation Reduction Act is offering, especially on hydrogen and carbon capture and storage,” Mensink said.

“You can invest into an electrolyser but you won’t have any renewable hydrogen if the electricity you need to produce the hydrogen with is so expensive that the hydrogen will either not be bought or sold at a loss,” he added.

The system also carries risks for European chemicals players, he added, claiming that the raw materials for these technolgoies will likely be developed in the US and imported back to Europe.

“On top of the European gas price being about five times the US, it does not match the USA IRA in whatever way,” he added.

Industry body Plastics Europe was more positive on the NZIA, with managing director Virginia Janssens cautiously welcoming the announcement as “a very important step forward”, but claiming that more is needed to drive the plastics sector to net zero

“We need urgent progress across a wide range of policy areas to give industry in Europe the clarity and confidence to ramp-up net zero investment and innovation. To scale-up chemical recycling in Europe, for example, we need urgent clarity on the EU rules for calculating chemically recycled content,” she said.

“The complexity of the European plastics system, and associated long-investment cycles, mean investment decisions taken now will determine what the industry looks like in 2050. The window of opportunity to make these decisions is rapidly closing,” she added.

Focus article by Tom Brown

Click here for today’s insight article covering the potential of small nuclear fusion reactors, another aspect of the NZIA.

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