10/06/2024

The Net Zero Industry Act is a law that was announced by Commission President von der Leyen on February 1, 2023, as part of European policies to achieve zero emissions by 2050. This law provides incentives, investments, and regulations to urge zero-emission growth in European industry and to protect it from foreign competition, especially after the proclamation of the U.S. Inflation Reduction Act, the broad system of government subsidies for industries that the U.S. government introduced in 2022, which could entice European manufacturers to relocate.

The European Commission then officially unveiled the proposal in March 2023. After that, the European Parliament and Council reached a tentative agreement on February 6, 2024, and Parliament voted on the legislation on April 25, 2024. Finally, on Monday, May 27, 2024, the European governments in the Council signed the final part of the Act. The Act entered into force one day after it was signed by the presidents of the European Parliament and the Council and published in the Official Journal of the EU, scheduled for the end of June 2024.

This law will enable the Union to reduce greenhouse gas emissions and maintain the technological production necessary for green growth within its borders. The European Union has set a goal of reaching a production capacity of zero-emission technologies needed to meet at least 40 percent of the EU’s annual needs by 2030 and 15 percent of global production by 2040. These categories include renewable energy technologies, nuclear power, heat pumps, electrolyzers, and other decarbonization technologies, including carbon capture and storage.

The Net Zero Industry Act proposes streamline permitting for projects that increase production within EU borders, ensuring the issuing within six to nine months. Public authorities deciding to invest in clean technology purchases will have to base their choices not only on price but also on the sustainability and resilience of the product, i.e., the degree to which the Union is dependent on the supply of the product itself from a third country. The law needs to offer producers and investors predictability, certainty, and long-term signals. It will establish targets and enhance investment conditions by simplifying and expediting permitting procedures, reducing administrative burdens, and facilitating market access.

The Net Zero Industry Act recognizes the unique challenges faced by energy-intensive industries, such as steel, chemical, or cement, in their decarbonization efforts. To support these sectors, the Act provides for investments in education, training, and technological innovation. This includes the creation of curricula, professional qualifications, and the conversion of the world of work to green jobs. These measures not only assist in the decarbonization process but also open up new roles and growth prospects for European citizens, underlining the Act’s potential for job creation and economic growth.

It is important to note that the Net Zero Industry Act could also substantially boost the renewable energy market. Since 2002, post-Brexit, the United Kingdom has established its own renewable energy certificate system, which requires electricity suppliers to supply the country with an increasing share of electricity from renewable sources. The UK also has certificates testifying to the production and use of biofuels to reduce greenhouse gas emissions from vehicles, encouraging biofuels that are less harmful to the environment.

As for green gas or biomethane production, unlike certificates for electricity, certificates for biomethane are still mainly managed by national registries. The Net Zero Industry Act includes measures that incentivize the production of clean technologies and renewable energy within European soil. It will also be interesting to assess how the markets for energy certificates evolve over time due to the measures.

 

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