Net Zero Industrial Act
The EU Green Deal Industrial Plan is quickly becoming reality. This ambitious plan announced by Ursula Von der Leyen one month ago (1) sets out a comprehensive approach to support a green-tech scale-up based on four pillars: 1) simplified regulatory environment, 2) mobilising private and public funding, 3) upskilling workforce and 4) diversification of the critical raw material supply chain.
Within this framework, the European Commission (EC) has published yesterday the Net Zero Industry Act aiming to scale up the European manufacturing capacity for net-zero technologies.
A simplified regulatory environment: Strategic Projects and Regulatory Sandboxes.
The proposed Net Zero Industry Act sets ambitious target to scale up European industrial manufacturing capacity to cover 40% of the EU deployment needs (2) for eight strategic net-zero technologies (3) necessary to achieve the 2030 climate and energy targets.
In order to achieve the manufacturing capacity objectives, the Act provides for specific regulatory frameworks to facilitate and speed up net zero investment projects, including:
- Net Zero Strategic Projects: projects that contribute to the development of net-zero manufacturing technologies (solar panels, wind turbines, heat pumps, etc.) and strategic CO2 storage projects.
- EU companies and consortia will be able to submit their projects to the relevant Member State to be recognised as such. In case of rejection, the applicant will have the right to appeal the decision to the EC.
- The application shall include a business plan evaluating the financial viability of the project and its consistency with the objective of creating quality jobs.
- Selected projects will also benefit from a special permit-granting procedure to be carried out by one designated central authority (One-Stop Shops).
- The permit-granting administrative procedures will enjoy priority status and will be subject to stringent time limits between 9 to 12 months, halved to 4 and 6 months for the expansion of existing manufacturing facilities. The lack of reply of the administrative body within the applicable time limits equals to a tacit approval.
- Net Zero Technologies Regulatory Sandboxes: controlled environment that facilitates the development, testing and validation of innovative net-zero technologies for a limited time before their placement on the market.
- Companies included in a sandbox will enjoy targeted exemptions from National and Union law, accompanied by appropriate mitigation measures to ensure that other regulatory objectives are fulfilled.
- An implementing act will establish the conditions for the setting up and operation of the net-zero regulatory sandboxes, as well as the application procedure that companies will have to follow.
- Green tech start-ups will have priority access to Regulatory Sandboxes.
Mobilising private and public funding: public guarantees and EU Funds.
The second pillar of the EU Green Deal Industrial Plan is to increase investments and financing in the production of clean technologies. Last week (4), the EC adopted a new Temporary Crisis and Transition Framework (TCTF) to make State Aid Rules more flexible until 31 December 2025 and streamline public funding towards green-tech projects.
To avoid fragmenting the European single market due to varying levels of national support, the Commission will mobilise existing EU funds to support the creation of a financial level playing field. For instance, InvestEU and the Innovation Fund will be revitalised, their scope expanded and bidding procedures will be substantially accelerated and simplified. Member States will also have to allocate an increasing share of their EU ETS national revenues to the pursuit of the Net Zero Industry Act manufacturing capacity objectives.
The Commission also envisages the creation of a European Sovereignty Fund in the context of the review of the multiannual financial framework. The financing of the Sovereignty Fund is still a matter of discussion, with some Member States (MS) advocating for a EU joint debt issuance, while fiscally conservative MS prefer to pick money from the EU’s existing budget and the remnants of the Recovery and Resilience Facility.
Closing remark
Although further details on how the Net Zero Industry Act will be translated into actual financing opportunities remain unknown at this time, these are without a doubt interesting times bringing great opportunities for companies that want to invest and innovate in the net zero sectors.
If you want to get more insights in this developing regulatory framework, and by extension the possible grants and incentives opportunities for your investment projects, please reach out to Tom Wallyn (tom.wallyn@pwc.com), Alexis De Méyère (alexis.de.meyere@pwc.com), Bart Wyns (bart.wyns@pwc.com) and Willem Gruyters (willem.gruyters@pwc.com). We are happy to support you every step of the way!
(1) See our dedicated NewsFlash, published on 1/2/2023: https://news.pwc.be/flemish-and-european-implications-of-the-climate-and-energy-crisis-government-support-for-green-industrial-investments/
(2) The “EU deployment need” is the number of solar panels, wind turbines, heat pumps, etc. that are expected to be installed in the EU every year in order to achieve its net zero and renewable energy targets.
(3) 1. Solar Photovoltaic and solar thermal technologies; 2. Onshore and offshore wind technologies; 3. Battery technologies; 4. Heat Pumps; 5. Electrolysers and fuel cells; 6. Sustainable biogas / biomethane technologies; 7. Carbon capture and storage (CCS); 8. Grid technologies.
(4) https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1563
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