Europe is recalibrating its industrial policy to align with its climate and strategic autonomy objectives. The new EU act to promote net-zero technology can be the right lever, but only if focused on readily available and cost-effective solutions.
Riccardo Nigro, Alberto Vela and Maria Luís Fernandes report.
Aimed at bolstering Europe’s manufacturing capacity for technologies critical to the transition, the Net-Zero Industry Act (NZIA) has the potential to raise EU’s industrial competitiveness while contributing to its short-term decarbonisation and strategic autonomy goals.
As lawmakers fine-tune this tool, it is worth stressing that NZIA is basically different from its US counterpart in terms of financing, the generous Inflation Reduction Act, which mobilises hundreds of billions towards the green transition in the US.
With less the EU should do more; the NZIA should target a narrow scope of strategic projects that will be the most impactful for the budget available.
Future-proof tech
Lawmakers must concentrate NZIA’s support on readily available technologies and techniques; energy and material efficiency ones, solar panels, wind turbines, heat pumps, batteries, electrolysers and grids are solutions that can be deployed now.
Such a targeted approach optimises the use of taxpayer’s money to support solutions that displace fossil fuels without delay. Dispersing limited financial resources in too many technologies, as currently proposed by lawmakers, will only hamper the effectiveness of the NZIA.
The NZIA also offers the opportunity to build a strong market case for sustainable products. This can be achieved by setting environmental sustainability and resilience criteria in public procurement contracts for net-zero technologies, as well as incentivising consumers to purchase net-zero final products, such as heat pumps.
EU procurement rules require comprehensive review, and lawmakers should take every opportunity to set robust public procurement requirements for products and materials with ambitious sustainability criteria.
Prevention first, mitigation when needed
Carbon capture and storage (CCS) is a technology that can contribute to achieving our climate neutrality goals. However, it should be used to capture and permanently store unavoidable and residual carbon emissions, meaning emissions that cannot be cut in the first place through, for instance, electrification, fossil fuel phase out, wider substitution of carbon-intensive materials or feedstocks.
Over-reliance on CCS would prevent the development of more efficient and safer technologies, such as renewable energy, innovative steelmaking processes and the use of low-carbon cements. It could even prolong fossil fuels use vulnerability, deterring frontrunners deploying other deep transformative innovative solutions not generating carbon in the first place and may divert the resources that could be spent otherwise in wider energy efficiency measures with wider benefits.
Avoid costly experiments
The NZIA comes with a dedicated funding facility, the Strategic Technologies for Europe Platform (STEP). Mainly composed of money coming from already-existing EU funds, STEP would provide additional 10 to 13 billion EUR in fresh money.
To put the NZIA financial capacity in perspective, the latest nuclear power plant built in Europe, the Finnish Olkiluoto, cost 11 billion EUR. Not only quadrupled its original cost, it also took 16 years to come online, three times longer than planned. Similarly, costs associated with CCS deployment and operation amount to hundreds of billions of euros[1] and have excessively long lead times.
Cost-effective, clean, and quick ways to decarbonise the power and construction sectors exist, as the growth of solar and wind energy and European low-carbon cement producers show.
The lack of available public resources should give EU legislators compelling reasoning not to extend the NZIA’s list of subsidised clean technologies to costly and slow-to-deploy ones.
Participation and nature
The NZIA will likely increase the number of industrial facilities in the EU, which could strain our ecosystems and local communities. Accelerating industrial change cannot come at the cost of severely impacting the EU’s most precious biodiversity areas, silencing communities and imposing shorter deadlines on national permitting authorities, often understaffed and therefore unable to keep up with the pace of incoming applications.
Getting local communities, industrial operators and public authorities to effectively work with one another will be crucial for timely deployment of net-zero technologies.
Collaborative permitting procedures are not necessarily slow; on the contrary, they are possible when the legal framework is clear, competent authorities are well-staffed, and operators and communities get timely information and opportunities to make their voices heard. Otherwise, pushbacks would likely result in lengthy court action and, eventually, in longer permitting procedures.
Europe’s industrial revival
We already have the right technologies to push to make our industry more resilient to external shocks and turn it into a model for the world to follow in the short term.
As the NZIA continues its legislative path, EU lawmakers must now focus on how to provide an effective legal framework which promotes industry frontrunners, reduces fossil fuel dependency, and advances Europe’s decarbonisation goals.
Our communities call for decent jobs, healthy environments and effective participation in the success of future green industries, and a laser-focused clean industry strategy will help Europe get there.
