TL/DR –
European governments have approved the Net Zero Industry Act (NZIA) to prevent falling behind the US and China in clean energy technology. This legislation redirects EU funding to increase manufacturing capacity of net-zero technologies, with the goal of meeting 40% of domestic demand by 2030, and to ensure a global market share in all key low-carbon technologies of at least 15% by 2040. The NZIA also mandates petroleum producers to develop carbon capture and storage infrastructure to permanently store CO2 captured from industrial processes.
European Legislation to Protect Firms and Ensure Clean Energy Transition
New legislation aims to protect European enterprises from US and Chinese competition in the transition from fossil fuels to clean energy. The law also obliges large oil companies to assist in carbon dioxide sequestration.
Expanded as the Net Zero Industry Act (NZIA), this legislation is expected to enable the EU to compete with the US and China in developing clean energy technologies. The NZIA also aims to scale the deployment of carbon capture and storage (CCS) infrastructure.
The NZIA redirects EU funding, eases permitting delays, and aligns with the new Critical Raw Materials Act. The latter ensures access to crucial resources such as lithium and rare earth metals.
This legislation has been introduced in response to fears that investment in renewable energy infrastructure and electric cars might divert toward the US owing to large-scale subsidies under the Biden administration’s Inflation Reduction Act. There’s also the threat of undermining by state support and low wages in the east.
According to the law, production capacity for ‘net-zero’ technologies should meet 40% of domestic demand by 2030. This includes batteries and solar photovoltaic panels, currently mostly imported from the Far East.
The NZIA mandates EU governments and the European Commission to secure a global market share of at least 15% in key low-carbon technologies by 2040. Petroleum producers are also required to develop facilities for the permanent storage of a combined 50 million tonnes of CO2 captured from industrial processes annually.
Carbon Storage Responsibility on Industry
Hanna Biro of the Oslo-based, pro-CCS environmental NGO Bellona, emphasizes that requiring EU oil and gas producers to take responsibility based on their production share is a crucial step. This will compel the industry to contribute more to storage development costs and risks, thereby relieving taxpayers in Member States striving to decarbonise key hard-to-abate industries.
To indicate the scale of the EU’s new carbon storage target, consider Norway’s state-supported Northern Lights project, currently the largest in development in Europe. It aims to go online this year with an injection capacity of 1.5m tonnes of CO2 annually.
Ursula von der Leyen, the Commission president, commends adopting the anti-offshoring law, as it fosters a regulatory environment conducive for domestic production. “The Act creates favourable conditions for those sectors vital for us to reach net-zero by 2050,” said von der Leyen.
A spokesperson for the Commission states that the law would create a “unified and predictable” environment for investors, increase competitiveness and robustness of Europe’s industrial base, ensure job creation, and enhance energy security.
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