Update from Brussels: Unveiling the Net-Zero Industry Act and Critical Raw Materials Act

By Illaria Graceffa and Antonio Pilati, SEC Newgate EU

On March 16, the European Commission published a legislative proposal for a Net-Zero Industry Act and Critical Raw Materials Act as part of the EU Green Deal Industrial Plan.   The initiatives are intended to advance the EU’s green transition and ensure strategic autonomy. They  are also the EU’s response to the US Inflation Reduction Act (IRA), whose green subsidies and “buy American” provisions risk attractinggreen tech investments away from Europe.

In practice, the Net-Zero Industry Act aims to boost EU’s manufacturing of clean technologies by speeding up permits and reducing red tape for environmental projects. The target is to produce autonomously at least 40% of the green technologies it needs by 2030. More precisely, the new rules will prioritise technologies such as solar photovoltaic and solar thermal; onshore wind energy and marine renewable energies; batteries and storage; heat pumps; electrolyzers and fuel cells; biogas/biomethane; carbon capture and storage; and grid technologies.

But for that, the right resources are needed. Therefore, the Critical Raw Materials Act will improve EU’s access to the materials necessary for the twin transitions. The new rules will cut bureaucracy for mining, processing and recycling, setting limits to excessive imports from a single country, while also imposing due diligence requirements across the value chain, in an effort to increase transparency and sustainability across the whole value chain.

To reinforce the external dimension of the plan, the Commission is also pushing for a “Critical Raw Materials club” to foster cooperation with other democracies in an effort to counter China’s dominance. And here again there is a link with the IRA, as the Commission hopes to persuade the Biden administration to include minerals from the EU in itsnew tax credits scheme. However – for now – Brussels is abstaining from setting “buy European” requirements, even though countries such as France might push in this direction during the negotiations of the proposals.

The question is whether the EU can meet such ambitious targets in practice, since resources are limited, and other stakeholders’ reactions are not yet clear. What is sure is that sustainability, trade and geopolitics are now more than ever intertwined – and play a strong role in  Europe’s ability to deliver on the EU Green Deal.