European Union (EU) governments have officially approved a new law Net Zero Industry Act aimed at ensuring the bloc produces 40% of its own solar panels, wind turbines, heat pumps, and other clean tech equipment. This initiative is designed to bolster European industry’s ability to compete with the U.S. and China.
The Net Zero Industry Act (NZIA) is expected to come into effect next month or in early July after it is signed by the presidents of the European Parliament and the Council, and published in the EU’s official journal.
Significance
The NZIA is a key part of the EU’s strategy to lead not only in reducing greenhouse gas emissions but also in manufacturing the necessary technologies. Europe’s current reliance on China is notable, with China expected to control 80% of the global manufacturing capacity for solar power. Additionally, the EU is concerned that the $369 billion in green subsidies from the U.S. Inflation Reduction Act might draw European producers to relocate to the U.S.
Background
The EU has set a goal for 2030 to produce 40% of the technologies needed to cut greenhouse gas emissions. This includes renewable energy, nuclear power, heat pumps, electrolysers, and other decarbonizing technologies like carbon capture. By 2040, the EU aims to achieve 15% of global production for these technologies.
The NZIA seeks to streamline the permit process for projects that enhance EU manufacturing, aiming for most permits to be granted within six to nine months. Public authorities purchasing clean tech products will need to consider sustainability and supply chain resilience, with a 30% weighting given to these factors alongside price.
Meeting the target will be particularly challenging in the solar sector, as EU manufacturers currently supply less than 3% of the solar panels used within the EU and are struggling to survive. Conversely, the EU wind energy sector is stronger, though Chinese companies are making inroads.
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