The EU’s Net-Zero Industry Act (NZIA)

What do I need to know?

Broad range of affected net-zero technologies

The net-zero technologies addressed by NZIA include all kinds of renewable energy including grid, battery energy storage and hydrogen technologies as well as carbon capture and storage (CCS) and nuclear.

Benchmarks for net-zero technology manufacturing capacity in the EU 

The NZIA sets the following benchmarks for net-zero technology manufacturing capacitiy in the EU to meet: 

• at least 40% of the EU’s annual deployment needs for technologies necessary to achieve the 2030 climate and energy targets
• 15% of world production of relevant technologies in the EU by 2040.

Enhanced permitting procedures for net-zero technology manufacturing projects: single point of contact and fixed deadlines

Member States will designate points of contact responsible for facilitating and coordinating the permit-granting process for net-zero technology manufacturing projects. Each designated contact point will be the sole point of contact for the project promoter in the permit-granting process. It will have to be an authority deciding on all relevant questions itself or it will have to involve all competent authorities in the permitting procedure.

In addition, the NZIA sets maximum periods for these permitting procedures. Permits for net-zero technology manufacturing projects will in principle be issued within the following deadlines:

• 12 months if the yearly manufacturing capacity of less than 1 GW
• 18 months if the yearly manufacturing capacity is 1 GW or more.

The competent authorities may extend these deadlines by a maximum of 3 months in exceptional cases, where the nature, complexity, location or size of the concerned project requires. An extension of those time limits by 6 months is possible where a project raises exceptional risks for the health and safety of workers or of the general population. 

Priority status of net-zero strategic projects and creation of net-zero acceleration valleys

Net-zero technology manufacturing projects may, upon application by the project sponsors with the respective Member State, be granted the status of net-zero strategic projects based on the following three criteria: 

• their contribution to the technological and industrial resilience of the EU’s net-zero technologies by increasing the manufacturing capacity of a component or a segment of the net-zero technology supply chain, in particular by adding manufacturing capacity in the EU for a technology for which the EU depends on more than 50% on imports coming from third countries 
• a clear positive impact on the EU’s net-zero industry chain or downstream sectors and
• their contribution to the EU’s climate or energy objectives. 

Net-zero strategic projects will benefit from a priority status which includes shorter deadlines in permitting procedures, namely:

• 9 months if the yearly manufacturing capacity of less than 1 GW
• 18 months if the yearly manufacturing capacity is 1 GW or more.

In addition, Member States may decide to designate net-zero acceleration valleys as specific areas to accelerate net-zero industrial activities, in particular to accelerate the implementation of net-zero technology manufacturing projects, including net-zero strategic projects or clusters thereof, or to test innovative net-zero technologies.

Carbon capture and storage

In addition to expanding the net-zero technology manufacturing capacities, the NZIA contains the objective of an annual CCS injection capacity of at least 50 million tonnes of CO2 at EU level by 2030, as well as to develop the necessary CO2 transport infrastructure. Oil and gas majors shall, in principle, be subject to an individual contribution to this target depending on their historic (2020 through 2023) crude oil and natural gas production by providing the CCS sites either themselves or by entering into agreements with third party CCS project developers. Relevant plans need to be submitted to the European Commission within twelve months from the entry into force of the NZIA. 

Environmental sustainability requirements in public procurement of net-zero manufacturing technologies

In order to create a demand-side pull for net-zero manufacturing technologies, public procurement of relevant technologies will consider minimum mandatory requirements regarding environmental sustainability, which the European Commission will specify in an implementing act. In addition, if the European Commission determines that a specific net-zero technology originating in a third country accounts for more than 50% of the supply of that specific technology within the EU, relevant public procurement procedures shall contain as conditions that not more than 50% of the value of the relevant technology shall be supplied from the determined third country.

Sustainability and resilience contribution of renewable energy auctions

In addition, Member States will implement pre-qualification or award criteria in auctions to deploy renewable energy sources to assess the auction’s sustainability and resilience contribution, namely the following:

• supply chain resilience, taking into account the proportion of the net-zero technology that originates from a third country accounting for more than 50% of the supply of that specific technology within the EU, as well as at least one of the following:
  • environmental sustainability going beyond the statutory law minimum requirements
  • innovation by providing entirely new solutions or improving comparable state-of-the-art solutions
  • energy system integration. 

The European Commission is to adopt an implementing act further specifying the criteria within nine months from the entry into force of the NZIA. The criteria will apply, in principle, in at least 30% of the volume auctioned per year or at least 6GW per year in each Member State, unless their application would result in disproportionate costs for the Member State (which is presumed in the event of a cost difference above 15% per auction). Each of the criteria shall, when applied as award criteria, have a minimum weight of 5% and a combined weight of between 15% and 30% in the respective auction.

Creation of new institutions

Finally, the NZIA results in the creation of new entities which will promote its objectives, in particular the following:

• Net-Zero Europe Platform, composed of high-level representatives of the Member States and of the European Commission, which will advise and assist the Commission and Member States to reach the objectives of the NZIA, in particular with respect to the coordination of EU and national financing
• Strategic Energy Technology (SET) Plan Steering Group, composed of Member States and the European Commission, which will provide guidance and direction to the EU’s SET Plan supporting the development of clean, efficient and cost-competitive energy technologies through coordination and collaboration in clean energy research and innovation and where relevant with third countries upon innovation
• European Net-Zero Industry Academies, which will be set up to provide training and education on net-zero technologies and to lead to quality jobs creation
• Regulatory sandboxes, to help develop and test, in close collaboration with industry and where relevant, research institutions, social partners and civil society, innovative net-zero technologies and to create a level-playing field for innovation, which will be coordinated within the framework of the Net-Zero Europe Platform

What should I do next? 

The NZIA will enter into force on the day following that of its publication in the Official Journal of the European Union, which is expected to happen at the end of June 2024. It will be directly applicable across the EU but the European Commission still needs to issue implementing and delegated acts. Likewise, the Member States need to take action to implement certain aspects. Irrespective, affected businesses should begin developing plans to comply with and benefit from the NZIA.