On 1 February, the European Commission announced a Green Deal Industrial Plan to enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality. The plan, aimed at scaling up of the EU’s manufacturing capacity for net-zero technologies and products, consists of four pillars: a simpler regulatory framework, faster access to funding, enhancing skills and open trade. The Commission also aims to propose a Net-Zero Industry Act to identify goals for net-zero industrial capacity and provide a regulatory framework suited for its quick deployment.
While the intentions behind this Communication are welcome, the announced measures mostly summarise existing support mechanisms. But more importantly, the Communication doesn’t underline the critical condition for receiving any additional support – significant emission reductions. The suggested measures announce more simplification and flexibility for accessing funds. However, flexibility should not come at the expense of a beneficial climate impact; if taxpayers are footing the bill, the investments for industry need to deliver significant emissions reductions.
Hydrogen: supported as an individual technology, but without needed safeguards
The Communication includes a wide variety of measures to simplify and accelerate the deployment of hydrogen, spanning from accelerated permitting to easier access to finance and direct subsidies. Hydrogen will be an essential element of industrial deep decarbonisation, so creating the appropriate regulatory and financing framework will enable this decarbonisation.
However, to ensure the efforts laid down in this communication deliver the climate effects that we need, Europe must ensure that hydrogen is produced with additional resources, and that it is reserved to those sectors that have no other decarbonisation pathways. Otherwise, hydrogen risks becoming a further threat to the climate, instead of a crucial climate solution.
We thus urge the Commission as part of the Green Deal Industrial Plan to adopt the delegated act on RFNBOs to provide the industry with regulatory certainty and the climate with adequate protection, and to include a very clear prioritisation strategy for industrial sectors with no other decarbonisation pathways into the auction scheme of the Hydrogen Bank. Similarly, we urge the institutions to ensure that a definition encompassing the whole lifecycle analysis of GHG emissions of low-carbon hydrogen is included in the Gas Market Package, together with a strict minimising of blending. Only with these safeguards in place hydrogen can contribute to building a European green industry.
CO2 infrastructure: general support present, but specific needs missing from the picture
The development of CO2 infrastructure is needed in industries where other options, such as direct electrification, have a limited deployment potential. The Communication touches upon several regulatory and financial aspects that would benefit the uptake of an EU wide CCS value chain.
The pillars of simple regulatory environment, faster permitting promoting strategic cross-border projects (transportation and CO2 infrastructure) are welcome and helpful to overcome bottlenecks standing in the way of deployment. Such a simplified regulatory framework would need to be harmonised across industries to incentivise a confident EU-wide CCS value chain development. The Communication also allows greater Member State flexibility when it comes to dispersing State Aid towards decarbonisation technologies such as CCS, potentially opening up much needed financing.
However, the lack of specific support mechanisms for CCS is a cause for concern since the technology will play a key part in the decarbonisation of industries such as the cement sector. In comparison, other technologies such as hydrogen are mentioned numerous times as a focus area. Although hydrogen is sure to play a role in EU decarbonisation, the specific focus on it creates a risk of syphoning funds away from CCS, direct electrification measures, and other necessary technologies jeopardises the realisation of an effective industrial climate action plan. For example, the Hydrogen Bank uses funds from the Innovation Fund, making fewer funds available for capital expenditure-heavy activities like CCS.
New renewable energy generation and grid infrastructure development: resting on REPowerEU plans
Accelerating the pace at which renewables are deployed and delivered to large consumers, such as industrial players, is crucial for the decarbonisation of European industry. In that context, the Communication’s plans on simplifying regulations, minimising bureaucratic burdens and establishing a large-scale skills partnership for onshore renewable energy will contribute to the acceleration of RES deployment in the EU.
However, while the extension and strengthening of smart electricity grids to accommodate large quantities of renewables is mentioned, it’s not supported with any additional measures outside of the existing REPowerEU plan. When it comes to State Aid, extending the provisions to all renewable technologies (in REDII) is necessary, but should still be accompanied by robust assessments that will prevent any potential negative environmental impacts.
The Communication also announces that the Commission intends to extend the new competitive bidding mechanism for scaling up manufacturing of components for solar and wind energy. This would be a welcome change from the current emphasis on hydrogen and sorely needed to deploy the additional RES generation necessary to power the direct electrification and hydrogen production targets.
Embodied Carbon: the recognition of full climate impact of materials is key
A predictable regulatory environment, such as the Commission proposal aims to establish, is crucial to effectively decarbonise the building sector. The proposal does indeed refer to the construction and manufacturing sectors as “key to the green transition”, but it fails to address building materials altogether, which are traditionally manufactured via CO2-intensive processes. Thus, we urge the Commission to explicitly include crucial materials such as cement in the scope of “products that are key to meet our climate neutrality goals” .
We welcome the Commission’s acknowledgement of the role that European standards have in rolling out new industrial value chains. Establishing clear standards that set thresholds for embodied carbon content in construction materials, together with mandatory green public procurement criteria, will send a clear signal for the creation of lead markets for low-carbon materials, whose uptake will help accelerate the decarbonisation of the building stock. Specific support mechanisms such as carbon contracts for difference are also needed for various low-carbon products, such as cement and steel.
In addition, a harmonised approach at EU level for embodied carbon requirements will ease the burden on industry players that are having to deal with different legislation to that end, as some Member States already include embodied carbon provisions in national legislation (e.g., Denmark). The Net-Zero Industry Act must not only ensure the highest level of harmonisation across Member States, but also that the rapid deployment of clean technologies promotes standardised LCA data collection in buildings.
Conclusions: What’s missing?
Overall, the Communication identifies the correct challenges for industrial decarbonisation, but falls short on a few key elements. Going forward, the Net-Zero Industry Act must demonstrate a strong commitment to supporting projects which deliver real emissions reductions. All additional support, financial or regulatory, should only be provided under the condition that the receiving projects and products are climate compatible.
In addition to the needed conditionality, the support aimed at clean technologies should have a stronger focus on the specific infrastructure needed to decarbonise industry. Renewable energy generation and targeted use, the development of grids and CO2 infrastructure are all important elements that will need to be supported in order to create a thriving carbon neutral industry in the EU.