European Union policymakers unveiled new regulations on Tuesday designed to bolster the domestic production of equipment for renewable energy sources such as solar and wind power, alongside other clean technologies. The initiative seeks to elevate Europe’s industrial standing vis-à-vis its Chinese and American counterparts.
The proposed measure entails setting a target for the EU to manufacture 40% of the requisite products by 2030 to mitigate greenhouse gas emissions. This includes a spectrum of technologies ranging from renewable energy and nuclear power to heat pumps and carbon capture mechanisms.
Amidst concerns about China’s dominance in global manufacturing capacity for solar power and the substantial green subsidies embedded in the U.S. Inflation Reduction Act (IRA), European policymakers have intensified efforts to safeguard the region’s industrial interests. The accord, known as the Net-Zero Industry Act (NZIA), was reached after extensive deliberations between European Parliament lawmakers and Belgium, the current holder of the EU presidency.
The NZIA, expected to come into effect later this year, aims to expedite the permitting process for projects enhancing EU manufacturing capabilities, ensuring permits are issued within 18 months. Moreover, the act mandates that public authorities prioritize environmental criteria and diversification of suppliers when procuring clean tech products.
Under the NZIA, EU member states will be required to incorporate non-price criteria in 30% of their auctions for renewable energy projects. Christian Ehler, the lawmaker leading the initiative, underscored its significance in responding to the challenges posed by the IRA and facilitating the EU’s attainment of its 2040 emissions target.
Achieving the 40% production target poses a formidable challenge, particularly in the solar sector, where domestic manufacturers currently account for less than 3% of EU panel deployments. Although the wind energy sector exhibits greater resilience, there are emerging concerns about the encroachment of Chinese companies.
Despite providing greater flexibility to support local production and coordinating existing EU funds, the NZIA lacks a substantial financial injection akin to the IRA. The proposed European Sovereignty Fund, intended to address this gap, has yet to materialize.
