NZIA, CRMA and more: Our Monthly Policy Update
December 18, 2023
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This month, we dive into:
[#nzia][#nzia]
On the Net Zero Industry Act (NZIA) two major developments have unfolded over the last couple of weeks:
These positions – see our key takeaways below – will now form the basis of the two institution’s negotiating position towards each other and the European Commission as they prepare to enter into ‘trilogue’ negotiations.
Leading up to the vote in plenary, several other committees in the European Parliament issued specialised opinions on this file, providing numerous valuable ideas and recommendations for how various aspects of the Act could be improved. Despite the plenitude of recommendations, the Parliament opted to approve of the initial report as a closed box, without amending changing it for better targeted measures to scale-up cleantech.
See here, the three Institution’s respective preferred lists of net-zero technologies which could benefit from NZIA.
Impact on cleantech
With regards both to Parliament and Council, expanding the list of eligible technologies risks seriously undermining the focus of the NZIA, therefore weakening its original explicit purpose to offer a strategic list of few key technologies. Parliament list of technologies would also open the door to hydrogen transport and hydrogen for fuels regardless of if the hydrogen is produced green or otherwise, which would hamper the EU’s ability to transition to fully renewable energy production and lower the opportunities cleantech innovators since it would create incentives for fossil hydrogen.
Parliament proposing to expand the scope of the act to cover the production of subcomponents, however, would be helpful in enabling cleantech manufacturing and deployment by giving clarity to those manufacturing those vital components.
The biggest benefit for cleantech of the Parliament report is its proposed use of ETS revenues earmarked for the deployment of cleantech across member states. On the Council Side, permitting has been weakened substantially – the predictability offered to cleantech innovators by clear permitting timelines is lost in the Council version. Further on the Council’s version, giving the option for Member States to invoke somewhat arbitrary ‘outs’, with regards to, for example permitting or GPP, in general reduces the simplicity and predictability of the Act for potential benefactors.
As trilogues begin, likely before Christmas to continue into spring, it’s key to remember that the three versions of the Act now available, are starting points for negotiations, and the final provisions of the Net Zero Industry Act, are far from set in stone.
Read more:
https://www.cleantechforeurope.com/policy/cleantech-leaders-for-an-ambitious-and-strategic-nzia
[#crma][#crma]
On 13 November, co-legislators (the European Parliament and Council) struck a deal on the Critical Raw Materials Act (CRMA), which creates a regulatory framework for selecting and implementing strategic raw materials projects, diversifying the EU's imports, boosting circularity, and improving the EU’s capacity to monitor and mitigate risks of supply disruptions.
The deal strengthens several elements of the European Commission’s proposal. It keeps the domestic capacity targets at 10% for extraction and 40% for processing but raises the target for recycling to at least 25%. Additionally, it calls for a substantial increase in the recovery of raw materials from waste. Furthermore, it mandates that no more than 65% of the EU’s annual consumption of a strategic raw material should be imported from a single non-EU country. Finally, it boosts the role of substitution by making substitution projects eligible to become Strategic Projects, which benefit from streamlined permitting and easier financing.
Impact on cleantech:
The Act improves the business case for innovators in the sector across Europe, and all along the value chain, especially in exploration, mining, processing, and recycling. Together with the recently passed Battery Regulation, it cements the EU’s regulatory leadership in the sector.
However, to compete with the US and China, the EU must complement this regulatory framework with a cleantech-focused EU-level public funding instrument that crowds in the private investment needed for a secure and environmentally sound critical minerals value chain.
Read more:
Our report: A European Critical Raw Materials Strategy fit for Cleantech Competitiveness
[#methane][#methane]
On 15 November, the European Parliament and Council struck a deal on the Methane Regulation, which sets standards for the measurement, reporting and verification of methane emissions from the energy sector. The regulation also mandates the detection and repair of methane leaks and bans most cases of venting and flaring by 2027.
Additionally, the agreed text mandates that starting in 2027, businesses who import oil and gas into the EU must prove that their supply chain complies with EU emissions monitoring regulations. The European Commission will have to impose methane intensity limits for fossil fuels imported into the EU, and in 2030 start penalizing businesses that don't comply with the new restrictions.
Impact on cleantech:
The IEA estimates that 70% of current methane emissions from the oil and gas sector could be avoided with existing technologies, and almost half of that could be avoided at no net cost. The measures established by the Methane Regulation will encourage innovators, investors, and fossil fuel companies to develop and deploy technologies such as planes, drones, satellites, and ground-sensors which track methane leaks and flaring at global and local scales.
Read more:
https://ec.europa.eu/commission/presscorner/detail/en/IP_23_5776
[#co2][#co2]
On 21 November, the European Parliament adopted its position on the upward revision of Europe’s CO2 emission performance standards for heavy duty vehicles (HDVs). In line with the European Commission’s proposal, the Parliament’s position retains the European Commission’s proposed targets, whereby HDV manufacturers would need to reduce the carbon emissions of their new vehicles by 45% from 2030, 65% from 2035, and 90% from of 2040 onwards. It also aims to drive accelerated decarbonization beyond trucks and buses by expanding the scope of vehicles covered to so-called “vocational vehicles” such as garbage trucks, street sweepers, and concrete mixers. The Parliament also wants new city buses to be zero-emission by 2030.
As the Council already adopted its position in October, the European Parliament and Council are set to commence interinstitutional negotiations in early 2024.
Impact on cleantech:
The European Parliament’s position sends a strong policy signal to HDV manufacturers and investors to double down on developing HDVs running on electricity of hydrogen. This clear incentive to invest in battery-electric or hydrogen fuel cell electric vehicles will prepare the European truck industry for a cleaner future in which they will face fierce competition from Chinese manufacturers. This regulation will also complement the extension of the EU carbon market to cover road transport (ETS 2), as well as recent EU legislation (AFIR) aimed at ensuring charging and refuelling stations are in place across the EU.
However, the loophole for e-fuels and biofuels weakens the market signal for investment into HDV electrification and hydrogen fuel cells, whilst empowering HDV manufacturers to continue to misguidedly delay their phase out of the internal-combustion engine.
Read more:
[#ecodesign][#ecodesign]
On 4 December, the European Parliament and Council reached a political agreement on the new ‘ecodesign’ rules which make it easier for products to be recycled and repaired, combats planned obsolescence, and bans the destruction of unsold clothing and footwear.
"Digital product passports," which will give consumers and repair shops information about nearly every product sold in the EU, including dishwashers, televisions, smartphones, and textiles, are the centerpiece of the new regulation – enabling consumers and businesses to compare product repairability and make informed choices.
Impact on cleantech:
This regulation sends a strong signal to producers of concerned products to reduce waste and improve the repairability and circularity of their products. The push for resource efficiency and circularity will increase demand for cleantech. It will now be vital that ecodesign rules for specific product groups such as iron, steel, aluminum, textiles, furniture, and chemicals are ambitiously implemented and that adequate resources are allocated toward enforcement. Finally, in the future, these standards should also be applied to products sold online and imported to the EU, to set global standards which European innovators could help companies around the world comply with.
Read more:
[#energy][#energy]
On 7 December, the European Parliament and Council reached a political agreement on the Energy Performance of Buildings Directive (EPBD), seeking to decarbonize and renovate existing buildings, and set minimum requirements for the energy performance of new buildings. Co-legislators decided to incorporate a plan for the phase-out of fossil fuel boilers by 2040.
The agreement also requires solar installations on all new public and commercial buildings by 2026, all renovated non-residential buildings by 2027, all new residential buildings by 2029, and all existing public buildings by 2030. It further establishes minimum energy performance standards (MEPS), whereby all non-residential buildings will be above the 16% of the worst performing by 2030 and above 26% by 2033.
Last but not least, EU countries shall ensure that the stock of residential buildings reduces its average energy consumption by 16% in 2030 and a range of 20-22% in 2035 regarding the renovation aim for residential structures. 55% of the energy consumption reduction will have to be achieved through the renovation of the worst performing buildings.
Impact on cleantech:
The buildings sector emits 36% of EU greenhouse gas emissions and accounts for 40% of Europe’s energy consumption. The EPBD is a large opportunity for clean technologies and business models, supporting the deployment of solar panels, heat pumps, insulation materials, and home energy management systems such as smart thermostats and EV chargers.
Read more:
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6423
[#gas][#gas]
On December 8, the European Parliament and Council reached a final agreement on the last piece of the EU’s hydrogen and decarbonised gas package, which comprises a regulation and directive that will create the market for the transmission, distribution, and storage of hydrogen in the EU.
The agreement establishes a new separate grid planning entity to coordinate the planning, development and operation of EU hydrogen infrastructure, that will gradually become independent from the existing natural gas network operator. This dedicated European Network of Network Operators of Hydrogen (ENNOH) is a significant political win that prevents incumbent fossil gas interests from raising barriers to entry and distorting the market in their favor, such as in the promotion of dedicated hydrogen infrastructure and cross-border trade.
Impact on cleantech:
This agreement provides urgently needed clarity to the growing green hydrogen sector around its regulatory framework. Overall, the agreed ‘gas package’ will support the use of green hydrogen for the decarbonization of fertiliser, chemicals, shipping, and steel sectors which are difficult to electrify. ENNOH will eventually respond to the real need of hydrogen markets, so it is important for it to be phased-in quickly to be independent from incumbent fossil fuel interests as soon as possible to ensure fair infrastructure access to renewable hydrogen producers.
Read more:
[#innovationfund][#innovationfund]
On November 23, the European Commission’s Innovation Fund opened two calls for proposals of €4.8 billion to accelerate the deployment of innovative technologies in Europe. The two calls cover five areas, each with its allocated budget and capital expenditure (CAPEX) requirements:
Project promoters can submit their applications by April 9, 2024. Applicants will be notified of evaluation results in the fourth quarter of 2024.
Read more:
https://cinea.ec.europa.eu/funding-opportunities/calls-proposals/innovation-fund-2023-call_en
[#hydrogen][#hydrogen]
On November 23, the European Commission launched a pilot auction to provide up to €800 million of public support for hydrogen projects located in the European Economic Area. The auction will provide subsidies to hydrogen developers in the form of a fixed premium in €/kg of renewable hydrogen produced over 10 years. Project developers of renewable hydrogen production facilities can apply until February 8. Applicants will be notified by early April.
The EHB auction will help scale up Europe’s RH2 industry by reducing the cost gap between renewable and fossil fuel hydrogen production. However, the funding available via the EHB is not enough for EU RH2 producers to compete globally. In the US, the IRA offers a tax credit of up to USD $3 per kilogramme of clean hydrogen produced by a qualified green hydrogen facility. On top of the tax credits, the Bipartisan Infrastructure Act offers USD $9.5 billion in funding for clean hydrogen initiatives.
Read more:
https://ec.europa.eu/commission/presscorner/detail/en/IP_23_5982
[#step][#step]
On October 2, the European Committee of the Regions held a meeting with European experts, including Cleantech for Europe, with the view to take primary input into account to support a territorial impact assessment of the Strategic Technologies for Europe Platform (STEP).
The Commission originally communicated its intentions to launch a “Sovereignty Fund” to get serious about financing cleantech, highlighting the current lack of tools available to fund cleantech. In lieu of that, STEP was then announced, proposing effectively to simply shift around existing funding, most notably cohesion funding designed to support the development of regions inside the European Union with a below average GDP per capita ratio. In terms of new funding, the original STEP proposal only saw an additional small pool of 10 billion euros across clean, deep and digital tech, as well as biotech and defense tech.
The Committee of the Regions reports that the STEP proposal risks creating further administrative burdens on already hard-pressed local bureaucrats, that it risks exacerbating pre-existing regional disparities, and that large companies stand a much larger chance of benefiting from STEP than SMEs.
The Committee of the Regions also found that STEP, by virtue of being touted as a “pilot project” by the Commission ahead of future, longer-term vehicles of a similar nature, risks failing to generate investor confidence and unlock investment into the EU.
To this end, the document by the Committee of the Regions highlights a set of concluding policy recommendations with implications for cleantech manufacturing. It leads by requesting that fresh money be delivered for the purposes of scaling STEP-related technologies. This with Cleantech for Europe’s prior analysis that STEP is far too small to make a dent in the cleantech funding landscape.
Impact on cleantech:
The cleantech transition is an opportunity for the whole of Europe, not just the currently or traditionally most economically powerful parts of the continent. By proposing to shift money set aside to foster greater cohesion inside the EU, we are overall decreasing the ability of the EU to act as a big cleantech market. European sovereignty requires that no region is left behind in the transition to net-zero. Thus, it is important that the deployment of clean technologies is facilitated across all member states, to tap into the natural resources, regional skill pools and strengths. To do so, a collaborative approach from the EU level, taking into account the needs of regional administration is crucial. While STEP could have proposed a pilot Sovereignty Fund to support cleantech development, fundamentally shifting around existing funding from their designated purpose falls short of such ambitions.
Read more:
https://www.youtube.com/watch?v=xxrWhbx9Vxc
https://cor.europa.eu/en/our-work/Documents/5039-TIA-report.pdf
[#grids][#grids]
On November 28, the European Commission launched an action plan putting forward policy recommendations to modernise Europe’s electricity grid and prepare for the renewables-based electrification of the energy system. These recommendations include:
Impact on cleantech:
An upgraded and expanded electric grid will be the backbone of Europe’s cleantech transition. The investment needed in grids for Europe to usher in a new clean industrial era is staggering: the European Commission estimates that overall around €584 billion in investments are necessary for electricity grids this decade alone. While the action plan is a good start to address many of the challenges that hound the upgrade of the grid including lead times for permitting and approvals, it does not provide a clear investment pathway for grid updates. For instance, in the US, the Bipartisan Infrastructure Law invests over $20 billion to upgrade the power grid.
Read More:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2023%3A757%3AFIN&qid=1701167355682
[#carbonremoval][#carbonremoval]
The European institutions are currently negotiating the final shape of the legislative proposal to establish the first EU-level certification framework for carbon removals. The proposed legislation covers different types of carbon removals, including permanent carbon storage through industrial technologies (such as bioenergy with carbon capture and storage, as well as direct air capture with capture and storage), carbon farming (e.g., restoring forests and soil, and wetland management) and carbon storage in long-lasting products (such as wood-based construction).
Key issues that the negotiators will have to address include: how the certificates will be used, restrictions on the types of claims that can be made and storage of biogenic (sequestered from the atmosphere during biomass growth) carbon.
Impact on cleantech:
The EU framework for carbon removals will help scale voluntary carbon markets by ensuring carbon removals are genuine, long-lasting and monitored, using a credible and transparent assessment. The framework would act as a signal to help give suppliers more confidence in their project plans and encourage investors and lenders to provide with financing.
Read more:
[#packaging][#packaging]
On 22 November, the European Parliament adopted its position on new EU-wide rules to reduce, reuse and recycle packaging. The draft legislation bans unnecessary packaging and forces industries to make all single-use packaging recyclable by 2030. Besides the overall packaging reduction targets proposed in the regulation (5% by 2030, 10 % by 2035 and 15 % by 2040), MEPs are advocating for more ambitious plastic packaging waste reduction goals, setting specific target: 10% by 2030, 15% by 2035 and 20% by 2040.
Additionally, by 2035, all packaging in Europe must be recycled. The EU will also set mandatory quotas for the reuse of different packaging, including drinking bottles.
Impact on cleantech:
A set of comprehensive and unified rules could accelerate progress toward a circular economy for packaging, making sustainability a commercial priority for corporations. In doing so, the policy would encourage a range of EU clean technologies to scale in sectors ranging production of sustainable alternative to existing packaging to end of life treatment and reuse of packaging materials.
Read more:
[#cop28][#cop28]
According to a recent report, the UAE Presidency's climate financing agenda started off as the most ambitious to date. Already on the first day at the COP in Dubai, the much-anticipated Loss and Damage Fund was agreed, allocating nearly €225m to countries most vulnerable to climate impacts. The host country UAE and Germany (which alone pledged €100m), with the rest of the contributions coming from the EU, the UK, the US and Japan. Several elements regarding the long-term sustainability of the fund, such as replenishing the fund periodically, are yet to be addressed, but this is an important step forward and provided a dynamic start to COP28.
A huge announcement came from the European Union, in partnership with the EIB and the Breakthrough Energy Catalyst program which together announced a €240M Euros program to invest in 2 European companies, Energy Dome and Ørsted, sending a big message to the world and setting the stage for the remaining conversations at this COP to be about leveraging investments, and discussing concrete solutions to the climate crisis and the transformation of the energy system. With this announcement, the European Union has put itself back in the role of the vanguard of climate innovation. If the Paris Agreement is now on a journey from targets to implementation, the mandate of COP28 is to pave the way for technical solutions.
COP28 yielded the first global agreement which explicitly refers to an impeding move away from fossil fuels. In conjunction with all the pledges to triple renewable energy capacity by 2030, this has generally been perceived as a positive step.
Negative components of this COP had to do with a lack of an agreement on Articles necessary for further development of carbon markets. Additionally small cleantech innovators and the next generation of industry were barely represented at this COP, due to limited capacity and financial resources compared with incumbent industry and fossil lobby. Questions remain regarding who is able to take part in these discussions.
Read more:
https://www.carbonbrief.org/cop28-key-outcomes-agreed-at-the-un-climate-talks-in-dubai/
[#readings][#readings]
A Kantian shift for the capital markets union
Christine Lagarde, President of the European Central Bank, stressed the need for a well-functioning capital markets union as the EU is faces “a new set of efforts that will require a generational effort to finance.” In this vein, she proposed that Europe needs to develop its own version of “European Securities Exchange Commission” and a single rulebook that will replace the region’s currently fragmented supervision with a centralized approach.
UN 2023 Climate Technology Progress Report
The United Nations released its annual Climate Technology Progress Report, which aims to provide insights on climate technology progress, focusing on both industrialized and developing countries, providing both a local and global perspective. The report focuses on clarifying what leads to technology development and transfer.
IEA Special Briefing on the the State of Clean Technology Manufacturing
The International Energy Agency released an update of its special briefing on the state of clean technology manufacturing, providing a snapshot of recent progress in the manufacturing of solar PV, wind, batteries, electrolysers and heat pumps. While the pipeline of projects continues to grow significantly, the average rate of new capacity announcements has slowed. Progress in Solar PV and battery manufacturing is on track for net-zero by 2050, but there are larger gaps between project announcements and final investment decisions in electrolyser manufacturing holding back the deployment of renewable hydrogen. More worryingly, activity has slowed considerably in the project pipeline for wind energy component manufacturing and heat pump manufacturing. The briefing also illustrates how the level of policy support has a large impact on the project pipeline.
