The Plan aims to “simplify, accelerate and align incentives to preserve the competitiveness and attractiveness of the EU as an investment location for the net-zero industry”[1].

On 1 February 2023, the European Commission (Commission) presented a proposal for a Green Deal Industrial Plan for the Net-Zero Age (the Plan). The Plan forms part of the European Green Deal adopted in 2019, which sets out the EU’s green transition ambitions and climate targets towards reaching net zero by 2050. The Plan sits alongside other Green Deal initiatives, including the “Fit for 55” package of policies (which seek to reduce greenhouse gas emissions by 55% from 1990 levels by 2030), as well as REPowerEU (introduced to reduce reliance on imported fossil fuels and provide clean and affordable energy).

The Plan is designed to support the scaling up of the EU’s net zero manufacturing capacities and installation of sustainable products and energy supplies, whilst also enhancing the competitiveness of Europe’s net zero industry. This Plan is particularly relevant in light of the US Inflation Reduction Act in the US, which aims to mobilise over $360 billion by 2032[2], and recent concerns in relation to energy security and energy prices in the EU.

Structure of the Plan

The Plan is based on four pillars: a predictable and simplified regulatory environment, faster access to sufficient funding, skills, and open trade.

Predictable and Simplified Regulatory Environment

Pursuant to the Plan, the Commission has pledged to present three key proposals in 2023 to improve industrial competitiveness:

1. A Net Zero Industry Act which aims to increase industrial manufacturing of key technologies in the EU and to provide a simplified regulatory framework to manufacture products required to meet climate neutrality goals.[3] The Commission hopes supporting industrial manufacturing capacity and multi-country net zero projects by faster permitting and developing European standards will achieve this goal.
2. A Critical Raw Materials Act to provide the EU with security of supply for critical raw minerals required for net zero technologies. The Commission hopes strengthening international engagement and facilitating necessary extraction, processing, and recycling will achieve this goal, whilst also ensuring continued research and innovation.
3. A reform of the electricity market design in March 2023, as part of the REPowerEU Plan.

Faster Access to Finance

The Commission has also committed to launch consultations with Member States on temporary flexibilities in State aid rules, involving the amendment of the Temporary Crisis Framework to the Temporary Crisis and Transition Framework for State aid. In particular, the proposed adaptations would allow for more straightforward procedures, and faster approvals for certain transactions.

To avoid fragmenting the Single Market due to varying levels of national support, EU funding will also be stepped up to contribute to targeted and swift funding of the EU’s net zero industry. A number of programmes are intended to contribute to fund the net zero industry, including the following:

• Recovery and Resilience Facility (RRF) and REPowerEU — The Commission is providing guidance to Member States on drafting REPowerEU chapters as part of their national Recovery and Resilience Plans. Overall, close to €270 billion REPowerEU RRF funds will be available for Member States.[4]
• InvestEU programme — Procedures under the programme will be simplified, and products aligned to the current needs.
• Innovation Fund — The Commission intends to launch a competitive bid in 2023 to support the production of renewable hydrogen, and to extend this mechanism to other net zero technology areas.

In the medium term, the Commission intends to propose a European Sovereignty Fund before summer 2023, to preserve a European edge on critical and emerging technologies.

In addition to the above funding sources, the Commission acknowledges in the Plan that significant investment will be required from private funding if the Commission is to achieve its aims. The EU will aim to create a fully developed Capital Markets Union to improve financing and investment opportunities for individuals and companies.

Enhancing Skills

According to the Plan, the success of the green transition depends on the development of green and digital skills, including ensuring the inclusion of women and youth. The Commission has pledged to take action through its overarching framework, the European Skills Agenda. Plans under this pillar include implementing the European strategy for universities to “future-proof” skills, a large-scale skills partnership for onshore renewable energy, and a Heat Pumps skills partnership. The Commission will propose to establish Net Zero Industry Academies to roll out upskilling and reskilling programs in strategic industries.

Open Trade for Resilient Supply Chains

The final pillar of the Plan consists of the requirement for global cooperation and trade. In the Plan, trade openness is described as an essential element to “maintain the EU’s position as a leader in net-zero technologies”. The EU is involved in a number of ongoing cooperation activities, including working with the World Trade Organization, advancing the EU’s network of Free Trade Agreements, and working with the US on solutions to EU concerns through the EU-US Task Force on the Inflation Reduction Act.

Conclusion and Next Steps

The Commission hopes that the Plan will provide a successful framework for the sustainable and net zero industry to prosper in the EU, and attract further capital in relation these areas.

The Commission indicated that it intends to adopt legislative proposals on the Plan before the European Council summit on 23-24 March 2023.

Latham & Watkins will continue to monitor developments in relation to the Green Deal Industrial Plan.

This post was prepared with the assistance of Samantha Banfield.

Endnotes

[1] European Commission: A Green Deal Industrial Plan for the Net-Zero Age.

[2] [Id.]

[3] This may include products such as batteries, windmills, and solar and carbon capture and storage technologies, although the precise product scope remains to be defined.

[4] European Commission – Green Deal Industrial Plan Q&A.