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Understanding the Green Deal Industrial Plan: A Comprehensive Introduction to Europe's Net-Zero Age

by Minoas Vitalis, EU Policy Analyst, FiscalNote EU Issue Tracker

By providing a clear framework and support for the transition towards climate neutrality, Europe's Green Deal Industrial Plan for the Net-Zero Age is poised to revolutionize the way we produce and consume, ultimately leading to a more sustainable and resilient Europe.

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The European Commission presented its Communication on the Green Deal Industrial Plan for the Net-Zero Age on February 1, 2023. The Plan provides a framework to support the transition of European industry toward climate neutrality and to develop the net-zero technologies necessary to achieve the EU's climate targets.

Building on previous initiatives, the Plan complements current efforts under the European Green Deal and REPowerEU. It is based on four key pillars:

Pillar I: A predictable and simplified regulatory environment

The goal is to eliminate unnecessary burdens for businesses, creating an attractive investment climate within the European Union. In this context, the Commission recommended three proposals to enhance industry competitiveness:

  • The Net-Zero Industry Act aims to provide a simplified regulatory environment suited for the quick deployment of net-zero technologies and to ensure the promotion of EU strategic projects by guaranteeing fast-track permitting. The lead Industry, Research and Energy (ITRE) Committee is set to hold a vote on the draft Report for the Net-Zero Industry Act on October 12, 2023, with a plenary submission for confirmation in late October or early November. The Council is provisionally expected to adopt a General Approach on the file in early December 2023, with trilogue negotiations between the institutions expected to begin after that.

  • The Critical Raw Materials Act ensures access to materials vital for manufacturing key technologies. The lead ITRE Committee is scheduled to vote on its draft Report on September 7, after which a plenary submission for confirmation will take place. This confirmation will mark the European Parliament's negotiating position. The Council is expected to possibly adopt a General Approach on the file in late September 2023 with trilogues expected to begin shortly after.

  • The Electricity Market Reform proposal would allow consumers to benefit from the low costs of renewables. The lead ITRE Committee adopted its Report on July 19, 2023. During an early September plenary session, it is expected that the Committee will announce its decision to enter into trilogue negotiations based on this Report. Discussions are ongoing within the Council, and it is generally anticipated that a provisional first reading agreement on the file will be reached by the end of this year.

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Pillar 2: Faster access to sufficient funding

The Commission aims to level the playing field within the Single Market and facilitate Member States in granting aid to accelerate their journey toward net-zero. To achieve this, the Commission has reviewed the General Block Exemption Regulation (GBER) and adopted a new Temporary Crisis and Transition Framework.

Finally, the Commission has also presented a proposal for a Strategic Technologies for Europe Platform (STEP), previously referred to as the European Sovereignty Fund. Exchanges of views are currently ongoing within the Parliament, with a draft Report expected later this year. In parallel, the Council is holding discussions to establish its internal position on the matter.

Pillar 3: Skill development for EU citizens

The Plan explains that actions in this Pillar are already underway and mentions the examples of the Digital Education Action Plan, the European Pact for Skills, and the European Skills Agenda. Furthermore, the Commission is working with EU countries to set targets for monitoring supply and demand for skills relevant to climate neutrality and to implement the European strategy for universities, which plays a vital role in ensuring citizens gain future-ready skills.

Pillar 4: Open trade for resilient supply chains

According to the Plan, the Commission will seek to conclude trade negotiations with Australia and make progress in its negotiations with Indonesia, India, and Mercosur. It will also aim to ratify its agreements with Chile, Mexico, and New Zealand to maintain the EU’s position as a leader in clean technologies.

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Global Race to Sustainable Technology: Europe's Response to the US IRA

In August 2022, the United States made headlines with the passing of the Inflation Reduction Act (IRA), a sweeping $369 billion USD package aimed at incentivizing sustainable technology investment. Initially labelled as "super aggressive" by French President Macron and criticized as "discriminatory" by EU officials, the Act sparked a lively debate on both sides of the Atlantic.

However, the stance of the Commission and Member States has since evolved to a more restrained approach. According to a policy briefing from the European Parliament Policy Department for Economic, Scientific and Quality of Life Policies, the IRA is unlikely to trigger a recession in the EU. This is primarily attributed to the EU's proactive approach to climate action and the implementation of relevant subsidies, which began earlier than in the United States.

While the EU remains confident in its position, it actively recognizes the ambitions of its international partners in the race to achieve net-zero emissions. Japan, for instance, has set a goal of raising approximately $145 billion USD in 2023 to foster investment in decarbonization and expedite the transition to clean technology.

Unlocking Business Potential: How the Green Deal Benefits the Private Sector

The Green Deal Industrial Plan will provide businesses of all sizes, active in net-zero product manufacturing, the opportunity to scale their day-to-day operations and compete effectively in the ever-changing international environment. Not only that, but it also enables businesses to reduce their environmental footprint.

Through the new Temporary Crisis and Transition Framework, businesses will be able to take advantage of a simplified procedure for aid for renewable energy deployments and decarbonising industrial processes. This means that businesses operating in net-zero technology production can take advantage of enhanced investment support schemes, potentially including tax benefits. Additionally, in the field of net-zero value chains, the EU’s framework will provide more targeted aid for important new production projects.

Moreover, a number of other programmes contribute to net-zero industry transition financing. First of all, the Recovery and Resilience Facility (RRF) and REPowerEU provide one-stop shops for permitting, tax incentives, and increased investment in essential skills to achieve the industry’s transition to net-zero. Secondly, the InvestEU program simplifies funding procedures to meet the challenges posed by the current climate. Finally, the Innovation Fund, where the Commission will launch a bid during autumn 2023, to support the production of renewable hydrogen.

With these programs, businesses gain access to diverse funding criteria that cater to their specific needs, enabling them to secure the financing required to scale their operations and embrace clean technologies.

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Navigating the Net-Zero Era with FiscalNote EU Issue Tracker

The Green Deal Industrial Plan for the Net-Zero Age undoubtedly represents the European Union's ambitious vision for a clean energy transition while ensuring the continued competitiveness of European industry. While the precise implications of the plan, both in the short and long term, are yet to be fully determined, it is evident that businesses have a significant opportunity to thrive by closely monitoring the developments in the legislative proposals.

The plan signals a transformative shift toward sustainability and allows businesses to leverage increased funding to scale up their operations. By staying informed and understanding the intricate details, organizations can position themselves at the forefront of the race toward sustainability. This entails not only keeping a watchful eye on the progress of the proposals but also recognizing how they align with their specific objectives and operations.

Fortunately, to navigate this intricate process, businesses can turn to FiscalNote EU Issue Tracker. This powerful tool provides real-time updates and insightful analysis to help organizations of all sizes remain informed about the latest developments in the EU legislative landscape. By leveraging this comprehensive platform, businesses can stay ahead of the curve, identify opportunities for growth, and effectively navigate the ever-changing net-zero environment.

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