Towards a Business Case for Industrial Decarbonisation in Europe

The Net-Zero Industry Act (NZIA) aims to tackle three challenges for the Union through regulation: decarbonisation, industrial competitiveness, and strategic autonomy. While I agree with all three objectives, I strongly believe that the Act’s methodology needs improvement.

The NZIA focuses on developing new manufacturing capacity to fulfill domestic demand for decarbonized energy technologies. However, this is not the right approach for two reasons. First, Europe is an export continent, and to maintain our prosperity and way of life, our industry needs to be oriented towards exports. Setting targets for domestic demand is not the right approach. Second, even if permitting is substantially sped up across Europe, the contribution of the final products of any new manufacturing capacity established under this Act will be optimistically deployed in 2028. The contribution of these final products to the 2030 decarbonisation objective cannot be expected to be very significant.

To address these issues, we need to shift the approach of the Act. We need to rethink the production objective, and instead of aiming for manufacturing to meet domestic demand, we need to aim at capturing a significant part of global demand.

This will gear our industry towards ambitious exports while building manufacturing capacity in Europe. Furthermore, we need to clarify that the NZIA should cover the full value chain of clean tech – with the exception of raw materials as the CRMA is covering this. This shift in objectives can only be successful if the Act also delivers the tools to achieve the objectives.

The key objective of the tools has to be to create a business case for industrial decarbonisation in Europe.

There are two main issues to address.

Firstly, we need to be ambitious on streamlining our regulatory environment. The NZIA should set quantitative objectives for lowering the administrative and regulatory burdens on our industry. Furthermore, we need to have Better Regulation. The ‘competitiveness check’ announced by President Von Der Leyen was a welcome step in this direction, and the next step should be to strengthen the innovation principle in the Commission’s process to prepare legislation. Innovation is our only way towards decarbonisation and competitiveness. Regulation can be a real challenge for innovation, and even market-creating regulations have the risk of being too prescriptive and not technology-neutral. By explicitly considering how a regulation could impact innovation, legislators can make informed decisions on the level of regulation required to achieve our objectives.

Secondly, we need investment. While the NZIA proposal mentions a future Sovereignty Fund, it is not adequate to meet the investment needs to achieve the Act’s objectives because it will focus on support for capital expenditure. Our regulations will make production in Europe more expensive – not setting it up, but actually running it.

To ensure a business case for industrial production in Europe, we need to address this. The NZIA should mandate Member States to set up effective tax-based schemes to lower operational expenditure.

This should be linked to decarbonisation objectives and funded through national ETS revenues.

In conclusion, to achieve the objectives of the NZIA, we need to shift the focus of the Act towards capturing global demand while building manufacturing capacity in Europe. To be successful, we need to streamline our regulatory environment and invest in tax-based schemes to lower operational expenditure while linking it to decarbonisation objectives. By doing so, we can create a business case for industrial decarbonisation in Europe while also addressing issues of competitiveness and strategic autonomy.