The NZIA – EU’s plan for industrial climate neutrality

Greta Camilleri is EU Affairs Manager within the Economic Intelligence, Research, EU Affairs Unit at Malta Enterprise

The recent forest fires in the Mediterranean and the erratic weather conditions have clearly indicated that globally, we are in a climate emergency. This has economic, social and environmental ramifications. Furthermore, geopolitical tensions, a shortage of critical resources, China’s and the United States’ advancements in Clean Tech are further pushing up Europe’s agenda to invest more in its industrial policy based on open strategic autonomy.

These developments motivated the EU to launch the ambitious European Green Deal aiming to become the first climate-neutral continent by 2050 based on the Paris Accords.

One of the fundamental pillars of the Deal promotes attaining a simplified regulatory framework to improve EU’s industrial competitive edge via resource-efficiency and green investments, thus leading to a swifter green transition.

These events compelled the European Commission (EC) to revamp its Industrial Policy, propose a Net-Zero Industry Act (NZIA), revise the EU State Aid Regulation Framework; and initiate the Critical Raw Materials Act.

‘Net- zero’?

Very often, the meaning of the term ‘net zero’ is misconceived. This term does not mean nil pollution levels. Rather, it implies cutting down greenhouse gas emissions to as close to 0% as possible. The emissions which would be produced are to be eliminated from the atmosphere through natural re-absorption, such as through ocean basins. Nonetheless, transitioning to a ‘net-zero world’ poses numerous challenges to various sectors which must heavily invest in replacing current polluting practices with cleaner ones.

The proposed Act will strengthen Europe’s manufacturing capacity of net-zero technologies to overcome hurdles when scaling up namely through stimulating the production of renewable energy and financing the required infrastructure. This Act will promote the facilitation of net-zero technologies to gain market access through public procurement and private investments. Fostering further innovation in manufacturing processes and final products is key and can possibly lead to the development of more regulatory sandboxes.

Expedient regulation, scale-up support

The draft proposal of the NZIA identifies several strategic net-zero technologies which will contribute towards efficacious de-carbonization once they are market ready.

The Act will further promote the development and deployment of such technologies through the establishment of a tailored regulatory framework. The rationale being to grant ‘priority status’ to projects of strategic European importance to benefit from shorter timelines and support the scale-up of Clean Tech across Member States.

The proposal, amongst others, prioritises projects tied to wind, solar, battery, carbon capture and storage types of technologies. Increasing the EU’s manufacturing capacity will lead, to a certain extent, to less dependencies on non-EU countries, as well as facilitate attaining ambitious climate and energy targets.

Net-zero academies and industrial partnerships

Apart from creating investment conditions, implementing the proposed Act calls for a workforce that has wide-ranging skills. Currently, finding adequately qualified employees is challenging due to skills shortages. Introducing Net-Zero Academies, Member States will have the opportunity to deliver various training programmes focused on Net-Zero industry technology with the sole aim to enhance the skills required. The introduction of a Net-Zero Europe Platform will assist Member States and the EC to coordinate their actions and promotes the exchange of information particularly in terms of Net-Zero Industrial Partnerships. Through this Platform, affected stakeholders may identify ways how to adopt best practices and prioritize investments.

Introducing the NZIA is part of the EU’s efforts in recognizing the huge growth potential which exists in the area of net-zero technology and serves to incentivize manufacturers and developers to invest in product innovation and production processes.

Malta’s NZIA example

A good example of the movement towards Clean Tech is the Maltese automobile components sector that is very much integrated with the European eco-system. This sector is diverse and plays an important role in our manufacturing landscape. It includes the production of semiconductor chips to electronic switch gear to rubber O-rings. Clearly, the largest challenge of the European automobile industry is the gradual phasing out of the integral combustion engine and ramping up the sales of electric vehicles. The Maltese automobile components sectors is gradually preparing for this transition. A flagship initiative of this change is the Important Projects of Common European Interest (IPCEI) that the largest semiconductor backend facility is carrying out through an Industry 4.0 project.

In the last two years, Malta Enterprise has intensified its efforts at EU level to provide the best support to businesses to capitalise on European opportunities and beyond. Companies interested in obtaining further updates on the NZIA are to contact Malta Enterprise on [email protected]