The EU Net Zero Industry Act: A Starting Point for Solving One Piece of the Energy Transition Puzzle

The EU Net Zero Industry Act (EU Regulation 2024/1735 - NZIA), which entered into force on 29 June 2024, aims to make investing into net-zero technologies in the EU simpler and more attractive by seeking to streamline project approval processes, reduce red tape, and promote private capital participation. The NZIA is billed to play an important role in assisting the EU to meet its stretch 2030 climate and energy targets, and is, in part, an acknowledgment that substantial investment (including that from private capital) is necessary to scale up the manufacturing of net-zero technologies at the rate needed to meet those targets.

In the short-term, the NZIA aims to boost domestic manufacturing of clean technologies by streamlining regulatory processes for “net-zero strategic projects” such as: (i) “net-zero technology” manufacturing projects (e.g. solar, onshore wind and offshore renewables technology, battery, and energy storage), (ii) CO₂ capture projects, (iii) CO₂ storage projects, and (iv) CO₂ transport infrastructure projects. In the medium term, the NZIA is designed to increase the EU’s share of the global green technology market, positioning European industries as leaders in sustainability. A key objective is to achieve 40% of the EU’s net-zero technology needs from domestic sources by 2030 and 15% of world production of such technologies by 2040. This seeks to strengthen the EU’s industrial base, reduce supply chain vulnerabilities, and support the region’s goal of becoming a global hub for clean technology. The NZIA also seeks to create quality jobs in the EU and encourage investment and upskilling in the workforce to satisfy the growing demand for skilled workers in the clean technology sector, at a time when traditional energy and infrastructure skillsets may be in lower demand. In the long term, the aim is that the NZIA will assist in transforming the EU economy as it navigates the energy transition, encouraging decarbonisation while driving competitive economic growth.

While the NZIA contains the outline of an ambitious new regime, it suffers from a lack of detail around implementation and funding. For example, further clarity around “net-zero technologies” will be provided in early 2025, when the European Commission is required to adopt a delegated act to identify sub-categories within “net-zero technologies” and specific components used for those technologies, the primary purpose of which can be said to be “net zero”. Until this legislation is published, it is not possible to be clear on the exact scope of the provisions in the NZIA. Detailed implementation guidelines for the NZIA are also expected to be introduced in 2025 and will be awaited with bated breath. For further analysis of the NZIA, please see our recent Paul Hastings client alert: The Net-Zero Industry Act | Paul Hastings LLP