Europe has announced eight key climate technologies in the race to net-zero.
Following the groundbreaking investment in climate technologies and solutions announced in the U.S. Inflation Reduction Act, Europe has revealed its own strategy to stay globally competitive in the race to net zero.
EU leaders have announced eight strategic technologies that will shape the green shift across the continent.
They are solar, electrolyzers and fuel cells, wind, sustainable biogas, batteries and storage, carbon capture technologies and storage, heat pumps and geothermal, and grid technologies.
The eight strategic technologies form the basis of the European Commission’s Net-Zero Industry Act (NZIA), still to be debated and approved but a clear signal from the EU about what to expect in the decades to come.
These technologies will be eligible to receive specific support, including financial incentives and less red tape. The duration of the permitting process will be cut to nine to twelve months depending on capacity, which is a major change.
Addressing the supply chain
The Commission has also introduced the Critical Raw Materials Act, designed to loosen the dependency upon China for critical minerals and the materials needed to reach a 55% reduction in emissions by 2030 and climate neutrality by 2050.
China has made great strides in securing the value chain for critical minerals, from excavation to processing. Rumors that China will restrict the export of some materials and products that are crucial for the manufacture of photovoltaic panels has caused unrest in the supply chain. This could severely hamper the ability for European countries to compete with Chinese companies in this area.
According to the new Act, 10% of the minerals needed shall be sourced from within the EU, 40% shall be processed within the EU and a minimum 15% recycling rate. The EU will enter into deals with other countries/regions for production and processing to diversify access and provide robust supply chains. These are supply chains which are totally dominated by China today.
Europe in a new global map
The news came just weeks after the European Commission released a report calling aimed at keeping the EU an attractive location for the investment and development of the net-zero industry amid changing global conditions.
The report, A Green Deal Industrial Plan for the Net-Zero Age, acknowledged the short-term difficulties faced by Europe due to war and high energy prices, and how some of the initiatives being promoted in other parts of the world are causing problems for Europe.
The European Commission questioned the fairness of some of these initiatives, in particular the strategy of high subsidies and supply chain dominance pursued by China but also giving a nod to the IRA in the U.S. and similar schemes in Japan and India.
CO2 storage a strategic priority
The inclusion of CO2 capture technologies and storage as one of Europe’s strategic priorities was by no means certain.
CO2 capture and storage has been identified as a key strategic technology for Europe.
Denmark, Norway, and the Netherlands are among the countries to have announced new CO2 storage plans. Now it’s clear that Europe’s leaders back the technologies, investment in capture technology and storage projects can really ramp up, and not a moment too soon.
It makes no sense to capture CO2 unless there is somewhere to store CO2. There is no way we can reach the commendable targets without such infrastructure in place.
The reduction in red tape of this proven technology is a key step, as is the obligation for oil and gas companies to provide 50 million tonnes of CO2 storage availability per year by 2030. It should be noted that the Act provides benchmarks for the various technologies and solutions rather than strict targets.
For context, Norway’s groundbreaking Northern Lights CO2 storage project provides a capacity of just 1.5 million tonnes per year in phase I, albeit with plans to extend beyond 5 million tonnes per year. But there are plans in Denmark to ramp up capacity above 50 million tonnes per year by 2030 and similar sizeable Dutch projects to support this overall target.
What’s perhaps most notable in the NZIA is the absence of nuclear as a strategic European net zero technology, albeit still mentioned as a net zero technology.
Hydrogen remains important
Hydrogen production is also a notable omission, even though the manufacturing of electrolyzers and fuel cells are included. However, there are already targets for hydrogen implementation, such as the near term target of 10 million tonnes per year EU production and the same imported by 2030.
This is part of the REPowerEU plan, basically to get rid of Russian Energy Dependence and use this as a momentum for the green transition and creating the basis for a thriving European renewable energy industry.
However, the launch of the European Hydrogen Bank to support the market and investor security of renewable hydrogen within the EU is a clear sign that Europe remains committed to hydrogen as an alternative fuel.
In the U.S. IRA, a tax cut of up to $3/kg can be gained. Auctions will be arranged for hydrogen production in the EU to be supported by the €800 million ($885 million) support mechanism giving a premium for up to 10 years. It could make the levelized cost of hydrogen in EU competitive to the U.S. for green hydrogen.
Europe’s revised plan for green industry
Although designed to ensure the EU reaches its climate targets and takes a global leadership role in clean technology and industrial innovation, the new plans are really just a consolidation of many existing measures with more of a long-term operational focus than before.
The European Commission wants to speed up the regulatory environment to allow technologies to scale quickly. It sets production benchmarks on key technologies and materials within the EU, something not seen so often in the EU environment.
The market model that has worked for so many years doesn’t work so well when there is a security of supply issue in energy as there is today. Europe now faces the deglobalization of markets, globalization and trade has been the very foundation for a thriving European economy.
Questions over finance and research strategy
The biggest question created by the NZIA is one of finance. There has been talk of central finance but the NZIA includes no new substantial funding. What it does do is allow member states to provide subsidies in key strategic areas, usually something that falls foul of EU state aid legislation.
Aside from that, funding will continue to come from existing channels such as Connecting Europe Facility, Projects of Common European Interest, and Invest in EU and new mechanisms like the Temporary Crisis and Transition Framework.
Another concerning aspect is the lack of research strategy mentioned in the recent reports. This is an area where the EU research and innovation framework programs have excelled in drawing together pan-European efforts and expertise to bring forward new technologies and solutions.
Governments are looking for quick fixes and how they can extract value from things at the highest Technology Readiness Levels. While that works in the short-term, it creates an innovation gap for the steady flow of new technologies that will be needed to reach net-zero. Being in a hurry means that the linear innovation model does not work. We need to run research, innovation and deployment in close connection in parallel.
Key member states are calling for a doubling of efforts for the next framework program, eying an investment of €200 billion ($220 billion) into the future EU economy.
So, the race is on. We are not only in the race for net zero but also a subsidy race. Climate change, protecting nature and our oceans has up to now not been reflected in our economic model. That is set to change and change fast as we prepare for a new market model driven by sustainable targets.