Exclusive interpretation! How much impact will the EU's "Net Zero Industries Act" have on our country? How to respond?
On June 28, 2024, the Net Zero Industries Act (hereinafter referred to as the "Act") officially came into effect. Together with the Critical Raw Materials Act and the Electricity Market Reform Plan, the "Bill" is called the three key pieces of legislation of the EU's "Green New Deal Industrial Plan". It aims to accelerate the EU's move towards climate neutrality and take advantage of the European Union. The advantages of a single market enhance the competitiveness of Europe's industrial industry and the elasticity of the energy system, and achieve a controllable impact on the development of my country's green industry.
Background and main contents of the EU's "Net Zero Industries Act"
The EU is a net importer of key technologies and components needed to achieve climate neutrality by 2050, with more than 90% of solar photovoltaic (PV) chips and other related components and more than a quarter of electric vehicles and batteries imported from China. To ensure that green transformation does not face risks due to strategic dependence, the EU has proposed a bill to set 2030 manufacturing capacity targets and simplify the regulatory framework for net-zero technology, making it an industrial leader in this market. At the same time, in the context of the energy crisis and other contexts, passing the Bill to ensure the security and stability of its supply chain and improve the EU's manufacturing capabilities is crucial to avoiding over-dependence and achieving the EU's ambitious climate and energy goals.
Develop indicative indicators to increase ambition for net-zero technology.The "Act" proposes that by 2030, the EU's local net-zero technology manufacturing capacity will reach 40% of the EU's deployment needs, supports strategic net-zero technologies that are commercially feasible or are about to enter the market, and identifies 8 strategic net-zero technologies, including: Solar photovoltaic and solar thermal technology, onshore wind energy and offshore renewable energy technology, battery and storage technology, heat pump and geothermal energy technology, electrolyzer and fuel cell technology, sustainable biogas/biomethane technology, carbon capture and storage technology, and power grid technology. In addition, the Act also supports other net-zero technologies such as sustainable alternative fuel technologies, advanced nuclear energy technologies, small modular reactors, and equally optimal fuels.
Adopt a number of investment promotion measures to enhance net-zero technological competitiveness.The "Act" adopts a number of measures to promote investment in net-zero technology: First, it clearly identifies net-zero strategic projects, gives net-zero strategic projects priority approval status, and streamlines administrative and licensing procedures for net-zero strategic projects. The second is to create platforms to coordinate EU actions, such as the Net Zero European Platform and the European Hydrogen Energy Bank, to attract investment in net-zero strategic projects. In addition, the Recovery Fund, the Investment EU Program, the Cohesion Policy Investment Fund and the EU Innovation Fund can also be used to fund investment in net-zero strategy projects. The third is to support carbon capture and storage projects and improve carbon dioxide injection capabilities. The "Act" proposes that the EU's annual carbon dioxide injection capacity will reach the carbon capture and storage target of at least 50 million tons by 2030, and requires oil and natural gas producers to contribute to the EU's carbon dioxide injection capacity goal. The fourth is to introduce sustainability and flexibility standards into public procurement procedures and auctions for deploying renewable energy to promote market access. The fifth is to improve labor skills in relevant industries, establish the European Net Zero Emissions Industrial Academy, strengthen skills training for professional talents in the net zero industry, and create high-quality employment opportunities. The sixth is to promote innovation, establish regulatory sandboxes, help companies develop and test innovative net-zero technologies, and grant certain exemptions in a targeted manner without violating other regulatory goals of the EU and member states.
Establish a net-zero technology platform at the EU level to promote scientific decision-making.The Act grants the establishment of a net-zero European platform. This platform is an advisory body that will help oversee all measures under the Act and facilitate the joint coordination and discussion of proposed actions between the European Commission and member states, including one-stop shops, net-zero strategic projects, financing coordination, market access, Skills innovation, net-zero regulatory sandbox, etc., providing relevant recommendations. There are different permanent or temporary groups under the platform, and industry representatives and other experts are invited to participate in the activities of this platform. The European Commission and member states can discuss net-zero industrial partnerships within the platform.
The Act supports the European Hydrogen Bank.The European Hydrogen Bank aims to create an emerging European hydrogen energy market, support the production of renewable hydrogen within the EU and imports from international partners, effectively link renewable energy supply with demand, mobilize private investment, and provide new growth opportunities and high-quality jobs to help achieve the EU's goal of producing 10 million tons of renewable hydrogen by 2030. The European Commission also proposed to create an EU auction platform through the European Hydrogen Energy Bank to provide "auction services" to member states, and use EU Innovation Funds and member state resources to fund potential renewable hydrogen energy projects to further support the deployment of renewable hydrogen.
Impact of the EU's "Net Zero Industries Act" on my country
The EU has introduced a series of actions to support European industries, investing and deploying net-zero industries and net-zero technologies. The "Act" is one of the key pieces of legislation to improve the local manufacturing capabilities of net-zero technology and its key components, and reduce dependence on other economies. The degree of dependence may have a certain impact on the development of my country's green industry.
The combination of the "Net Zero Industries Act", the "Critical Raw Materials Act" and "New and Waste Battery Regulations" has intensified global competition in my country's clean technology industry.The "Act" requires the EU's local net-zero technology manufacturing capacity to reach 40% of its deployment needs in 2030. The "Critical Raw Materials Act" requires that the annual demand for each strategic raw material from a single third country should not exceed 65%. The "New Battery and Waste Battery Regulations" require that power batteries, etc. be marked with a carbon footprint and prohibit the import of power batteries that do not meet the carbon footprint level requirements. This series of EU regulations will intensify global competition for key mineral resources in the green industry and market competition for low-carbon products, or will change the division of labor among countries in global trade and intensify global competition in my country's clean technology industry and fields. However, my country's new energy industry chain has complete upstream and downstream factor resources, and a complete industrial chain from production equipment to system integration and product applications has been established. The cost of wind power and photovoltaic power generation has dropped by 60% and 80% respectively, representing advanced production capacity. The EU Act has little impact on my country's green industry.
Reconstructing the clean technology industry interferes with the existing global supply chain landscape.The EU promotes a net-zero industrial partnership, establishes a key raw material alliance system, and plunges key mineral resources. It wants to restructure the layout of the clean technology industry, which may distort the global clean technology product industry chain and supply chain, including the EU, and undermine the optimization of resource allocation. Guided by the existing global pattern, weakening the regulatory role of market mechanisms. Our country is the only country in the world that has the production capacity of various products in the entire rare earth industry chain. It has global advantages in electric vehicles, lithium batteries, photovoltaic products, etc. Our country is also a major importer of European photovoltaic modules and batteries, supplying 45% of barite and germanium, 85% of cerium, lanthanum, neodymium, praseodymium, samarium, 100% of dysprosium, erbium, europium, etc., and 100% of heavy rare earth elements. It is difficult for the EU to "decouple" from our country in the short term.
It has triggered an increase in protectionist policy tendencies and upgraded green trade barriers.Creating trade barriers and supporting local manufacturing has become a combination of efforts for many countries to vigorously develop their own photovoltaic manufacturing industries. The EU bill is seen as a response to green manufacturing subsidy policies in major economies and aims to enhance the competitiveness of local clean energy manufacturing industries. In addition, the EU requires risk assessments of key raw material supply chains and supply chain due diligence for batteries. This series of trade protection measures will inevitably lead companies to invest more resources in proving the environmental performance of products, increase the cost of companies entering the EU market, intensify market competition, and may trigger an increase in global protectionist policy tendencies. The EU's actions are suspected of violating WTO rules and are trade protectionism, and many countries have expressed concern about this. The Executive Vice President of the European Commission expressed his willingness to properly handle differences with China through dialogue.
Overall, the EU Act may have an impact on global green transformation and development, and its impact on the development of my country's green industry can be controllable.
Suggestions for my country to deal with EU green regulations
The EU emphasizes "risk reduction" and "dependence reduction" and promotes "reliable" partnerships. It also hopes to seize the opportunity of my country's green and low-carbon transformation market and "hold up the banner of environmental protection with one hand and the big stick of protectionism with the other." In order to properly respond to the impact of EU green regulations on related industries in my country, the author puts forward the following suggestions:
Strengthen strategic advantages and optimize the global layout of industrial and supply chains.my country's new energy industry has developed real skills in open competition. It should maintain strategic focus, continue to promote domestic green and low-carbon transformation, and enhance technical strength, such as building and operating a national carbon emissions trading market, strengthening cooperation with green electricity, green certificates, and energy use rights markets, etc., continuously strengthen my country's new energy and other related industries, and consolidate my country's strategic position. At the same time, we should deepen international cooperation, optimize industrial layout, and actively participate in the exploration and cooperative development of high-quality overseas mineral resources. In response to my country's "three new things", we should fully clarify the competition and cooperation situation with developed economies such as the United States, Europe, Japan and South Korea, and actively seek win-win cooperation with all parties.
Accelerate mutual recognition in line with international standards and participate in the formulation of international rules.Promote basic capacity building, accelerate the establishment of a carbon footprint accounting and evaluation standard system, pay special attention to the calculation of power carbon emissions, and correct problems such as the high power carbon emission factor in my country. Strengthen China-EU negotiations and dialogue, accelerate the mutual recognition of relevant domestic laws and regulations and standards systems in line with international standards, and actively participate in the formulation of international market supply guidelines and industry standards to ensure its leading position in global green transformation and development, and enhance my country's participation in the field of green and low-carbon industries. The right to speak. In addition, cultivate large-scale enterprises with international competitiveness and encourage large-scale mineral enterprises to upgrade their technology and participate in international cooperation.
charging andGive full play to the role of China-EU dialogue mechanism and deepen practical cooperation in key areas.The China-EU High-Level Dialogue on Environment and Climate is an important component of the China-EU Comprehensive Strategic Partnership and an important platform for cooperation in the green and low-carbon fields. We should give full play to the role of the high-level dialogue mechanism, strengthen dialogue and exchanges between the two sides, enhance mutual trust, build consensus, and demonstrate our country's efforts to reduce global wind power. Important contributions to the cost and popularization of green and low-carbon development such as photovoltaic power generation and electric vehicles globally. Deeply explore the potential for cooperation in key areas, especially deepen practical cooperation in supply chain due diligence, carbon footprint, carbon traceability, carbon certification, etc., and encourage the establishment of multi-entity exchange platforms such as experts, think tanks, enterprises, and localities.
Author's unit: Environmental and Economic Policy Research Center, Ministry of Ecology and Environment
