The European Union is finding it difficult to find an answer to the billion-dollar American and Chinese funding programs for the production of green technologies. The majority of member states rejected ideas for new and perhaps debt-financed EU funds early on. Now the European Parliament and the Council of Ministers want to improve the framework conditions for green technologies with the “Net Zero Industry Act”. Domestic products should also be given preferential treatment in tenders and auctions (“Buy European”). Negotiators from both institutions have agreed on this.

Hendrik Kafsack

Economic correspondent in Brussels.

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    The compromise envisages that the list of technologies covered by the law proposed by the European Commission in early 2023 will be greatly expanded. In addition to renewable energies, this includes nuclear power, heat pumps, hydrogen technology, technologies that can be used to decarbonize industry, power grid expansion and the production of synthetic e-fuels. This also includes the separation and storage or use of CO2 (CCUS).

    Member States are not obliged to promote all technologies. Otherwise, Germany in particular would not have supported the inclusion of nuclear power in the list.

    Response to the complaints from the European solar and wind industry

    The agreement enshrines the goal of building capacity to capture 50 million tonnes of CO2 in the EU by 2030. This corresponds to the roadmap for expanding CCUS presented by the Commission on Tuesday. For the other green technologies - the text refers to net-zero technologies - the European Parliament and the Council of Ministers have announced two goals: The share of domestic production should increase to 40 percent of new annual installations across all technologies by 2030 and 15 percent for each individual technology percent of production in the world.

    In order to get there, the “Net Zero Industry Act” provides for faster approval procedures. They should be limited to 18 months for larger projects of more than 1 gigawatt. For smaller ones it is twelve months. States can also classify individual projects as strategically important if they are crucial for independence from deliveries from third countries. The approval periods are then shortened to nine months for small projects and twelve months for large projects. Strategic projects also benefit from the fact that environmental impact assessments are to be simplified.

    The “Net-Zero Acceleration Valleys”, which the member states can designate, also benefit from preferential treatment including simplified environmental assessments. With these economic zones, states should specifically promote clusters of factories and suppliers for green technologies.

    Check in 2027

    In order to give European manufacturers priority in tenders and auctions, the compromise introduces some new requirements. This is not least a reaction to the complaints from the European solar and wind industry about alleged dumping prices from competitors from China. When awarding public contracts for renewable energy, the authorities should use criteria such as social and environmental standards and cybersecurity in addition to the price. If the EU depends for more than half on deliveries of a technology from a non-European third country or the share has grown significantly, that country's share in tenders should be limited to 50 percent. This is primarily aimed at China. Exceptions to these requirements are possible if costs otherwise increase by 20 percent or more.

    In auctions for the expansion of renewable energies, it is required that at least 30 percent of the auctioned output or 6 gigawatts per EU state be linked to sustainability and resilience criteria - such as the 50 percent criterion in public tenders. The commission should examine this in 2027 and then possibly propose a higher share of up to 50 percent. France had insisted on this. The federal government was against it. Germany relies heavily on auctions to expand renewables. The requirements for auctions should apply after a transition period of 18 months. Here too, exceptions are possible if costs increase by 15 percent or more.

    The European Parliament and the Council of Ministers still have to officially accept the agreement. In this case, however, that would probably be a formality. The SPD MP Tiemo Wölken spoke of an “important signal of departure for the industry: We are driving forward decarbonization and investing in future sectors such as batteries, solar power, wind energy and heat pumps.”

    The European Parliament's chief negotiator, CDU MP Christian Ehler, said: "The Net-Zero Industry Act may not mirror the American Inflation Reduction Act, but it can make Europe more attractive as a location and investment location for our industry."

    Parliament and the Council of Ministers have also agreed on the Commission proposal for the platform to promote green technologies STEP. It is intended to make it easier to access existing funding. There is no new money.