Brussels has unveiled its long-awaited response to the US’s mammoth $369bn climate bill — and it’s getting mixed reviews from Europe’s climate sector.
While America’s bill tried to stimulate green growth through subsidies, the Net Zero Industry Act (NZIA) focuses on permit timelines for new solar and wind farms, curbing the amount of tech that authorities can buy from abroad to 40%, and encouraging the use of hydrogen.
The generosity of the US bill has been tempting European climate tech startups to consider moving across the pond, something that European policymakers are keen to avoid.
“We think the NZIA could be much more ambitious,” Jules Besnainou, executive director of Cleantech for Europe, a Brussels-based lobby group, tells Sifted. “It also offers very little on funding, and even removed some good ideas on standards and certification.” He did, however, welcome the “ambitious” streamlining of permit timelines.
Yair Reem, investor at climate-focused VC firm Extantia, says he's pleased that the plan is less reliant on subsidies than US policy, as that approach can leave industries overly dependent on state cash.
European founders can unpack their bags
“European founders can unpack their bags,” he says. It comes a week after the bloc relaxed its usually rigid state-level subsidy rules for climate tech companies in a bid to match American funding offers.
Climeworks, a direct air capture company and one of Europe's highest-value climate tech startups, welcomed the bill, but says it wants a clearer role laid out for carbon dioxide removal tech (CDR).
"The NZIA is generally a welcome step towards increase climate action throughout Europe," Louis Uzor, policy manager at Climeworks, tells Sifted. "It is however unfortunate that it remains rather vague as regards implications for CDR."
The new proposal will now have to be negotiated and ratified by the European Parliament and EU member states.
The plan is the result of weeks of work from the EU to respond to the US bill. In recent months, some European startups, including Climeworks and nuclear fusion startup Marvel Fusion, have said they're considering expanding to the US to take advantage of the incentives.
Northvolt, Europe’s best-capitalised climate startup and one looking at which side of the pond to IPO in, told Sifted this week that it had always wanted to be a European champion, but “now that the IRA came we have to re-evaluate this”.
What’s in the Net Zero Industry Act?
Brussels is targeting at least 40% of the bloc’s climate tech — such as solar panels, windmills, green hydrogen, heat pumps, batteries and the new generation of nuclear technology — to be manufactured in Europe by 2030.
Some of the solutions the bill proposes include:
- Streamlining procedures of acquiring permissions to construct technologies such as windmills and solar panels;
- Changing procurement rules to make governments and local governments prioritise European technologies;
- A target of 50m tonnes of annual carbon capture and storage capacity by 2030. It also introduces requirements for oil and gas producers to contribute to the goal;
- Facilitating access to market for such companies through, for example, introducing new criteria in public procurement that would favour European technologies;
- Setting up regulatory sandboxes to test net-zero technologies in a controlled way for a limited time period;
- Setting up a “bank” for renewable hydrogen — a tool which will cover and eventually also lower the cost gap between renewable hydrogen and fossil fuels for early projects, to unlock private investment in the sector.
It also presented a new law on “critical raw materials” — which aims to lower the EU's dependency on importing raw materials required for producing green technologies, such as lithium and silicon.
Last week’s relaxation of state subsidies for clean tech
While the NZIA doesn't include subsidies, the EU did decide last week to bend its usually rigid state aid rules to allow for state subsidies in clean tech. It leaves the question of subsidies up to the discretion of member states.
The new rules will be temporary and will allow EU governments to offer subsidies to climate tech if such incentives are available in other countries, such as the US, and “where there is a real risk of investments being diverted away from Europe”.
That said, Thierry Breton, EU’s commissioner for the internal market, said on Thursday that “competitiveness will not come from subsidies”.
European policymakers know they need to keep innovative climate tech companies in Europe. If they want to meet their ambitious climate targets, they can’t be reliant on technologies coming from abroad.
“If we want to get to climate neutrality as we plan in 2050, and if we also want to use all the opportunities this industrial revolution is throwing at us… we’ll need a massive scaleup of clean tech manufacturing,” said Frans Timmermans, EU’s climate action boss, stressing the importance of sectors like batteries, solar panels, heat pumps, electrolysers and wind turbines.