A new industrial revolution: the European Green Deal for a decarbonised industry

The European Commission is presenting this Green Industrial Plan as the "new industrial revolution", which aims to become the great opportunity of this decade to invest in the clean energy economy and in the industry of the zero net emissions era.

A predictable and simplified regulatory framework

In order to establish the conditions for the development of the Green Industrial Plan, the European Commission's proposal calls for the adoption of the following regulations:

1. A Net Zero Industry Act, aiming to strengthen industrial manufacturing of key technologies within the EU, and simplifying the regulatory framework in order to:

• Set industrial capacity targets up to 2030:
• Determine the production capacity of key products to achieve climate neutrality;
• Reduce the length of permitting procedures for different industrial processes;
• Streamlining procedures by establishing "one-stop-shop" type measures (i.e., a sole point of contact for investors and industrial stakeholders during the entire administrative process);
• Enable the Commission to call for European standards that promote rapid deployment of key technologies;
• Create regulatory sandboxes that allow for rapid experimentation and disruptive innovation to assess new technologies;
• Influence public action through the mechanisms of public procurement, concessions, or incentives for companies and end-users to use zero net emissions technology based on circularity and sustainability.

2. A Critical Raw Materials Act for the manufacturing of net zero emission technologies for the EU, aimed at securing supply, diversifying supply, and encouraging recycling of raw materials to reduce the EU's dependence on concentrated supplies from third countries.

3. A reform of the electricity market, which is currently undergoing public consultation, so as to encourage long-term price contracts to reduce the price of energy.

4. A new regulatory framework for batteries, a crucial element in the energy transition towards the climate neutral economy, to ensure competitive and resilient value chains to foster the circular economy of batteries (produce, reuse and recycle).

5. A revision of the Ecodesign Regulation for sustainable products, which will apply to a wider range of products and will extend sustainability requirements.

6. A unified regulatory framework for road transport infrastructure, so that the road transport network in the EU is reinforced with charging and refuelling infrastructure for alternative fuels, hydrogen, and electric vehicle charging infrastructure.

Accelerated access to finance

Through reform and transformation as a pillar of this new industrial revolution, the Green Industrial Plan will draw on public funding through state aid mechanisms. In this regard, on 1 February, the European Commission sent the Member States a draft proposal to transform the Temporary Crisis Framework into the Temporary Transition Framework, which will take the form of the following:

1. Supporting the deployment of all renewable energy sources under RED II Directive;

2. Eliminating the need for open tenders for less mature technologies;

3. Incentivise private investment through changes to raise the maximum threshold for state aid and simplify the calculations for obtaining state aid.

4. Allow and incentivise state aid for the production of batteries, solar panels, windmills, heat pumps, electrolysers and carbon capture and storage technologies and critical materials for the production of the above.

In this regard, one of the key reforms is Regulation (EU) 651/2014 declaring certain categories of aid compatible with the internal market, known as the General Block Exemption Regulation.

Another key reform is that the Temporary Crisis Framework will include measures to facilitate the decarbonisation of industry, as well as aid to compensate for high energy prices.

The European Commission hopes that these changes to incentivise public investment in decarbonisation will translate into attracting private investment, on which achieving climate neutrality will depend.

The European Commission also reiterates the instruments already in place in the EU to accelerate decarbonisation, including REPowerEU, the InvestEU Programme, the Innovation Fund and support from the European Investment Bank.

Enhancing skills for decarbonisation

With a focus on skills-first approach both green and digital, at all levels and for all, with a special emphasis on the inclusion of women and youth, the European Commission will propose, among other measures, the creation of Zero Emission Industry Academies to implement retraining and upskilling programmes in strategic industries for decarbonization.

The Industrial Green Plan also sets out how to combine a skills-first approach, which recognises real skills, with existing skills-based approaches, and how to facilitate access for third-country nationals to EU labour markets in priority sectors, as well as measures to encourage and harmonise public and private funding for skills development.

Open trade for resilient supply chains

The fourth pillar of the Green Industrial Plan responds to strengthening global cooperation, based on reinforcing the EU's network of free trade agreements and other forms of cooperation with partners, in order to support the green transition.

These include the creation of the EU-US Working Group on the Inflation Reduction Act, in which the EU and the US have been working to find solutions since October 2022 to EU concerns about strengthening and maintaining transatlantic value chains and a common vision for achieving decarbonisation.

The European Commission will consider the creation of a Critical Raw Materials Club bringing together raw materials "consumers" and resource-rich countries to ensure global security of supply through a competitive and diversified industrial base, as well as clean technology and net-zero emission industrial partnerships.

The Commission will also act appropriately to protect the single market from unfair trade in the clean technology sector and will use the instruments at its disposal to ensure that foreign subsidies do not distort competition in the single market, including in the clean technology sector.

If you would like to know more about the new regulatory and energy sector legislation and its possible implications, please do not hesitate to contact one of our experts listed below or your usual contact at Osborne Clarke.