Six months after the approval of the European Regulation on Zero Net Emissions Industry, the so-called "NZIA"

For years, the European Union has been committed to accelerating the decarbonization of its economy and to an ambitious implementation of diversified renewable energy sources in order to achieve climate neutrality and reduce its energy dependence on third countries.

The European Green Deal 2023 Industrial Plan sets out a comprehensive approach to support the expansion of clean energy technologies based on four pillars: (i) a regulatory framework that simplifies and streamlines permitting processes; (ii) boosting investment and financing for the zero emission industry; (iii) developing the skills needed to make the transition and increase the number of skilled workers in the sector and (iv) increasing trade and diversification of the supply chain for key raw materials.

The recently adopted NZIA Regulation is one of the instruments created to achieve these goals. Note its complementarity with Regulation (EU) 2024/1252, which establishes a framework to ensure a secure and sustainable supply of key raw materials, in order to ensure the resilience of the EU's energy future throughout the supply chain of zero-emission technologies. However, while Regulation 2024/1252 deals with upstream, the NZIA Regulation deals with downstream products.

More specifically, the objective of the NZIA Regulation, which is the subject of our analysis, is that at least 40% of the EU's annual requirements for the deployment of zero-emission technologies should be manufactured in the EU, as well as an increase in the proportion of global production to 15% by 2040.

At this point, it should be noted that the NZIA Regulation states that zero net emission technologies included in its scope of application are solar, wind, geothermal, hydrogen, biogas, etc. Examples include solar panels, wind turbines, batteries and heat pumps.

The following are some of the main measures provided for in this regulation.

Simplification and shortening of procedures in projects for the creation of zero emission technologies. Special mention to strategic projects

Currently, zero net emission manufacturing projects are subject to lengthy and complex permitting processes that can take between two and seven years, depending on the Member State, the technology and the segment of the value chain. Consequently, a simplification of procedures is necessary to provide developers and other investors with the necessary certainty and clarity to increase project development.

To this end, the text set a deadline of 30 December 2024 for Member States to establish or designate one or more authorities as single points of contact for developers at the relevant administrative level. Each of these single points of contact will be responsible for facilitating and coordinating the permitting process for net zero manufacturing projects and for providing information on the rationalization of administrative processes.

With the same aim of simplifying procedures, the time limits for the granting of authorizations are limited, so that it is regulated:

1. A 12-month deadline for the construction or expansion of net zero emission manufacturing projects with an annual manufacturing capacity of less than 1 GW.
2. A period of 18 months for the construction or expansion of net zero emission manufacturing projects with an annual manufacturing capacity of 1 GW or more. The same deadline applies to projects whose annual manufacturing capacity is not measured in GW.

Likewise, the period for declaring that an application for authorization is complete or, where appropriate, for requesting additional information, is restricted to 45 days from the receipt of the application for authorization. The same period of 45 days is set for issuing environmental assessment opinions in those projects where they are required.

This simplification of deadlines, competent authorities and procedures to be followed is even more noticeable in what the NZIA Regulation calls "strategic" projects, i.e. those that bring additional benefits to the EU. To this end, a deadline of 1 March 2025 is set for the Commission to adopt an implementing act establishing guidelines to ensure uniform conditions for the application of the criteria for a project to be considered as strategic by Member States. This implementing act has now been submitted for public consultation until 20 February 2025.

It should be noted that the following have been submitted too for public information: (i) the delegated act on primary components used under the NZIA Regulation until 20 February 2025; (ii) the implementing act on non-price criteria until 21 February 2025 and (iii) the implementing act on the list of net zero emission technology end-products and their main specific components until 20 February 2025.

Promotion of "Zero Net Emission Acceleration Valleys" and "Controlled Zero Net Emission Test Sites"

According to the regulation's own preamble, the clustering of industrial activity in centers to promote industrial synergies can reduce the environmental impact of activities and improve efficiency for industrial actors. In this respect, the NZIA Regulation promotes the development of zero net emissions acceleration valleys. The objectives of these valleys are to create clusters of net zero emission industrial activities, to increase the attractiveness of the Union as a location for manufacturing activities and to further rationalize the administrative procedures for establishing net zero emission manufacturing capacities.

Similarly, the NZIA Regulation encourages controlled zero net emission test sites, these are sites that are designed to test innovative zero net emission technologies or other technologies with the potential to enable the transition to a climate-neutral and clean economy and to reduce strategic dependencies, in a controlled real-world environment for a limited period of time. 

Increased CO₂ injection and storage capacity

Carbon capture and storage is a technology that will contribute to climate change mitigation. It involves capturing the CO₂ emitted by industrial installations, transporting it to a storage site and injecting it into a suitable underground geological formation for permanent storage. The target reflected by the NZIA Regulation is to achieve an annual injection capacity of at least 50 million tonnes of CO₂ by 2030.

In order to achieve this target, the Commision shall submit a progress report by 30 June 2027, and every two years thereafter. On the basis of the assessment, by 31 December 2028 at the latest, the Commission may submit a legislative proposal to introduce a new Union-wide target for CO₂ injection capacity by 2040, or earlier if necessary. It also provides that if the Commission decides not to submit a legislative proposal to introduce such a target, it shall inform the European Parliament and the Council of the reasons for that decision.

Another deadline to be considered is 30 December 2024, to achieve transparency of CO₂ storage capacity data by Member States publishing data for all areas where CO₂ storage sites may be authorized in their territory and obliging entities that are or have been holders of an authorization in their territory to make public the geological data relating to production sites that have been decommissioned or whose decommissioning has been notified to the competent authority and, if available, economic assessments of the respective costs of allowing CO₂ injection. It should also be noted that CO₂ storage sites will be considered as strategic projects provided that they meet certain requirements.

In relation to the injection of CO₂ , an obligation is established for each entity licensed to produce oil and natural gas to make an individual contribution to the Union-wide target for available CO₂ injection capacity. These individual contributions shall be calculated proportionally on the basis of each entity's share of Union crude oil and natural gas production from 1 January 2020 to 31 December 2023 and shall consist of the CO₂ injection capacity at a licensed storage site available on the market by 2030. Entities whose crude oil and natural gas production is below the defined threshold are excluded from this calculation and are not subject to contribution.

Other new features introduced by the NZIA Regulation

In addition to the aspects already mentioned, the NZIA Regulation also includes:

• The determination of market access conditions for zero net emissions technologies. In this respect, it establishes, for example, the obligation for contracting authorities to include certain minimum conditions and requirements related to social and environmental matters in public tendering procedures in which the contracts include zero net emissions technology as part of their subject matter, or in the case of works contracts and works concessions that include this technology.
• The creation of the European Zero Net Emissions Platform as a coordination mechanism for discussion and exchange of information and best practices on issues related to the NZIA Regulation, which will allow the monitoring of all measures foreseen in the regulation.
• The creation of European Zero Net Emissions Academies, which will aim to develop content and learning programmes together with industry to ensure that the value chain has sufficient skills and manpower.
• The obligation to take the NZIA Regulation into account when Member States draw up their national energy and climate plans.

Phased entry into force

The NZIA Regulation entered into force on the day following its publication in the Official Journal of the European Union, i.e. 29 June 2024. However, the articles provide for two derogations in this respect:

• Until 30 June 2026, Article 25, Section 1, concerning procurement procedures for zero emission technologies shall apply only to contracts concluded by central purchasing bodies and to contracts with a value of EUR 25 million or more.
• Until 30 December 2025, Articles 26 and 28, concerning auctions for the implementation of renewable energy sources and other forms of public intervention, shall not apply.

In conclusion, it will take time to assess the benefits that all these new measures will bring to the achievement of the objectives set by the EU. Key to this will be the role of Member States in effectively meeting the deadlines set in the NZIA Regulation.

Should you wish to know more about Regulation (EU) 2024/1735 or any other energy issues, please do not hesitate to contact one of our experts listed below or your usual contact at Osborne Clarke.