The Green Deal Industrial Plan: European Commission’s Further Initiative to Foster Green Transition in Europe

On February 1, 2023 the European Commission (the “Commission”) presented the Green Deal Industrial Plan (the “Plan”)[1] with the aim to increase technological development, manufacturing production and installation of net-zero products and energy supply in the next decade, mainly by achieving the following goals:

• a predictable and simplified regulatory environment;
• faster access to sufficient funding;
• enhancing skills; and
• open trade for resilient supply chains.

The Plan responds to the European Council’s invitation to the Commission to submit proposals for investments in clean technologies by the end of January 2023 so as to increase the EU’s competitiveness in these sectors. It forms part of the European Green Deal dated December 11, 2019 and complements the EU Industrial Strategy launched by the Commission in March 2020 (updated in May 2021) to help Europe’s industry lead the twin transitions towards climate neutrality and digital leadership.

The European initiative follows the legislative race towards a zero-emissions future already underway in several countries, including the United States, Japan, India, the UK and Canada, where investment plans have been put forward.

The Plan was discussed in the European Council on February 9[2]. The Commission will now put forward legislative proposals by mid-March, with a view to discussing them at the regular European Council on March 23.

1. A predictable and simplified regulatory environment

The first pillar of the Plan consists of simplifying the current regulatory framework.

The Commission will propose:

• a Net-Zero Industry Act to underpin industrial manufacturing of technologies and products that are key to the EU’s climate neutrality goals, such as batteries, windmills, heat pumps, solar, electrolyzers, carbon capture and storage technologies.[3] The act will: (i) identify goals for net-zero industrial capacity by 2030; (ii) ensure simplified and fast-track permitting processes, defining specific time limits for different stages of permitting, and reinforcing Member States’ administrative capacity;[4] and (iii) define criteria for identifying European strategic projects, which could benefit from accelerated permitting procedures and from private as well as EU and national public funding. The Commission might also assess the possibility to establish regulatory sandboxesto allow for rapid experimentation and disruptive innovation to test new technologies.
• a Critical Raw Materials Act, to ensure sufficient access to critical raw materials that are vital for manufacturing key technologies and foster research and innovation to reduce the use of such materials and develop bio-based substitutes.

In addition, the framework described above will be complemented by the reform of the electricity market design[5] - for which a public consultation is currently ongoing - that will enable consumers to benefit from more predictable and lower costs of renewable power, e.g. through long-term price contracts.

2. Faster access to sufficient funding

The second pillar of the Plan aims at speeding up access to funding for net-zero industry, both at national and EU level. To that end, the Commission will consult Member States on a proposal to amend the Temporary Crisis Framework (the “TCF”)[6], which will become the Temporary Crisis and Transition Framework (the “TCTF”) for State aid. With the draft TCTF, the Commission intends to: (i) extend TCF aid provisions to all renewable technologies and to renewable hydrogen and biofuel storage; (ii) further simplify TCF provisions on decarbonization aid to industry, by allowing more flexible aid ceilings and - in the hydrogen, energy efficiency and electrification sectors - aid by reference to standard percentages of investment costs; (iii) enhance investment support schemes for production of strategic net-zero technologies;[7] (iv) provide more targeted aid for major new production projects in strategic net-zero value chains.

Moreover, the Commission intends to revise the General Block Exemption Regulation in light of the Green Deal, giving Member States more flexibility to support measures in key sectors, such as hydrogen, carbon capture and storage, zero-emission vehicles and energy performance of buildings, by further increasing thresholds that trigger notification to the Commission. The revision of the General Block Exemption Regulation will also contribute to streamlining and simplifying the approval of Important Projects of Common European Interest (IPCEIs).

The Commission will also facilitate the use of existing EU funds to finance clean tech innovation, manufacturing and deployment, such as REPowerEU,[8] InvestEU and the Innovation Fund. In particular, thanks to the funds of the Innovation Fund,[9] in autumn 2023 the Commission will launch a first auction to support industries in the production of renewable hydrogen. Winners of this auction will receive a fixed premium for each kilogram of renewable hydrogen produced over a period of 10 years. Terms and conditions for this first pilot auction, with an indicative budget of Euro 800 million, will be announced in June 2023.

In the mid-term, the Commission intends to give a structural answer to the investment needs, by proposing a European Sovereignty Fund in the context of the review of the Multi-annual financial framework before summer 2023.

3. Enhancing skills

The third pillar of the Plan focuses on the improvement of skills - green and digital - of the workforce.

In order to financially support skills development, the Commission proposes to use existing EU funding (such as the funds provided by the Multiannual Financial Framework 2021-2027 and NextGenerationEU).

4. Open trade for resilient supply chains

The fourth pillar focuses on global cooperation and trade openness in the market of as essential elements for maintaining the EU’s position as a leader in net-zero technologies. To that end, the Commission will continue to support the WTO and proposes to grow the EU’s network of Free Trade Agreements.

The Commission also proposes to develop a number of new initiatives, such as the development of a Critical Raw Materials Club to deliver on a secure, sustainable and affordable global supply of raw materials, and a Clean Tech/Net-zero Industrial Partnerships initiative promoting the adoption of net-zero technologies globally.

In the Commission’s view, trade openness will be achieved also through a European response to unfair trade practices like dumping and distortive subsidies, with a focus on sectors that are key for achieving the EU’s net-zero goal.

[1] Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social committee and the Committee of the Regions - A Green Deal Industrial Plan for the Net-Zero Age (COM(2023) 62 final).

[2]Statement by President von der Leyen on the Green Deal Industrial Plan, Brussels, February 1, 2023 (https://ec.europa.eu/commission/presscorner/detail/en/statement_23_521)

[3] The precise product scope is still to be defined.

[4] For instance, the act proposes to introduce a ‘one-stop-shop’, a sole point of contact for investors and industrial stakeholders during the entire administrative process.

[5] See https://www.clearygottlieb.com/news-and-insights/publication-listing/commission-launches-consultation-on-reform-of-the-eu-electricity-market-design-to-support-a-clean-and-affordable-energy-transition 

[6] See https://www.clearygottlieb.com/news-and-insights/publication-listing/second-amendment-to-the-state-aid-temporary-crisis-framework  

[7] Among the investment support schemes the Commission includes the possibility of granting higher aid to match the aid received for similar projects by competitors located outside of the EU, while ensuring the proportionality of such aid.

[8] To help Member States access the REPowerEU funds, the Commission has also published a Guidance on Recovery and Resilience Plans, giving guidance on adjusting existing plans and preparing REPowerEU chapters.

[9] The Innovation Fund supports the development of technologies and solutions that decarbonize energy intensive industry, boost renewable energy and energy storage (including batteries and hydrogen) and strengthen net-zero supply chains by supporting the manufacturing of critical components for batteries, wind and solar energy, electrolyzers, fuel cells and heat pumps. According to the Commission, over the course of the next ten years, around Euro 40 billion will be available under the Innovation Fund.