EU Commission Opens Basket of “Green” Plans

17.03.2023 - Ahead of a summit of EU leaders on Mar. 23-24, the European Commission has shaken out a cornucopia of proposals to stimulate green investment in the 27-member bloc.

Some of the moves, which will likely be discussed next week, are intended to be Europe’s answer to the US Inflation Reduction Act (IRA), which has been luring companies with financial rewards totaling €369 billion for investment in “green” projects on US shores.

Hardly a day passes without a competitor or customer’s announcement of a new stateside deal, or so it seems to European chemical producers, who have up to now watched anxiously from the sidelines.

Along with boosting recycling volumes, other elements of the EU’s plans target achieving autonomy in critical industrial applications to reduce dependence on foreign suppliers. Many raw materials are now mined mainly in China.

With the Net-Zero-Industry Act, Brussels wants to ensure that by 2030, the EU’s own manufacturing capacity will be sufficient to meet 40% of its needs in terms of equipment for solar or wind power, batteries, heat pumps, electrolysers and fuel cells, biogas or carbon capture.

From a competition perspective that will please European chemical producers, the “net zero” act proposes to streamline the permitting process for EU green projects such as solar parks and fuel cell and cut authorities’ decision-making time to 18 months versus the two or more years it currently can take.

Accelerating the permitting process

Faster permitting is a popular feature of the US’s IRA and frequently leveraged by European industrial players as a reason for shifting proposed production plants to North America (Canadian projects can also draw subsidies through the IRA).

To accelerate the start of European projects, the new EU rules will allow member states to establish a single national authority that would coordinate the screening of permit awards and assign priority to net-zero projects.

The Critical Raw Materials Act, planned to be in effect by 2030, is designed to put Europe in a position to extract 10% of the minerals it requires to make, for example, the lithium-ion batteries used in smartphones, electric vehicles or wind turbines.

This act also is also aimed at boosting recycling capacity for critical materials, including rare earths, to 15%, and guaranteeing that countries and companies can process 40% of their annual need for each strategic raw material at home.

Sustainable hydrogen as a centerpiece

What may be the centerpiece of Brussels’ plans is the proposed creation, by 2030, of a European Hydrogen Bank to support investment in sustainable hydrogen. This alternative fuel, the Commission believes, can make a “major contribution” to ending imports of Russian fossil fuels and achieving climate-neutrality by 2050 as foreseen by the European Green Deal.

Energy commissioner Kadri Simson has said the bank can accelerate investment and bridge the investment gap toward reaching the “ambitious” REPowerEU targets of producing 10 million tonnes of renewable hydrogen by 2030, flanked by 10 million t of imports.

To meet these targets, EU officials estimate that total investment of €335-471 billion will be needed, including €200-300 billion for additional renewable energy production.

Most of the funds are expected to come from private sources, but EU- and member state funding could play an important role in leveraging private investment, especially in the early days of establishing the hydrogen market, Simson said.

The bank would also have an international dimension, to facilitate hydrogen imports into the EU. At the same time, it would facilitate establishing a full hydrogen value chain on European soil, thereby supporting the Net-Zero Industry Act and benefiting industries that make early decisions to redirect or focus on cleantech deployment.

To lower the cost gap between renewable hydrogen and fossil fuels for early projects, the Commission intends for the hydrogen bank to cover and lower the cost gap for early projects. This is to be achieved through an auction system for renewable hydrogen production projects to support producers through a fixed-price payment per kg of hydrogen produced for a maximum of 10 years of operation.

The first pilot auctions are due to be launched in autumn 2023, backed by €800 million from the EU Innovation Fund. The hydrogen bank will create an auction platform as a service, using monies from both the fund and member states to back renewable hydrogen projects without prejudice to EU state aid rules.

The Commission has already proposed a comprehensive legislative framework for hydrogen production, consumption, infrastructure development and market design including binding targets for renewable hydrogen consumption in industry and transport under the revised Renewable Energy Directive.  

Reports say that most of the hydrogen proposals are still being discussed by the EU Parliament and the Council.

Author: Dede Williams, Freelance Journalist