The Approval of the Net Zero Industry Act Paves the Way for Carbon Capture Implementation

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TL/DR –

The European Union has adopted the Net Zero Industry Act (NZIA), aimed at preventing the region from falling behind the US and China in the clean energy technology market. The law redirects EU funding, eases permitting delays, and complements the new Critical Raw Materials Act. The NZIA stipulates that the manufacturing capacity of designated ‘net-zero’ technologies should reach 40% of domestic demand by 2030, and requires petroleum producers to develop facilities for the permanent storage of 50 million tonnes of CO2 captured from industrial processes annually.


European Legislation Balances Clean Energy Transition and Protection from Foreign Competition

The recent legislation aimed at safeguarding European companies during the shift from fossil fuels to renewable sources of energy also compels big oil firms to contribute to carbon dioxide emission reduction.

This new law, known as the Net Zero Industry Act (NZIA), was officially adopted on 27 May. It is anticipated to prevent Europe from trailing behind the US and China in the race for clean energy technology dominance. The NZIA is hoped to encourage the application of carbon capture and storage (CCS), which has had many false starts over the years.

The NZIA redirects EU funding, accelerates permitting processes, and aligns with the new Critical Raw Materials Act, which is designed to secure access to elements like lithium and rare earths. This is a strategic move to counter the potential flight of investment in renewable energy infrastructure and clean tech towards the US, where they could benefit from substantial subsidies under the Biden administration’s Inflation Reduction Act.

The new legislation also aims to foster a homegrown renewable energy industry. It stipulates that by 2030, the manufacturing capacity of designated ‘net-zero’ technologies should meet 40% of domestic demand. This would include batteries and solar photovoltaic panels, currently majorly imported from the East, a fate the EU is attempting to dodge for its wind turbine and heat pump sectors.

Additionally, the NZIA mandates governments and the European Commission to secure a global market share of at least 15% in all primary low-carbon technologies by 2040.

Carbon storage responsibility placed on industry

The law expects oil and gas producers to initiate the execution of CCS infrastructure, developing facilities capable of permanently storing a combined 50 million tonnes a year of captured CO2 from industrial processes. “Assigning responsibility to EU oil and gas producers based on their production share is a crucial and first-of-its-kind step to compel the industry to act,” said Hanna Biro of the pro-CCS environmental NGO Bellona.

This significant step means that industries contributing largely to climate change are now obligated to bear a greater portion of the storage development costs and risks. It thus reduces the financial load on taxpayers in Member States looking to decarbonise vital industries.

To put the EU’s new carbon storage target in context, the largest project under development in Europe currently is non-EU petroleum giant Norway’s state-supported Northern Lights project. It has been under development since 2016 and aims to inject 1.5m tonnes of CO2 per year.

The adoption of the anti-offshoring law was commended by Commission president Ursula von der Leyen, as it fosters a regulatory environment conducive to the quick expansion of domestic production. She believes that the Act provides the best conditions for industries vital for achieving net-zero by 2050.

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