FACTBOX-EU aims to be a leader in green tech production

The act also seeks to create "valleys" with clusters of net-zero industry, helping reindustrialise certain regions. PUBLIC TENDERS Public authorities procuring clean tech equipment will have to take into account not only the price, but also sustainability criteria and the EU's push to ensure that no more than 50% of supply is from a single source. In the case of auctions for renewable energy, generally involving feed-in tariffs, these criteria should apply for at least 30% of the volume auctioned every year per EU country, or alternatively for a maximum of 6 gigawatts.

European Union policymakers have agreed new rules to promote local production of clean tech equipment such as solar panels and fuel cells to try to help EU industry compete with Chinese and U.S. rivals.

The Net-Zero Industry Act (NZIA), which is likely to enter force this year, is part of the EU's push to ensure it is not only a global leader in cutting greenhouse gas emissions, but also in manufacturing the equipment required. Proposed alongside the Critical Raw Material Act, the NZIA is part of the EU's response to the $369 billion of green subsidies offered in the U.S. Inflation Reduction Act.

This is what it entails: TARGETS

The NZIA sets a benchmark for European manufacturers to produce 40% of the EU's annual needs for clean tech products by 2030 and sets it on course to be the first climate-neutral continent by 2050. The target applies to equipment needed for renewable energy, nuclear power, industrial decarbonisation, electricity grids, energy storage and biotech.

The act also sets a target of reaching 50 million metric tons of annual storage capacity of carbon dioxide by 2030. The European Commission, which proposed the act, highlights that the EU currently depends on imports, notably from China, which provides more than 90% of the EU's photovoltaic wafers and accounts for 90% of global investment in clean tech manufacturing.

Hitting the target will be particularly tough in solar, given domestic manufacturers supply less than 3% of EU panel deployments and are fighting for survival. The EU wind energy sector is far stronger, although Chinese companies are starting to gain a foothold. SPEEDIER PERMITS

The NZIA addresses one of the issues that business say holds back investments - the length of time it takes to secure permits. The act sets limits of between nine and 18 months for permits to be granted for projects that would boost clean tech manufacturing.

It also mandates EU countries to set up single points of contact for those seeking permits and prioritise projects that help the EU reduce its reliance on imports from a single country or boost the competitiveness of the EU's clean tech supply chain. The act also seeks to create "valleys" with clusters of net-zero industry, helping reindustrialise certain regions.

PUBLIC TENDERS Public authorities procuring clean tech equipment will have to take into account not only the price, but also sustainability criteria and the EU's push to ensure that no more than 50% of supply is from a single source.

In the case of auctions for renewable energy, generally involving feed-in tariffs, these criteria should apply for at least 30% of the volume auctioned every year per EU country, or alternatively for a maximum of 6 gigawatts. However, if the application of these criteria results in a disproportionate cost difference, then authorities may decide not to apply them. In the case of auctions, this difference would have to be above 15% and for public procurement over 20%.

FUNDS Unlike the U.S. Inflation Reduction Act, the NZIA does not involve new money, but seeks to coordinate European Investment Bank loans and existing financing, including guarantees under the InvestEU programmes and the 723 billion euro post-COVID recovery fund.

EU countries may be able to use national emission trading system revenues. The Commission will also give EU countries greater leeway to support the roll-out of manufacturing projects.