The EU’s NZIA: 3 quick fixes for re-shoring European sustainable production

21 Sep 2023

By Léa Margot Malfrait, Regulatory Affairs Officer – Energy and Climate 

The Commission presented the Net Zero Industry Act (NZIA) as the EU response to the US Inflation Reduction Act (IRA). The Regulation targets domestic technology manufacturing by simplifying permitting, upscaling local manufacturing, and fostering European competitiveness and resilience.

Why this focus on European value chains? Because achieving our green transition must be done sustainably and reliably, and producing in the EU, guarantees dependability, a greener production and respect for workers’ rights.

So, how can we strengthen the NZIA to ensure it gives a boost to domestic production?

First, we need to make it crystal clear that the Act supports the entire supply chain of clean technologies under its scope. If one part of a value chain falls, the rest of the chain falls as well. This is why the clause in Article 2 of the NZIA exempting raw materials covered by the Critical Raw Materials Act (CRMA) from its scope has no grounds to exist. While being closely interlinked and complementary to each other, the Acts do not have the same purpose.

On the one hand, the NZIA aims to simplify permitting for key technologies, upscaling their manufacturing, and boost their competitiveness. On the other hand, the CRMA seeks to enhance the extraction and production of critical and strategic materials in the EU, better processing and recycling domestically, and ensure we are not over-reliant on imports from third countries. Aluminium needs support on both angles. If you take the example of solar panels, aluminium will be indispensable to their scaling up: each MW of photovoltaic capacity necessitates 21 tonnes of aluminium. Increasing solar PV capacity from today’s 136 GW to 320 GW by 2025 and 600 GW by 2030, as proposed by the EU Solar Strategy, will require an additional 4 and 10 million tonnes of aluminium, respectively.

Without European-made aluminium supported through the CRMA and NZIA frameworks, reaching the NZIA’s objectives for domestic EU manufacturing will be impossible. To summarise, entire clean value chains need support because raw materials are crucial for manufacturing net-zero technologies. European aluminium-based production needs a better regulatory framework to be able to remain in Europe, but it also needs a boost in its extraction and recycling capacity to meet the growing demand for our material.  

Second, to give a real competitiveness boost to EU products compared to imported products and level the playing field, the NZIA non-price criteria should be streamlined. To avoid market fragmentation, the Commission should develop a Delegated Act laying out how the criteria should be applied at the national level. The emergency measures adopted during the electricity price crisis have given a perfect example of the adverse effects such a patchwork application can have: it has impacted the market while not delivering lower prices for consumers, deterring investment and creating bottlenecks in the PPA market. We must not repeat the same mistake with the NZIA: non-price criteria are welcomed, but they need to come with legal certainty.

Finally, the design of the non-price criteria should be adapted in three ways. First, a criterion encompassing social sustainability should be added to the Act to reflect the advantages European production holds over third countries. Second, the weight of the criteria should be more important (40%), and Member States should have the possibility to award importance to each of the criteria listed in the NZIA. Third, the threshold to consider disproportionate the difference in price caused by the application of the non-price criteria should be increased. We would propose to increase it to a 40% price difference (a figure based on the previous anti-dumping duty imposed on Chinese solar panels).

To conclude, if the NZIA is not adapted to cover entire supply chains and the provisions on access to markets are not designed to truly foster the competitiveness of European manufacturing of components to clean technologies, we strongly doubt that such a new framework will be truly effective in preventing overreliance on third countries’ imports. It will lead to more, not less, leakage of European clean tech manufacturing value chains outside Europe.

Read our position paper on the NZIA here.

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