Questions and Answers: Green Deal Industrial Plan for the Net-Zero Age
Why is the Green Deal Industrial Plan needed?
The European Green Deal, presented by the Commission on 11 December 2019, sets the goal of making Europe the first climate-neutral continent by 2050. The EU Climate Law enshrines in legislation the EU's commitment to climate neutrality and the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels.
The EU's industrial strategy laid the foundations for an industrial policy that would support the twin transitions to a green and digital economy, make EU industry more competitive globally, and enhance Europe's open strategic autonomy.
To enable the greening and competitiveness of our industry, and the investments in the transformation of our economy, the Commission has already provided a clear policy framework with ambitious regulation, such as the Battery or the Ecodesign for Sustainable Products Regulations. It has launched alliances in the field of batteries, raw materials, solar, hydrogen and circular plastics to promote industrial cooperation. In addition, different EU funding sources such as the Recovery and Resilience Facility, the Innovation Fund, InvestEU and cohesion policy aim to mobilise public and private financial resources to support the much-needed green investments.
Against the backdrop of high energy prices triggered by the Russian war of aggression against Ukraine and the changing geopolitical environment, there is a need to speed up the net-zero industrial transformation. The Green Deal Industrial Plan will ensure that the EU has access to the technologies, products and solutions that are key to our transition to net-zero and that represent a major new source of economic growth and quality jobs. It will strengthen the competitiveness, attract investments in the net-zero industrial base and in green industrial innovation.
What is new about the Green Deal Industrial Plan?
EU net-zero industry plays an important role in manufacturing high-quality and innovative products that are used around the world. To seize the net-zero opportunity, the Plan will speed up the net-zero transformation of the EU industry. It will ensure that the EU has access to diversified net-zero manufacturing capacity to reach the climate objectives and bring more and better quality jobs for Europeans.
A number of EU programmes and initiatives support the deployment of clean technologies in different ways (e.g. deployment of renewable energies and related infrastructures like grids, development of hydrogen generation and supply networks). The Green Deal Industrial Plan will complement these by focusing on the net-zero manufacturing capacity, together with the development of the green skills of the EU workforce to help it make the most of this transformation. With the Green Deal Industrial Plan, we want to create the right conditions for net-zero industries to thrive in Europe – without having to compromise on our open economy.
What are the main elements in the Plan?
The Green Deal Industrial Plan is based on four pillars:
- A predictable, coherent and simplified regulatory environment, which supports the quick deployment of net-zero manufacturing capacities;
- Faster access to sufficient funding, by boosting investments while avoiding the fragmentation of the Single Market;
- Skills, by ensuring that the European workforce is skilled in the technologies required by the green transition; and
- Open trade for resilient supply chains, based on cooperation with the EU's partners to ensure diversified and reliable supplies and fair international competition.
How will the Green Deal Industrial Plan support the objectives of the European Green Deal?
Europe is determined to become climate-neutral by 2050. To achieve these objectives, the availability of green technologies and products, such as photovoltaic cells, wind turbines, heat pumps, hydrogen electrolysers, batteries and carbon capture and storage equipment will need to be secured.
The Green Deal Industrial Plan is tackling this issue by creating an attractive environment for net-zero investments, so that the EU manufacturing capacity for these products is strengthened and demand satisfied.
How can the Green Deal Industrial Plan benefit European businesses and society?
The Green Deal Industrial Plan will provide opportunities for businesses of all sizes supplying net-zero products to scale their operations and thrive. It will also benefit the activity of all business by enabling a secure, affordable and sustainable energy supply, and by increasing the availability of the clean tech solutions needed to reduce their environmental footprint.
Communities will benefit from the quality jobs that the clean tech industry provides, while citizens will enjoy the advantages of a cleaner environment and of a more sustainable market economy.
How will the plan simplify the regulatory environment?
The Commission will present key proposals aimed to strengthen industrial competitiveness:
- A Net-Zero Industry Act, to support industrial manufacturing capacity and strategic and multi-country projects in net-zero products by faster permitting and developing European standards.
- A Critical Raw Materials Act, to ensure access to critical raw materials which, like rare earths, are vital for manufacturing net-zero technologies and products.
- A reform of the electricity market design, to address energy prices volatility, while preserving security of supply, delivering affordable electricity, and bringing the benefits of renewable generation to European citizens and businesses.
- The use of harmonised sustainability and circularity requirements in public procurement can help create a more predictable demand for net-zero products and solutions.
The Commission will work as a priority on Ecodesign requirements on net-zero technologies.
How will the plan provide faster access to funding?
Together with this Communication, the Commission is launching the consultations with Member States on temporary flexibilities in State aid rules. In particular, the proposed temporary adaptations would allow for easier calculations, straightforward procedures, and fast approvals. This adaptation would include:
- Simplification of aid for renewable energy deployments;
- Simplification of aid for decarbonising industrial processes;
- Enhanced investment support schemes for production of strategic net-zero technologies, including via tax benefits;
- More targeted aid for major new production projects in strategic net-zero value chains, taking into account global funding gaps.
The Commission will also further increase the notification thresholds for State aid for green investments, with a revised Green Deal General Block Exemption Regulation. Together with a code of best practice, to be endorsed by the Commission and Member States this spring, this will contribute to further streamline and simplify the approval of IPCEI related projects.
To avoid fragmenting the Single Market due to varying levels of national support, EU funding must be stepped up. A number of programmes contribute to fund the net-zero industry, in particular:
- RRF and REPowerEU. The Commission today is providing guidance to Member States on how to draft their REPowerEU chapters as part of their national Recovery and Resilience Plans. To address disruption of supply chains and the economic hardship caused by the Russian war of aggression against Ukraine, the guidance encourages measures to provide support to companies and boost their competitiveness thanks to one-stop-shops for permitting, tax incentives, and investing in the skills necessary for the industrial transition.
- InvestEU programme, where procedures will be simplified, and products aligned to the current needs.
- Innovation Fund, where the Commission intends to launch a competitive bid in autumn 2023 to support the production of renewable hydrogen, and to extend this mechanism to other net-zero technology areas.
The Commission is exploring avenues to achieve greater common financing at EU level to support investments in manufacturing of net-zero technologies, based on an ongoing investment needs assessment. The Commission will work with Member States in the short term, with a focus on REPowerEU, InvestEU and the Innovation Fund, on a bridging solution to provide fast and targeted support.
For the mid-term, the Commission intends to give a structural answer to the investment needs by proposing a European Sovereignty Fund to preserve a European edge on critical and emerging technologies, including net-zero.
How will the Plan contribute to enhance the availability of green and digital skills?
- Is working with Member States to set targets and indicators to monitor supply and demand in skills and jobs in the sectors relevant for the green transition, considering age and gender aspects.
- Is working with Member States and the higher education sector to implement the European strategy for universities, which plays a key role in ensuring future-proof skills.
- Will work on opening new pathways for international STEM students and researchers to come to Europe.
- Will work on establishing skills partnerships for onshore renewable energy, heat pumps and energy efficiency.
- Will propose to establish Net-Zero Industry Academies to roll out up-skilling and re-skilling programmes in strategic industries for achieving the net-zero goals, as well as an Academy for sustainable construction.
- Will facilitate recognition of qualifications.
- Will consider how to combine a ‘Skills-first' approach, recognising actual skills, with existing approaches based on qualifications.
- Will present a proposal on recognition of qualifications of third country nationals, and is examining the creation of an EU Talent pool to facilitate their access to EU labour markets in priority sectors.
The Commission will also support the alignment of public and private funding for skills development, and stimulate increased investment in training, exploring measures such as:
- Increasing the ceiling for State aid to SMEs training under the General Block Exemption Regulation;
- Treating training expenditure by companies as an investment instead of a cost in company accounts.
What is the role of trade in the Plan?
Trade policy is an essential element to maintain the EU's position as a leader in net-zero technologies, as it keeps the Single Market connected to growth poles outside of our continent while securing access to the inputs critical for the clean transition. This is why the fourth pillar of the Green Deal Industrial Plan consists of global cooperation and making open and fair trade work for the clean transition. In that regard, the Commission:
- Will continue to develop the EU's network of Free Trade Agreements while making the most of those already in place through effective implementation and enforcement.
- Will continue to cooperate with partners to support the green transition, like the EU-US Task Force on the Inflation Reduction Act.
- Will explore raw materials partnerships with like-minded partners to stablish a Critical Raw Materials Club to bring together raw material 'consumers' and resource-rich countries to ensure global security of supply through a competitive and diversified industrial base.
- Will explore Clean Tech/Net-Zero Industrial Partnerships promoting the adoption of clean technologies globally and supporting the role of EU industrial capabilities in making the global clean energy transition possible.
- Is working on an EU export credits strategy, in coherence with EU investment policies such as the Global Gateway and the Sustainable Investment Facilitation Agreements (SIFA), in pursuit of the net-zero goals.
- Is ready to deploy the International Procurement Instrument as needed to promote reciprocity on access to public procurement markets.
The Commission will also protect the Single Market from unfair trade in the clean tech sector with the trade defence instruments and, thanks to the Regulation on Foreign Subsidies, will ensure that non-EU countries' subsidies do not distort competition in the Single Market, also in the clean tech sector. With the help of the EU framework on foreign direct investment screening and the anti-coercion instrument, it will also support proper responses to trade-related threats to the EU's economic security.
What is the Notice on the Guidance on Recovery and Resilience Plans in the context of REPowerEU about?
The Guidance on Recovery and Resilience Plans (RRPs) in the context of REPowerEU explains the process for modifying existing plans, as well as how Member States can prepare REPowerEU chapters.
Firstly, the guidance explains the different legal grounds to modify a plan. It also lays out the information on the reasons, objectives and nature of the changes that Member States can submit to the Commission.
Secondly, the guidance covers how Member States should go about preparing their REPowerEU chapters, outlining the elements that need to be included and the potential funding sources and eligible measures.
This guidance replaces the one published by the Commission in May 2022. The Commission guidance of January 2021 on the preparation of RRPs remains valid.
When will today's Guidance take effect?
Member States will be able to submit a modified Recovery and Resilience Plan that includes a REPowerEU chapter, once the RRF Regulation, as amended by the Regulation on REPowerEU Chapters (the ‘amended RRF Regulation') has entered into force. We expect this to happen shortly.
To ensure quick progress towards REPowerEU goals, we encourage Member States to already start engaging with the Commission on the basis of the guidance adopted today.
How much money is available for Member States under REPowerEU?
Overall, close to €270 billion REPowerEU RRF funds will be available for Member States.
This includes an increase in the RRF financial envelope, once the amended RRF Regulation takes effect, by:
- EUR 20 billion in new grants to finance measures that Member States will be able to include in REPowerEU chapters. These grants will be financed through the sale of Emissions Trading System allowances.
- EUR 5.4 billion of funds from the Brexit Adjustment Reserve that Member States will be able to voluntarily transfer to the RRF to finance REPowerEU measures. This comes on top of the existing transfer possibilities of 5% from the cohesion policy funds (up to EUR 17 billion).
- These new grant possibilities come in addition to the remaining EUR 225 billion of RRF loans that Member States can use for REPowerEU purposes.
Once the revised plans are adopted, Member States will have the possibility to request pre-financing of up to 20% of funds allocated to REPowerEU chapters, allowing for a swift disbursement of the funds.
What support does the RRF foresee to support the competitiveness of clean tech industries in particular?
The 27 national Recovery and Resilience Plans that were approved under the RRF already contain EUR 250 billion in measures that contribute to the green transition, including several investments supporting the decarbonisation of industry in the transition towards climate neutrality.
The RRF and its new REPowerEU component offers significant additional funding opportunities to reinforce the competitiveness of the EU. It enables an acceleration of the EU industry's transition to climate neutrality.
Member States are encouraged to integrate investments and reforms in their REPowerEU chapters that support the present and future competitiveness of EU clean tech industries. In this context, the Commission encourages Member States to include three types of measures in their modified plans to support clean tech industries/value chains and enhance competitiveness:
- A one-stop-shop for permitting of renewables and clean tech projects to simplify and speed up the approval process for building and operating clean tech projects.
- Tax breaks or other forms of support for green, clean tech investments, such as tax credits, accelerated depreciation, or subsidies linked to the acquisition or improvement of green investment assets.
- Investment in reskilling the workforce for a greener future.
On what grounds can Member States revise their existing plans?
The first priority remains the swift implementation of the existing plans. However, the geopolitical context has changed considerably since the adoption of the RRF Regulation. Hence, this guidance describes to Member States how they can revise their plans based on the available legal grounds.
A revision can be linked to financial aspects, that is, to benefit from additional REPowerEU funds, or in light of a change in a Member State's maximum financial allocation under the RRF or to take up additional RRF loans.
Member States can also amend their plan if they can demonstrate that objective circumstances render the implementation of certain milestones and targets unfeasible. Those objective circumstances could be linked to inflation, shortages in the supply chain or the fact that there is a better alternative measure to fulfil the intended policy objective of a measure.
The guidance gives flexibility to Member States to adjust the plans to the current context while making sure that the overall ambition of the plans is maintained.
Is there a deadline for Member States to change a plan?
To ensure a swift roll-out of REPowerEU measures, Member States should submit their modified plans with REPowerEU chapters by 30 April 2023 at the latest.
The REPowerEU chapters should address in a comprehensive manner the challenges that Member States are facing.
To ensure the optimal allocation of remaining RRF loans, Member States are invited to indicate their interest in taking up loans as soon as possible and no later than 30 days after the entry into force of the amended RRF Regulation.
What principles apply when Member States wish to introduce changes to their plans?
Overall, there are a few key principles that the Commission encourages Member States to take on board when introducing changes to their RRP. These include:
- The priority remains the implementation of the measures in the existing RRPs. Member States should ensure sufficient progress with reforms and investments and make all efforts to submit payment requests on time.
- Member States should prioritise measures in their revised plan whose implementation is already under way and can be undertaken by the 2026 deadline. This should contribute to progress more quickly towards the REPowerEU objectives.
- Member States are also invited to take stock and discuss with the Commission their experience in the implementation of the Facility so far, to determine whether any changes could help to accelerate the implementation of existing measures.
How can the REPowerEU chapter in the revised plans contribute to tackling the energy crisis?
The REPowerEU chapters in the revised plans will provide a framework, accompanied by financial support, with dedicated investments and reforms strengthening the EU industrial base and EU energy resilience.
Those measures should be aimed at accelerating the green transition by, among others, diversifying energy supplies, increasing the uptake of renewables, improving energy efficiency performance, scaling-up energy storage capacities, and reducing dependence on fossil fuels.
The REPowerEU chapters should also be used to reinforce competitiveness of the EU industry and support the transition to zero or low-carbon technologies and clean tech industries, through regulatory measures, tax breaks, financial support, and upskilling of the workforce.
Why is a further relaxation of the State aid rules necessary?
The Commission is keeping under constant review the existing State aid rules in order to ensure that these are fit for purpose.
As outlined in the Green Deal Industry Plan, we need to accelerate the decarbonisation of our EU industry and the roll out of renewables. This is why the Commission is proposing to enlarge the scope of the existing simplified State aid provisions to cover all renewable energy technologies. We also aim at providing simpler options to Member States to quantify how much aid they can grant to each project, while ensuring that aid remains proportionate.
Furthermore, to keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU. That is why the Commission is proposing new proportionate State aid provisions to counter any risks that investments in strategic clean tech sectors might be unfairly diverted to third countries outside Europe, introducing a new anti-relocation investment aid possibility.
Which are the State aid rules that you are proposing to revise?
In view of the current crisis provoked by Russia's war of aggressions against Ukraine, of the green and digital objectives of the Commission and of the challenges our European industry is facing, the Commission proposes to adapt the existing temporary crisis framework to allow Member States to boost investments in strategic sectors for the transition to a net-zero economy. The draft State aid Temporary Crisis and Transition Framework, which has been sent to Member States today for consultation, is an important element of the Commission's proposal for a Green Deal Industry Plan – in particular for its second pillar aiming at ensuring faster access to funding. At the same time, by adopting a common framework that is applicable to all member states, the Commission ensures that distortions on the internal market are limited both in time and in scope.
In addition, the Commission is in the process of revising the General Block Exemption Regulation (“GBER”), which enables Member States to directly implement aid measures, without having to notify them ex- ante to the Commission for approval. The revised GBER will be adopted in the coming weeks and will give Member States more flexibility to support measures in key sectors for the transition to a net-zero economy, such as hydrogen, carbon capture and storage, zero-emission vehicles and energy performance of buildings. In particular, the Commission intends to further increase notification thresholds for support for green investments and to enlarge the scope of investment aid for recharging and refuelling infrastructures, as well as to further facilitate SMEs training aid for skills.
Among others, the revision of the GBER will contribute to further streamline and simplify the roll-out of Important Projects of Common European Interests (IPCEI), specifically in relation to the implementation of smaller, IPCEI-related, innovative projects, in particular by small and medium-sized enterprises. In addition, the Commission is working together with Member States on a code of good practices for a transparent, inclusive and faster design of IPCEIs. The code of good practice will be signed by the Commission and the Member States by spring this year.
What changes are you proposing to the Temporary Crisis Framework?
The State aid Temporary Crisis Framework, adopted on 23 March 2022, enables Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia's war against Ukraine. It has been amended on 20 July 2022, to complement the Winter Preparedness Package and in line with the REPowerEU Plan objectives, as well as on 28 October 2022, to address high gas prices in the EU and ensure security of supply this winter. The Temporary Crisis Framework is applicable until 31 December 2023.
In the context of the Green Deal Industry Plan, we propose to further simplify the granting of aid in strategic sectors for the green transition. Therefore, the Commission is consulting Member States on a draft Temporary Crisis and Transition Framework, which proposes to allow aid until end of 2025 to enable:
- The fast roll-out of aid to support renewable energy and decarbonising the industry;
- Investments in the production of strategic equipment necessary for the net-zero transition.
When will the Commission adopt the revised State aid rules?
Today, the Commission has sent to Member States a draft Temporary Crisis and Transition Framework for consultation. Once it will have received the feedback from the Member States, the Commission will analyse it and take it into consideration in the adoption of the revised Framework. This should take place in the coming weeks.
Also in the coming weeks, the Commission will adopt a revised version of the General Block Exemption Regulation (GBER).
Finally, the Commission and the Member States will sign the code of best practice on Important Projects of Common European Interests (IPCEI) in spring this year.
How do State aid rules contribute to ensuring that Europe remains an attractive investments destination?
We propose to Member States clear, predictable and simple rules as regards the conditions to support the production of critical goods for the green transition. In order to ensure the integrity of the Single Market and the level playing field, we propose to limit in time and scope the aid measures, as well as to target them to those sectors that are at real risk of being unfairly diverted outside Europe.
In particular, we propose to allow aid for the production of batteries, solar panels, wind turbines, heat-pumps, electrolysers and carbon capture usage and storage (CCUS), as well as related critical raw materials necessary for the production of such equipment. For projects that take place in disadvantaged regions in the EU (where the GDP per capita is below 75% EU average) or for projects involving investments in several Member States, further aid may be allowed to match the level of support offered in third countries, up to what is necessary to make the investment profitable in Europe.
For More Information
A Green Deal Industrial Plan for the Net-Zero Age
State aid: Proposal for a Temporary Crisis and Transition Framework
Guidance on REPowerEU chapters in the context of recovery and resilience plans