The Net Zero Industry Act: an opportunity to enhance the resilience of the EU industry

FuelsEurope recommendations and proposed amendments

 Brussels, 13 June 2023: FuelsEurope welcomes the Net Zero Industry Act (NZIA) in its aim of promoting the ramp-up of critical technologies and their deployment to help EU decarbonization objectives, as well as its focus on industrial investments and competitiveness. This legislative proposal shows a renewed attention towards energy security, providing a possible response to new global challenges. With this perspective, we aim at contributing to this debate by sharing our views on how promoting the deployment of renewable and low-carbon technologies would help the resilience of the EU industry, which is currently facing a growing and dangerous trend of de-industrialization.

Supporting private investments in energy transition while safeguarding energy security

Implementing the European Green Deal is pivotal, and the NZIA should be instrumental for the improvement of the whole European industry’s competitiveness towards its global competitors. Simultaneously, EU legislation should provide stability and long-term signals to guide investors, along with safeguarding a secure and affordable energy supply. The supply and deployment of crucial technologies is of central importance for EU decarbonisation and - while ensuring imports are part of the solution - a new industrial strategy should support the development of value chains within the EU while taking into account the global dimension of said value chains and the related interlinkages (e.g., for waste & residues, new feedstock value chains, etc).

This is why, to enhance investments, we call on legislators to consider the following:

  • Keep a technology-open approach to foster investment opportunities for decarbonisation
    • Whereas the act is envisaging an integrated method for the deployment of selected technologies, regulatory authorities should be open to consider a broader set of technologies based on their emissions’ abatement potential;
    • To stimulate the needed investments for the transition of the entire economy towards net zero, the focus should be extended to all low-carbon and renewable energy sources, industrial operations as well as the decarbonization of transport. Scaling up all relevant technologies along the value chains, covering both demand and supply sides would enable the transition, while infrastructures would also be vital to create a solid EU critical value chain.
  • EU’s investment potential should be unlocked to support/achieve the energy transition
    • Unequivocal market signals and sufficiently available public funding would help industry preserve its competitiveness while helping achieve the EU climate goals;
    • Simplifying access to EU funding would give investors further confidence, enabling the EU to transition faster. This why we ask that EU funds -currently defined by a complex regulatory framework – would be further simplified to unlock their potential.
  • Provide adequate export mechanism such as an export adjustment
    • In the absence of an effective global carbon pricing system, having ambitious decarbonization targets for EU industry can represent a competitive disadvantage that may be detrimental for the reduction of GHG emissions globally (i.e., carbon leakage risk) this danger should be addressed through adequate mechanisms for both imports and exports, as export competitiveness is critical for the resilience of the EU industry. CBAM missed this opportunity, which would have been essential to preserve the competitiveness of EU producers of globally traded products. We recommend EU legislators to cooperate with relevant trade partners with the aim of adapting the current WTO rules to become applicable to the new challenges of the energy transition.

A value chain focus: strategic technologies scope & definition shall include their deployment

Considering the defined selection criteria, we find questionable the exclusion of technologies related to the manufacturing of sustainable alternative fuels, Carbon capture and Usage (CCU) and renewable fuels of non-biological origin from the Annex on Strategic Net-Zero Technologies[1]. In alignment with the Fit-for-55 package and RePowerEU communication, these technologies -and their deployment - should also be prioritised, for an efficient decarbonisation of transport and other economic sectors, while enhancing the EU’s security of supply and its leadership in low and zero-carbon technologies.

Sustainable alternative fuels technologies: a strategic opportunity for decarbonisation

FuelsEurope welcomes the inclusion of sustainable alternative fuels in the list of “net-zero technologies”, and asks for a definition of “sustainable alternative fuel technologies” extended to all RED-compliant fuel technologies[2]. Specifically, such inclusion should not be limited to technologies for SAF and bunker fuels (shipping), as suggested by footnote 67. Whilst we understand the focus on these two hard-to-abate sectors, there are two practical reasons that require broadening this to more types of fuels:

  1. Fuels production typically yields a range of different products. For example, producing SAF will also result in the production of renewable (pursuant to RED II) and low-carbon fuels for road transport and chemical products. Including these fuels is key to leveraging the benefits and synergies with other transportation sectors, allowing to exploit of the full potential of these technologies for a net-zero transport future;
  2. The focus of NZIA is on technologies. Fuels production processes (e.g., HEFA unit to produce SAF and other fuels) can work with a range of different feedstocks. Adding operational constraints -around the use of certain technologies cannot be practically applied in the context of legislation that only focuses on technology manufacturing.

Considering the production of all renewable and low carbon fuels (e.g., drop-in biofuels, synthetic climate-neutral gaseous fuels, synthetic and renewable methanol, petrol, diesel, aviation and maritime fuels) and related technologies as strategic would help the EU meet its Green Deal targets, while strengthening its energy security. In addition to that, pushing for the deployment of these fuels would require an explicit reference to research and development of production processes and technologies linked with the upgrading and/or conversion of biomass wastes and residues (e.g., recyclable part of the Municipal Solid Waste), including but not limited to enzymatic or cellulosic, Fischer-Tropsch, Gasification, Pyrolysis technologies and hydrothermal liquefaction (HTL).

Carbon Capture Storage (CCS) and Carbon Capture and Use (CCU): a pragmatic approach

We praise that also the NZIA, in recognition of the value of CCS, added this technology among the ‘strategic net zero technologies’, as an essential enabler for industrial and sectorial (e.g., on-board ship CCS) decarbonisation. Its carbon abatement potential when combining CCS solutions with biomass feedstocks in bioenergy (BECCS), which may lead to negative emissions[3], which is more than needed to achieve climate neutrality that is otherwise impossible target through the accumulation of positive emissions pathways, even at the lowest levels.

It should be noted that the US Inflation reduction act is proposing several rewarding provisions – such as tax rebate - to deploy technologies considered critical for decarbonisation, such as CCS; this has been established by providing targeted incentives for both industrial CO2 capture and direct air capture, including provision related to C02 transport and storage infrastructure[4].

On the other hand, for what relates to the mandate for CCS, FuelsEurope considers that only a system based on incentives will be able to create a fully functioning CO2 market. However, the current proposal lacks a market-based and value-chain approach. It risks discouraging investments or result in upward costs instead of encouraging investments in net-zero technologies and improving the competitiveness of the EU. To create such a market, the NZIA should tackle the whole CO2 value chain (including transport and storage infrastructures), and be able to promote investments via targeted incentives (e.g., measures supporting demand). In this context, Member States would play a decisive role in allowing CCS deployment (e.g., authorizing storage sites), helping to underpin investment in sufficient CO2 capture via boosting demand and enabling the CCS value chains to be developed, reducing stranded asset risk.

We finally ask for the extension of the definition of CCS technologies to include CO2 capture and CO2 infrastructure projects, as only coordinated investment planning along the value chain - from emissions sources to emissions sinks - will enable a profitable CO2 market.

FuelsEurope final recommendations

We believe that the fuel manufacturing industry is a central contributor to the EU energy and climate transition and the NZIA would be an opportunity to create the enabling regulatory framework to support the European industries’ transformation. We ask for EU regulators’ support through a strategic approach across policies to defend the competitiveness of our industry and maximize our contribution to the energy transition. This is why, in order to enhance investments in the energy transition, we call for the NZIA to set up the following measures:

  • Establish a framework which supports and incentivises private investments for the deployment of renewable, low or zero-carbon technologies & products along the whole value chain;
  • Promote the conversions/repurposing/upgrading of existing refinery assets for the production of low-emission fuels/energy; therefore, enlarging the scope of the act, keeping a technology-open approach, allowing all technologies with GHG abatement potential to be scaled up:
    • Include renewable & low-carbon fuels as defined in the RED as well as a wider range of renewable and low-carbon liquid fuels production technologies;
    • Explicitly refer to the research and development for the production processes for upgrading/conversion of biomass wastes and residues including - among others - enzymatic/cellulosic, Fischer-Tropsch, Gasification and Pyrolysis technologies;
    • Include CCU, along with measures to create an efficient CO2 market in support of the development of CCS.

The European Fuels Manufacturers industry has proven to be a reliable energy supplier to EU businesses and citizens, particularly in the unprecedented crisis of the pandemic and of the war at our doorstep. The geopolitical landscape has dramatically changed and has highlighted the need of a competitive EU industry supplying affordable and reliable energy throughout the transition to a net-zero economy.

[1] https://www.ieabioenergy.com/wp-content/uploads/2020/11/Production-Technologies-and-Costs.pdf

[2] Sustainable biomass availability in the EU, to 2050 Publications - FuelsEurope, the report is aiming at providing an estimation of the sustainable biomass potential availability in the EU and UK by 2030 &2050, giving also an evaluation of the advanced biofuel potential. The work covers only EU27 & UK feedstocks of agricultural, forest and waste origin included in Annex IX of RED II (Part A & B). Food and feed crops, and other sustainable feedstocks accepted by RED but not included in Annex IX, are not included in this study.

[3] Refinery-Technology.pdf (concawe.eu)

[4] FACT SHEET: President Biden to Catalyze Global Climate Action through the Major Economies Forum on Energy and Climate | The White House

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