EU unveils plan for future Net-Zero Industry Act and European Sovereignty Fund

Published 2 February 2023

PrintCategory: Impact and ESG

Recently, the EU Commission presented a plan for a Net-Zero Industry Act and a European Sovereignty Fund as part of a bigger Green Deal Industrial Plan. The initiatives shall be seen in connection with the European Green Deal and the goal of making EU climate neutral by 2050. The purpose is to maintain an attractive European industry and prevent European businesses in the green industry from leaving the EU.

It comes as an extension of the adoption by the USA of a $369 billion economic scheme in August 2022: The Inflation Reduction Act (IRA). The IRA is seen as one of the most significant legislations on climate in the American history and aims towards reducing CO2 emissions with 50 % in 2030 by investing in various technologies and clean energy solutions. However, EU fears that this will make the American market more interesting for European businesses. Therefore, the aim with the Net-Zero Industry Act is to create a competitive environment for European businesses within EU.

A Net-Zero Industry Act shall channel investments to projects throughout the supply chain. Among others, a focus point will be ensuring a fast-track and more simple process for new production sites for clean tech. This requires adaption of the European state aid rules in order to increase the government support.

However, some EU member states have expressed their concern about loosen the state aid rules. They fear that it will be a problem for smaller member states as they are not able to offer the same support as the bigger member states. The EU Commission agrees that focusing only on amending the state aid rules will have a negative effect on competition within EU itself. Therefore, they are planning a European Sovereignty Fund which will be prepared as a part of the mid-term review of the long-term budget later in 2023.  However, it has become clear that the EU Commission itself is divided. The EU Commissioner for competition has raised concerns about a possible fracturing of the EU internal market if the adaption of the state aid rules is not temporary as well as proposed a new state aid framework. On the other hand, the Commissioner for Internal Market is concerned that temporary solutions are not enough.

It is increasingly difficult – but increasingly important – for investors, fund managers, startups and other players in the venture capital eco system to be able to navigate and this rapidly evolving and changing political landscape that influence the global ESG agenda. At Mazanti-Andersen we are cooperating with specialized global political advisors to better assist our clients manage and understand the expectations and opportunities to come within the ESG realm of their geographical investment scope.

Next steps: Before further steps are taken, the EU Commission will investigate what needs the green industry has. At the moment, the EU Commission and member states are discussing the best way to revise emergency state aid rules in EU. However, a specific time frame for the plan and process going forward is not yet known.

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