European response to US cleantech incentives leaves industry and environmentalists fuming

The Net-Zero Industry Act (NZIA), a body of legislation proposed by the European Commission to help industry cut its greenhouse gas emissions, is receiving an angry response from Europe’s chemical industry. European environmental groups also say the draft act is problematic.

“The Net-Zero Industry Act reads more like a Zero Industry Act,” Marco Mensink, director general of Cefic, Europe’s largest chemical industry association, says in a statement. The act is “very unlikely to become a game changer” in its aim to help industry cut greenhouse gas emissions to zero by 2050, he says.

Technologies the EC wants to encourage include alternative fuels, renewable energy, electrolyzers for making green hydrogen, batteries, and carbon capture and storage. One of the act’s goals is to create better conditions for setting up such projects in Europe and attracting investment by streamlining legislative procedures and simplifying permit-granting.

The NZIA represents a key component of Europe’s Green Deal Industrial Plan. The NZIA still has to be approved by the European Parliament and European member states to be implemented as law.

Europe’s chemical industry had hoped NZIA would increase cleantech incentives in Europe to bring them in line with the $369 billion of incentives and tax breaks introduced last year in the US as part of the country’s Inflation Reduction Act. But based on this measure, Europe’s chemical industry considers the act to have fallen short. “On top of the European gas price being about five times the US, it does not match the IRA,” Mensink says.

A key problem with the proposed European act is that, unlike the IRA, it fails to provide incentives to reduce day-to-day operational expenses in areas such as hydrogen production and carbon capture and storage, Mensink adds.

A concern for Europe’s chemical industry is that now “the IRA will draw our customers to the US,” Cefic says. The organization is especially concerned that producers of batteries, electrolyzers, and renewable products will switch investments from Europe to North America, just as Volkswagen appears to have done earlier this month with a planned lithium-ion battery plant.

Solvay CEO Ilham Kadri and Merck KGaA CEO Belén Garijo both voiced their concerns in interviews with the Financial Times, saying the proposed act will not stem the flow of projects to the US.

Meanwhile, the European Environment Bureau (EEB), a consortium of 180 environmental campaign groups, also criticized the proposed act for encouraging technologies such as carbon capture rather than seeking to stop pollution at its source. The legislation “has been given away to vested interests by confusing clean with not-so-clean technologies and speed with fewer controls,” EEB says.

The act’s promotion of carbon capture and nuclear technology is especially problematic for EEB, as the bureau expects this “will only give extra life to fossil fuels,” Luke Haywood, EEB’s head of climate policy, says in a statement.