“The Industrial Acceleration Law is going to accelerate decarbonization. That is its objective”, slipped the vice-president and industrial commissioner of the European Commission, Stéphane Séjourné, this Wednesday. Brussels wants to focus public procurement towards European products to foster its own economic growth and cut dependencies with third parties, while supporting green production.
With its new industrial regulation, the European Commission introduces a deep green shift in the way Europe manages its emissions while accelerating the decarbonization process. The new proposed approach is far from being solely environmental: it seeks to create a “business case” where the climate transition can serve as an engine for economic growth, with the aim of reassuring the sectors most reluctant to the community's green strategy.
Organizations in the sector are already rushing to warn that demanding low-carbon public procurement “is one of the most powerful tools for low-emission steel to move from pilot projects to commercial reality”.
Public procurement with climate criteria
“A significant change in European economic doctrine”, they say in the Schuman roundabout about the new legislation, which imposes specific criteria in the continent's public procurement processes. After discussing for weeks the scope and affected sectors, the necessary consensus was achieved for the rule to prosper, limiting its content solely to electric vehicles, energy-intensive industries and zero-emission technologies.
Currently, industrial emissions account for approximately 30% of the total figure for the European Union. Brussels wants to reverse the situation with the creation of “lead markets” for low-carbon products. The new legislation presented this Wednesday introduces mandatory quotas in public procurement starting in 2029.
Through the public sector, which represents the 15% of the EU's GDP, minimum percentages of low-carbon materials will be required in infrastructure and construction projects. In relation to steel and aluminum, at least 25% must be low-carbon. For cement, at least 5% must comply with the Union's origin requirements.
How is “low carbon” defined
To be able to determine what is exactly considered “low carbon”, the regulation not only takes into account direct emissions, but also the critical indirect emissions. These, in practice, turn out to be those that come from the electricity, hydrogen and heat used in manufacturing.
Once the new regulation comes into force, a voluntary classification system will be established that will be based on the greenhouse gas intensity for industrial products. The community executive states that this will allow companies to differentiate their clean products in the market, as well as justify a price “premium” for their better environmental performance.
Furthermore, the Commission will acquire powers to issue measures that promote the use of chemical products derived from sustainable carbon sources —biomass, waste or CO₂ capture— with the aim of reducing dependence on fossil raw materials.
Changes in energy auctions and technological security
With this regulation, Europe also changes the rules of the game for all energy infrastructures and the supply chain of renewable technologies. Through the text, the Net-Zero Industry Regulation is modified to raise the criteria in energy auctions.
The Union's origin requirements will apply to a minimum volume of 40% of the capacity auctioned annually by each Member State, or at least 8 GW. However, the total auctioned volume must meet strict cybersecurity conditions.
This implies excluding those considered “high-risk suppliers” of critical components —such as control systems or firewalls— with the aim of preserving the stability of the electricity grid throughout the European continent.
The power of industrial acceleration areas
Furthermore, in the new industrial acceleration areas that the text promotes, Member States will have to carry out long-term energy needs analyses. This will eventually oblige transmission system operators to make early investments in the grid to safeguard fast connections to low-carbon energy supplies.
At the Commission, they point out that the industrial accelerator will help to eliminate administrative bottlenecks that hinder large emission reduction projects. For example, from now on, all those facilities of energy-intensive industries that significantly and permanently reduce their carbon emissions will be qualified as strategic projects.
This type of project will benefit from a “digital one-stop shop” and from stricter deadlines for permit granting. Furthermore, in acceleration areas, an “aggregated base permit” will be implemented that will cover general environmental assessments. This will allow companies to only process the specific permits for their facility.
Local content as a symptom of strategic autonomy
To ensure that decarbonization does not end up generating new dependencies, local content requirements will also be imposed. Electrolyzers must be manufactured in community territory and include locally produced stacks.
These electrolyzers are those used to produce what is known as green hydrogen. The stack comes to be the core of the electrolyzer, where the chemical reaction that produces hydrogen occurs. It is the most important and technological component. Europe wants these machines to be manufactured within its borders.
Furthermore, when a new nuclear plant is built, up to two or three key components must come from European companies. This includes everything from the reactor to the turbines, also including the reactor vessel or the steam generators.
The response of the sector
In the sectors most involved in the fight against climate change, the proposal has not fully convinced. Several organizations point out that a mandatory and harmonized definition of low-carbon steel is required.
The non-profit organization Climate Group points out that, despite the fact that the law correctly authorizes the Commission to develop steel classification systems based on emissions intensity, “an enabling power alone leaves too much to chance and a classification system is not the same as a label”.
“A voluntary classification system will not provide the certainty producers need to make investment decisions that truly reduce emissions on a large scale”, explains its head of policy and advocacy, Andrew Forth.
For his part, from the European Parliament, the socialist MEP Nicolás González Casares warns that the fact that European origin is not required for steel could favor low-carbon steel produced outside Europe, even in industrial systems that do not bear the same regulatory costs as European industry.
“If we want to create true ‘lead markets’, it is not enough to reward carbon; we must also ensure that industrial value remains in Europe”, states the member of the Industry Committee.