EUROPEAN COMMISSION Brussels, 1.2.2023 COM(2023) 62 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A Green Deal Industrial Plan for the Net-Zero Age



1.Introduction: A Green Deal Industrial Plan for the net-zero age This decade will be decisive for the world to limit the rise in global temperatures and to take the necessary steps towards net-zero. The stakes are high and the challenges complex – but there is a once in a generation opportunity to use this imperative to act as a catalyst to invest in the clean energy economy and industry of the net-zero age. The European Green Deal sets in stone our green transition ambitions, including our climate targets towards net-zero by 2050. The Fit for 55 package provides a concrete plan to put the European economy firmly on track, with the REPowerEU Plan accelerating the move away from fossil fuels. Alongside the Circular Economy Action Plan, this sets the framework for the transformation of the EU’s industry for the net-zero age. In the next few years, the economic shape of the net-zero age will be firmly set. New markets will have been created, breakthrough clean technologies will have been innovated, developed, and brought to market, and our energy systems transformed. Therefore, those who invest first and faster today will secure their place in this new economy and create jobs for a newly skilled workforce, rejuvenate industrial manufacturing bases, lower costs for people and businesses and be in a prime position to support other parts of the world to decarbonise their own economies. The scale of the opportunity for European industry puts this need in sharp focus. The International Energy Agency estimates that the global market for key mass-manufactured clean energy technologies will be worth around USD 650 billion a year by 2030 (approximately EUR 600 billion) – more than three times today’s level. The related energy manufacturing jobs could more than double in the same time period. The net-zero industry globally is growing strongly, to the extent of demand sometimes outpacing supply. The EU is well equipped to step up and seize the net-zero opportunity. Europe’s economic model, built on its Single Market, has brought rising prosperity over the past decades. Europe is a leading player on innovation, venture capital and deployment of net-zero technologies and sustainable products. It has a strong starting point – an industry with a track record as a proven trend-setter and standard-setter, with growing levels of digitalisation. Manufacturing high quality and innovative products that are used across the world. It has world-leading scientists and researchers, consistently developing breakthrough solutions or refining existing technologies. The EU has also shown how the green transition can strengthen competitiveness. The phase-out of Russian fossil fuels has accelerated a new industrial revolution aimed at ending the age of fossil fuels. A wide range of new net-zero technologies is being developed and deployed across our economy: in transport, buildings, manufacturing, energy, and even creating entirely new markets. Our net-zero ecosystem was worth over EUR 100 billion in 2021, doubling in value since 2020. The EU has also proven its inbuilt resilience to continued change and challenge. Industry is being challenged on everything from high inflation, labour shortages, demographic change, post-COVID supply chains disruptions, rising interest rates, spikes in energy costs and input prices. This is paired with strong, but not always fair, competition on the fragmented global market. Despite these headwinds, so far, the EU economy has held up remarkably and political unity is paying off. Gas and oil prices have now fallen below pre-war levels. Inflation across Europe dropped for the second consecutive month, and markedly, in December 2022. Unemployment is lower than before the 2008 financial crisis and labour markets continue to perform well. The EU is committed and convinced that it can speed up net-zero industrial transformation at home. On top of needs and opportunities such as the roll-out of renewables, the transformation of energy and transport infrastructures such as grids, the massive switch to fossil-free hydrogen as a storage medium, fuel and feedstock, the EU can also be a leading player in the net-zero industries of the future. We can also create new forms of clean tech cooperation with our partners abroad. By working together with partners on developing net-zero technologies, diversifying and strengthening supply chains, and supporting others on their green transition, the race to net-zero can be good for the planet and for business. And the encouraging signs are that Europe’s partners are also beginning to seize the net-zero industrial opportunities. The United States’ Inflation Reduction Act will mobilise over USD 360 billion by 2032 (approximately EUR 330 billion). Japan's green transformation plans aim to raise up to JPY 20 trillion (approximately EUR 140 billion) – through ‘green transition' bonds. India has put forward the Production Linked Incentive Scheme to enhance competitiveness in sectors like solar photovoltaics and batteries. The UK, Canada and many others have also put forward their investment plans in clean tech technologies. Europe is committed to working with all of those partners for the greater good. However, trade and competition on net-zero industry must be fair. Some of our partners’ initiatives can have undesired collateral effects on our own net-zero industries. More fundamentally, China’s subsidies have long been twice as high as those in the EU, relative to GDP. This has distorted the market and ensured that the manufacturing of a number of net- zero technologies is currently dominated by China, which has made subsidising clean tech innovation and manufacturing a priority of its Five-Year Plan. China’s pipeline of announced investments in clean technologies exceeds USD 280 billion (approximately EUR 260 billion). Europe and its partners must do more to combat the effect of such unfair subsidies and prolonged market distortion. Where the public footprint in private markets is outsized, distortions create an unlevelled playing field and unfair competition emerges. The Commission will continue to make full use of trade defence instruments (TDI) to defend the Single Market, and rules-based international trade, from unfair trade practices like dumping and distortive subsidies. Going forward, competitiveness challenges remain. The era of cheap fossil fuels is now over, calling for an acceleration of the green transition to ensure industry has access to abundant and affordable clean energy. The EU needs to build on its greatest strength, the Single Market, and avoid fragmentation. Therefore the Commission is committed to come forward with a comprehensive European approach, based on common strategic priorities and an investment needs assessment. This will require to explore various options to secure a common EU response, including EU funding. More also needs to be done to facilitate businesses’ access to private funding, notably by completing the Capitals Market Union. Greater competitiveness must go hand in hand with well-paid quality jobs and investment in human capital. The net-zero industrial age will be framed by the decisions taken today. The EU must be ready to lead the way, with speed, ambition and a shared sense of direction. A common response, anchored in EU policies and instruments, will be far more effective than the addition of 27 national approaches. 2.A Green Deal Industrial Plan – staying ahead of the game Against this backdrop of seismic opportunity and challenge, Europe needs a new Green Deal Industrial Plan. The Plan will form part of the European Green Deal, which set us on the path to climate neutrality, and will enable Europe to lead the way globally in the net-zero industrial age. The starting point for the Plan is the need to massively increase the technological development, manufacturing production and installation of net-zero products and energy supply in the next decade, and the value added of an EU-wide approach to meet this challenge together. This is made more difficult by the global competition for raw materials and skilled personnel. The Plan aims to address this dichotomy by focusing on the areas where Europe can make the biggest difference. It also seeks to avert the risk of replacing our reliance on Russian fossil fuels with other strategic dependencies that could impede our access to key technologies and inputs for the green transition, through a mix of diversification and own development and production. The Plan will complement ongoing efforts to transform industry under the European Green Deal and the EU Industrial strategy, in particular the Circular Economy Action Plan. Modernising and decarbonising energy-intensive industries also remains a top priority, as does ensuring job transitions and quality job creation through training and education. This is why a strong joint European response to boost the net-zero industry is needed. The Green Deal Industrial Plan will play to our strengths: openness, innovation, inclusiveness and sustainability. With the right conditions, the net-zero industry in Europe will play a vital role in transforming the continent into a green economy - delivering prosperity in the EU and leading globally both on technology and on combatting climate change and environmental pollution. This outline for a new Green Deal Industrial Plan is based on four pillars:

2.1.A predictable, coherent and simplified regulatory environment The EU has traditionally relied on a strong regulatory environment for setting conducive conditions for business, for providing quality employment for our workforce and a high level of protection for our environment. These three dimensions can be mutually reinforcing, if regulation is balanced and smartly designed, which requires continuous attention. This is why this year the Commission has introduced an additional 'competitiveness check' on all new regulation to ensure that all potential competitiveness impacts are addressed and unnecessary burdens avoided. A simple, predictable and clear regulatory environment is key to promoting investment. Action at EU level prevents fragmentation between 27 regulatory approaches. This spring, the Commission will table three key proposals for industrial competitiveness, rooted in the need for reform: First, as part of the Green Deal Industrial Plan, the Commission proposes to put forward a Net-Zero Industry Act to underpin industrial manufacturing of key technologies in the EU. The act would provide a simplified regulatory framework for production capacity of products that are key to meet our climate neutrality goals, such as batteries, windmills, heat pumps, solar, electrolysers, carbon capture and storage technologies. The Net-Zero Industry Act would in particular: ·Following sector-specific analysis, identify goals for industrial capacity by 2030 where necessary to ensure that strategic dependencies do not put the green transition at risk. It will consider the whole supply and value chain across borders, so that supplies do not become a bottleneck; ·Reduce the length and enhance the predictability of permitting processes by defining specific time limits for different stages of permitting, and significantly reinforce Member States’ administrative capacity, e.g. by introducing a 'one-stop-shop' - a sole point of contact for investors and industrial stakeholders during the entire administrative process. As European value chains are highly integrated and interconnected in the Single Market (see Figure 1), the Net-Zero Act would define simple and operational criteria for identifying net-zero supply chain projects of strategic interest. This should ensure that all Member States continue benefiting from innovative industrial deployment by promoting strategic projects, including multi-country projects, accessible to both developed and less developed regions. These projects could benefit from accelerated permitting procedures and attract private as well as EU and national public funding. European standards can help to promote the roll-out of clean and digital technologies. In particular for new industrial value chains, anticipating and developing high-quality European standards could provide EU industries an important competitive advantage – including at global level. They could demonstrate ‘marketability’ and attract investment in firms that adhere to them. European standards would allow EU industries to scale up their technologies across the Single Market – this is very important for start-ups and SMEs. ·The Act could enable the Commission to request European standards promoting the fast roll-out of key technologies.

Figure 1 Wind supply chains and jobs are highly integrated in the EU and Europe Source: Wind Europe. The map presents EU wind manufacturing facilities across its segments. The circles size is proportional to the number of jobs per facility (small circles: 10-50 employees; big circles: over 1000 employees). To foster innovation, the Commission will assess the possibility to establish regulatory sandboxes to allow for rapid experimentation and disruptive innovation to test new technologies. Such regulatory sandboxes may also pave the way for simplification of the process of authorisation/certification for placing products in the market. These procedures can now be lengthy, slowing the introduction of innovative products and representing a significant burden especially for SMEs and start-ups. The Commission will continue funding testing facilities as one important step to bring technology to market. To further stimulate the demand for net-zero products at large scale, various forms of public action such as public procurement, concessions and incentives to business and end users to use net-zero technologies based on sustainability and circularity can play a big role. Public authorities in the EU spend around 14% of GDP (around EUR 2 trillion per year) on the purchase of services, works and products. Procurement policy and other public support can play a role in maximising public-interest returns on public money while fostering security of supply through diversification of sources. To this end, the Commission would define sustainability characteristics and possible requirements for net-zero products, using available legal tools and existing EU standards. It would promote a more predictable and uniform demand for net-zero solutions and allow public authorities to set out ambitious sustainability requirements. Second, the Commission will propose a Critical Raw Materials Act. The manufacturing of EU net-zero technologies is only possible if access to relevant critical raw materials is ensured, including by diversifying sourcing and by recycling raw materials to lower the EU’s dependence on highly concentrated supplies from third countries and boost quality jobs and growth in the circular economy. This act will aim to provide the EU security of supply, including by strengthening international engagement, facilitating extraction (where relevant), processing and recycling, while ensuring high environmental standards and continuing research and innovation, e.g. to reduce material use and to develop bio-based substitutes. There have already been tangible successes: today, some EU companies are using lignin stemming from wood in batteries, instead of graphite. Third, energy. Russia’s weaponisation of energy was a major wake-up call for security of supply and tackling dependencies. The competitiveness of many companies has been severely weakened by high energy prices and the disruptions in several supply chains. This has particularly been the case of the energy-intensive industries. To address the high costs of energy and replace costly fossil fuels with cheaper renewables, important steps have been taken in line with the REPowerEU plan. For example, in 2022 wind and solar renewable energy production capacity in the EU exceeded 400 GW, an increase of over 25% compared to 2020. We have set up the EU energy platform to pool gas demand, coordinate infrastructure use and negotiate with international partners, made savings, filled storages and put in place a cap on short-term markets. Several infrastructure projects and interconnections have been completed in both electricity and gas. In March, the Commission will present a reform of the electricity market design, for which a public consultation is currently ongoing. Long-term price contracts could play an important role to enable all electricity users to benefit from more predictable and lower costs of renewable power. As set out in the REPowerEU Plan, boosting industrial competitiveness will require both transforming industrial processes, massive speed-up and scale-up of renewable energy and stronger efforts for energy efficiency and reduction of energy demand as well as reskilling and upskilling of the workforce. The new EU regulatory framework for batteries is a crucial element in the EU's transition to a climate neutral economy, by securing competitive and resilient value chains for battery production, reuse and recycling in the EU. Going forward, the Ecodesign for Sustainable Products Regulation will apply to a broader range of products and further expand the range of sustainability requirements, in which EU industry excels. The Commission will give a high priority to work on net-zero technologies under the existing and future Ecodesign working plans. Furthermore, it is key that consumers can make their choices based on transparent and reliable information on the sustainability, durability and carbon footprint of the products. Market transparency is a tool facilitating uptake of technologically and environmentally superior net-zero products. For example, the Commission will propose a unified energy label for heat pumps to allow users to compare different technologies by the end of this year. The Commission proposal on empowering consumers for the green transition also works in this direction. Finally, infrastructure is key to the conducive net-zero business environment that the Green Deal Industrial Plan seeks to establish. Full coverage of the TEN-T networks with charging and refueling infrastructure and development and strengthening of a European hydrogen backbone and the extension and strengthening of smart electricity grids to accommodate large quantities of renewables on the TEN-E network require large investment.but also a strengthening of our regulatory framework. Now is the time to map the infrastructure needed with a European mindset. The Commission urges co-legislators to adopt the Alternative Fuels Infrastructure Regulation (AFIR) as soon as possible, to help create a future-proof charging and refueling network. To develop and strengthen hydrogen and electricity infrastructure the Commission will further examine the resource needs of the Connecting Europe Facility and will use the full scope of the revised TEN-E Regulation to accelerate the planning, financing and deployment of crucial (cross-border) infrastructure. Notably the development and implementation of the cross-border infrastructure needs to be accelerated in the coming years. The Commission will also consider further ways, including possible legislative action, to make sure that Member States deliver cross-border energy infrastructure, so that there are no undue delays to the roll-out of the strategic infrastructure. The Green Deal Industrial Plan will succeed in boosting competitiveness if all actors (authorities, social partners, investors, consumers) join forces towards the same objectives. The recently established Clean Tech Europe Platform, the Clean Energy Industrial Forum, together with other relevant stakeholders, would support the plan, coordinate action to meet the investment and manufacturing targets and further promote matchmaking opportunities. The Commission will continue to engage closely with the European Parliament to make the Green Deal Industrial Plan a success. 2.2.Speeding up access to finance Global net-zero industry has experienced strong growth, with clean energy investments up by 10% in 2022 year on year. The EU’s net-zero industry is competitive in some sectors, such as wind energy or heat pumps, even in our relatively high-energy-price environment, while it has limited footholds in other segments, such as solar PV panels. Moreover, ensuring a timely transition to a net-zero economy requires faster development of those sectors. The EU industry’s market shares are under strong pressure, to a great extent because subsidies abroad are unleveling the playing field. This calls for access to funding for net-zero industry to be extended and accelerated. This is the second pillar of the Green Deal Industrial Plan. Targeted public funding must also play its role. Already today, the EU and national funding play an important role in fostering net-zero innovation, manufacturing, roll-out and related strengthening of grids and infratructure. Private funding will be key to unlock investments for the net-zero industry.

Under NextGenerationEU, the 27 national recovery and resilience plans funded by the Recovery and Resilience Facility (RRF) already make available EUR 250 billion for green measures, including investments supporting the decarbonisation of industry. Horizon Europe dedicates EUR 40 billion to Green Deal research and innovation, also in partnership with industry. Cohesion policies make around EUR 100 billion available for green transition, including the Just Transition Fund. The Commission will further facilitate the swift mobilisation of Cohesion investments in support of the Net-Zero Industrial Plan, including by speeding up the design and reimbursements of energy efficiency and renewable projects through standard reimbursement schemes. To date, these EU funding sources have largely benefitted research and innovation and deployment of renewable energy and related infrastructures, rather than targeting manufacturing capacity in the sector. Funding for net-zero industrial value chains can be stepped up in scale and speed through targeted state aid. But to avoid fragmenting the Single Market due to varying levels of national support – and varying capacities to grant such support – there also needs to be adequate EU-level funding to facilitate the flourishing of such industrial value chains across the Union as a whole. 2.2.1 National funding Starting with state aid: EU competition policy provides tools to support the development and deployment of key cutting edge technologies strategic for the green and digital transitions, while preserving the integrity of the Single Market and respecting EU’s international obligations. In 2022 alone, the Commission approved aid schemes with an overall budget of EUR 51 billion to deploy new renewable energy production capacity and decarbonise industrial production across the Union. As early as March 2022, following Russia's aggression against Ukraine, the Commission adopted a Temporary Crisis Framework providing a tool for Member States to remedy the negative economic effects created by the war and facilitate structural adjustments to better respond to the resulting economic situation. The Framework has been amended twice and already includes specific provisions on simplified support for renewable energy, decarbonisation technologies and energy efficiency measures. The Commission now intends to allow further flexibility for the Member States to grant aid limited to carefully defined areas and on a temporary basis. The Commission will consult Member States on a proposal to adapt State aid rules on a temporary basis, until end 2025, to further speed up and simplify, with easier calculations, simpler procedures, and accelerated approvals. These changes will also assist Member States in delivering on specific projects under National Recovery Plans which fall within their scope. The Commission intends to adapt state aid rules along five axes, subject to conditions necessary to limit distortions to the Single Market, to avoid greater regional disparities and to ensure compliance with international obligations. Four of these will be implemented through the proposed amendment of the Temporary Crisis Framework (TCF), which will be transformed into the Temporary Crisis and Transition Framework (TCTF) for State aid: 1.Simplification of aid for renewable energy deployments; The TCF has already simplified aid for renewable deployments. The draft TCTF would go further, by: -extending the provisions to all renewable technologies (under RED II) and to renewable hydrogen and biofuel storage; -eliminating the need for open tenders for less mature technologies (for which tenders may work less well); and -extending deadlines to complete projects. 2.Simplification of aid for decarbonising industrial processes ; Decarbonisation aid to industry had already been simplified by the TCF. The TCTF would go further with a number of provisions, such as: -allowing aid by reference to standard percentages of investment costs, based on case experience – for hydrogen use, energy efficiency and electrification. -More flexible aid ceilings per beneficiary in schemes fulfilling specific conditions.

3.Enhanced investment support schemes for production of strategic net-zero technologies, including the possibility of granting higher aid to match the aid received for similar projects by competitors located outside of the EU while ensuring the proportionality of such aid; 4.More targeted aid for major new production projects in strategic net-zero value chains, taking into account global funding gaps.

The draft TCTF would aim to ensure a level playing field with other jurisdictions and within the internal market, targeted to those sectors where a third-country delocalisation risk has been identified, and proportionate in terms of aid amounts. The TCTF would enable Member States to put in place schemes to support new investments in production facilities in defined, strategic net-zero sectors, including via tax benefits. The permitted aid amount would be modulated with higher aid intensities and aid amount ceilings if the investment is located in assisted areas, in order to contribute to the goal of convergence between Member States and regions. Appropriate conditions would be required to verify the concrete risks of diversion of the investment outside the EEA and that there is no risk of relocation within the EEA. Member States can align their national fiscal incentives along a common scheme that the Commission stands ready to prepare, and thereby create a common scheme offering greater transparency and predictability to businesses across the EU. In addition, Member States would also be able to match the aid offered by a third country, for individual initial investments in the same targeted sectors relevant to net-zero technology leadership, subject to conditions, such as being part of a multi-country cooperation, with material positive spillovers across Member States and with particular consideration for assisted areas. Such aid should address substantiated risks of certain investments being diverted in favour of third countries outside the EEA, and it should not facilitate relocation of production activities between Member States. The aid would be limited to what is necessary for the project to take place in the EEA. The Commission will remain committed to fast procedures under the TCTF, as is already the case for aid approved under the Temporary Crisis Framework, where median approval time has been 19 days. 5.Significantly increasing notification thresholds for state aid in these fields The Commission will adapt the State Aid rules on this fifth axis by further revising the Green Deal General Block Exemption Regulation. In addition to provisions linked to IPCEI projects (see below), this would give Member States more flexibility: -to support measures in key sectors, such as hydrogen, carbon capture and storage, zero-emission vehicles and energy performance of buildings, by further increasing thresholds triggering notification to the Commission. -enlarge the scope of investment aid for recharging and refuelling infrastructures, -further facilitating training aid for skills. Today, the EU has five Important Projects of Common European Interest (IPCEI), large development projects undertaken by several Member States to fund new technologies in strategic areas, with strong positive spillovers across borders and for innovation, workers and customers: one in microelectronics, two in batteries and two in hydrogen, with more projects in preparation. Public support of EUR 18 billion for approved IPCEIs is expected to unlock an additional EUR 36 billion in private investments, a leveraging factor of 2. To accelerate the roll-out of new projects, the approval of IPCEI related projects will be further streamlined and simplified; ·A code of good practices for a transparent, inclusive and faster design of IPCEIs will allow for a streamlined assessment and is to be endorsed by the Member States and the Commission this spring. ·The Commission is also preparing to speed up the implementation of smaller, IPCEI-related, innovative projects, in particular by small and medium-sized enterprises, through higher notification thresholds and greater aid intensities under the General Block Exemption Regulation. 2.2.2 EU funding To support the transition reaching the EU’s net-zero objectives and REPowerEU targets with diversified sources and secure supplies, the EU will have to continue to rely on a competitive net-zero industry. Greater investments are needed by 2030 in the manufacturing of net-zero technologies given the European ambitious EU targets and international competition.. Important disparities exist within the EU in terms of support by Member States. For example, while in 2020, 0.57% of EU GDP was allocated to support renewable energy sources, one country allocated almost 1% of its GDP and ten others spent less than half the EU average. To avoid fragmenting the Single Market due to varying levels of national support, facilitate the green transition across the Union as a whole, avoid exacerbating regional disparities and address the gap between funding currently available and the financing needs for scaling up the net zero industry, we must also step up EU funding. Accompanying the Green Deal Industry Plan, the EU budget will continue to contribute to targeted and swift funding of the EU’s net-zero industry. REPowerEU is our dedicated vehicle, and is boosted by other EU funds. The Commission will continue to provide support to Member States to design, develop and implement reforms as well as help strengthen the administrative capacity of Member States to ensure effective implementation of the funding. REPowerEU

Thanks to the agreement reached end of 2022, the EU support to the transition will now be increased with the additional funding brought to the RRF by the REPowerEU initiative: additional RRF grants (EUR 20 billion) will be available to Member States to promote the greening of industry, to support EU net-zero industry projects, and to assist energy-intensive industries in the face of high energy prices. Member States will also be able to dedicate grants of the Brexit Adjustment Reserve (EUR 5.4 billion) to these objectives. Furthermore, they will be able to use the remaining RRF loans (EUR 225 billion) with substantial pre-financing for these investments and reforms . In order to assist the Member States in implementing the RRF and its REPowerEU component, the Commission published today the Guidance on Recovery and Resilience Plans. The Guidance provides flexibility to adjust the plans to the current context, and to prepare REPowerEU chapters. It acknowledges issues arising from the disruption of supply chains, energy prices and inflation and offers to Member States effective solutions to maintain the ambition of the initial plans. The Commission strongly encourages Member States to include in their modified RRPs simple and effective measures to provide immediate support to companies and boost their competitiveness: ·(i) one-stop-shops for the permitting of renewables and net-zero projects to accelerate, digitalize and streamline the processes for obtaining the necessary approvals and permits for building and operating net-zero-tech projects; coupled with dedicated strengthening of administrative capacity to eliminate administrative bottlenecks in permitting;(ii) tax breaks or other forms of support for green net-zero technologies investments undertaken by businesses, taking the form of either a tax credit, an accelerated depreciation or a subsidy linked to the acquisition or improvement of green investment assets; ·(iii) and investing in equipping the workforce with skills necessary for this industrial transition. The European Investment Bank (EIB) Group will support the achievement of all the objectives of the RePowerEU Plan with additional loans and equity. The Commission and the EIB Group will continue working together to explore how the EIB Group could step up its clean tech and other activities contributing to the Green Deal. InvestEU Programme The InvestEU Programme is well placed to boost net-zero investments in the EU. InvestEU is the Union’s instrument for catalysing private investments in EU priority areas. Through the EIB, the EIF, the EBRD and 14 other implementing partners, the EU supports public and private investments in net-zero tech and industrial innovation. Examples of projects that can be supported are RDI of battery technologies, critical raw materials recycling, demonstration plants for manufacturing materials in the supply chain of electric vehicle batteries, hydrogen propulsion technologies, innovative advanced biofuels plants, advanced manufacturing technology equipment in steel processing. InvestEU can mobilise over EUR 372 billion of financing – public, but mainly private - through the backing of the EU budget guarantee of EUR 26.2 billion. To date the Commission has signed InvestEU guarantee agreements for a total value of EUR 21 billion. On the back of these guarantee agreements, the EIF has already signed InvestEU guarantee agreements with 48 financial intermediaries from 19 Member States for EUR 2.3 billion lending to European SMEs and small mid-caps, and 54 agreements with funds from 14 Member States for equity investments worth EUR 1.9 billion. Examples of InvestEU-supported investments by the EIB and the EIF in the area of clean technology: ·A EUR 37 million investment by the EIB in a p-CAM (precursor cathode active material) commercial demonstration production plant. P-Cam is used in the supply chain of electric vehicle batteries (high tech lithium-ion battery cells). ·A EUR 315 million loan by the EIB to a joint venture for technology and product developments of hydrogen automotive propulsion technologies, and active safety systems. ·A EUR 32 million investment by the EIB in support of R&D projects of a manufacturing company in electrification technologies for agricultural machinery and power transmission systems for tractors and off-road vehicles. ·A EUR 101 million guarantee by the EIF to a fund in support of early-stage technology companies (venture capital), high growth potential industrial companies; and decarbonisation sector companies (renewable energy projects and sustainability companies). ·A EUR 125 million loan to a greenfield production facility for cathode materials. The cathode materials will be supplied to battery manufacturers of high-tech lithium-ion batteries that are primarily used in electric vehicles. To ensure a timely delivery on the objectives of the Green Deal Industrial Plan, InvestEU procedures, should be simplified, and its products aligned to current needs. Guarantee agreements and financial products need to be aligned with the revised state aid framework, while specific provisions of the GBER will significantly simplify state aid aspects for national compartments in InvestEU. The Commission will continue to work with the EIB, the EU’s bank, and other partners to address in an efficient and timely way the financing needs of priority projects, such as IPCEIs. Funding through InvestEU is heavily frontloaded, as the biggest part of the funding comes from NextGenerationEU. By end 2023 EUR 14.83 billion of the EU guarantee needs to be committed, leaving only EU 11.37 billion for the period 2024-2027. At the same time, one can expect a significant increase in the demand for InvestEU support, given the revised eligibility conditions foreseen under the forthcoming Temporary Crisis and Transition Framework (TCTF). In particular, lifting current financing limitations on manufacturing projects in the areas covered by the TCTF would give rise to an increased demand and use of the EU guarantee by implementing partners. Therefore, the Commission is assessing how the overall funding for InvestEU could be increased, in particular for the period covering 2024 until 2027.

Innovation Fund The Innovation Fund supports the development and first-of-a-kind deployment of technologies and solutions that decarbonise energy intensive industry, boost renewable energy and energy storage (including batteries and hydrogen) and strengthen net-zero supply chains by supporting the manufacturing of critical components for batteries, wind and solar energy, electrolysers, fuel cells and heat pumps. Over the decade, an estimated EUR 40 billion will be available under the Innovation Fund. The revised and upgraded Emission Trading System directive, as agreed at the end of 2022 as part of the Fit for 55 package, allows the Innovation Fund to subsidise, through competitive bidding, 100% of the funding gap for scaling up clean tech deployment and manufacturing. The Innovation Fund can thus act as a European one-stop-shop for such support, thereby reducing the difficulties for investors in stacking different revenue streams and funding sources. The Commission will launch in autumn 2023 a first auction – or competitive bid - for supporting the production of renewable hydrogen. Winners of this auction will receive a fixed premium for each kg of renewable hydrogen produced over a period of 10 years. This will have a similar impact as the production tax credit in the US IRA, the difference being that the premium, based on the received bids, will make EU support cost-effective, fast and administratively light. Terms and conditions for this first pilot auction, with an indicative budget of EUR 800 million, will be announced in June 2023. This pilot auction will be followed by further auctions or other forms of support for hydrogen production and use that contribute towards the REPowerEU hydrogen targets, thereby covering the EU domestic part of the Hydrogen Bank. Further building on this experience, the Commission considers extending the new competitive bidding mechanism for scaling up manufacturing of components for solar and wind energy, batteries and electrolysers, based on an analysis of EU net-zero sector needs, market sizing, and potential project pipeline. Also here, the Innovation Fund support would take the form of a production subsidy, instead of the 60% share of relevant cost that is the current practice of the Fund. The EU emission trading system revenues will increase in the coming years. The greater part of this amount will constitute national revenues that Member States must use for climate action. The Commission encourages Member States to devote a share of those revenues to scaling up manufacturing of net-zero technologies. A share of the increased ETS revenues could also underpin the reinforcement of an efficient EU net-zero investment vehicle, such as the Innovation Fund. Numerous funds are thus available, mostly geared to innovation and deployment. 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 Delivering on a comprehensive European approach will be essential in order to preserve the Single Market from fragmentation and realise maximum synergies and scale. The Commission will work with Member States in the short term, with a focus on the afore-mentioned instruments – REPowerEU, InvestEU and the Innovation Fund - on a bridging solution to provide fast and targeted support where it is most needed, in complement to the temporary and targeted state aid changes outlined above. While the operationalisation of these different elements may not come at the same time, we are committed to deliver on this comprehensive European approach. For the mid-term, the Commission intends to give a structural answer to the investment needs, by proposing a European Sovereignty Fund in the context of the review of the Multi-annual financial framework before summer 2023. The aim is preserving a European edge on critical and emerging technologies relevant to the green and digital transitions, from computing-related technologies, including microelectronics, quantum computing, and artificial intelligence, to biotechnology and biomanufacturing and net-zero technologies. This structural instrument will build on experience of coordinated multi-country projects under the IPCEIs and seek to enhance all Member States’ access to such projects, thereby safeguarding cohesion and the Single Market against risks caused by unequal availability of state aids. The Commission will work with Member States in the design of the Sovereignty Fund to ensure that it addresses their respective needs. 2.2.3 Private funding By far the greater part of the investments needed for the net-zero transition will have to come from private funding. Public funding can crowd-in private investments, but it will not be sufficient to close the investment-gap needs. For successful net-zero transformation, we need vast amounts of private-sector financing in particular, financing raised through capital markets from a broad range of investors, including small retail investors as well as big institutional ones. Well-functioning capital markets and the sustainable finance framework are thus essential. The EU must ensure that its capital markets can support the necessary volume and variety of funding for EU companies, in particular in strategic industrial segments. The EU must intensify its efforts to create a fully developed Capital Markets Union (CMU). The CMU aims at increasing the size of individual capital markets and their cross-border integration to improve financing and investment opportunities for individuals and companies, including those operating in the clean tech sector. A deeper and truly integrated single market for capital would provide EU companies the means to finance themselves, to scale up and become less dependent on bank financing and to obtain financing to manage the green transition. Advancing the Capital Markets Union is thus an essential contribution to the Commission’s political objectives of green and digital global competitiveness of European firms and the EU’s open strategic autonomy. Achieving a fully integrated EU capital market requires greater ambition and commitment from all key stakeholders in reaching swift agreement on the Commission’s legislative proposals implementing the 2020 CMU Action Plan. The EU sustainable finance framework supports investors and businesses efforts to scale up their investments that would be aligned with the European Green Deal targets. EU sustainable-finance policies will support the green transition by making private funding of green projects and companies easier to obtain and more attractive, as recalled in the Renewed Sustainable Finance Strategy .

2.3.Enhancing Skills The green transition must be people-centred and inclusive to ensure equitable and just outcomes, generating quality jobs and leaving no-one behind. The European economy counted 4.5 million green jobs in 2019 up from 3.2 million in 2000. The green transition will amplify demands for new skills at all levels, requiring a large-scale up-skilling and re-skilling of the workforce. The battery industry alone estimates it will need an extra 800 000 workers by 2025. In the next decade, there will be fierce competition for talents. The productivity of our industry, the prosperity of our society and our ability to meet the net-zero objectives will depend on our ability to retain and attract workers. This is why the third pillar of the Green Deal Industrial Plan must focus on skills - green and digital, at all levels and for all people, with inclusiveness of women and youth at the heart of the Plan. Demand for talent is acute. Labour shortages, as proxied by the vacancy rate, have doubled in sectors considered key for the green transition between 2015 and 2021 and green transition technical skills are in growing demand. As it is estimated that between 35% and 40% of all jobs would contribute to the twin transition, technical - including digital - skills requirements and education levels in the green economy outpace the economy overall. Overall labour productivity is higher in the green sectors, with for example productivity in the clean energy sector about 20% higher than on average across the economy, rendering green skills even more important for future prosperity. The EU is taking action to address skills related challenges posed by the twin green and digital transition through its overarching framework - the European Skills Agenda , which runs in synergy with the European Education Area. The European Pact for Skills, which recently celebrated its second anniversary, supports 14 large-scale partnerships in European industrial ecosystems helping them to equip the workforce with the skills necessary for the transition towards a carbon-neutral and digital economy. The partnerships promote coordinated action by companies, workers, public authorities, social partners, education and training providers and employment services. Over 1,000 members have so far signed up, including large multinational companies, SMEs, local training providers, and chambers of commerce. Collectively, they have pledged to help upskill and reskill 6 million people. In addition, the Clean Energy Industrial Forum commits to stepping up efforts and investments in the development of skills. The Digital Education Action Plan, the Digital Decade and the Structured Dialogue for Digital Education and Skills that took place in 2022 have prepared the ground for speeding up actions in reforming education systems and the provision of basic and advanced digital skills across the economy and at all ages. This provides a strong starting point to ensure that the society and businesses alike, can use digital skills for more precision and efficient use of natural resources, for a more positive impact on the environment. The recent Communication on harnessing talents in Europe’s regions supports policies to help acquire and develop the skills required for the green transition in all EU regions. The European Year of Skills 2023 is a unique opportunity to develop the skills needed to thrive in a rapidly changing economy and to step up efforts. It is time for the EU and its Member States to be bolder and more ambitious in bringing about step changes in the education and skills agenda, and to implement opportunities presented by the EU framework: ·The Commission 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. A gender gap continues to prevail in the net- zero technologies sector. For example, women are under-represented in vocational and higher education in Science, Technology, Engineering, and Mathematics (STEM) sub-fields that are highly relevant for the energy sector. In the renewables sector, women account only for one third of the workforce, so there is a clear opportunity for harnessing female talent there. ·The Commission 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. The EU provides substantial financial support for this purpose, including through the Erasmus+ European Universities initiative (EUR 1.1 billion). ·Furthermore, we need to attract, and retain top talent to Europe, especially in Science, technology, engineering, and mathematics (STEM). We need to open new pathways for international STEM students and researchers to come to Europe. ·A large-scale skills partnership for onshore renewable energy under the Pact for Skills will be established by February 2023. The partnership will identify commitments and targets and develop a vision of concrete upskilling and reskilling needs for the renewable energy sector in Europe. ·A Heat Pumps skills partnership will be established by the end of this year and efforts are under way to create a skills partnership on energy efficiency. ·Modelled on the European Battery Alliance Academy, the Commission will propose to establish Net-Zero Industry Academies to roll out up-skilling and re-skilling programmes in strategic industries for the green transition, such as raw materials, hydrogen and solar technologies, The Commission will initiate an Academy to offer on- and offline trainings for sustainable construction with a focus on the use of biobased materials, circularity and digital technologies. Validation of skills, alongside efforts to support the recognition of qualifications across Member States and from third countries, as well as labour mobility policies, can facilitate matching people’s skills to employers’ needs. People learn in multiple ways and in different contexts outside of formal education and training structures. In order to support this: ·As part of the EU’s Skills Agenda, the Commission will facilitate recognition of qualifications. This could allow for a “fast track” to recognition and reduce administrative by supporting quick authentication of qualifications by employers and training providers. ·The Commission will further consider how to combine a ‘Skills-first’ approach recognizing actual skills with existing approaches based on qualifications, in the interests of EU mobile citizens and third-country nationals. ·In particular, to attract talent from outside the EU, the Commission is examining a skills-based approach to facilitate access of third country nationals to EU labour markets in priority sectors through the development of an EU Talent Pool and present a proposal on recognition of qualifications of third-country nationals. More can be done to support people in acquiring new skills. The EU has robust policy frameworks to financially support skills development, with Council Recommendations supporting a number of skills reforms in the areas of individual learning accounts and micro-credentials, to quality and effective apprenticeships and vocational education and training. Making these policy reforms deliver concrete results in a coordinated fashion across Europe requires both public and private funding to align, which could include:

·The General Block Exemption Regulation ceiling for aid to SMEs for training will increase from EUR 2 million to EUR 3 million. ·Measures providing opportunities to skill workers as part of an IPCEI will be taken into account in assessing state aid compliance of such projects. ·To stimulate increased investment in training in new net-zero technologies and production processes, the Commission will explore the treatment of training expenditure by companies as an investment rather than as an expense or operating cost. EU funding is also available. The Multiannual Financial Framework 2021-2027 and NextGenerationEU support investments of around EUR 64.8 billion in skilling, re-skilling and up-skilling. Out of those EUR 64.8 billion, cohesion policy, through the European Social Fund + (ESF+) is the main EU instrument to support investments in skills and is making EUR 5.8 billion available for green skills and green jobs. European Regional Development Fund (ERDF) complements ESF+ with investments in skills, education and training, including infrastructure. The Just Transition Mechanism (JTM) supports with EUR 3 billion training and skills development of workers to adapt to the green transition. The Recovery and Resilience Facility is providing a significant financial support. 14 Member States are including measures for training on green skills and jobs in their national Recovery and Resilience Plans that, together, amount to around EUR 1.5 billion. 2.4.Trade and resilient supply chains The EU welcomes initiatives conducted across the world on the road to climate neutrality and environmental sustainability. The goal of net zero can be best achieved if net-zero technologies incentives are underpinned by principles of fair competition and open trade. The fourth pillar of the Green Deal Industrial Plan consists of global cooperation and making trade work for the clean transition. The EU draws competitive and political strength from being a trading powerhouse. The EU remains an attractive destination for global investment. We would have not achieved our resilience and overcome the challenges of the past years without the efficiencies that trade brings and the win-win partnerships we developed with third countries. At the same time, an increase in unfair and coercive practices have required us to develop new tools and enforce our rights, in order to maintain a level playing field . Altogether, this reflects the EU’s drive towards Open Strategic Autonomy. Trade openness is an essential element of our strategy to maintain the EU’s position as a leader in net-zero technologies. Trade policy keeps the Single Market connected to growth poles outside of our continent while securing access to the inputs critical for the green transition. On the one hand, open trade creates opportunities for our industry by opening new export markets and creating economies of scale. On the other hand, it provides access to raw materials, parts, components as well as services that our industry needs, given that two-thirds of our imports consists of intermediates. The EU will work with its partners to promote stability in international trade and strengthen legal certainty for investors and companies by continuing to support the World Trade Organization (WTO), including through its reform. The WTO has a role in supporting climate neutrality by providing a forum for deliberations on trade aspects of the green transition, by clarifying how to promote green investments in a manner that minimises trade distortions, as well as by reinforcing disciplines on subsidies that negatively impact both trade and the climate. The Commission will also continue to advance the EU’s network of Free Trade Agreements, while making the most of those already in place through effective implementation and enforcement. In particular, the Commission will work to conclude negotiations with Australia by summer 2023 and make significant progress with India and Indonesia, while exploring possibilities with other partners in the Indo-Pacific. The Commission will also put forward for ratification the agreements with Chile, Mexico and New Zealand and seek to make progress with Mercosur. The Commission will also aim to finalise its Economic Partnership Agreement with Kenya. The Commission will support the clean transition by continuing to develop other forms of cooperation with partners, beyond more traditional trade agreements. The Trade and Technology Council with the US, and that under preparation with India, establish a new tool for cooperation. Through the work of the dedicated EU-US Task Force on the Inflation Reduction Act, the EU and the US are working towards pragmatic solutions to EU concerns, with a view to maintaining and reinforcing Transatlantic value chains and ensuring positive cooperation on the shared interest to achieve net-zero. The EU has developed Sustainable Investment Facilitation Agreements (SIFA) in particular with partners in Africa, in order to make it easier to attract and expand investments while integrating environment and labour right commitments. Climate and energy is a key area for partnerships under Global Gateway, the EU’s contribution to narrowing the global investment gap worldwide. Moreover, the EU will support developing countries in their efforts to adapt and comply with the EU’s autonomous sustainability requirements. The EU will further develop its policy dialogue and concrete actions on research and innovation with the Union for the Mediterranean and the African Union to promote co-operation on renewable energies and green hydrogen. The Commission proposes that investments in other key partnership areas such as digital or transport should be further aligned with the goal of net-zero. The Commission will continue to support sustainable investments in energy, transport and digital connectivity through the implementation of Economic and Investment Plans for the Western Balkans, the Eastern Partnership and the Southern Neighbourhood. A number of new initiatives will also be developed: ·We will work with like-minded partners to establish a Critical Raw Materials Club to deliver on a secure, sustainable and affordable global supply of raw materials essential to our green and digital transition with a competitive and diversified industrial base. Building on existing international initiatives, the Club will develop principles to bring together raw material ’consumers' and resource-rich countries and foster co-operation to allow resource-rich developing countries to move up the value chain. ·We will develop Clean Tech/Net-zero Industrial Partnerships promoting the adoption of net-zero technologies globally and supporting the role of EU industrial capabilities in paving the way for the global clean energy transition. ·We will develop an export credits strategy including an EU export credit facility and enhanced coordination of EU financial tools. These can foster coherence with EU policies such as the European Green Deal or Global Gateway which pledged to invest in infrastructures aligned with pathways towards net-zero emissions. Openness only thrives where fairness survives. Countries around the world have developed new initiatives to support the green transition. Where the public footprint in private markets is outsized, distortions create an unlevelled playing field and unfair competition emerges.A particular concern exists in respect of non-market economies. The EU wants to lead a robust response to address these trends. In the first place, the Commission will continue to make full use of trade defence instruments (TDI) to defend the Single Market from unfair trade practices like dumping and distortive subsidies, with a focus on sectors that are key for achieving the EU’s net-zero goal. We will also take further steps to ensure that our measures are not circumvented.