The European Union’s emphasis on promoting both digital advancement and sustainability underscores a crucial point in its trajectory towards a Green and Digital Europe. As it navigates the twin transition, the intersection of technology and environmental responsibility offers profound opportunities for progress and resilience.

As a report by DigitalEurope outlines, in Europe 1.25 Gt of CO2 is consumed – i.e., 2.3% of global CO2 emissions – but .08 Gt of CO2 could be saved by 2030 with digital technologies. Indeed, digital technologies are instrumental in enhancing energy efficiency and reducing greenhouse gas emissions overall. From the perspective of material efficiency, they are becoming progressively more environmentally friendly. Digital transformation, in general, enables increased economic efficiency through automation, data analysis, and innovation. This process helps reduce costs, enhance productivity, and stimulate economic growth, which is crucial for achieving the SDGs related to poverty eradication and promoting sustainable economic development.

There are many examples that show how the digital and green transition are linked. An outstanding  illustration lies in the transition to renewable energy sources where solar panels, wind turbines and hydropower exemplify sustainable technologies that diminish our reliance on fossil fuels and decrease greenhouse gas emissions. In addition, digitalization facilitates the development of “smart” electricity grids, allowing for the sustainable integration of renewable energy generation, leading to a power system with decreased operational and maintenance expenses, as well as fewer outages.

EU moves towards sustainable digitalization

The European Green Deal and the New Circular Economy Action Plan represent an ambitious environmental policy agenda and exemplify EU efforts towards sustainable digitalization, namely, the gradual, eco-friendly integration of digital technologies into the economy.

However, these approaches must ensure that digital advances do not produce more greenhouse gas emissions than they help save. Presently, according to the European Commission, digital technologies contribute to approximately 8-10% of our energy consumption and 2-4% of our greenhouse gas emissions, percentages that may seem small but have significant impacts, particularly in terms of tons of CO2 emissions. This is why there is a growing focus on ensuring that progress in each domain supports rather than obstructs the other, and the EU is currently dedicating resources and implementing strategies to reach green and digital objectives, for example, by promoting the advancement and adoption of eco-friendly digital technologies.

Initiatives like the European Green and Digital Coalition are being pursued to investigate both voluntary and mandatory measures aimed at assisting the private sector in achieving carbon neutrality and increasing the utilization of renewable resources. One such example of the EU effort in the field of sustainable transition is the agreement reached on February 2024 by legislators on the Strategic Technologies for Europe Platform (STEP), a plan to foster investment in green technologies. STEP aims to strengthen the European Union’s competitiveness in critical technologies through a series of investment incentives. The program focuses on development in what pertains to the areas of deep tech, cleantech and biotech, to develop sustainable energy production and eco-friendly technologies.

The Net Zero Industry Act

A notable example showcasing the recent endeavours of the EU in advancing sustainable transition is the Net Zero Industry Act (NZIA). Proposed by the Commission in March 2023, and part of the Green Deal Industrial Plan’s pillar for a predictable and simplified regulatory environment, the NZIA aims at promoting investments in the production capacity of products that are key in meeting the EU’s climate neutrality goals and eliminating carbon emissions from industrial activities. A goal that can be fostered by digitalization through enhancing energy efficiency, optimizing resource usage, and facilitating the transition to sustainable production methods through data-driven insights and technological developments.

The Regulation covers items required for producing net-zero technologies, distinguishing between standard net-zero technologies and strategic ones. The latter are those set to significantly aid decarbonization by 2030 and are either already available in the market or soon to be. While all net-zero technologies are covered by this regulation, strategic ones receive extra benefits, such as eligibility for resilience-based benefits in auctions and the opportunity to be designated as Net-Zero strategic projects. These projects may receive priority status, allowing them to benefit from expedited timelines. They are chosen based on three main criteria: 1. Readiness of the technology; 2. Contribution to decarbonization and competitiveness; 3. Resilience of the energy system. These projects must also meet other specific requirements, including being a technology on which the EU relies for over 50% of its imports. If a project is acknowledged as strategic, it should be granted the highest national importance status, leveraging this in approval procedures and spatial planning. Paramount public interest must also be taken into consideration among other factors, when assessing strategic projects status.

While under discussion, provisions from the regulation sparked debate among Member States (MSs). The primary disagreements revolved around the criteria and benefits allocated to strategic net-zero technologies. Some MSs were concerned these criteria might disadvantage certain industries or technologies, potentially leading to increased costs or difficulties in meeting decarbonization targets. Particularly, countries like Germany, heavily reliant on renewable auctions for their decarbonization efforts, expressed concerns that the Regulation may complicate or increase the cost of those auctions. As well, there were discussions about the prioritization of projects and the allocation of resources, with differing opinions on how to ensure fairness and effectiveness in the implementation of the Act across MSs.

On 25 April 2024, during the last plenary session before the European elections, MEPs finally approved the Net-Zero Industry Act. The move followed the provisional agreement reached by legislators in February and marks the finalization of the NZIA.  The final stage will involve EU Competition Ministers giving their approval on 24 May 2024.

EU Member States can now opt to provide incentives for project bidders in public procurement and certain energy auctions using non-price factors such as sustainability or resilience. Initially, this approach will affect at least 30% of auctions, providing a balanced strategy that supports EU solar manufacturers in securing financing for their projects by ensuring a steady demand. Importantly, this adjustment should not disrupt the remainder of the auction market, preserving the momentum necessary for solar deployment.