The European Commission has proposed a funding programme worth billions for the period 2021-2030 (with some amount possibly made available before 2021). Called NER400 Innovation Fund, it will build on the NER300 programme which saw 2.1 bn EUR awarded to 38 innovative renewable energy and one CCS project. NER400 Innovation Fund will additionally include measures to decarbonise industrial production.

The debate on NER400 Innovation Fund’s function and form is underway now. In 2016 and 2017 the European Parliament and Council of Ministers will consider and likely adopt the primary legislation that will set it up.

This website is unofficial and independent, providing

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Jun 08 2016

Knowledge-sharing rules erased from the ETS legislative text

The ETS Directive 2009 put a requirement on the owners of installations that were awarded NER300 money to share results and experiences from its operation. The EC proposed removing this from the legislative text governing NER400 Innovation Fund, leaving the only reference to knowledge-sharing in the recitals.

Neither Federley nor Duncan have so far drafted amendments that would put knowledge-sharing back into the legislative text.

Stakeholders’ views

(as expressed in the public consultation on revision of the EU Emission Trading System (EU ETS) Directive)

BDEW and IOGP are pro. BDEW: “Projects shall be selected on the basis of objective and transparent criteria that include requirements for knowledge-sharing.” IOGP: “Pre-commercial/demonstration programmes should stimulate and maximise learning, as well as sharing and broadening knowledge in areas where there are gaps. This would increase confidence in CCS and also improve public support.” Finnish Forest Industries Association is anti: “More limited knowledge sharing. IPR should secure noticeable exclusive rights to the industrial player for more than 5 years.”

Shell says, “It would be beneficial if the EU Commission clearly defined foreground and background knowledge, with clear protection provided for knowledge developed by a company prior to it submitting an application.” [Editor’s note: The distinction is clear in the EC’s Horizon 2020 programme and was made clear as NER300 developed.]

  1. NER400.com’s comment

    MEPs or the Council should put knowledge-sharing rules into NER400 Innovation Fund. They should be more robust than those of NER300, not less, and proportionate to the nature and amount of funding/finance required from the Fund.

    Companies that do not get awards must be allowed to stand on the shoulders of the lucky ones that do by learning from their mistakes or successes. Info on the installation’s performance should be published in the form, for example, of high-resolution time-series data-sets. This is necessary to make swift progress in bringing climate-protecting technologies to market and is consistent with the EC’s agenda on Open Data, recently given support in the Council.

Jun 08 2016

Dutch Presidency publishes paper covering the Council’s progress on NER400 Innovation Fund

…(and the ETS 2030 file more generally). The paper includes the lines,

“The selection of projects/the allocation of funds should be primarily based on merit, while access to bid on fair terms should be enabled to allow for a wide and balanced geographical spread of projects. Most delegations are in favour of simplified procedures for smaller projects, also to enable a wide geographical spread of projects.”

“The Presidency proposes to further explore the need for a wide geographical spread if simplified procedures and access to bid on fair terms are in place. The Presidency invites industry to come forward with concrete ideas regarding the use of the Innovation Fund.”

Presidency note

  1. NER400.com’s comment

    The Presidency is wise to listen to industry (both power and non-power sectors) and advance cautiously. It is also what the Impact Assessment advises in regard to choosing the maximum funding rate. It says, “it is not possible to simulate the effect of higher funding rates based on current experience with the NER 300” and recommends that co-funding rates for RES, CCS and industry be identified “through more extensive market testing in the context of preparing the implementing legislation for the Innovation Fund.” This line appears in the Impact Assessment body and annex (p59, p222) and in the executive summary of the Impact Assessment (SWD (2015) 136). It is odd, therefore, that the EC in its legislative proposals pre-empted this exercise and plumped for 60% as a flat rate for all the sectors concerned by NER400 Innovation Fund, and odder still that MEP Duncan should feel he has the insight to confidently boost it to 75%.

Jun 08 2016

MEP Ian Duncan hands in his amendments on NER400 Innovation Fund

Ian Duncan is an MEP in the Environment Committee of the European Parliament. He shares the lead on NER400 Innovation Fund with Fredrick Federley in the Industry, Research and Energy Committee.

***UPDATE 20 June 2016: This article might have over-stated Mr Duncan’s support for CCS, at least according to this tweet of his from the Politico/Shell event of this evening.***

He wants (in common with Fredrick Federley)

  • 150 M more EUAs for NER400 Innovation Fund than proposed by the EC, and for them to be exclusively destined to projects to decarbonise heavy industry
  • to remove all provisions related to the distribution of projects among Member States, unlike the EC, which proposes ‘geographic balance’. On this point, Federley’s intuition that Member States will resist the move is correct, as has been made clear by the Council at every occasion (here, here and most recently here).

He also wants

  • a selection process that would be based on a project’s “impact on energy systems or industrial processes within a Member State, a group of Member States or the Union”
  • clearer support for CCU (“A number of [Member States] ask for explicit mentioning” of the same thing, reported the Dutch Presidency on 3 June 2016)
  • Up to 20% of total number of allowances to one project (European Commission proposal: 15%)
  • more generous funding per project: 75% of costs (ahead of Federley’s 60% and the EC’s 50%)
  • the possibility to get up to 60% of the award on the strength of effort rather than successful operation of the installation (as against the EC’s proposal of 40%)
  • allowances for the Innovation Fund to “be shared equally between the auction share and the free allocation share” (putting him, a centre-right MEP of the ECR Group on a collision course with the other, larger centre-right EPP Group, which wants all allowances to be taken from the auctioned share).

His Draft Report setting out his views is here.

Shell and Politico are giving him a platform to set out his views at this event (Brussels, 20 June). Shell is a partner in the Peterhead CCS project (one of two projects that had been in the DECC’s CCS competition until the competition was cancelled in November 2015).

  1. NER400.com’s comment

    It’s a surprise Mr Duncan’s middle initials aren’t “C. C. S.”, or perhaps “CCU”. His amendments are geared towards helping projects that require enormous sums of public money, and he (correctly) sees geographic balance as an obstacle in that endeavour. The Carbon Capture and Storage Association and ROAD, a frontrunning CCS project, were the only respondents out of 400+ to the consultation on revision of the EU Emission Trading System (EU ETS) Directive to comment on the overall funding cap, and both said no cap should be placed on funding for CCS.

    Under his proposals, assuming he accepts the EC’s forecast of an average carbon price of 25 EUR / tonne over the period of NER400 Innovation Fund, a single CCS project could scoop an award of 3 bn EUR, 1.8 bn EUR of which it would get to keep without ever producing a MWh of electricity.

    Mr Duncan says his 20% ceiling is “to guarantee enough support for breakthrough technologies.” ‘Breakthrough’ might be the wrong word. Technologies that require the public to take on so much liability in absolute and relative terms in single installations should be called ‘forcethrough’ technologies.

    CCS is far from universally popular among the public consultation respondents, including industry. Details here.

Jun 07 2016

Attitudes to CCS, CCU and coal’s place in NER400

This article is written from the published responses to the European Commission consultation on revision of the EU Emission Trading System (EU ETS) Directive, which closed on 16 March 2015.

***UPDATE 17 June 2016: Information on the Belgian government’s position has been published (integrated below).***



Except for the companies trying to earn money from CCS technology and the associations that support them, Sandbag is the most fervently pro-CCS respondent. It said, “The Commission should bring forward proposals for an EU-wide target for greenhouse gas sequestration, in order to stimulate Member States to offer the support to CCS, as has happened successfully with the Renewables targets.” (Editor’s note: a future article will cover its radical position on earmarking in NER400 Innovation Fund).

Two speak up for ‘Bio-CCS’, in which the CO2 released from the combustion of biomass is stored rather than vented to the atmosphere, Bellona and Magnus Nilsson Produktion. The latter says, “Storing 80% of the emission from a coal plant is not good enough while storing 25 % of the CO2 from a biomass fuelled plant is extremely interesting. It might be worth favouring CCS in combination with biomass use.”

Austrian Federal Economic Chamber — Wirtschaftskammer Österreich (WKÖ) says, “So far, the funding of renewable energy projects has been the main focus of the NER 300. However, more effort should be undertaken to realise European projects for CCS.”

CCS is the third priority of Carbon Market Watch / Nature Code and five other NGOs, and then only for industrial applications, not power generation (the line taken by MEP Gerben-Jan Gerbrandy, also).

Member States

Speaking at the Green Growth Summit on 17 September 2015, Amber Rudd (the UK’s Secretary of State for Energy and Climate Change), said that the fact that NER400 Innovation Fund would be “open to Carbon Capture & Storage (CCS) and industrial low carbon projects for first time” was one of three things the UK liked about the EC’s proposals for Phase IV of the ETS. On 26 November, however, the UK government cancelled funding for its own flagship CCS programme.

The Belgian government, in three lines on NER400 Innovation Fund in its position paper circulated to the Council of Ministers, wrote, “Specific projects for the capture or use of carbon dioxide should also be eligible for funding from this innovation fund.”


Projekt21plus: “We have to note that we see critical aspect about the technology of CCS, concerning acceptance and feasibility and are not in favor to support further research in CCS with EU finances.”

Glass for Europe and 11 glass companies say CCS is a “very costly end-of-pipe technique, subject to critics and lack of acceptance.”

CEMBUREAU is also put off by the cost: “The most important point for CCS is that the operational costs of a plant equipped with post-combustion carbon capture technology are expected to be double the cost of a conventional cement plant.” So are CIPCEL and CPME: “For years the NER300 program has targeted CCS linked to power generation and the result is disappointing due to the massive infrastructure costs and time needed to implement CCS properly.” EPF says, “The NER300 programme hasn’t been fully implemented because of the huge cost of CCS projects.” Its solution would be to trap CO2 by making durable products out of wood.

Metal producers are also inclined to scepticism. Aluminium producer Trimet: “it should be scrutinized whether the funding of CCS technology is still appropriate”. Aurubis (copper producer) asks whether resource-efficiency and a list of other technologies would be more cost-efficient than CCS. It and Royal DSM (generalist materials producer) wonder whether CCS is the right “focus”.

Opposition is found in central Europe from two Czech organisations (CEZ and Czech chamber of commerce) and the Polish government (including more recent statements). Bavaria (Bavarian State Ministry of the Environment and Consumer Protection) is condemnatory: “CCS is no realistic option in near future.”

CCS in industry

The European Lime Association, EuLA, points out that in lime manufacture, “68% of the total CO2 emissions are so-called ‘process emissions’ originating from the decarbonation of the limestone.” The challenge of decarbonising sectors with a high proportion of “irreducible ‘process’ emissions” was highlighted by its Spanish member, ANCADE. E3G appears to consider that they as well as chemicals, pulp & paper, and steel “should be given ‘priority focus'” as “electrification is not a viable option” for them.

Different technological responses are proposed to tackle process emissions. EuLA favours CCS, but UNESID, which represents steel manufacturers, proposed moving from carbon to hydrogen as a reducing agent: “The case of hydrogen is a clear case in which a demonstration or pilot plant would need a very tailor-made support, since these kind of plants neither are or are expected to be profitable in a short/medium even long term. It would need [an] affordable and widespread [hydrogen] generation and distribution.”

CCU — carbon capture and use

CEEP is the most enthusiastic supporter of CCU, more so than when it responded to the 2014 public consultation (compare 2015 “We strongly advise including CCU as having a substantial chance of success” with 2014: “new developments concerning a decrease of CO2 emissions should be supported starting from power production efficiency, no matter if it is based on coal, gas or other sources of energy such as RES and the utilisation of CO2“).

CEMBUREAU: “Given the issues related to CO2 storage, R&D related to new alternatives to reuse or valorize the CO2 captured should be promoted and financially supported. […] Regulatory barriers, such as the one related to the ‘Transferred CO2‘ (included in the MRV of the EU-ETS for the period 2013-2020) which only allows the subtraction of the transferred CO2 if it will be ‘for the purpose of long-term geological storage’ should be removed.”

Projekt21plus “could imagine” a programme “with focus on recycling of carbon instead of storage” providing it does not lead to “any additional emissions”. It singles out methanation, which is a technique for storing electricity also known as ‘power-to-gas’, as an example of where such recycling would be “imaginable”. Two other respondents, ENAGAS and IOGP, referred to power-to-gas as a technology to store electricity (ENAGAS advocating the use of gas in transport applications). Others spoke about electricity storage more generally (see below). Exclude coal from NER400 Innovation Fund’s scope, Projekt21plus proposes.

Royal DSM, Aurubis and VIK (materials / power) wonder if CCU isn’t more cost-efficient than CCS. [Editor’s comment: maybe, but the two technologies serve different purposes]


Martin Korolec, Poland’s Government plenipotentiary for climate policy, wrote that NER400 Innovation Fund “should be eligible for all low-emission energy technologies, including clean coal technologies.”

Polish Lime Association (Stowarzyszenie Przemyslu Wapienniczego) said, “the development of so-called clean coal technologies and low-emission and high-efficiency coal technology should find its place in the development of climate policy.”

May 26 2016

Key European Parliament deadlines related to NER400 Innovation Fund (ITRE)

Situation 25 May 2016:

Exchange of views on working document 17/03/2016
Consideration of draft opinion 13/06/2016
Deadline for amendments 6pm 15/06/2016
Consideration of amendments (optional) 12/07/2016
Deadline for compromise amendments 12 noon 03/10/2016
Vote ITRE 13/10/2016
May 26 2016

NER400 Innovation Fund discussion at Carbon Market Watch report launch

MEPs Jo Leinen and Gerben-Jan Gerbrandy yesterday co-hosted the launch of Carbon Market Watch’s report ‘The Final Frontier — Decarbonising Europe’s energy intensive industries‘ in the European Parliament. Carbon Market Watch says its “findings highlight that claims by polluters that their industrial sectors cannot be decarbonised — often used as means to justify special treatment — are grossly unsubstantiated”. Femke de Jong, EU Policy Director at Carbon Market Watch, put up this slide comparing the quantity of freely-allocated allowances to industry with the amount to be targeted on innovation, but stopped short of repeating her organisation’s call for an ‘NER1000’ made in October 2015:


MEP Fredrick Federley’s proposal to increase the size of the Innovation Fund from 450 M allowances to 600 appeared to have CEFIC‘s explicit support. William Garcia, Executive Director for Energy, Climate and HSSE at CEFIC said, “The larger the fund is the better. 400 M EUAs is a very good start but maybe not enough”.

Federley said, “If we create an Innovation Fund, it’s important to know that the funding is being used. We know from NER300 there’s a lot of money not being used.”

He took a hypothetical example to defend his line that location should not be a consideration in the selection of projects for funding or financing: “If an industry in Portugal comes up with the best ideas to decarbonise then that is where the Innovation Fund’s means should be used. Theoretically this could happen and we should not stop that process.” However, he expects that Council will “endorse [the EC’s proposal for geographical balance] because every government wants to go home feeling it has secured so-and-so millions of euros of investment in its country”.

Gerben-Jan Gerbrandy, responding to a question by IOGP, said, “I’ve always supported the development of CCS technology but I’ve always foreseen that it shouldn’t be the oil and gas companies that are going to use that technology. I think we have to focus on process CO2 because there the biggest difficulties lie.”

May 26 2016

One instrument or two? A plea to ITRE and ENVI MEPs (and the Council)

It is not 100% clear whether the EC wants to create one instrument combining 400 M monetised EUAs and 50 M other monetised EUAs, or two instruments each fed by their respective source. The text in its proposal on an ‘Innovation Fund’ is divided into two sections (see page 19 here). The first refers to 400 M EUAs, uses language from the European Council Conclusions of 23-24 Oct 2014 and does not specify from which part of the ETS the EUAs should be drawn. The second refers to 50 M EUAs to come specifically from the MSR and uses language from the MSR Decision.

The 400 M EUA section talks of the need to support projects in “geographically balanced locations”, while the 50 M EUA section says projects in “all Member States” will be supported. The 50 M EUA endowment will “include small-scale projects,” while the 400 M EUA block puts no restrictions on size. The 400 M EUA section talks of the conditions for disbursement, while the 50 M EUA section describes the competition, saying it must be run on “on the basis of objective and transparent criteria”.

  1. NER400.com’s comment

    It’s a mess

    While there is ambiguity in the legal text, the official detailed Q&A, by contrast, makes it clear that the EC wants to launch one single ‘Innovation Fund’, not two funds with different rules. Table 41 of the Impact Assessment suggests the same thing. Amendments by Parliament and Council will hopefully iron out inconsistencies in phrasing in the legislative text so that it reads more like a description of a single, unified instrument. A sub-paragraph could describe where the 450 M EUA will come from, saying that 50 M EUA of them are from the MSR and constitute the portion that will be available before 2021.

    The policy of this website is to call the instrument ‘NER400 Innovation Fund’: the phrase lacks the accuracy of NER450, but is faster to say. ‘Innovation Fund’ on its own is too generic (and difficult to use in search engines).

May 05 2016

First MEP amendments to NER400 Innovation Fund rules published

Fredrick Federley, the lead MEP in the drafting of amendments related to NER400 Innovation Fund, has published his amendments to the European Commission’s proposal. There are five, numbered 19-23. His other amendments concern other rules for the Emissions Trading Scheme.

Most were trailed last week, but not the one reproduced below. In it Federley proposes “Eligible CCS and innovative renewable energy projects should reduce the levelised costs of electricity production with the technology by at least 20%.”:

Amendment 20
Proposal for a directive
Article 1 – paragraph 1 – point 5 – point f

Directive 2003/87/EC
Article 10a – paragraph 8 – subparagraph 2

Text proposed by the Commission Amendment
The allowances shall be made available for innovation in low-carbon industrial technologies and processes and support for demonstration projects for the development of a wide range of CCS and innovative renewable energy technologies that are not yet commercially viable in geographically balanced locations. In order to promote innovative projects, up to 60% of the relevant costs of projects may be supported, out of which up to 40% may not be dependent on verified avoidance of greenhouse gas emissions provided that pre-determined milestones are attained taking into account the technology deployed. The allowances shall be made available for innovation in low-carbon industrial technologies and processes and support for demonstration projects for the development of a wide range of CCS and innovative renewable energy technologies that are not yet commercially viable. Eligible low-carbon industrial projects shall contribute to emissions reductions of at least 20% below the benchmark as set out in paragraph 2 and should enhance competitiveness and productivity. Eligible CCS and innovative renewable energy projects should reduce the levelised costs of electricity production with the technology by at least 20%. In order to promote innovative projects, up to 60% of the relevant costs of projects may be supported, out of which up to 40% may not be dependent on verified avoidance of greenhouse gas emissions provided that pre-determined milestones are attained taking into account the technology deployed. The Commission shall publish before 2018 the state aid guidelines for Member State co-financing of eligible projects.
  1. NER400.com’s comment

    The eligibility criterion proposed for industrial projects seems reasonable: it is quite likely that a plant that incorporates a green process does so at higher cost than one that uses a dirty process, and that a difference remains no matter how many optimisations are made to the greener process.

    It’s different for installations producing renewable energy (“energy” — Federley appears only to consider electricity). The game here is to use NER400 Innovation Fund money to improve a technology that already produces zero-carbon electricity, so Federley’s ‘levelised cost of electricity’ is badly defined: he cannot mean that the installation put forward for the competition will produce energy at 80% of the cost of the current generation of that technology or the installation would not need any NER400 Innovation Fund money. As to the alternative possibility, namely that he is referring to the levelised cost of electricity of the technology once the NER400 Innovation Fund project is over and the technology is widely deployed, that amount will be highly speculative at the time the NER400 proposal is submitted, making it an unsound eligibility criterion.

May 05 2016

Which EUAs to monetise for NER400 Innovation Fund, and when should the proceeds first be awarded?

Fredrick Federley, in his amendment 22, proposes using 150 M more EUA (EU Emissions Trading System Allowances) for NER400 Innovation Fund than the 450 M EUA proposed by the European Commission. His extra EUAs would be ‘Phase’ 3 ETS allowances (i.e. related to reaching the 2020 target of a 20% cut in CO2 emissions) that have not been released to emitters so far.

He has support for this position from ZEP and Alstom, who called on the EC in their response to the March 2015 ETS Review public consultation, to “monetise free allowances from the NER non-allocated in 2020 and free allocations allocated to plants that will close before 2020”. He has Shell‘s support, too. Shell would like to create an ‘allowance pool’ that could contain allowances “from within the Market Stability Reserve (MSR) [and] the remaining [un-allocated] allowances at the end of each ETS phase”. These would be monetised “in tranches properly sized to maintain the necessary supply”. TVU says something similar. (See ‘When is the right time to monetise allowances’ for more)

But Eurelectric and four others from the electricity industry are opposed. They say, “in order not to undermine the Market Stability Reserve (and functioning of the ETS), it is important that the Innovation Fund (NER400) is fed by phase IV allowances, and that all unallocated allowances from phase III go directly to the MSR.” The CCSA, Alstom and IETA also eye up the “significant amount of funding returned to EU institutions as a result of successful NER300 applicants not taking projects through to delivery. This funding is readily available and would not further impact on the ETS market as allowances have already been monetised.”

Having your cake and eating it?

ZEP and Alstom also suggest “Without being monetised, allowances from the ETS could be used as collateral at an agreed carbon price.” Bellona explains the idea as follows “A ‘guarantee fund’ should be set up to guarantee targeted support for CCS in cases where the EUA price falls below a minimum threshold – a determined ‘strike price’ – and therefore the NER400 fails to deliver the necessary funding.” Scotland Europa and CCSA have a different name for the process: ‘backstopping’. The original promoter of the idea is the NGO Change Partnership, which did not make a contribution on the topic of NER400 to the public consultation, or if it did, it was not published.

  1. NER400.com’s comment

    The approach carries some risk for the carbon market. If carbon prices are high and so is demand for EUAs, the mechanism will keep prices high. If carbon prices fall and the guarantee fund must be called upon, the effect of the guarantee fund will be to drive prices lower. It is a source of volatility. Many contributors call for a schedule published well in advance for when exactly allowances will be monetised (said by TVU & Shell above and see ‘When is the right time to monetise allowances’).

More NER300-like funding before 2022?

At the time that the public consultation was running, an agreement was being finalised between the EC, European Parliament and Member States on the MSR. The possibility of an early start to NER400 Innovation Fund or of another round of NER300 using allowances from the MSR was felt quite keenly by the stakeholders. Indeed, the European Parliament’s proposed amendments in that regard were eye-catching (see article from March 2015).

Ocean Energy Europe called “on the Commission to take the necessary steps for the renewal, before 2020, of NER300 or a similar instrument that has the same focus and encompasses renewable energies.” ZEP, CCSA and IETA made the same request. ROAD (the Netherlands’s flagship CCS project) said, “The Innovation fund should start as soon as possible and not in 2021. In fact, some projects should already be operational in 2021.”

Their message was taken up by the UK, with DECC (the UK ministry responsible for NER300) calling on the EC to consider “an early start to the application and award process for a limited number of projects that might be up and running and ready to receive operational funding as soon as the first allowances are monetised in 2021.” Scotland Europa says the fund “should be open for application in 2017 to allow its release in 2018.”

May 05 2016

When is the right time to monetise allowances?

Before NER400 Innovation Fund can begin to disburse money to projects, EU ETS carbon allowances will need to be sold. Federley, lead MEP on NER400 Innovation Fund, hedges his bets on the timing of the sale of the EUAs:

“The monetisation of allowances for the innovation fund shall time the auctioning of allowances in such a way to provide certainty of available funds, while avoiding a negative impact on the orderly functioning of the carbon market.”

Amendment 23 Fredrick Federley Draft Opinion

CEPS hints at the problems caused by fluctuating EUA prices: “With the significant volatility in EUA prices, the NER has not been able to provide a stable pool of money, especially for the larger projects, including CCS. A mechanism that would make the funds more predictable for such projects is something that should be considered.” Projekt21plus agrees: “Currently when the price for allowances is at a quite low level, the support for the innovation fund is at a quite low level as well. We prefer a future structure of the programme which is independent from the variability of prices for emission allowances and deliver a reliable basis for financing innovation projects seriously.”

Perhaps the solution lies in doing what was suggested by Catalonia: “The EIB could sell in advance a portion of credits before the call of proposals”. This approach could satisfy DECC’s wish for “further clarity on how the funding will be handled, both to ensure that projects of each type are considered for and able to receive funding, and to have a greater understanding of the number of projects that could be funded in each area.”

The electricity sector speaks as one to say, “The timing of inflow of these NER400 allowances into the market should also be made predictable for market parties” with support from Hungary and IETA, which adds that the release should be “gradual and clarified well in advance”. But they are countered by voices saying the EIB could be given the freedom to be a little cannier in when it chooses to monetise EUAs. CEPS: “The EIB is currently strictly required to act as a price-taker. It could be considered to allow the EIB more freedom in determining when to monetise, so that the total amount of funds available would be maximised.” DECC: “The timescale for the auctioning of any allowances for the Innovation Fund [NER400] (as well as the Modernisation Fund) needs to be carefully considered to maximise the value of the Fund whilst minimising the impact on the wider carbon market. This may suggest a more flexible or staggered approach than was adopted in the NER300.” EFET (on a collision course with IETA): “Allowing the European Investment Bank more freedom in determining when to monetize allowances (setting temporal windows) will enable to maximise revenues and exploit the Fund as a market stabilizer.”

Burdening the EIB

What if allowances don’t fetch the price expected at the time the programme is designed? The Polish Electricity Association would pass all EUA price risk to the EIB: “It could be considered to determine in the future ex-ante the minimum value of allowances to be auctioned and have e.g. the EIB to cover potential differences between actual carbon prices and the previously determined floor price.” The think-tank Bruegel has suggested the same thing: “A public bank (eg the European Investment Bank) would offer contracts that agree to pay in the future any positive difference between the actual carbon price and a target level. Investors would bid to acquire such contracts to hedge their investments. Hence, public budgets would be significantly exposed to the functioning of the ETS.” (See also ‘Merging: towards a “NER 2020” and a “Horizon 400”?’ for Estonia’s wish for MS and EIB to share the risk of project underperformance)