Oct 26 2015

Environment Ministers exchange views on ETS Innovation Fund

Luxemburg, which holds the Presidency of the EU until the end of the year, asked the other Member States (Presidency Note), “Are the proposed low carbon funding mechanisms for industrial innovation and energy sector modernisation a sufficient stimulus for public and private investments needed to achieve the 2030 climate target?”

They presented their answers during three-minute contributions to today’s Orientation Debate on the EC’s proposals for the Emissions Trading System 2021-2030. In most cases, Member States’ comments briefly covered ETS Innovation Fund, which is one component of the future ETS.

Technology choices

The UK singled out CCS and RES as its priorities for the new fund. Support for CCS came from Slovakia, but Poland’s representative said, “Instead of supporting CCS, which I personally have doubts is climate-friendly, we should develop CCU.” Slovakia supported CCU (carbon capture and use), too.

France and Sweden want to stop support for fossil fuels, with Sweden saying (via interpretation) “Investments in fossil fuels are a blind alley — a dead end — that will make it more expensive to achieve our objectives. We need to focus on renewables, energy efficiency and infrastructure.” The same three items were mentioned in that order by Germany. Both Germany and Denmark wanted to link ETS Innovation Fund to achieving long-term climate targets.

Finland said, “The Innovation Fund has important role in funding investments in new innovative technology based on renewables.” Sweden spoke up for advanced biofuels specifically.

Ireland, Germany, Austria, Bulgaria, Lithuania and Finland explicitly endorsed the broadening of the scope of ETS innovation funding to industry.

Small = small

Small Member States call for small-scale projects: Slovenia, Austria (the two countries that pressed for the derogation that became NER300’s Article 6(2)) and Latvia, Cyprus and Malta (Malta via a re-interpretation of what it means for a project to be ‘innovative’).

Another way for small Member States to try to get projects is to call for a mechanism that distributes projects evenly (or at least, more evenly than an open competition) between territories. This is called for by Bulgaria, Lithuania and Slovakia.

No to Delegated Acts

According to the EC’s proposals, ETS Innovation Fund will be implemented through a Delegated Act, a piece of legislation negotiated directly between technical staff in the European Commission and civil servants from national administrations. Portugal and Latvia called for the text of the ETS Directive (as opposed to Delegated Acts) to include more detail on the functioning of ETS Innovation Fund, and Hungary and Portugal called for less use of Delegated Acts in general in the ETS revision process.

Other sources of funding exist

Poland and Spain pointed out that other instruments exist at EU level to fund innovation. This fact did not trouble Slovenia, which said it was still feeling the effects of the economic crisis and that ETS Innovation Fund would be a welcome source of funding. France even said the budget of ETS Innovation Fund could be swelled by putting into it allowances that, under the EC’s proposals, would go to industries that are not at significant risk of carbon leakage.

Estonia was not represented in the debate, although in a public consultation on the revision of the ETS that closed on 16 March this year, as part of a longer comment it said, “the new fund should still follow the principle of even geographic allocation of the available financing”.

Oct 24 2015

Successor programme to NER300, “NER400”, agreed

As part of their deliberations on the EU’s Framework for Climate and Energy 2020-2030, European leaders last night mandated the creation of a successor programme to NER300, “NER400”, which would be “initially endowed with 400 million carbon allowances”. The current programme raised 2.1 bn EUR for innovative renewable energy projects and one CCS project. The next one would raise over 9 bn EUR on the assumption of a carbon price of 23 EUR/tonne. This price is a forecast made in August 2014 by Thomson Reuters for the period 2021-2030.

The European Council wants NER400 to cover “low carbon innovation in industrial sectors” as well as CCS and renewables. A reference to “small projects” has been included in the four lines devoted to the topic in the summit’s Conclusions.

  1. NER400.com’s comment

    The creation of NER400 turned out to be one of the less contentious parts of last night’s deal. According to a source, the form of words had been agreed last week. What a difference six years makes. As this account from a similar European summit in 2008 shows, the setting up of the original NER300 was a much harder fought battle.

Oct 09 2015

An NER1000?

The EC’s proposals for Europe’s Emissions Trading Scheme for the period 2021-2030 would give away too many carbon allowances for free, says Carbon Market Watch. Many of the 6.3 bn allowances to be given to companies at risk of carbon leakage will inhibit them from producing more efficiently or investing in innovative technologies that reduce CO2 says the campaigning organisation. “A wide range of technological options to reduce emissions in these carbon-intensive sectors are available that remain unexploited. Free allocation shields industrial sectors from the carbon price signal and puts European industry at risk of falling behind in deploying low-carbon, state-of-the-art technologies compared to their competitors abroad.”

Carbon Market Watch calls for free allocation of allowances only for those sectors that are both heavily reliant on exports (or exposed to imports) and very carbon-intense, and even then, only for “the share of carbon costs that are not passed on to customers”. On the other hand, it calls for ETS Innovation Fund to be boosted to a fund of 1000 million allowances, ‘NER1000’, to help industry innovate and regain technological prowess in efficient production.

Its report, Carbon leakage myth buster, is here.