May 05 2016

First MEP amendments to ETS Innovation Fund rules published

Fredrick Federley, the lead MEP in the drafting of amendments related to ETS 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 ETS 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 ETS Innovation Fund money. As to the alternative possibility, namely that he is referring to the levelised cost of electricity of the technology once the ETS 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.