Sep 16 2016

European Commission gently promoting an increase in the Innovation Fund pot beyond its proposal

***UPDATE 27 Jun 2017: Commissioner Cañete, participating in today’s trilogue meeting, reportedly says he would like an agreement on the size of the Fund to be found between the Council’s (450 M EUA) and Parliament’s (650 M EUA) positions.***

***UPDATE 12 Jun 2017: Director General Jos Delbeke says of the negotiations between the European Parliament and Council on the size of ETS Innovation Fund, “With good winds we could get higher amounts than 450 M EUA. It would not be the European Commission standing in the way.” He was speaking at the event Final event: Towards the ETS Innovation Fund.***

***UPDATE 13 Feb 2017: Commissioner Cañete tells the European Parliament, “Parliament is discussing to send a clear signal on the need to boost the Innovation Fund for the benefit of European companies and to ensure that the Modernisation Fund spurs decarbonisation in lower-income Member States. When looking at these funds we need to be mindful of their effects on Member States auction revenues and favour elements that would bring the Council and Parliament together”. To recall, the European Parliament called for the allowances to come from the part of ETS allowances that are auctioned, thus depriving the Member States of revenue.

Later in the plenary debate, Jutte Guteland and Bas Eickhout drew attention to the idea of more money for the Innovation Fund.***

Judge for yourself from the quotes below, all made in the last three months. The Commission tends not to draw attention without further comment to amendments it doesn’t like:

9 June

Commissioner Cañete at the High Level Roundtable on low carbon innovation: “[Our proposal] comes with 450 million allowances and I note that both rapporteurs in Parliament have put forward amendments that would see even more allowances.”

20 June

Commissioner Cañete at Environment Council: “Both rapporteurs see the need to increase the endowment of the Innovation Fund from the current 450 M EUA to speed up Europe’s low-carbon transition. That represents a significant amount of money.”

12 July

DG CLIMA Director Mary-Veronica Tovšak Pleterski at European Parliament ITRE committee Consideration of Amendments on Federley Draft Opinion: “I note with interest the reflections about potentially increasing the endowment for industrial projects in the innovation Fund.”

Sep 16 2016

MEPs’ amendments

MEPs’ amendments on the EU Emissions Trading Scheme 2021-2030 are in. The article covers the views of MEPs other than Federley and Duncan on ETS Innovation Fund, expressed through their amendments. For Duncan’s and Federley’s amendments, see this article.

The Industry, Research and energy Committee’s (ITRE’s) package of amendments is available here. This particular pdf contains the amendments that concern Innovation Fund (in English).

The Environment Committee’s (ENVI’s) are here. This particular pdf contains the amendments that concern Innovation Fund (in English).

600 M allowances for the fund, please, not 400

Supported by Greens-EFA, S&D Eickhout, Italy ALDE, Italy ENF
Not supported by EPP – put same amendment as the Greens-EFA and S&D, except for the increase in allowances
Amendment numbers 409, 411, 412 409, 410, 414

Other suggestions for the amount of allowances for the Innovation Fund range from the meanest “up to 400 M EUAs” from Lorenzo Fontana and Matteo Salvini (ITRE Italy ENF) via 550 M (ENVI ALDE Gerbrandy and Faria) to the most generous, 800 M EUA (ENVI S&D Schaldemose, Guteland and Groote). Two out of three 800 M-supporters also signed the more widely-supported amendment calling for 600 M EUA, implying that they see it as an extreme position.

None of these amendments fully reflect the shared position of the two Rapporteurs, which is that the extra allowances beyond the 450 M proposed by the Commission specifically go on low-carbon innovation in industry, not the power sector.

Ivo Belet had reported ENVI’s position to the ITRE committee on 13 June as being supportive of more money in the Innovation Fund: “We agree with ITRE […] on the importance of the Innovation Fund and on looking for as much as possible means for the Innovation Fund. We agree on that one within ENVI and ITRE also.” Except for rapporteur Ian Duncan’s amendment, this support has not come through in ENVI’s amendments. There seems to be a split in Ian Duncan’s Political Group. His colleague in the ITRE committee, Hans-Olof Henkel, in a speech setting out the Group’s position, told the committee, “We should leave the Innovation Fund as it is and not increase it.”

The allowances in the Innovation Fund should be used to ‘leverage’ funding

Supported by EPP, S&D Eickhout, S&D, EPP; Italy, The Netherlands, Spain ALDE; Italy ENF
Not supported by Kyllönen, Konečná (grants only)
Amendment numbers 408, 409, 414 409-412, 414-417, 430

Three others in ENVI, in the ‘justification’ text that accompanies their amendment, explicitly rule-in grants (Bas Eickhout, Gerben-Jan Gerbrandy, José Inácio Faria)

Innovation Fund should support product innovation, not just process innovation

Supported by S&D Italy ALDE
Not supported by
Amendment numbers 409 428

Some companies backing this approach identify themselves here.

Provenance of the Innovation Fund allowances

The auctioned share of EU ETS allowances Hökmark, Niebler, Rübig (EPP); Kappel (ENF) EPP
The freely-allocated share of EU ETS allowances Poche (S&D) The same three S&D who supported increasing the Innovation Fund by 400 M EUAs to 800 M EUAs say in a ‘justification’ that they want the increase on the EC’s proposal to come from the freely-allocated share.
Amendment numbers 414, 418, 422, 423 417

Federley commented, “Regarding the source of allowances, the amendments go in different directions. That means, should we take them from the free allowances or the auctioning share? I would say that most of the amendments are split in two groups, and we can see that all through the amendments there’s a big debate going on how to support the different funds.” (16:24:03)

The EPP Group (the largest Group in the European Parliament) had decided on the line that the allowances should be drawn from the auctioned share in its May 2016 position paper.

Start date

Date Proposer
2018 EPP, Greens-EFA; Gerbrandy, Selimovic (ALDE)
2019 Pargneaux (S&D)
ITRE S&D wants the ETS Innovation Fund monetisation to begin only in 2022, but does not rule out that the first projects could be awarded and receive their money sooner.

Scrap special help for small-scale projects

Supported by Rapporteur Federley, Fontana (ENF) Gerbrandy, Selimovic (ALDE); Salvini (ENF)
Not supported by Dalli (S&D – opposition from Member States, too)

Technology choices

Pro free-for-all

The allowances shall be made available for the entire/whole range of innovation in low-carbon industrial technologies and processes Geier, Krehl (Germany S&D), EPP, ECR Meissner, Müller (Germany ALDE)

Against winner-takes-all

The competition should “ensur[e] a degree of geographical and sectoral balance” S&D incl. Dalli

Additional / emphasised technologies

“energy conversion and storage and battery technologies” EPP, Germany S&D EPP
“innovative technologies for transmission and distribution” Three EPP
“smart grid infrastructures notably for the deployment of electric mobility” S&D Zorrinho (S&D), who adds “electric batteries”
“energy storage” and “bio-based materials” S&D
Extractive industry Meissner, Müller (Germany ALDE)
District heating, cogeneration Marinescu; Krasnodębski, Czesak, Tošenovský (Poland ECR) Wiśniewska, Piecha (Poland ECR)
“supporting energy efficiency improvements” Sylikiotis (GUE)

Fossil fuels

Pro-CCU EPP, S&D, Poland ECR, ENF, Marinescu EPP; Wiśniewska, Piech (Poland ECR); Meissner, Müller (Germany ALDE); Tănăsescu, Sârbu (Romania S&D); Zorrinho (S&D), Leinen (S&D), Marinescu
Pro-CCU subject to strict conditions Gerbrandy
Delete CCS Tamburrano, Evi (Italy ENF); Sylikiotis (GUE) Italy ENF
CCS only for industrial applications Eickhout (Greens-EFA)

Two ENVI MEPs, Gerben-Jan Gerbrandy and Bas Eickhout, adapted the line taken by their colleagues in ITRE (who had submitted their amendments some weeks earlier) and followed the advice of this website and Graeme Sweeney (link) to avoid a requirement for power projects to demonstrate a 20% LCOE improvement. They want 20% saving compared to a benchmark to be an eligibility criterion only for industrial projects.

Federley, lead MEP in the ITRE committee for the ETS proposal, spoke of his attitude to CCS at an event on 20 June. He said, “When it comes to CCS technology, it was not the EU failing. It was the UK government which stopped the funding.” Shell, which sponsored the event, echoed that message in its summary of the event. On CCS, “The technology still needs to be proven on a commercial scale, and this requires demonstration plants. In Europe, the EU has allocated massive funding for these plants, the money hasn’t flowed through because national governments are refusing to match the funding.”

Prioritisation of funding

Implied prioritisation of renewables over CCS through a switching of the terms S&D (AM 435)
“The indicative shares of funding per category shall be the following: 50% industry innovation projects, including CCS and 50% RES.” Greens-EFA, who also outline a way to achieve the split while ensuring that funds are used
Max 50 M EUAs for innovative RES, CCS and CCU ENF Salvini (ENF)

Max refund rate on eligible costs

The amendments are all over the place, but in every case propose a higher refund rate than the Commission. The MEPs do not avail of the ‘Justifications’ section to explain their reasons for the rates they choose. The impression from the divergence of the choices is that the Impact Assessment’s analysis is right: no choice is better than any other. This will be explored in a future article. The table below also shows MEPs’ recommendations for the proportion of grant that may be paid out for effort in delivery an operating rather than on successful operation of that plant.

Max refund rate on eligible costs /% %age that may be paid out on effort alone ITRE ENVI
60 40 [n/a – EC proposal]
75 40 [n/a – Option 1 for the Innovation Fund described in the Impact Assessment]
80 [no comment] Fontana, Kappel (ENF) Salvini (ENF)
75 25 Marinescu
75 55 EPP; Geier, Krehl (Germany S&D)
75 [no comment] Nica (ALDE)
75 60 Henkel (ECR) Duncan (Rapporteur)

Duncan supports amendments that increase the percentage of the award that may be paid out on effort alone. He compared ETS Innovation Fund to a Scottish funding scheme at the Shell event mentioned above, “The Saltire prize is awarded only when you achieve a certain target and given that no enterprise has ever met the target, the prize has never been awarded. So the tantalising prize has done no good. Far better for the money to have gone at the other end to try and get these schemes working.”

Caps on the award

Max 20% of total (or projected total) value of allowances to one project Jens Gieseke, Norbert Lins, Birgit Collin-Langen (Germany EPP) but this looks to be a mistake, as most of it concerns Article 10a point 19, as does the justification

(Recall that rapporteur Duncan wanted max 20% — he seems still to be the MEP happiest concentrating money)

Max 15% S&D: explicit agreement with the current text of the Directive, which the EC does not propose to change
Max 10% or 300 M EUR, whichever is less Greens-EFA
  1.’s comment

    On the creation of leverage instruments

    The best way for ETS Innovation Fund to provide ‘leverage instruments’ would be to top up a popular existing scheme administered by the EIB, EDP Innovfin. This financing mechanism, launched in 2015 is oversubscribed. It awards money on a first-come-first-served basis. Many NER300 projects have applied to it for cheap financing of their projects. The wider ‘Innovfin’ programme could be used to finance industry projects. It is important for financing programmes to be open to any project that meets the EIB’s conditions.

    ETS Innovation Fund should distribute most of its money as non-refundable awards. Awards represent a clear public subsidy. The competition for awards would be based exclusively on the amount of non-refundable subsidy going to a project, like with NER300.

    Max reimbursement rate

    The maximum reimbursement rate proposed by MEPs is high, but because of uncertainty over future state aid rules and the amount of national co-funding that will be allowed under those rules for winning projects, it seems a sensible precaution. Many MEPs want state aid rules and ETS Innovation Fund rules to dovetail.

Sep 13 2016

ETS Innovation Fund public events

Wind Europe Summit 2016, Hamburg, 27 Sept 2016

Wind Europe promises a 1:30-hour event that will “provide an overview of the current state of the NER 300 programme and its future. Experiences from [three] funded wind energy projects will be shared with the audience and a panel will discuss challenges and opportunities identified.” More information is available here.

Energy Visions 20 June 2016

As part of their Energy Visions partnership, Politico and Shell co-organised the event ‘Innovation: the Way to a Low-Carbon Economy?’, with panellists including Fredrick Federley and Ian Duncan, the MEPs most closely involved with ETS Innovation Fund.

picture Energy Visions

Carbon Market Watch 25 May 2016

Carbon Market Watch organised this ETS Innovation Fund event at the European Parliament on 25 May. Click image to go to registration form.

The NGO has made some bold statements on ETS Innovation Fund, calling in October 2015 for an ‘NER1000’ fund created from the monetisation of a billion allowances. It said, “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.”

poster Carbon Market Watch

EPP Group event 4 May 2016

This event by the EPP political group in the European Parliament coincided with the publication of its position paper on the ETS.

poster EPP Group

Sep 07 2016

The legislators debate: three debates in the European Parliament committee and one in the Council of Ministers

Praise for clear criteria

DG CLIMA Director Tovšak Pleterski commented on ETS Innovation Fund in her second appearance in front of the ITRE committee (17:05:45, 12 July). She “noted with interest” the “guidance how […] projects can be evaluated and to have further discussion on the right balance of risk sharing as expressed by the funding rate.”

The only amendment on how projects should be evaluated came from the Greens-EFA Group. Their proposed AM 426 in ITRE said, “Eligible low-carbon industrial projects shall contribute to emissions reductions of at least 20% below the updated benchmark set out in paragraph 2 and shall enhance competitiveness and productivity. Technologies shall compete on GHG saving and on subsidy requirements. Eligible innovative renewable energy projects shall be defined in the delegate act referred to in Article 23, which will also specify a process for updating that list. Those technologies shall compete by their cost-per-unit performance (CPUP).”


Perhaps recalling the debacle over his committee’s failure in 2015 to agree on the start of the Market Stability Reserve, Federley is keen to work across the political divide from the outset to achieve a majority for his report: “Once again, I can’t repeat it enough, we have to make sure from all the parties that we deliver a majority, otherwise we lose the influence in the ENVI committee and we will lose influence in the Parliament as such. I call for open, wide and vivid debate, but in the end we have to make sure we deliver a majority from the group.” Jo Leinen, a member of the ENVI Committee from a different Political Group to Federley, also wanted to see the final report leave the Parliament with a strong majority (11:17:03, 21 June).

Small-scale projects

Three Member States appealed for adequate support for small-scale projects. Slovenia was the first country to make the point in the Council debate (20 June). Like the UK and Germany, it explicitly welcomed proposal for ETS Innovation Fund, then added, “Our experiences with the already existing fund called NER300 allows us to support the inclusions of provisions that would take into account the principle of excellence and allow financing for small projects. We therefore welcome the Presidency’s proposal. Future discussions on the Innovation Fund should therefore also focus on provisions that would allow the access of small excellent projects to financing and this would also allow a more balanced geographic distribution of the funds.”

Austria echoed Slovenia’s comments. These two countries had successfully pushed for a derogation helping small projects in NER300. This time, in the Council debate, they were joined by Malta. Miriam Dalli, an MEP from Malta’s governing party, provided further support with her amendment in the Environment Committee (AM 423).

Details on past Council support for small-scale projects were given in this article.

Several Member States also expressed their support for small-scale projects at a meeting of the (rather shadowy) European Climate Policy Group on 1 June 2016.

Appeal for transparency

Austria called for transparency in the operation of the Innovation Fund.