Search: consultation on revision of the EU Emission Trading System

May 16 2017

Steps in the shaping of ETS Innovation Fund

***UPDATE 25 June 2017: DG CLIMA has uploaded the presentations made in the workshops and its conference report. No attendance lists, though.***


UPDATE 24 May 2017: Registration open for “Presentation of the report of recommendations from the sectorial consultation round tables” (wrap-up event ‘Conference 3’) — deadline 7 June. Agenda.***


This table recaps the different stages in the shaping of ETS Innovation Fund. The next event is the wrap-up event on 12 June. Registration not yet open.

Timing What Output
08 May to 31 July 2014 Public consultation 1: “Consultation on Emission Trading System (ETS) post-2020 carbon leakage provisions” Analysis
19 Dec 2014 to 17 Mar 2015 Public consultation 2: “Consultation on revision of the EU Emission Trading System (EU ETS) Directive” Analysis
15 July 2015 ETS and Impact assessment Europa.eu
9 June 2016 Conference 1: “High Level Round Table on Low-Carbon Innovation” Article
20 Jan 2017 Conference 2: “Finance for innovation: Towards the ETS Innovation Fund”

Presentations:

6 Feb Sectoral roundtables:

  • Ferrous metals
  • Non-ferrous metals

(invitation-only)

3 non-public reports: innovation needs for both sectors + joint report on financing needs
23 March Sectoral roundtables:

  • Oil & refining
  • Chemicals & bio-based
  • Pulp & paper

(invitation-only)

4 non-public reports: innovation needs for both sectors + joint report on financing needs
6 April Sectoral roundtables:

  • Cement & lime
  • Glass & Ceramics
  • Renewable energies
  • Storage

(invitation-only)

6 non-public reports: innovation needs for all sectors + joint report for cement & lime and glass & ceramics on financing needs + joint report for renewable energies and storage on financing needs

The EC said it would publish the questions put to the participants in these workshops, but it has not. It also said it would publish the presentations, but it has not, possibly because speakers refused to allow this.

April Online survey Survey of about 150 companies or associations by CLIMA’s consultants to gain knowledge of specific projects’ financial needs and asking pointed questions about the design of ETS Innovation Fund.
12 June Conference 3: Wrap-up of stakeholder roundtables

Each sectoral roundtable report is presented by its writer. A consolidated summary of the full thirteen, which the EC should have in its possession “by the end of May” (Doubrava, 6 April) is published by the EC. It will include a list of the participants in the roundtables.

This final event “is probably where we from the Commission side will become a bit more outspoken in terms of what we think could fly from all the ideas we have been hearing,” said Artur Runge-Metzger on 20 Jan.

  Public consultation 3 Described by Runge-Metzger as a “web-based stakeholder consultation”, he downplayed its usefulness because he said it will not afford the opportunity for stakeholders to be questioned by each other and the Commission, unlike the roundtables. Director-General Jos Delbeke, speaking on 12 June 2017, confirmed it would happen, with a 12-week deadline to respond. That was confirmed on 19 Sept in a presentation by Head of Unit Peter Wehrheim
2018 Impact Assessment written; operational rules defined From the Wehrheim presentation at the link above
2020, maybe 2019 First ETS Innovation Fund awards made Artur Runge-Metzger on 20 Jan 2017: “ETS Innovation Fund will provide money as of 2020 – around that date. Maybe it’s 2019 if we are lucky.” Wehrheim presentation 19 Sept 2017 (link above): “Launch the Innovation Fund close to or before 2020.”
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 ETS 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. ***UPDATE 13 Sept 2016: The Greens-EFA have proposed amendments requiring knowledge-sharing (ITRE: 439; ENVI: 441)***

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 ETS 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

MEP Ian Duncan hands in his amendments on ETS Innovation Fund

Ian Duncan is an MEP in the Environment Committee of the European Parliament. He shares the lead on ETS 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 his tweet below from the Politico/Shell event of this evening, where he also made a comment that goes against the kind of companies or consortia that can mount multi-billion euro projects: “[Bigger companies] should be innovating without the Funds frankly – they’ve got plenty of cash at the moment. So I don’t think they’re the ones that need it.”***


He wants (in common with Fredrick Federley)

  • 150 M more EUAs for ETS 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 EC’s 60%)
  • 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 ETS 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).***

CCS

Pro

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 ETS 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 ETS 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 ETS 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.”

Anti

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 ETS 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]

Coal

Martin Korolec, Poland’s Government plenipotentiary for climate policy, wrote that ETS 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.”

Apr 17 2016

Who wants it? Is a funding programme created from the monetisation of carbon allowances a good idea in principle?

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.

CEPI + 2 explain the situation: “The NER300 program was funded from the sale of 300 million emission allowances from the New Entrants’ Reserve, designed to support new investments in industry, to support research programs focused on renewable energy and carbon capture and storage. As such, it represented a financial transfer from the European industry to the energy sector.” The EC, with the backing of the European Council and European Parliament, wants to broaden NER300 out to industry, yet industry continues to view NER400 with more suspicion than the power sector. The hardest line is taken by Glass for Europe: “the innovation fund should be funded by auctioning revenues and not by the diversion or use of any sort of potentially tradable allowances.” The association (but not its members) added this line: “We consider the financing scheme and the increase in the initial endowment from 300 to 400 million allowances not appropriate.” Why the hostility? Say companies in the non-ferrous metal sector among several others, “Firstly, the availability of funds will be linked to the price of emission allowances (EUAs) and thus will be very volatile, depending on the success of the EU’s climate policy. Secondly, the need for co-financing of such projects depends on the competitive position of low-carbon energy in the market, which is mainly linked to the cost of carbon emissions.”

Shell is anxious not to create redundancy in the EU’s instruments, and for the welfare of industry: “[ETS Innovation Fund should] not replace other existing or future support mechanisms at EU or MS level. The fund should continue to use allowances under the existing cap. The fund should also avoid any impact to the level of free allocation for those on the current carbon leakage list.” (For alternative points of view, see ‘Baby snatching’ on the question of coherence with existing instruments, and the statements of some Member States here and associations here on the question of carbon leakage).

Twenty-one organisations, many from the materials sector and chambers of commerce, say that while “the ETS directive states that half of auctioning revenues should be spent on decarbonisation measures, this has not been the case so far.” BP believes it has economic theory on its side when it says that even this would have been too much. “BP’s preference for EU ETS revenues is that they should be returned to the economy in a non-distortionary manner, e.g. via corporation and income tax reductions.”

Cembureau can say…

“There is a strong argument that with the high carbon prices that MSR [Market Stability Reserve] will generate that power generation does not need a high level of innovation funding and could justify investments using the higher EUA price and their ability to pass on the full EUA cost.”

… but the new reality, accepted by many more today than before the European Council Conclusions of October 2014 (see the responses to the ETS consultation of 2014 on post-2020 carbon leakage provisions), is that ETS Innovation Fund is on its way. Its arrival is greeted with a tone of heavy resignation by GSV

“The steel industry does not in principle support the removal of ETS allowances from the wider market […], but if allowances are to be removed it is vital that there is fair access to innovation funding for all sectors impacted by the EU ETS.”

…and cheerfully by Austrian Federal Economic Chamber — Wirtschaftskammer Österreich (WKÖ)…

“We explicitly welcome the creation of the innovation fund, especially the extended scope to include low-carbon innovation in industrial sectors!”

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”.