Category: Int(er/ra-)institutional debate

Jan 15 2017

Wrap-up of 2016: state of play in European Parliament and Council

This article is adapted from a piece written for Carbon Pulse of 15 Dec 2016.

The end of 2016 saw the two lead committees on ETS Innovation Fund in the European Parliament, ITRE and ENVI (shorthanded to “European Parliament” in the rest of this piece), adopt their amendments to the European Commission’s (EC’s) proposals. First ITRE voted, on 10 Nov; then ENVI on 15 Dec.

Member States were not ready to adopt their set of amendments on the Emissions Trading Scheme at the Environment Council meeting of 19 Dec, but from the document reflecting the state of their discussions, and their statements in the meeting (Sweden, Luxemburg, Czech Republic, Germany, Estonia), it looks like their position on ETS Innovation Fund is settled.

European Parliament going for a big and generous Innovation Fund — Council reluctant to follow

Like ITRE, ENVI wants a bigger Innovation Fund, made up of 600 million allowances, not the 400 million proposed by the EC. The EC had proposed that a maximum of 15% of the allowances could go to one project. MEPs did not decrease this limit to compensate the increased size of the Fund.

Innovation Fund’s predecessor, NER300, capped “relevant costs” at 50%, and this equated, typically, to around 30-40% of project CAPEX. ENVI voted to be more generous with Innovation Fund, allowing requests of up to 75% of relevant costs, but MEPs never put forward analysis to support that decision. The Commission did not set a good example: its defence of a 60% cap, set out in the Impact Assessment accompanying its proposals, is threadbare (see this article for more). The Council sticks with the EC’s cap nonetheless.

Enlarged scope: European Parliament and Council want funding for energy storage technologies

The co-legislators want ETS Innovation Fund’s scope enlarged: energy storage technologies should be included. They underlined the need to fund CCU — carbon capture and use, which was implicitly already covered by the EC’s proposal — where it “contributes substantially to mitigating climate change” (Council’s phrasing). The European Parliament also underlined bio-based materials.

European Parliament wants even looser link between project performance and award payout

ENVI Rapporteur Ian Duncan was keen to break the link between a project’s performance and its right to keep its award. The Committee took up his suggestion to allow up to 60% of the award to be paid out on effort alone: provided a project meets milestones in construction and commissioning it can keep up to 60% of its award. This would mean, in the extreme case, that only 40% would be payable on the project actually working.

The Member States prefer not to depart from the Commission’s proposals, by which no more than 40% of the award may be paid out on effort alone.

Council makes the 50 M EUAs from the Market Stability Reserve an integral part of ETS Innovation Fund

The Council re-arranged the EC’s text relating to ETS Innovation Fund to more clearly show that the 400 M carbon allowances for ETS Innovation Fund and 50 M allowances from the Market Stability Reserve will be put towards one and the same funding programme.

European Parliament votes for fuzzier selection criteria

MEPs want energy projects in the ETS Innovation Fund to be selected in part for their “future prospects to significantly lower the costs of transitioning towards low-emissions energy production”. Again, the Council prefers the Commission’s language, namely to use “objective and transparent” selection criteria. This was the principle that governed NER300’s design, interpreted in the NER300 Decision to mean that all projects would compete on a measure known as “cost-per-unit-performance”. That measure allowed the many and disparate renewable energy projects to be compared with each other, and was computable from nothing more than those projects’ internal financial and production forecasts.

Roland Schulze, the EC’s counterpart in the European Investment Bank for NER300, gave his views on ETS Innovation Fund’s selection process on 16 Jun 2016.

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

ITRE ENVI
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

ITRE ENVI
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

ITRE ENVI
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

ITRE ENVI
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

ITRE ENVI
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

ITRE ENVI
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

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

Additional / emphasised technologies

ITRE ENVI
“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

ITRE ENVI
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

ITRE ENVI
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. NER400.com’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 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).”

Multipartisanship

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.

Jun 08 2016

Dutch Presidency publishes paper covering the Council’s progress on ETS 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 ETS 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 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.

May 26 2016

Key European Parliament deadlines related to ETS 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 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.

May 05 2016

EPP Group sets out its priorities for ETS reform

A short article on its website sets them out.

Part of its proposed reforms relate to ETS Innovation Fund. Its clearest line is, “The allowances for the innovation fund should be taken from the auction share rather than from the free allocation share.”

  1. NER400.com’s comment

    There are other statements on ETS Innovation Fund, but they are rather cryptic. It’s difficult to infer anything more than a vague enthusiasm for CCS (Carbon Capture and Storage) and CCU (Carbon Capture and Usage) from the lines below:

    “Innovation fund (to be financed by allowances from the auction share): we should ensure that CCS and CCU projects can trigger support under the innovation fund/support, topping up the existing amount of allowances in the innovation fund.”

    It also says, “Small projects as well as projects in non-ETS sectors should be supported”, but is unclear whether it is talking about them being supported in ETS Innovation Fund, or through Member States’ auctioning revenues.

Apr 25 2016

MEP Fredrick Federley sets out his stall on ETS Innovation Fund

He wants

  • 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’.

He likes

  • the EC’s proposal to increase the maximum reimbursement rate from 50% (in NER300) to 60% of relevant costs.

He revealed this in interviews with Bloomberg News and Carbon Pulse on 22 April.

  1. NER400.com’s comment

    Federley is from Sweden. Had there been, in NER300, no rules on the maximum number of projects a country could get, Sweden would have got more projects than all other Member States in the first NER300 funding round. (The EC has not disclosed enough information to tell whether this would be true for the second round.) The abandonment of ‘geographic balance’ rules is the position of Svebio — the Swedish Bioenergy Association — and Fortum, which describes itself as “one of the major energy companies of Sweden”. But Federley can expect resistance, as explained here.

    Federley proposes to take his 150 M extra EUAs from the Market Stability Reserve, allowing the release of an equivalent number of tons of CO2. They should be taken from another part of the Emissions Trading Scheme to allow the MSR to do its job of reducing the short- and medium-term availability of allowances.