Category: Int(er/ra-)institutional debate

Dec 18 2015

European Parliament supports ETS Innovation Fund

In the Report on Towards a European Energy Union (2015/2113(INI)) that it adopted on 24 November, the European Parliament “Calls on the Commission to set up the ETS Innovation Fund, which should support low-carbon demonstration projects, building on the NER300 programme for CCS and renewables, but extending its scope to low-carbon innovation in industrial sectors;”

Para 138

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.’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.

Mar 04 2015

More NER300 might come from 2018 and yet more from 2020

More NER300 in the period 2018-2025…

Further funding for innovative renewable energy technologies and CCS could come from 2018 under proposals from the European Parliament’s Environment, Public Health and Food Safety Committee, which last Wednesday adopted a Report (unofficial version available here) on the Emission Trading Scheme’s carbon Market Stability Reserve (MSR). The MSR is a measure that would be applied to Europe’s Emissions Trading Scheme to adjust the amount of carbon allowances that are in the market. 300 M allowances might be drawn from the MSR and ‘gradually’ made available in the period 2018-2025 for low carbon projects, according to the Committee’s amendment 18. At the current price of 7 EUR, 300 M allowances would fetch 2.1 bn EUR when monetised.

The Committee wants the scope of the future scheme to be broadened to include so-called ‘Annex 1’ installations. These are the industrial plants covered by this list.

…and even more in the period 2020-2030

EU Heads of State agreed in October 2014 to create ‘NER400’, insisting as they did so on the inclusion of ‘industrial sectors’ in its scope. The EC interpreted that mandate restrictively in its Energy Union Communication of 25 Feb 2015 compared to the position it laid out in January 2014 in the Communication A policy framework for climate and energy in the period from 2020 to 2030.

EC in January 2014

In line with the Union’s innovation and industrial policies, the concept of an expanded NER300 system will, therefore, be explored as a means of directing revenues from the ETS towards the demonstration of innovative low carbon technologies in the industry and power generation sectors.

EC in February 2015

[…]there are additional research priorities which merit a much greater level of collaboration between the Commission and those Member States who want to use these technologies:

  • A forward-looking approach to carbon capture and storage (CCS) and carbon capture and use (CCU) for the power and industrial sectors, which will be critical to reaching the 2050 climate objectives in a cost-effective way. This will require an enabling policy framework, including a reform of the Emissions Trading System and the new Innovation Fund, to increase business and investor clarity, which is needed to further develop this technology.

‘Innovative renewables’, the primary beneficiary of NER300 in its first two rounds, are not linked to ETS-related funding schemes here, nor are non-CCS or non-CCU approaches to decarbonisation in industry.

Member States do not so far share the European Parliament committee’s view that before 2020 there should be an interim scheme. It remains to be seen whether, in the closed-door Council-Parliament negotiations that will now start, the lead MEP in the negotiations, Ivo Belet, can change their minds.