The European Commission has proposed a funding programme worth billions for the period 2021-2030 (with some amount possibly made available before 2021). Called ETS Innovation Fund, it will build on the NER300 programme which saw 2.1 bn EUR awarded to 38 innovative renewable energy and one CCS project. ETS Innovation Fund will additionally include measures to decarbonise industrial production.

The debate on ETS Innovation Fund’s function and form is underway now. In 2017 the European Parliament and Council of Ministers will likely adopt the primary legislation that will set it up.

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Dec 15 2016

60% cap on ETS Innovation Fund’s refund rate – why?

The EC has not explained why it proposed that a project’s “relevant costs” under ETS Innovation Fund be refunded at a maximum of 60% and not some other rate.

In 2015 an internal working group in the EC, the Impact Assessment Board, saw a draft of the Impact Assessment and sent it back [See IAB negative opinion] to DG CLIMA saying “The Impact Assessment should clarify the method that was used to determine […] the funding rate”. DG CLIMA’s response, which satisfied the IAB, was to add an annex (Annex 14) to the Impact Assessment containing a sensitivity analysis for the effect of different funding rates on the amounts that the ETS Innovation Fund and Project Sponsor would need to cover for a project of given total cost. The result is straight-line charts (see below) whose shape offers no clue as to why 60%, specifically, was felt to be a threshold.

Furthermore, the assumptions used to draw the charts are flaky. Two approximations are used. The first is that total costs are twice additional (or in NER300’s language ‘relevant’) costs. The basis for this assumption is not explained, although the approximation affects the relative position of the sensitivity analysis curves. The second is that additional costs for a typical RES project are 100 M EUR. This appears to contradict the evidence. The average NER300 award for RES projects was 47 M EUR and they asked, on average, to have 39% of their relevant costs refunded. This means a better estimate of additional costs would have been 120 M EUR.




Source: copy-paste from EC’s Impact Assessment + additions (red outline).

The EC proposed 60% even though it noted, in July 2015, that “more extensive market testing” would be necessary to justify that or any other rate (see this article). The tender for the market testing would be only be issued one year later.

  1. NER400.com’s comment

    Possibly 60% was chosen because it was the ‘centre of gravity’ between the maximum permissible coverage of investment costs under the current State Aid rules – RES: 65%; energy efficiency: 50%; CCS: 100% – weighted according to where the EC expects to see most ETS Innovation Fund projects. Still, different funding rates could have been proposed for each of these categories, as they are for State aid.

    These State Aid rules (details see Annex I of the Guidelines on State aid for environmental protection and energy 2014-2020) apply for the period 2014-2020, in which time only up to 50 M EUAs-worth of awards will be made. Most of the ETS Innovation Fund will be run during under the State Aid regime that will enter into force subsequently. Relevant State Aid Guidelines for that period will begin to be discussed in 2017. The Impact Assessment says ETS Innovation Fund’s rules need to anticipate them: “the maximum funding rates and further design of the operational modalities would need to be consistent with future State Aid rules.” MEPs, in their amendments to the draft legislation, agreed (see Compromise 12, adopted by ENVI committee today).

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. 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 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.

Jun 13 2016

DG CLIMA’s public meeting on ETS Innovation Fund: who said what

The Commission workshop High Level Round Table on Low-Carbon Innovation was held on 9 June to gather stakeholders’ views on the future ETS Innovation Fund. The Director General of DG CLIMA, Jos Delbeke, chaired it for the four hours that it lasted. The EIB, represented by Roland Schulze, took the floor several times, too. Their comments, quoted below, are the most noteworthy.

The roundtable brought forward more ideas for ETS Innovation Fund than the debates in June and July the European Parliament and Council (article).

Let’s pick a small number of areas to focus on

Gernot Klotz (President, K4I) was in favour of a competition limited to a few areas, saying, “It needs some top-down approach because it needs focus.” Commissioner Cañete took note of this request to “not try to spread the support all over the place,” as did Delbeke: “We should be very clear about which technology we want.” He had heard other stakeholders join Klotz, including Martin Porter from the Industrial Innovation for Competitiveness initiative (I24C) who said, “We can’t hide away from the need to make certain choices on the technologies to choose.” The think tank Bruegel had also called for this (among other measures) in its position paper of 2015: “develop a more methodological approach to technology selection”.

But 11 days later those following the evening event Innovation: the Way to a Low-Carbon Economy? took the opposite view. See tweet below.

Funds for making green products not green manufacturing

Some industry speakers (and some MEPs) wanted ETS Innovation Fund to directly support production of manufactured goods rather than improvements to the manufacturing process. Crucially the products would have to serve a green purpose. Roland Merger, Vice President Corporate Technology at BASF, was the first to suggest the idea and it found support from Nicolas de Warren of his competitor Arkema. The steel sector, also represented on the panel, was split. Thyssen Krupp’s Head of Innovation Strategy & Projects Markus Oles felt one has “a better chance to reduce in total our emissions in process than if we are only focused on products” and implied through his example that the cement sector would agree. The Director General of Eurofer Axel Eggert, meanwhile, said that so long as there was no worldwide price on carbon emissions, product innovation was the more viable way forward. [NER400.com comment below]

Alternatives to the “focus-on-products” and “focus-on-processes” approaches were put forward. Gernot Klotz called for NER400 to support “value chains” (the network of suppliers and other firms who make an installation possible) as opposed to installations by themselves. “Through the supply of technological elements,” he said, “other countries can participate and benefit, like in the car and ICT industries”. I24C wanted support for a similar concept that it called “ecosystems”.

Projects that take in whole value-chains or ecosystems would be bigger than ones with a smaller scope, implying less work for the EC per euro of support paid out by ETS Innovation Fund. Jos Delbeke pointed this out (see box immediately below).

“The alternative for us as a policy body is in the line of asking industry to make a cluster across sectors resulting in a project bigger than a project in my little sector. There is more a vision about what needs to be done, and there are more industrial players and more industrial sectors. If the consequence of that is bigger projects, we would be willing to take that because it would mean for us less bureaucracy because you would do more coordination. The more you go for tiny projects, the more we pay in terms of resources, man time for dealing with them all.”

— Jos Delbeke

Roland Schulze of the EIB, who has been closely involved with the predecessor of ETS Innovation Fund — NER300 — since its earliest days, repeatedly drew attention to the difficulty of fairly evaluating competing proposals that deal in product innovation or that set the challenge at a very high level, by demanding, for example that a project deliver a ‘functionality’ like thermal comfort. He visited or revisited the topic in every one of the three times he took the floor and was backed up by Martijn Overgaag of Ecofys (see box immediately below).

EIB official pushing for a clear and simple competition

“The idea to simplify on […] functionalities is very attractive. However, I think it will make it even more complicated to measure the value for money impact. […] If it would go that way […] we need to make sure there is no competition among other funds and they are not contradicting or the impact is anyway lost.” He does not want to see overlaps in the kinds of project that the EU’s different funding instruments serve.

“In my personal view, I think process innovation would be more effective with regard to contributing to positively to the objective of achieving a low-carbon economy because it is much more measurable and one can allocate it in the context of reducing CO2 emissions. […] A grant funding mechanism for innovation needs to have a clear indicator to measure that the public funding impact leads to tangible effects in the economy so that the public funding can see some value for money.”

“In principle I’m agnostic about process or product innovation. The challenge is how can one then identify a proper indicator to then make sure that public grant funding mechanisms will bring value for money. That is a task one has to think about very thoroughly. LCA (lifecycle assessment) very much depends on how one draws the boundaries around the calculation. It is probably not that easy [to draw the boundaries fairly]. I said I’m agnostic but from the clear measurement of an impact, process innovation is much easier.”

— Roland Schulze [NER400.com comment below]

Delbeke aligned himself with de Warren when he summed up the discussions: “We had the discussion on whether we should strive for optimising process emissions […] or whether we should go for product innovations […]. We concluded that in fact the best way to look at this is that there are a number of functionalities that we want to reach and at least five were suggested: we need more for insulation, lightweighting of materials, energy storage, lighting, improved energy efficiency in renewable energy not least of photovoltaic panels.” But Delbeke appeared to acknowledge Schulze’s concerns: “There were four or five elements that I noted from our discussion, of which ‘Keep it simple’. NER300 was overly complicated but the more we were going into the discussion I was holding my breath because if we have to put that into operation it could become as complicated as the NER300.” His willingness to imagine an ETS Innovation Fund that would fund product development did not seem totally sincere. He had also said, “You will hardly hear anyone in DG CLIMA talking about green industries and normal industries. We don’t do that. A windmill is steel, is concrete, is chemicals. These are traditional products that are combined in a very intelligent manner.” If DG CLIMA’s general attitude is to reduce a piece of technology to its inputs, it is hard to see how it will take precisely the opposite position in the case of ETS Innovation Fund to create a list of ‘green’ end-products.

A measurable selection criterion for the competition

Leaving to one side the question of whether environment-enhancing end products or rather the industrial processes that make them should be proper object of ETS Innovation Fund, one idea that resonated with the room was to select projects according to their ability to reduce greenhouse gas emissions. Merger said “We should look at which reduction potential in terms of carbon emissions they have” and Oles agreed that this metric should be used to “prioritise” proposals. At an event in May by Carbon Market Watch Tomas Wyns had introduced his report The Final Frontier. An idea it contained, to require industrial ETS Innovation Fund projects to demonstrate CO2 savings of at least 20% compared to a benchmark, found its way into amendments by the two leading European Parliament MEPs for the ETS Directive (and by several other MEPs), and Wyns plugged his idea at this event, too.

Graeme Sweeney, Chairman of the Zero Emissions Platform promoting CCS savaged the idea of requiring electricity-generating projects to achieve reduction in the levelised cost of electricity by 20% for the reasons given in this article. It, too, had found its way into the amendment proposed by Federley. He said, “It is barking mad.” Delbeke recognised that different approaches would be needed for both: “In each category you can go for the lowest cost of carbon. The story we have heard today from the manufacturing industry is very different and the game is more complicated than the lowest cost of carbon saved. That is one of the conclusions I take with me. The discussions we are having squarely confirm that when it comes to the allocation of funds to the manufacturing industry unlike the renewable sector, it’s a very different process we are faced up to and we need more and better ideas than may have worked for renewables under NER300.”

Europe first!

Klotz saw reducing the EU’s dependence on imported components as an important aim for ETS Innovation Fund. He challenged the audience, “Do we favour that all these processes [to develop technology] happen in Europe and get added value for Europe, because you can easily build a smart city with Amreican ICT, with solar panels from China and with materials from Saudi Arabia.” Delbeke took note. Two hours later, in his wrap-up, he said, “Do we want to maximise part of the low carbon activities inside the European Union and the answer was clearly ‘yes’ and for that we need the continuation of demonstration plants […] [where] low carbon technology that is not yet ripe for uptake by the market can be brought into the market. There were suggestions of how to maximise the European content. The European first idea was mentioned. It was not pursued much more,” but he implied that the mission “to maximise the European presence in low-carbon technology” is worthwhile.

Knowledge-sharing — speakers silent

A questioner twice asked the panellists for their views on ETS Innovation Fund’s knowledge-sharing rules. No answer came. Then Delbeke tried a third time, “The point that we were not hearing anything about was the knowledge-sharing that was repeatedly brought on the table. Any comments on the obligations under the current NER300?”

Only Merger responded, saying, “For me the main point is that how you do it is clear from the start so that when you apply for a project you do not end up with lengthy discussions and then you can make your decision whether you want to be part of the project or not.”

The Commission proposed no knowledge-sharing conditions for ETS Innovation Fund (see post). Delbeke offered this clue as to why that might be: “It was a heated point I remember when we adopted NER300 and the lack of clarity that is there now cannot be attributed to the Commission but to very difficult compromise making in the institutions.” Some MEPs want knowledge-sharing rules back put in.

Tolerant of failure

Delbeke appealed for NER400 to tolerate failure: “If you take risk, you are not always going to see success everywhere. You will also see a failure. Do we have a culture of accepting or do you want one or the other official — Commissioner or who else — to be blamed and to be taken up in a political scrutiny process that is as far as that is concerned not a pleasant one.” He retained the idea as one of the five mentioned in his summing up, although whether he meant “risk” or “expectations” is not clear: “We need to in particular manage the risk much better. […] We should get out of the blame game. If a technology does not make it nobody should have to be blamed.”

He had support from industry speakers: Klotz and Francesco Venturini, ENEL Green Power CEO.

A focus on demonstration projects

Commissioner Cañete defended the EC’s proposal to focus on demonstration projects: “Europeans have been very intelligent in delivering resarch in the past, but now we have to deliver innovation and every speaker has said we have given less attention than in the past. Big research budgets, but not concentrate on how we bring the patents to the market, how we develop the projects, and all the difficulties involved in that along the way. It’s complicated to patent. It’s much more complicated to bring a product to the market and make the consumers accept it.” Delbeke was blunter: “No research, no laboratories, no PhDs, but demonstration projects, pilot projects in industry.”

But what kind of demonstration projects? Delbeke said, “The intent is still to be clarified to what extent we go for breakthrough technologies breaking through, disrupting or whatever the name can be or on the other hand the rolling out of very interesting technology that are already known and are very interesting but for which the delta remains significant” [“delta” being the difference in cost between the output of the eco-friendly technology and that of the equivalent dirtier incumbent].

Next steps

  • Delbeke said, “We have lots of other policies […] [We do our] innovation policies collectively with a number of DGs, like DG Grow, DG RTD etc.” A coordination meeting with other DGs would take place immediately after the meeting.
  • Of his openness for fresh thinking from the Council and European Parliament he said, “We are motivated to make something more specific than what is there in the ETS proposal. In the ETS proposal, it was capturing a lot of ideas but in a not-too-specific manner, so the co-legislators will have to put more flesh on the bones and whatever is not spelt out in the Directive will have to be spelt out later in an Implementing Decision. So once the ideas are clear we can come forward with more operational thoughts about what needs to be done.”
  • Of the timing (note the meeting was held before the Brexit referendum result) he said, “Our thinking is open, but only for a while because legislation will be adopted, presumably second half 2017, so it’s now time to take heart and conclude in the next couple of months because otherwise the opportunity for modification of our proposal that was deliberately left more open compared to the NER300 but without having filled out the last detail yet.”

  1. NER400.com’s comment

    Roland Schulze is right to insist on a clear selection criterion for the projects in the competition, especially as the competition will span a wide range of very different technologies. Basing selection on non-quantitative criteria like a degree of innovativeness will make it harder for the losers to accept the result.

    Product innovation would not be an appropriate object for ETS Innovation Fund even if the products eligible for funding are useful for shifting to a low-carbon economy. The focus, for projects in industry, must be on cutting process emissions because ETS Innovation Fund’s purpose is to help European companies protect themselves from carbon leakage. The risk of carbon leakage (i.e. the risk of an industry shifting to a part of the world where environmental standards are lower) is not reduced by helping those companies make their products more attractive to consumers, at least not directly. Delbeke is right to be sceptical.

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

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.

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).***



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.”


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]


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.”