Europe Funds Carbon Trading Overhaul

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The European Commission (EC) has outlined changes to the world's largest carbon cap-and-trade system that will make it easier for poorer nations to decarbonize their electricity mix.

The EC plans to use the failing Emissions Trading System (ETS) to establish two funds: the Innovation Fund and the Modernisation Fund. The ETS is the only mechanism in the European Union (EU) for monitoring and tracking carbon dioxide (CO2) emissions in Europe, covering almost 12,000 power stations, factories and refineries in 30 countries.

To start, 50 million unallocated allowances from the ETS--valued at about 1.2 billion euro ($1.3 billion) when sold--will be used to establish the fund. From 2021, an additional 400 million allowances, worth about 10 billion euros ($10.8 billion), will be used to expand the program. The fund will support "first-of-a-kind investments in renewable energy, carbon capture and storage, and low-carbon innovation in energy-intensive industry."

The Modernisation Fund is designed to support poorer European states to boost energy efficiency and modernize their energy systems. Between 2021 and 2030, 2% of the allowances, some 310 million allowances in total, will be set aside to establish the fund. The countries eligible to receive support are Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia.

"Actions speak louder than words," said Miguel Arias Cañete, EU Commissioner for Climate Action and Energy. "Today, we take a decisive step toward enshrining the EU's target of at least 40% emissions cut by 2030 into law. My message to our global partners ahead of the Paris climate conference: the EU stands by its international commitments. And my message to investors, businesses and industry: invest in clean energy; it's here to stay and continue to grow. With these proposals, Europe is once again showing the way and leading the global the transition to a low-carbon society."

The changes come just two months after the EC announced it was fast-tracking measures to rescue the ETS, which has been failing in recent years. The system has suffered from a glut of allowances that has driven the cost of allowances too low to act as a deterrent to polluters. Since its inception in 2008, prices have fallen by 65%. Starting in 2019, two years earlier than originally planned, the EC plans to take billions of allowances out of play to boost the price. For additional information, see May 11, 2015, article - Europe Agrees on Landmark Carbon Deal.

EU Commission Vice-President for Energy Union Maroš Šefčovič said: "In the Energy Union strategy, we committed to empowering European consumers, creating a single well-functioning energy market, putting energy efficiency first and becoming the No. 1 in renewables. Today, five months after the adoption of the Energy Union strategy, this Summer Package shows our determination to decarbonize our economy and to give consumers a central role in Europe's energy transition. It marks not only a new deal for consumers, but a new deal for Europe´s entire energy system."

Last October, Industrial Info covered the launch of the EU's ambitious 2030 Climate and Energy Policy, which aims to cut greenhouse gas emissions by 40% by 2030 as well as boost the renewable energy share of its 28 member states to at least 27%. For additional information, see October 24, 2014, article - Europe Agrees 2030 Emissions Goals.

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