Insights and Commentaries

Insights and Commentaries

Institute response to the EU Emissions Trading System consultations

15th March 2015

Topic(s): Carbon capture, law and regulation, Policy, use and storage (CCUS)

A recent consultation period ahead of the EU Emissions Trading System Directive's reform called for submissions on a range of low carbon technologies. The Global CCS Institute participated in the process in support of carbon capture and storage (CCS) and the proposed innovation fund.

Image courtesy of Symbiot/Shutterstock

So what's this all about? The European Council concluded that 400 million allowances in the period 2021 to 2030 should be dedicated under the EU Emissions Trading System (EU ETS) in setting up an innovation fund to support demonstration projects of carbon capture and storage (CCS), in addition to other low carbon technologies. To make this fund operational, a legal basis has to be created via the EU ETS Directive.

The Institute has submitted its views on the innovation fund in response to the European Commission’s request for stakeholders to participate in the public consultation on the revision of the ETS Directive (established by Directive 2003/87/EC).

The Institute’s main observations are as follows:

  • CCS must be part of the innovation fund

Additional financial support measures in the period 2021-2030 are needed to enable transition to an actual portfolio of projects and to provide a basis for expansion elsewhere in Europe. The innovation fund is an essential incentivising factor for the private sector to invest in CCS technology, specifically in the current context of low carbon prices.

  • The programme design needs to be flexible

Flexibility in design would allow innovative technologies developed in the upcoming five years to be considered by the innovation fund, increasing outreach to a wider portfolio of projects. Those projects are vital in driving large scale CCS deployment post 2020.

  • Industrial CCS and clusters must not be overlooked

The lack of large-scale CCS projects in high-emitting industrial applications is of concern since CCS is the only technology that can help achieve deep reductions in CO2 emissions in these industries in the longer term. Urgent attention must be given to the implementation of policies that incentivise the development and subsequent widespread deployment of CCS in high-emitting industrial applications.

  • Seven years is too long to wait to support CCS

There is currently a significant risk that CCS projects in Europe face a gap of around seven years between funding programmes, as the innovation fund is not expected to start the monetisation of allowances until 2022 at the earliest. The use of innovative investment vehicles encouraged by the European Investment Bank (EIB) could further leverage existing funding resources and de-risk investment by the private sector.

Read the full report here.

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