EU eyes two energy sector funds
National leaders are looking for ways to boost innovation and modernise industry in low-income member states.
The European Union’s national leaders are considering creating two funds to boost innovation in the energy sector and modernise the industry in low-income member states. The funds are seen as a way to overcome opposition to the greenhouse-gas reduction and renewable-energy targets in the 2030 package by providing new financing for research and development in the wealthier member states and to overhaul the energy sector in central and east European countries.
The two funds would be financed from a share of the proceeds of auctions of emissions allowances and would be managed by the European Investment Bank (EIB). The EIB would also be responsible for selecting eligible energy projects.
The first fund, called the “new innovation facility”, would finance the demonstration of low-carbon innovation projects for the power sector and industry. Its scope would be broader than the NER300 fund launched in 2010 which used proceeds from a share of ETS auctions to finance carbon capture and storage (CCS) projects.
After the fund was created, member states’ enthusiasm for CCS waned as the technical difficulties and costs of large-scale projects became apparent. Funds were awarded to only one project, the White Rose project in the UK, which received €300 million. Some of the unspent funds were redirected to energy-efficiency projects in cities.
The new innovation facility would finance industrial-scale demonstration projects for reducing CO2 emissions, developing renewables or increasing energy efficiency. According to discussions among senior member state officials responsible for energy and climate change, this fund would receive around 5% of the proceeds from allowances auctions.
The second fund would help lower-income member states to modernise their energy sectors and improve the energy efficiency of buildings. It would receive around 4% of ETS proceeds.
The share of the proceeds from the sale of allowances to finance these funds, which could amount to 10% of the total, would be set aside before a further 10-12% of auction proceeds is earmarked for redistribution for low-income member states. In addition to the two funds, there will also be financing available for energy sector projects from the structural and cohesion fund and the Connecting Europe Facility.
According to discussions within the Commission so far, there seems to be some support for these funds, while the size of the allocation from ETS allowance auctions will be a significant issue for negotiation.
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