EU member states this week (2 February) agreed how to allocate billions worth of EU money from the bloc's emissions trading scheme (EU ETS) to support renewable energies and emerging technology to capture carbon dioxide and store it underground.
After a year of negotiations to fine-tune the details, national experts approved a proposal on how to use 300 million emission allowances from the scheme's 'new entrants reserve' to finance projects in renewables and CCS (Carbon Capture and Storage; see EurActiv LinksDossier).
The final adoption of the decision, expected in May, will see billions in EU funding allocated to the development of clean technologies.
The agreement was hailed as groundbreaking after a year of disagreement over the funds. The European Commission will set aside 300 million allowances at European level, which will be sold by the European Investment Bank (EIB) and then distributed to support projects in member states.
However, national capitals rejected a proposal to match every euro taken from EU funds with an equal contribution from state coffers. Their decision addressed fears expressed by the poorer member states of Central and Eastern Europe, which were concerned about the cost of such a scheme.
Moreover, member states introduced more flexibility to the allocation process by allowing each country to host a maximum of three projects instead of the Commission's proposed two. In any case, each country is entitled to at least one project.
MEP Chris Davies (ALDE, UK), the architect of the CCS proposal in the European Parliament, described the approval as " the largest single financial support mechanism for carbon capture and storage anywhere in the world".
"Obviously it's combined with renewables, but one assumes that significantly more than half will go to CCS, and I think that is a hugely important development," he said.
The CCS funding is aimed at accelerating investment so that the EU can reach its goal of having up to 12 CCS demonstration plants up and running by 2015.
Davies warned, however, that the EU was moving too slowly and regretted that it had taken the bloc 13 months to take a decision on how to use the allowances.
"The key question for the future now is that unless we accelerate the decision-making process for the selection of potential projects, we will have great difficulty in meeting the 2015 deadline," he said.
Near unanimous support
Only one member state, Poland, voted against the decision. This makes it unlikely that the European Parliament will raise objections during the three-month scrutiny period required before the Commission can adopt the legislation.
The UK was originally reluctant to let the EU executive alone decide upon the final list of projects. In the end, a consultation with member states will take place before the Commission takes final decisions on eligible projects.
Moreover Germany, which championed the resistance with its own proposal to share allowances between member states according to their emissions, made a U-turn in support of the decision.
"This is the first step in what is going to be a much bigger discussion over the next couple of years and it's hugely important," said Sanjeev Kumar, expert on the EU's emissions trading scheme at WWF.
He argued that it brings together EU discussions on restructuring the European budget around climate and energy and the Strategic Energy Technology (SET) Plan, which promotes both renewables and CCS but lacks a financial component.
"This is a much bigger achievement than how many technologies get financed: how it's organised and structured. The crucial thing is that this is money at EU level and member states accepted that we need to make a financial contribution towards an EU goal," said Kumar.
Green MEP Claude Turmes (Luxembourg) said that the agreed text would channel public funds to coal-fired power plants at the expense of renewables.
"Unproven Carbon Capture and Storage is set for another big pay day, having already claimed a disproportionately large slice of public funds through the EU recovery package," he regretted. "Furthermore, agrofuels will receive EC financial support as part of the funding to renewable energy, even though the Commission is still dragging its feet in evaluating their impact on food production and real greenhouse gas emissions."
The European Renewable Energy Council (EREC) stated that the agreement was better than expected. But it called for a greater share of the allowances to be allocated to renewable energy projects, arguing that these will be rolled out out more quickly than CCS and hence bring bigger CO2 cuts.
EREC welcomed the abandonment of a requirement for member states to match every euro received with national funding.
"This would have certainly decreased rather than increased the ability of NER300 to fund projects," said Arthouros Zervos, EREC president.
The revised EU emissions trading scheme (EU ETS; see EurActiv LinksDossier) for the period 2013-2020 set aside 300 million allowances to subsidise the construction of 12 carbon capture and storage demonstration plants and support projects on innovative renewable energy technologies (EurActiv 12/12/09).
At a carbon price of €20 a tonne, the revenue would amount to about €6 billion, the EU executive estimates.
A draft decision, sent by the European Commission to member states in December, proposed that each member state would be allowed to host a maximum of two projects (EurActiv 18/12/09). It proposed to award the allowances through two rounds of calls for proposals.
- May 2010: Commission expected to adopt the decision.
- By end 2010: Member states to submit projects to the EIB.
- 2011: EIB assessment of projects.
- By end 2011: Commission to make final selection.