Carbon capture and storage (CCS) projects will likely be first to benefit from funding out of the EU emissions trading scheme (EU ETS), with support for renewables to follow later, a draft European Commission proposal suggests.
The draft text, sent to member states last week, sets out the rules on allocating the 300 million allowances that were set aside from the ‘new entrants reserve’ of the EU ETS to CCS (see EURACTIV LinksDossier) and renewable projects.
At a carbon price of €20 a tonne, the revenue would amount to about €6 billion, the EU executive estimates.
The draft proposes to award the allowances through two rounds of calls for proposals. This would “allow, on the one hand, for mature projects to receive financing already in the first round, and on the other hand, to provide for a possibility to adjust any technical or geographical imbalance in the second round,” the text reads.
The Commission seems to take “mature projects” to mean CCS at this point. Its impact assessment accompanying the draft decision argues that in the case of renewables, it would be “preferable” to wait until the second call to allow for a “maximum number of technologies to come to maturity”.
The EU executive refers to comments by several member states that the funds for the second round should be substantial in order to stretch to funding technologies, particularly renewables, which will not be in a position to take advantage of the first call.
However, the draft stresses that there should be a balance between CCS and renewable energy projects. It lists the technologies eligible to receive funding for at least one project in order to ensure that only technologies that are not yet commercially viable but ready for large-scale demonstration qualify.
Germany has been advocating opening up all renewable categories to proposals, instead of limiting the projects to a closed list of technologies.
Although the renewables industry feels that many important technologies are missing from the list, it said that the topics defined give developers a more cost-efficient means of securing funding. This will avoid hit-and-miss proposals whereby developers would have to explain why their project is innovative and risk rejection, they argued.
To ensure even geographical coverage, the Commission chose an approach whereby each member state is allowed to host a maximum of two projects. The draft states that the second round of proposals can be used to adjust any technical or geographical imbalances.
The draft text requires member states to co-finance the projects by matching the EU ETS investment. They should therefore have the opportunity to decide which projects they will support in their territory, the Commission says, while reserving its right to make the final selection.
Countries will send their proposals to the European Investment Bank (EIB), which assesses the financial and technical viability of the projects before making recommendations to the Commission.
Member states are scheduled to vote on the text in February.