Towards that end, numerous governments have established financial instruments to stimulate innovation. In Europe, the EU has established the Innovation Fund, one of the largest such instruments in the world. In the decade between 2030 and 2040, the fund is expected to receive €40 billion from the EU ETS (based on an average carbon price of €75 per tonne).
The Innovation Fund finances innovative clean technologies and large projects of common interest to EU member states. These include the decarbonisation of energy-intensive industries, renewable energy, energy storage, sustainable mobility and buildings, hydrogen, and carbon capture, use and storage. As a major use of ETS revenue, the Innovation Fund has a responsibility to ensure investments deliver accelerated decarbonisation. Projects must be selected with an understanding of the impact of the funded technology at an economy wide scale, in terms of resource use and maximising emissions saving potential.
Although innovation is urgently needed to help address the climate challenges facing industry and society, there are numerous associated risks. One is an overreliance on future technologies that may not emerge or may not be sufficiently scalable. This can lead to an overemphasis on the potential of carbon removal technologies for climate action, deterring urgently needed mitigation efforts.
When it comes to innovation, Carbon Market Watch focuses on:
“The Innovation Fund is a useful test case for how carbon pricing can generate revenue to fund decarbonisation efforts in sectors covered by the ETS. Unfortunately, despite the vast climate investment needed, 5 billion allowances from the ETS will not be auctioned between 2021-2030. These free allowances, which act as a pollution subsidy of roughly €400 billion for heavy industry, are a missed opportunity to mobilise auctioning revenues for urgent climate action.”
Eleanor Scott
Expert on EU Carbon Market
“The Innovation Fund is a useful test case for how carbon pricing can generate revenue to fund decarbonisation efforts in sectors covered by the ETS. Unfortunately, despite the vast climate investment needed, 5 billion allowances from the ETS will not be auctioned between 2021-2030. These free allowances, which act as a pollution subsidy of roughly €400 billion for heavy industry, are a missed opportunity to mobilise auctioning revenues for urgent climate action.”
Eleanor Scott
Expert on EU Carbon Market
Eliminating free pollution permits from the EU ETS
Ensuring the Innovation Fund invests in technologies with significant emissions reduction potential at economy wide scale
Launched during a summer of fossil-fuelled climate breakdown marked by heatwaves and wildfires, the European Commission’s carbon market revision backtracks on climate action. The new proposal actively weakens the effectiveness
EU policymakers should not fall for this trap: the ETS is essential for EU companies planning to invest in a cleaner industrial future.
With all the free allowances the European Union’s chemical sector receives under the EU’s Emissions Trading System, it effectively pays no carbon price for its pollution, which is grossly unfair
Carbon Market Watch presents a unique, first-of-its-kind report pairing EU ETS account holders (and their installations) to their parent companies, assessing the highest level of private ownership possible. This report presents an overview of which companies have the biggest carbon footprint in the EU, who received the most free pollution permits, and which sectors are not delivering on their decarbonisation promises.
There is an increasing need for both public and private expenditure, and an availability of growing ETS revenues. Those delivering the most climate action must be rewarded.
sam.vandenplas[at]carbonmarketwatch.org
lidia.tamellini[at]carbonmarketwatch.org
emma.wikstrom[at]carbonmarketwatch.org
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