On 14 July, the European Commission will present its Fit for 55 package that aims to deliver the 2030 climate target of 55%. The package will include 13 policy strands that fundamentally overhaul the EU’s climate policy. It will also include the revision of the EU Emission Trading System. Furthermore, we observe that EU carbon allowance prices hit an all time high and the EU carbon price today hits record high 50 euros a tonne.
Based on ERCST and CEEP’s long-standing expertise on the EU ETS, previous work done on the funding mechanisms, engagement and consultations with climate policy experts, policymakers and stakeholders, we propose 7 major recommendations to the use of auctioning revenues and design of the funding mechanisms in light of the review of the EU ETS under the European Green Deal:
- Ensure auctioning revenues are fully mobilised to for climate and energy purposes.
- Safeguard the solidarity mechanism from the functioning of the Market Stability Reserve (MSR).
- Ensure an adequately increased Modernisation Fund.
- Maintain trust and stability by keeping financing rules for the Modernisation Fund unchanged until the 2024 review.
- Taking additional factors into account when distributing the modernisation fund among MS.
- Ensure sufficient revenues are mobilised through the Innovation Fund to finance breakthrough low-carbon technologies.
- Explore additional financing options to deploy low-carbon technologies at scale through the Innovation Fund.