Repower Eu plan will not distort ETS
With the Repower Eu plan , Europe wants to free itself from energy dependence on Russia
To finance the Repower Eu plan will not touch the ETS quotas of the stability reserve. The finance ministers of the 27 decided to put together the missing 20 billion using for 75% the Innovation Fund and for 25% anticipating the sale of carbon market permits (frontloading). “The aim is “not to disrupt the functioning of the EU ETS, while ensuring a credible revenue stream“, explains a Council note.
Towards the clash between Council and Parliament on the Repower Eu plan
In the original version of the Repower Eu plan, which aims to eliminate the EU’s energy dependency on Russia in forced stages, the Commission proposed a €300 billion package of which €225 billion in funding and grants, 75 billion in loans. It also suggested that additional 20 billion of funding, the ones discussed by the Council, be recovered from the Market Stability Reserve.
The MSR is a drawer where excess allowances from the European ETS are withdrawn in order to achieve two objectives: to keep carbon prices high enough and to continue to encourage emission reductions in the sectors covered. Therefore, putting those quotas back into circulation would depress permit prices and, according to the Council, undermine the credibility of the whole system.
To avoid this outcome, the 27 decided to take the money mainly from another fund, which should in theory finance the industrial transition to low-carbon technologies. And it is a solution that the European Parliament does not like at all, with which the Council will now have to negotiate to give final approval to the Repower Eu plan.
“We completely disagree that most of the money comes from the Innovation Fund, because we need the fund to support the industry transition,” said Peter Liese, German MEP and main negotiator on the reform of the ETS in the European Parliament. The Strasbourg proposal is to use frontloading for the full 20 billion.