Innovation and modernisation fund
The two European funds for the promotion of low-emission innovative technologies in energy and industry (Innovation Fund) and for the modernisation of the energy sector (Modernisation Fund) will be provided with financial resources through the auctioning of emission allowances. The volume of funds should increase further in the future. In addition, the scope of the funds will be expanded.
The innovation fund is to be expanded to include the building, land and maritime transport sectors and the amount of emission allowances allocated to the fund is to be increased from the current 450 million to at least 480 million allowances, including 5 million with regard to aviation. Emission allowances that are no longer allocated free of charge due to the introduction of the Carbon Border Adjustment Mechanism (CBAM) should also flow into the Innovation Fund. In addition, 27 million emission allowances from the MSR will be made available to the innovation fund. At the same time, however, it is planned that the Innovation Fund will be used to provide 12 billion Euros in funding for programmes to decarbonise and improve energy independence as part of ‘RePowerEU’. This relates to industrial sectors, the use or storage of CO2 (CCU/CCS) in industry or the energy sector, renewable energies and energy storage as well as maritime transport. These areas are to be prioritised with a portion of the fund earmarked for this purpose. In addition, climate protection contracts (Carbon Contracts for Difference) in the future can also be subsidised through the innovation fund.
The modernisation fund, which aims to assist poorer Member States to decarbonise their energy systems, will also be increased. Instead of 2 percent of the cap, another 2.5 percent of the cap will be made available for the modernisation fund in the future. In addition, three southern European states (Greece, Portugal and Slovenia) have been added to the group of eligible Member States for a part of the fund.
To the topic
Climate Change 06/2018: The Innovation Fund - how can it support low-carbon industry in Europe?
Climate Social Fund
A new EU-managed climate social fund will be created to counter the additional burdens of the new emissions trading system (EU ETS 2) for financially acutely vulnerable households, micro-enterprises and transport users. One year before the introduction of EU ETS 2 in 2026, revenues of 50 million allowances from EU ETS 1 will flow into the newly created fund. Proceeds from EU ETS 2 will follow from 2027 onwards. 65 billion euros are to be generated in total from the auctioning of allowances for the Social Climate Fund (54.6 billion euros if the introduction of EU ETS 2 is postponed by one year).
The fund aims to support the implementation of national social climate plans. The maximum amount of funding Member States can use is determined by country-specific ceilings. On the one hand, temporary, direct income support is eligible. On the other hand, the fund is designed to support measures and investments that offer assistance to financially vulnerable groups in switching from fossil fuels to climate-friendly technologies. An additional 25 percent is to be added from national funds for implementing the social climate plans so that a total of an estimated 86.7 billion euros will be available.
In addition, the Member States are to use their remaining proceeds from EU ETS 1 and EU ETS 2 in full to actively support the transformation to climate neutrality in terms of economic and social policy. In Germany, these funds are channelled into the Climate Transition Fund, which finances a wide range of approaches.
To the topic