Emissions Trading System — Innovation Fund rules
Delegated Regulation (EU) 2019/856 with regard to the operation of the Innovation Fund
The Innovation Fund introduced in Directive 2003/87/EC is designed to support innovative initiatives as part of EU emissions trading system (ETS)*, the EU’s cornerstone policy to tackle climate change by reducing greenhouse gas (GHG) emissions.This regulation sets out detailed rules about how the fund operates.It has applied since 17 June 2019.
KEY POINTS
The regulation sets out detailed rules for the Innovation Fund, including
operational objectives;
forms of support provided;
application procedure;
how projects are selected;
how the fund is governed;
reporting, monitoring, evaluation, control, and publicity.
Objectives and forms of support
The fund provides financial support for projects demonstrating highly innovative technologies, processes or products with significant potential to reduce GHG emissions, while attracting additional public and private resources.
Support will be in the form of grants, or combining EU grants with financial instruments under the EU’s unified investment support instrument (InvestEU), which replaces the current European Fund for Strategic Investments for the period 2021-2027. Funding can also take any of the other forms outlined in Regulation (EU, Euratom) 2018/1046 (the ‘Financial Regulation’), in particular prizes, and procurement.
Application and selection
Applicants are invited to apply for financial support for eligible projects following a call for proposals issued by the European Commission after consultation with EU countries. Projects are selected based on criteria including:
the potential to avoid GHG emissions;
degree of innovation of the projects compared to the state of the art;
maturity of planning, business model, financial and legal structure; prospect of concluding the financial close of the project within a pre-defined time period of no more than 4 years;
technical and market potential for widespread application or future cost reductions;
cost efficiency of the project based on a formula balancing costs against GHG emissions avoided, energy generated, or CO2 stored (carbon capture and storage) in the first 10 years of operation.
Governance and administration
The Commission directly manages the Fund’s operation except where implementing bodies are delegated. EU countries are consulted about short-listed projects before any decisions on awards are made.
Entities receiving aid should display on their websites information about projects supported under this regulation, including explicit reference to the Innovation Fund support received, as well as ensuring that coherent, effective and targeted information on the support reaches multiple audiences, including the media and the public.
KEY TERMS
EU Emissions Trading System (EU ETS): the first, and by far the largest, international system for trading GHG emission allowances, it covers nearly 11 000 power stations and manufacturing plants in the EU, Iceland, Norway and Liechtenstein, as well as aviation activities.
DOCUMENTS
Commission Delegated Regulation (EU) 2019/856 of 26 February 2019 supplementing Directive 2003/87/EC of the European Parliament and of the Council with regard to the operation of the Innovation Fund (OJ L 140, 28.5.2019, pp. 6-17)
Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30.7.2018, pp. 1-222)
Commission Decision 2010/670/EU of 3 November 2010 laying down criteria and measures for the financing of commercial demonstration projects that aim at the environmentally safe capture and geological storage of CO2, as well as demonstration projects of innovative renewable energy technologies under the scheme for greenhouse gas emission allowance trading within the Community established by Directive 2003/87/EC of the European Parliament and of the Council (OJ L 290, 6.11.2010, pp. 39-48)
Successive amendments to Decision 2010/670/EU have been incorporated into the original text. This consolidated version is of documentary value only.
Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide and amending Council Directive 85/337/EEC, European Parliament and Council Directives 2000/60/EC, 2001/80/EC, 2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006 (OJ L 140, 5.6.2009, pp. 114-135)
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ L 275, 25.10.2003, pp. 32-46)
last update 07.10.2019
Greenhouse gas emission allowance trading and aviation
Taking into account the scale and global nature of the aviation industry and its impact on the environment, the EU takes action to reduce greenhouse gas (GHG) emissions caused by aviation in Europe, whilst working with the international community through the International Civil Aviation Organisation (ICAO) to establish measures with a global reach.
Directive 2008/101/EC of the European Parliament and of the Council of 19 November 2008 amending Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community
This directive amends Directive 2003/87/EC, which set up the EU emissions trading system (EU ETS), by factoring in carbon dioxide emissions caused by aviation activity. As a result, all flights to, from and within all EU countries and Norway, Iceland and Liechtenstein are covered under the EU ETS.
KEY POINTS
95 % of the average emissions over the 2004-2006 period is set as the annual cap* for aviation emissions for the period from 2013 to 2020.
The directive applies to EU and non-EU airlines alike, which receive tradable allowances covering a certain level of CO2 emissions from their flights per year.
377/2013/EU retroactively exempted the EU ETS requirements for flights to and from non-EEA countries in 2012 to allow time for negotiations with the ICAO towards a global market-based measure (MBM) for aviation emissions.
The legislation was amended for the 2013-2016 period under Regulation (EU) No 421/2014. This means that only flights within the EU, Norway, Iceland and Liechtenstein are covered under the EU ETS, pending the outcome of negotiations in ICAO for a global MBM to be agreed by 2016 and to be applied by 2020.
Aviation is one of the fastest-growing sources of GHG emissions globally (and in the EU), accounting for roughly 3 % of total emissions. It is expected that, by 2020, the amount of GHGs released by aviation will be 70 % higher than in 2005, even after taking into account improved fuel efficiency.
The EU ETS is the cornerstone of the EU’s policy to combat climate change and its key tool for reducing industrial GHG emissions cost-effectively. The first – and still by far the biggest – international system for trading GHG emission allowances, the EU ETS covers more than 11 000 power stations and industrial plants in the 28 EU countries (1), Iceland, Norway and Liechtenstein, as well as emissions from aviation.
The EU ETS works on the ‘cap and trade’ principle. A ‘cap’, or limit, is set on the total amount of certain GHG that can be emitted by the factories, power plants and other installations in the system. The cap is reduced over time so that total emissions fall. The system allows the trading of emission allowances so that the total emissions of the installations and aircraft operators stays within the cap and the least-cost measures can be taken up to reduce emissions.
For more information, see reducing emissions from aviation on the European Commission’s website.
REFERENCES
Directive 2008/101/EC
Decision No 377/2013/EU of the European Parliament and of the Council of 24 April 2013 derogating temporarily from Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community (Official Journal L 113 of 25.4.2013, pp. 1-4).
Regulation (EU) No 421/2014 of the European Parliament and of the Council of 16 April 2014 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in view of the implementation by 2020 of an international agreement applying a single global market-based measure to international aviation emissions (Official Journal L 129 of 30.4.2014, pp. 1-4).