How to optimise the EU ETS transition funds?

Analysing options for Article 10c derogations, the Modernisation Fund, and for Solidarity & Growth provisions

Dave Jones

Global Programme Lead

19 June 2019 | < 1 min read

Executive summary

Analysing Article 10c, the Modernisation Fund, and Solidarity & Growth provisions

The Modernisation Fund offers much better investment prospects than Article 10c

In this short briefing:

  • We analyse the small-print from the European Commission to assess the investment options possible for Article 10c and the Modernisation Fund.
  • We analyse the available options for each eligible Member State and the financial impact of these decisions. We quantify the action the MSR (Market Stability Reserve) on auction volumes – and how this may change as a result of Member State decisions.

Key Finding: The Modernisation Fund offers much better investment prospects than Article 10c

We already know that the Article 10c derogation cannot be used to subsidise coal investment like it was in this decade, but the criteria for its use in the next phase of the ETS are so strict that governments should instead transfer those allowances to maximise the Modernisation Fund. The Modernisation Fund could be a very influential source of funding for cutting emissions in Central and Eastern Europe. On our calculations, the fund could be worth €50 billion in the next decade if the ten eligible countries choose to maximise their contribution.

Dave Jones Power & Carbon Analyst, Ember

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