The objective of the European Emission Trading System (EU ETS) is “to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner” (European Parliament and Council, 2009).
If static (or short-term) efficiency is almost a natural feature of cap-and-trade schemes like the EU ETS, dynamic (or long-term) efficiency depends on the ability of the system to promote and sustain innovation and diffusion of low-carbon technologies.
For this to happen, significant carbon price levels are a necessary condition, but equally important are the stability of the EU ETS and low price volatility of allowances. Moreover, climate finance can play a significant role in supporting innovation and green investments.
The reform of the EU ETS for Phase IV introduces the Innovation Fund (IF), which will be an enhanced version of the NER 300. The scope of the IF programme will be wider compared to that of NER 300, both in terms of the resources made available and in terms of the range of eligible beneficiaries.
Outside the EU ETS, climate finance plays a very important role and a framework aligning financial institutions with the long-term climate goals is taking shape. The European Investment Bank Group guided by EU policy, including the commitments to the Paris Agreement and to the United Nations Sustainable Development Goals, fosters sustainable growth within the EU and abroad. The EIB inaugurated the green bond market in 2007 and is the largest issuer to date with more than EUR 21 bn with allocations to 160 renewable energy and energy efficiency projects all over the world.
This debate is carried out under the LIFE SIDE project aiming at supporting European policy-makers with the design and implementation of the new EU ETS legislation.
More information about the event and the speakers can be found here.
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