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Central and Eastern Europe (CEE) needs to be on board if we want to successfully reform the EU Emissions Trading System (EU ETS). Only then can we finally address the 3.8 – 4.4 billion allowance surplus that Sandbag predicts will have accumulated in the market and the Market Stability Reserve by 2020. Only with CEE support can we protect the EU ETS from the likelihood of emissions far below the cap for the foreseeable future.

In this blog we highlight one of the ways that the post-2020 EU ETS will support CEE business and citizens in the transition to a low-carbon economy.

Last week Sandbag met in Warsaw with CEE NGOs whose work focus on climate mitigation policies at the national level. Carbon Market Watch and Polska Zielona Sieć invited Sandbag to explain how Member State organisations can support the reform of key climate policies – the EU ETS and the Effort Sharing Regulation.

National NGOs know best how to advocate for an ambitious EU ETS at the regional level, but they can often lack access to data and information on the EU policy agenda. That’s why we focused on sharing our EU ETS tools, such as a brand new interactive EU ETS data dashboard. We believe that making the EU ETS reality more transparent in CEE Member States will go hand in hand with winning CEE government support for the EU ETS reform.

Ola Mirowicz, Sandbag’s Climate Policy Adviser to Member States, covered this topic focusing on the funds available to CEE countries for driving low-carbon investment after 2020:

“Moving away from emission intensive energy systems in Central and Eastern Europe will require significant investment. The EU ETS Modernisation Fund is one the resources that will be available exclusively to Central and Eastern European countries after 2020 for financial support for the transition to the low-carbon economy. It is also one of the few tools that can be used to improve the perception of the EU ETS among our governments in Central and Eastern Europe.”

 

What will the size of the Modernisation Fund be?

The cost of energy to end consumers is a key problem the CEE governments consider when making decisions about the future of the EU climate policy. The Modernisation Fund, as well as income the EU ETS generates to Member State treasuries, should keep energy bills lower by supporting capital investments in modernizing outdated energy infrastructure.

The value of this funding will depend on the carbon price post-2020. Recipient countries with the GDP/capita lower than 60% average in 2013 should be searching for ways to raise the fund’s value, which would be less than €2 billion at today’s prices.

How can we increase the size of the funds? By supporting changes to the EU ETS cap that would strengthen the carbon price. In our new briefing (A tighter cap grows the funds) we explain how the re-basing of the cap in 2021 in line with the real emission reductions could increase the funds value by 30%-50% regardless its diminishing effect on the volume of the allocation under these provisions. We estimated this effect using two different price scenarios.

If you want to understand better how the Modernisation Fund can be used to promote low-carbon investments in the CEE countries and the EU ETS reform check out Ola’s presentation (the official version) and the Carbon Market Watch webinar.

What next?

There are many resources available to Central and Eastern Europe. Help us bringing the discussion on the EU ETS with CEE governments to the next level and use our resources to support your asks with analytical findings.

The ball is in your court!

The webinar is available to watch here.