The European Parliament ENVI Committee is considering aligning the EU Emissions Trading System cap for Phase 4 with actual emissions in 2020. This will significantly increase the value of the EU ETS funds available to support lower income Member States in their transition to low-carbon economy, particularly Central and Eastern European (CEE) Member States.
Phase 4 of the EU ETS includes provisions for the creation of the Modernisation Fund for low-carbon investments in energy sectors and the redistribution of 10% of the number of allowances auctioned for solidarity, growth and interconnections. In addition, the Innovation Fund has been set up with a fixed volume of 450 million allowances.
Re-basing the cap to reflect actual emissions levels at the end of Phase 3 will reduce the number of allowances in the funds by about 13%, but the net effect of these changes is the increase in the value of the funds by 30-50%. The value of the Innovation Fund available to all Member States, would increase by 52% from €5.6 to €8.6 billion.