Draft ID: 82ffb9c4-20b6-4c29-ab25-976e70952dd4
Date: 02/02/2021 14:29:30

Updating the EU Emissions Trading System
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Introduction
The European Green Deal, adopted by the Commission in December 2019, has tackling climate change
and reaching the objectives of the Paris Agreement and other environmental issues (including addressing
air pollution) at its core. The 2050 climate neutrality objective, which the Commission proposed in 2018 and
the European Council and Parliament endorsed, is one of its central elements. The Commission has
proposed to enshrine climate neutrality into EU law. In order to set the EU on a sustainable path to achieve
climate neutrality by 2050, the Commission has proposed in the Communication on stepping up the EU’s
2030 climate ambition an EU-wide, economy-wide net greenhouse gas emissions reduction target of at
least 55% in 2030 (compared to 1990).
Building on the existing 2030 legislation and the Communication on stepping up the EU’s 2030 climate
ambition, the Commission will review and propose to revise, where necessary, the key relevant legislation
by June 2021. This will include a coherent set of changes to, notably, the EU Emissions Trading System
Directive, the Effort Sharing Regulation and the Land Use, Land Use Change and Forestry (LULUCF)
Regulation, CO2 Emissions Performance Standards for Cars and Vans and, the Renewable Energy
Directive and the Energy Efficiency Directive.
This consultation focuses on the EU Emissions Trading System (EU ETS), a key tool for reducing
greenhouse-gas emissions and achieving the EU’s climate targets. The EU ETS is a cap-and-trade system
that currently governs 41% of the EU’s emissions, covering power and heat generation, energy-intensive
industrial sectors and aviation within the European Economic Area and to/from Switzerland. The
Communication on stepping up the EU’s 2030 climate ambition explicitly indicates the need to revise the
EU ETS in light of the aforementioned more ambitious target. This includes the extension of the EU ETS to
new sectors, such as the maritime sector, which is a sector that requires a basket of measures to ensure its
fair contribution to the climate neutrality goal by 2050. Furthermore, emissions trading system could be
expanded to road transport and buildings, and potentially all fossil fuel use.
This public consultation invites citizens and organisations to contribute to the assessment of how
to translate the increased EU 2030 emission reduction ambition into an upgraded, more ambitious,
workable and realistic ETS. The results of the consultation (which will be summarised and
published) will inform the Impact Assessment, accompanying the Commission proposal for
revising the ETS. There are additional parallel public consultations on the review of the LULUCF
Regulation, of the CO2 Emissions Performance Standards for Cars and Vans and of the Effort Sharing
Regulation.

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Guidance on the questionnaire
This public consultation consists of some introductory questions related to your profile, followed by a
questionnaire. Please note that you are not obliged to respond to all questions in the questionnaire.
The Commission already held an open public consultation on the 2030 Climate Target Plan, which was
open for 12 weeks from 31 March to 23 June 2020. Many high-level questions related to the increased
climate ambition were asked in the context of that consultation. The present questionnaire therefore
focuses on more specialised and detailed questions on the ETS design required to best achieve the
revised target.
At the end of the questionnaire, you are invited to provide any additional comments and to upload
additional information, position papers or policy briefs that express the position or views of yourself or your
organisation.
The results of the questionnaire as well as the uploaded position papers and policy briefs will be published
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data and contributions will be dealt with.
In the interest of transparency, if you are replying on behalf of an organisation, please register with the
register of interest representatives if you have not already done so. Registering commits you to complying
with a Code of Conduct. If you do not wish to register, your contribution will be treated and published
together with those received from individuals.

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van Hussen

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A. The Contribution of EU ETS to the overall climate ambition for 2030
The Commission has proposed to increase the net economy-wide target to reduce greenhouse gas
emissions (‘GHG’) domestically by at least 55% by 2030 compared to 1990. Currently, consistent with the
EU‑wide GHG emission reduction target of 40% in 2030 (compared to 1990), the ETS Directive puts a cap

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on emissions to ensure that the sectors covered by the EU ETS will reduce their emissions by 43%, as
compared to 2005, by 2030. To achieve the increased economy-wide target, also the ETS’s contribution
will have to be increased and changes to fundamental aspects of the EU ETS may be required, including
the cap on emissions and the measures in place to protect against the risk of carbon leakage.

1. With the increased 2030 GHG reduction ambition of at least 55%, what
should be the current EU ETS sectors’ contribution to the increased 2030
target (i.e. without the accounting for the possible inclusion of new sectors)?
The current ETS sectors should increase their current ETS contribution
(compared to 2005) in line with the new target. Based on cost-efficiency
considerations as calculated in the Impact Assessment accompanying the
Communication on stepping up the EU’s 2030 climate ambition (table 26),
the current ETS sectors should contribute around -63% compared to 2005
The contribution of the current ETS sectors should be more than what their
potential for cost-efficient emissions reductions would indicate
The contribution of the current ETS sectors should be more than 43%
reductions (compared to 2005) but less than what their potential for costeffective emissions reductions would indicate
Other
Please specify:
1000 character(s) maximum
The EU 2030 target needs to be delivered in the most cost-effective manner. This implies that the majority of
reductions needs to take place in the EU ETS, in line with the impact assessment accompanying the EU
Climate Target Plan. For non-ETS sectors, strengthening EU legislation (such as CO2 and energy standards
for cars, buildings and appliances) should ensure that the required reduction is achieved. The current
distribution in the ESR target setting needs to be changed to fully reflect cost-effectiveness, in line with a
pathway to climate neutrality by 2050 in each member state, while allowing for enough flexibility.

2. A strengthened EU ETS 2030 ambition can be achieved through different
combinations of policy options. Considering the current EU ETS sectors,
please rate the following aspects in terms of relevance? Please rate from 1
(not important) to 5 (very important):
1

2

3

4

5

Strengthen the cap through the increase of the linear reduction factor
Strengthen the cap through a one-off reduction (‘rebasing the cap’)
A combination of increasing the linear reduction factor and a one-off
reduction

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Cancelling allowances held in the Market Stability Reserve (MSR) [The
Market Stability Reserve is further explained in section E of this survey]
Maintain the increased feeding rate of the MSR after 2023
Early application of a strengthened cap (e.g. 2023 instead of later)
Other, please specify in the box below

Please specify:
1000 character(s) maximum
To achieve the increased EU climate ambitions, two essential changes are necessary:
1. The emission ceiling should be fully quantitatively aligned with 2030 and 2050 emission reduction targets:
the linear reduction factor will need to be substantially higher than the current 2.2% during the second half of
the fourth trading period (2026 - 2030), and possibly already earlier. A rebase of the cap can also be
considered.
2. The Market Stability Reserve should be enhanced to fully cope with surplus allowances: the increased
ambition requires an annual intake rate of surplus allowances substantially higher than the current 24%. To
this purpose, a progressive intake rate could be considered.

3. In view of a strengthened ETS cap and thus a decreasing absolute volume
of allowances available for auctioning and free allocation, how should the
total cap be divided?
The current auction share of 57% should be maintained
The auction share should be increased and free allocation decreased
Other

B. Addressing the risk of carbon leakage
Current rules foresee the continuation of the free allocation until 2030 based on updated benchmark
values. In the European Green Deal, the Commission announced it would propose, for selected sectors, a
Carbon Border Adjustment Mechanism should differences in levels of ambition worldwide persist, as the EU
increases its climate ambition. Such measure would be an alternative to the measures that address the risk
of carbon leakage in the EU’s Emissions Trading System. Furthermore, an increased ambition for the EU
ETS and hence a lower cap of allowances under the ETS would impact the amount of allowances available
for free allocation in any case.

4. Do you believe the current carbon leakage framework addressing direct
carbon costs, consisting of free allocation, should be maintained, amended
or replaced? Multiple answers are possible
The current carbon leakage protection framework should be maintained
without changes

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The current carbon leakage protection framework should be modified by
targeting the support even more to the sectors most at risk
For selected sectors, the current carbon leakage framework should be
replaced by a Carbon Border Adjustment Mechanism
Free allocation should be made conditional to beneficiaries carrying out
investments for reducing their GHG emissions
Other measures to further incentivise GHG reductions should be introduced
EU ETS benchmark values reflect the average emission intensities of the 10% best installations covered by
the ETS per product. These benchmark values will be updated for the periods 2021–2025 and 2026–2030
by considering the actual improvements of the installations’ performances. However, the annual update
rate is limited to a value between 0.2% and 1.6% per year. The annual update rate reflects the
improvements in each sector between 2007–2008 and 2016–2017 and results in a reduction of the
benchmarks applied for calculating the free allocation received by each installation.

5. In view of the likely lower amount of allowances available for free
allocation, (due to increased ETS target) which of the following aspects in
relation to the benchmark-based allocation do you consider most relevant?
Please rate from 1 (not important) to 5 (very important):
1

2

3

4

5

Modified method to determine benchmark values to ensure faster
incorporation of innovation and technological progress (e.g. by not
limiting the annual reduction rate for each benchmark when updating
benchmark values)
Additional product benchmarks
Revised definitions of product benchmarks to incentivise innovation
Increased transparency regarding benchmark values and process via
mandatory publication of underlying data by industry
Other, please specify in the box below

Please specify:
1000 character(s) maximum
- Current transparency is considered to be balanced between openness to the public and interests of the
companies involved. Some data is very sensitive because of competition between companies inside and
outside the EU.
- Additional research on the impact of further reducing the fall back benchmarks is necessary.

Member States can compensate certain electro-intensive sectors for the indirect costs passed on through
electricity prices (indirect cost compensation, the ETS Directive currently states that Member States should
limit the amount they spend on indirect cost compensation to 25% of their auction revenues. This

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compensation is subject to State aid rules and as such not granted in all countries. Multiple responses
possible.

6. Should the approach to indirect cost compensation be modified?
Yes, the rapidly on-going decarbonisation of the electricity production in the
EU will sufficiently reduce indirect costs and therefore, indirect cost
compensation can be gradually phased out
Yes, indirect cost compensation should be further harmonised in Europe,
sectors exposed to the risk carbon leakage due to indirect costs should be
compensated equally regardless of the Member State where they are active
Yes, the approach to indirect cost compensation should remain the same,
but additional requirements should be set to ensure that Member States
granting it do not spend more than a given percentage of their auctioning
revenues on it
No, Member States should maintain flexibility to grant indirect cost
compensation or not, subject to State Aid control

C. An increasing role for emissions trading
An expansion of emissions trading could include emissions from fossil fuel combustion in road transport
and buildings. Depending on the administrative systems chosen, the portion of industry currently not
included in the ETS could also be brought in. The Commission will look, inter alia, at the option to cover all
emissions of fossil fuel combustion under the ETS, while taking into account potential effects on existing
EU legislation in this field.
In the context of the impact assessment work for the Communication on stepping up the EU’s 2030 climate
ambition, difficulties emerged as to regulating emitters themselves in a number of sectors being examined
for possible ETS application in the same manner as in the current ETS sectors (downstream approach),
because these emitters number in the millions and are often private persons. Instead, entities further up the
supply chain such as the fuel distributors or tax warehouses could be regulated and be required to monitor
and report emissions as well as surrender allowances (upstream approach).
The EU ETS has shown that the development of a new market requires setting up functioning monitoring,
reporting and verification (MRV) and can benefit from transitional arrangements for market and price
stability reasons, before being gradually integrated into the existing system. Transitional arrangements for
an extension of ETS scope would allow for setting up gradually the required regulatory framework and
administrative capacity.

7. Carbon pricing alone does not address all barriers to the deployment of
low and zero emissions solutions. Which other policies should be deployed

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when extending the use of emissions trading to emissions from buildings,
road transport or all fossil fuel combustion? Please rate from 1 (not
important) to 5 (very important):
1

2

3

4

5

Polices addressing energy performance of buildings, the energy savings
obligation, or other energy efficiency policies to be specified in the box
below
CO2-standards for cars and vans
Transport policies
Renewable energy policies
Energy taxation
Other, please specify in the box below

Please specify:
1000 character(s) maximum
Considering the high upfront costs for building renovation, additional policies are required to support building
owners in the process. E.g. financial instruments, technical assistance and research and development for
different types of buildings and different types of building owners. Regarding ETS for road transport, other
measures are of prime importance: ambitious CO2 emission standards, ZEV sales requirements and phaseout target dates for non-zero emission mobility across all road transport modalities. In addition, a high level
of ambition is needed for fuel quality standards and renewable energy requirements in transport. The
introduction of EU carbon pricing may undermine the effectiveness and future level of ambition of these
other measures. The Netherlands is in favor of aligning the Energy Taxation Directive ETS with climate
objectives. The possibility of providing exemptions in the ETD should be reduced and the minimum rates
should be increased.

8. Emissions trading for road transport and buildings or all fossil fuel use
could be integrated into the existing EU ETS so that there would be one
single system covering emissions from all these sectors. If the new sectors
are integrated into the current EU ETS such integration would be (multiple
answers are possible):
Positive, because it would capture the emissions under the cap and facilitate
more cost-effective abatement by increasing abatement options
Positive, because including buildings into an extended EU ETS would
provide a level playing field for all modes of heating and cooling

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Positive, because including fossil fuels used in road transport into an
extended EU ETS would provide a level playing field for all modes of road
and rail transport, including electric rail which is already subject to indirect
carbon pricing
Positive, because setting a separate ETS for road transport and/or buildings
or all fossil fuel use would lead to higher administrative costs for
administrations and regulated entities
Positive, because including emissions from all fossil fuel use into an
extended EU ETS would provide a uniform carbon price signal for all
industries
Negative, because there could be an insufficient price signal for the transport
and building sector to decarbonise
Negative, because the new sectors are too different from the current sectors
and abatement effort will mainly materialise in the current ETS sectors
Negative, as the integration of the new sectors in the current ETS might
disrupt and undermine the stability of the current ETS
Other
Please specify:
1000 character(s) maximum
If there would be a system for road transport or buildings, we prefer separate systems (no integration with
stationary installations) and gradual integration after thorough studies and a 'trial' period. Also, such a
system should not replace any source policy such as CO2 standards for cars.

9. A separate EU-wide emissions trading system for road transport and
buildings or all fossil fuel use could be established as a parallel system to
the current EU ETS. Flexibilities could be built in, e.g. to allow partial
fungibility between the allowances of the separate systems. What is your
preferred design option for the relationship between these two systems:
Both systems should stay independent and no relationship between them
should be established
One-way flexibilities between the systems will increase cost-efficiency
Two-way flexibilities between the systems will increase cost-efficiency
Other
10. Establishing a separate EU-wide emissions trading system for road
transport and buildings or all fossil fuels will require choosing its main
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features. Which of the following aspects of the new ETS do you consider
should be similar to the current ETS in order to allow for a later integration?
Please rate from 1 (very similar) to 5 (very different):
1

2

3

4

5

The level of ambition for emissions reduction
The linear reduction factor
Provisions to address distributional aspects, i.e. how revenues are
divided and used
Provisions to address carbon leakage issues in the energy intensive
industry where appropriate
Monitoring, reporting and verification rules
The infrastructure to be used (e.g. the use of the existing EU ETS
infrastructure such as the Union Registry)
Application of the market stability provisions

11. Emissions trading for road transport and buildings or all fossil fuels
could be gradually integrated into the existing EU ETS. Should the ETS
revision already determine when and how such integration will take place?
Yes, the market needs certainty and legislation should determine that
integration will happen at a specific time within , e.g., 5 years from its entry
into force
Yes, the legislation should foresee a review to determine whether and when
integration is desirable
No, in view of the risks associated the legislation should not foresee such
integration
Other
Please specify:
1000 character(s) maximum
Integration should not be foreseen in the legislation. This would first require a detailed impact assessment, to
be done based on an ex post evaluation of a separate system.

D. Extension to Maritime greenhouse gas emissions
While CO2 emissions from EU’s international maritime transport are being monitored, reported and verified
under the dedicated EU MRV System, they are not covered by the EU ETS or other EU climate legislation,
contrary to the EU’s international commitment to economy-wide action under the Paris Agreement.

15

In line with the European Green Deal communication, the Commission will assess carbon pricing options to
ensure that the price of waterborne transport reflects the impact it has on climate. In addition, the
Commission will consider including at least intra-EU maritime transport in the EU ETS, as stated in the
communication on stepping up Europe’s 2030 climate ambition, to ensure the sector contributes to the
emission reductions needed.
As carbon pricing will not be able to address all barriers to the deployment of low and zero emissions
solutions, a basket of other complementary policy actions at EU level are needed to trigger further
investments in clean energy technologies and infrastructure. The existing legislative framework, the
ongoing reviews and announced revisions of other related pieces of legislation, including on mobility,
transport fuels, or Energy Taxation Directive, will be taken into account to ensure synergies of instruments.
Due to the international nature of maritime transport, international cooperation is desirable, notably at the
International Maritime Organization.

12. What is your opinion on the most appropriate measure to put a price on
GHG emissions from EU maritime transport activities?
Extension of the EU ETS to cover maritime transport
A specific ETS system just for maritime transport
A tax at EU level on GHG emissions from maritime transport
Other
Please specify:
1000 character(s) maximum
Ideally reduction measures at IMO level are agreed to align the international shipping emissions with the
Paris goals. Those are more effective, and can avoid negative impacts on the level playing field. For
example through a global fuel levy.
At the same time, the Netherlands supports exploring EU measures, including EU-ETS, and underlines the
need for a package of well-coordinated measures. The aim must be in sector emission reduction and
greening investments, in particular spurring the transition to sustainable energy carriers, while facilitating
global measures.
Regarding ETS, a specific maritime ETS system seems the more logical option for this. However, it is
difficult to judge at this stage. Sufficient safeguards are needed for carbon leakage prevention and the
competitiveness of the European maritime industry.
Starting with intra EU would leave out big emitters, burdening small ship owners. This would require serious
efforts to ensure they will be able to invest in greening.

13. Decarbonisation of the maritime transport to ensure its fair contribution
to EU climate targets will require a basket of measures across different policy
areas, including putting a price on carbon emissions from shipping. Do you
think that EU carbon pricing measures in the maritime sector (such as an
ETS or a tax on GHG emissions from maritime transport) should be
combined with EU emission standards for ships (notably technical or
operational carbon intensity standards)?
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at most 1 choice(s)

Yes
No, emission standards are sufficient and should be implemented alone
No, carbon pricing is sufficient and should be implemented alone
I do not know
14. The impacts of EU carbon pricing for the maritime sector, in particular its environmental
effectiveness, will directly depend on the design elements for the selected measure. Please select
the most appropriate design option for a EU carbon pricing policy for maritime transport under
each of the categories listed below.

Regulated Entities
Carbon price should be paid by ship commercial operators
Carbon price should be paid by ship owners
Other
Please specify:
1000 character(s) maximum
The shipowner or any other organisation or person, such as the manager or the bareboat charterer, who has
assumed the responsibility for the operation of the ship from the shipowner and who, on assuming such
responsibility, has agreed to take over all the duties and responsibilities imposed by the International
Management Code for the Safe Operation of Ships and for Pollution Prevention

Exemptions
The International Maritime Organisation has energy efficiency measures (the
Energy Efficiency Design Index for new ships and the Ship Energy Efficiency
Management Plan for existing ships) in place for ships of 400GT and above.
Therefore, only ships below 400 GT should be excluded.
In line with the EU MRV System for shipping, ships below 5000 GT should
be excluded, as they are only responsible for about 10% of emissions.
Other
Please specify:
1000 character(s) maximum

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One of the dilemmas with ETS is that 5000gt as in EU MRV makes sense when extra EU voyages would be
included. Should ETS shipping start with intra EU, it would oblige only the smaller ship owners to make an
effort. The bigger ship owners and ships operate mostly outside of that scope. This would be less of a
dilemma if those bigger ships were to contribute through alternative obligations / measures, and if inclusion
of smaller ship owners under ETS could be made more palatable. For instance by applying a credit and
baseline mechanism that would allow ship owners that overperform to sell credits to ship owners that
underperform. Such a mechanism could help create a business case and speed up investments.

Geographical scope
Emissions from intra-EU (from an EU port to another EU port) and extra-EU
voyages (departing and incoming between an EU port and a port outside the
EU) should be addressed by carbon pricing
Emissions from intra-EU voyages (from an EU port to another EU port)
should be addressed by carbon pricing
Type of emissions covered
In line with the EU MRV System for shipping, only CO2 emissions should be
accounted for, as they are responsible for 98% of all GHG emissions from
maritime transport.
Not only emissions of CO2, but also of methane, nitrous oxide and black
carbon emissions should be accounted for in view of their important increase
over the 2012-2018 period.
Other
Please specify:
1000 character(s) maximum
Investigate the appropriateness of including methane, whether it would be implementable, enforceable and
proportional to the required efforts

15. The Climate Target Plan Impact Assessment presented various scenarios
where the extra‑EU scope of the maritime sector is included in the EU GHG
target. In line with these scenarios, if the EU were to apply carbon pricing to
emissions from extra-EU voyages, on which basis should this be done?
(select one option)
Departing journeys only (from an EU port to a port outside the EU)
Incoming journeys only (from a port outside the EU to an EU port)
50% of both the incoming and the outgoing journeys
100% of both the incoming and the outgoing journeys
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E. Market stability
Since its introduction, the Market Stability Reserve (MSR) has reinforced the stability of the EU ETS. The
MSR is a rule-based instrument placing allowances in or releasing allowances from the reserve in case the
total number of allowances in circulation (‘the surplus’) is above or below pre-established thresholds. The
rhythm of placement in the reserve, (‘the intake rate’), is 24% per year until 2023 and 12% from 2024. As
planned for in the legislation, the Commission is reviewing the functioning of the Market Stability Reserve,
to assess whether it has achieved its objectives and whether it remains fit for purpose in an ETS with
higher climate ambition.

16. Has the MSR delivered on its main objective (the stability of the ETS), and
is it likely to fulfil its goals in the future, or should its structure or parameters
be changed?
Yes, the approach has worked well and should not be changed
Yes, the approach has worked well and should be continued, but parameters
(e.g. volume-based thresholds, intake rate) should be modified
Yes, the approach has worked well but a carbon price floor is necessary
Yes, the approach has worked well but should be improved to be able to
react faster to address unexpected demand or supply shocks
No, the approach did not work well and it should be reconsidered in the
future
Other
17. Should the MSR thresholds (minimum of 400 and maximum of 833 million
allowances) used to determine whether allowances are placed in the MSR or
released, be kept as they are? Please explain your answer.
The thresholds as they are fit for purpose
The thresholds should be increased
The thresholds should be reduced
Please explain your answer:
1000 character(s) maximum
The threshold can be revisited, which should be based on an analysis of hedging needs in the market. This
could imply both lower and higher thresholds.
Furthermore, the difference between zero intake at 832 mln TNAC and ~100 mln intake at 833 mln TNAC
could be addressed.

18. Should the MSR intake rate be kept as it is or should it be increased or
decreased?
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at most 1 choice(s)

The MSR intake rate should be kept at 24% and fall back to the level of 12%
as of 2024 as per current regulation
The MSR intake rate should be kept at 24% beyond 2023
The MSR intake rate should be higher than 24%, in order to reduce the
surplus faster
The MSR intake rate should be decreased, to lower than 12% from 2024
onwards
Other
19. Current regulation determines that as a long-term measure to improve the
functioning of the EU ETS, and unless otherwise decided in the first review of
the MSR in 2021, from 2023 onwards the number of allowances held in the
reserve will be limited to the auction volume of the previous year. Holdings
above that amount will lose their validity. Do you believe this invalidation rule
should be kept in place? Please explain your answer.
Yes, the rule should remain in place
No, the rule should be abolished
Yes, the rule should remain in place but be amended please explain how in
the box
20. At the moment, emission allowances for aviation are not taken into
account for the calculation of the EU ETS surplus and therefore do not
influence the amount of allowances fed into or released from the MSR.
Should aviation allowances and emissions be taken into account in the
future?
Yes
No
You may explain your answer:
1000 character(s) maximum

The review of the EU ETS Directive for Phase IV (2021-2030) introduced, in Article 12(4) of the ETS
Directive, the option for Member States to cancel voluntarily emission allowances corresponding to
electricity generation capacity in their territory that was closed following national measures.

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21. Should voluntary cancellation of allowances become mandatory for
Member States that implement national measures to close fossil fuels power
plants or other measures that substantially reduce demand for allowances,
for instance by promoting breakthrough technologies or banning polluting
technologies?
No, it should be left to the Member State to decide what to do with the
resulting allowances
Yes, these allowances should be cancelled proportionally, taking into
account the emissions of the replacing power generating technology
Other, for instance placing the allowances in the MSR.

F. Revenues
Emissions trading raises revenues for public authorities that can be re-invested in the economy, leading to
better overall economic outcomes. A small percentage of revenues is allocated to the EU Modernisation
and Innovation Funds to support low-carbon investments. However, the largest share of the revenues are
for the Member States. The majority of these revenues are currently reported as being used for climaterelated purposes. The review will address the current rules in place, also taking into account that as new
sectors are possibly added to the ETS, revenues may increase and at the same time there is a need for
ETS revenue to contribute as an own resource of the EU budget .

22. In your opinion, how should the ETS revenue be used? (Multiple answers
are possible)
Facilitating just transition and the social impacts of the climate transformation
Addressing social and distributional impacts related to the review of ETS
Energy efficiency, in particular the renovation of buildings
Low‑carbon and zero‑emissions mobility
Support for clean investments in ETS sectors
Providing financial incentives for consumers to buy more climate friendly
goods and services, including more fuel efficient vehicles/ vehicles not using
fossil fuels
More support to innovation
Lowering taxes such as labour taxation and increasing transfers to EU
citizens, in particular low-income households
23. Are stricter rules necessary to ensure Member States spend their ETS
auction revenues in line with climate objectives?

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Yes, the ETS Directive should require Member States to spend more
revenues on climate-related purposes
Yes, the ETS Directive should require that Member States spend ETS
revenues in a way compatible with the climate neutrality objective (‘do no
harm’)
No, Member States should be free to determine how they want to spend the
revenues, taking into account that 50% should be used for climate-related
purposes.

G. Low-carbon support mechanisms
Currently, the Innovation Fund is funded by 325 million allowances from the free allocation share, 75 million
allowances from the auction share, 50 million allowances from the MSR monetised in 2020 and the leftover
allowances from the NER300 programme. The monetisation of these allowances is expected to generate
around EUR 10 billion until 2030 depending on the carbon price.

24. What should be the size of the Innovation Fund?
The size of the Innovation Fund should remain unchanged
The size of the Innovation Fund should increase by using more allowances
from the auction share
The size of the Innovation Fund should increase by using more allowances
from the free allocation share
The size of the Innovation Fund should increase significantly regardless of
the source of allowances. Please indicate by how much (e.g. double or
triple) in the box
25. Currently the ETS Directive foresees that the maximum funding rate for
projects financed by the Innovation Fund is 60% of the relevant costs. Should
this rate be changed?
No, some of the risk of innovation has to be borne by the project proponent
Yes, it should be increased to allow better risk-sharing for risky and complex
projects
Yes, it should be increased but only in case of competitive bidding (e.g.
Carbon Contracts for Difference)
Other
26. Should additional supporting instruments be introduced to support full
market deployment of low-carbon products through the Innovation Fund?
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For example, as Carbon Contracts for Difference, whereby beneficiary
projects would be guaranteed a fixed carbon price in case the ETS price is
not high enough.
at most 1 choice(s)

Yes, additional support (e.g. covering the gap in operating revenues) is
needed to create markets for low-carbon products
No, the existing support is sufficient
The Modernisation Fund is a dedicated funding programme to support 10 lower-income EU Member States
in their transition to climate neutrality by helping to modernise their energy systems and improve energy
efficiency. Currently, the Modernisation Fund is funded by 2% of the total cap, e.g. around 285 million
allowances. Beneficiary Member States had the opportunity to transfer their solidarity allowances and the
allowances available to them under Article 10c of the ETS Directive to the Modernisation Fund. The total
size of the Modernisation Fund after such transfers is around 645 million allowances. The monetisation of
these allowances is expected to generate around EUR 14 billion until 2030 depending on the carbon price.

27. What should be the size of the Modernisation Fund?
The size of the Modernisation Fund should remain at 2% of the cap
The size of the Modernisation Fund should remain unchanged as an
absolute amount
The size of the Modernisation Fund should increase
Other
Please specify:
1000 character(s) maximum
The size of the Modernisation Fund should remain at 2% of the cap. The size already adapts to market
circumstances based on the EUA price.

The ETS Directive has complex rules on the types of investments to be financed under the Modernisation
Fund. There is a general provision that investments have to be consistent with the 2030 climate and energy
framework and the Paris Agreement. No support from the Modernisation Fund shall be provided to energy
generation facilities that use solid fossil fuels, but there are exceptions. There are two types of investments
that can be funded by the Modernisation Fund (priority and non-priority), subject to different approval
processes (simple and straightforward for priority projects and more complex for non-priority ones).
Investments in gas are allowed as non-priority ones, both for power generation and infrastructure.
Investments for certain just transition purposes are allowed and there are overlaps with the Just Transition
Fund.

28. Should the types of investments that can be financed by the
Modernisation Fund be streamlined and the coherence with the Green Deal
be enhanced? (Multiple answers are possible)

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No, the investments that can be supported by the Modernisation Fund
should remain unchanged.
Yes, the exception for financing coal-fired district heating in certain Member
States should be removed
Yes, the Modernisation Fund should be allowed to finance only non-fossil
fuel based heating and cooling systems
Yes, the Modernisation Fund should be allowed to finance only priority
projects to simplify the administration
Other

H. Concluding questions
29. Are there other key aspects which you did not find reflected in the
questions and you would like to comment upon?
1000 character(s) maximum
- how to account for captured carbon (biogenic and fossil) in permanent storage and fuels, including the
possibility for negative overall emissions in case of biogenic carbon (incl. BECCS)?
- transport of CO2 by boat, train or truck for CC(U)S should be facilitated.
- an assessment is needed on how electrification can be better incentivised.

If appropriate, please upload any additional materials such as concise
position papers or policy briefs that express the position or views of yourself
or your organisation:
Only files of the type pdf,txt,doc,docx,odt,rtf are allowed

If your organisation is not registered, you can register now here

Contact
CLIMA-ETS-REVISION-OPC@ec.europa.eu

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