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The European Union and the European Parliament have reached a deal under which the EU is set to raise as much as $21.3 billion (20 billion euros) from the common carbon market to finance its strategy to ditch dependence on Russian gas, Bloomberg reported on Wednesday, citing EU officials familiar with the negotiations.
The EU’s REPowerEU strategy will be financed via an Innovation Fund and frontloading allowances under the EU Emissions Trading System (EU ETS). The frontloaded ETS allowances, or auctions of emissions allowances, will account for 40% of the funding, while the innovation fund would contribute 60% to the 20 billion euros funding for the REPowerEU plan, Bloomberg’s sources said.
In October, the EU member states agreed on the ways to tap the carbon market, by modifying a proposal from the European Commission from May.
“As regards the sources of financing of the additional € 20 billion, instead of auctioning from the EU Emissions Trading System (ETS) Market Stability Reserve, the Council opts for a combination of sources: the Innovation Fund (75%) and frontloading ETS allowances (25%). The Council’s aim is to not disrupt the functioning of the EU ETS system while ensuring a credible revenue stream,” the EU said.
It looks like the deal between the EU member states and the European Parliament has changed the share of contribution from the innovation fund and ETS allowances, to 60% and 40%, respectively.
In another landmark carbon market deal this week, the European Parliament and the EU member states reached on Tuesday a provisional agreement to impose a carbon tax on the imports of polluting non-EU products such as iron and steel, cement, aluminum, fertilizers, and electricity, in a first trade regulation accounting for carbon emission intensity.
While the EU says that the law will incentivize non-EU countries to increase their climate ambition, the EU’s key trading partners, including the United States and emerging economies in Asia, have expressed concern that the new rules would further complicate trade and raise export costs for U.S. and other manufacturers.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.