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Options to finance the premium cost of climate-neutral products in the EU : the potential of the ETS and demand creation
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STG Policy Briefs; 2022/16
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DELBEKE, Jos, EGENHOFER, Christian, LAMAS, Rebecca, Options to finance the premium cost of climate-neutral products in the EU : the potential of the ETS and demand creation, STG Policy Briefs, 2022/16 - https://hdl.handle.net/1814/74641
Abstract
Materials such as cement, steel and chemicals can account for up to 90% of CO2 emissions in key value chains and industries, such as electronics, construction, automotive, food and fashion. To meet climate targets, it is necessary to develop and deploy new breakthrough technologies that can ultimately transition the
supply chain towards climate-neutral production and products. As has been recognised by the European Green Deal, the market for climate-neutral materials offers growth opportunities for European industry, and the opportunity to attract a bigger share of the global clean-tech growth capital. For this to happen, Europe needs robust tools to close the cost gap. This Policy Brief proposes two immediate measures that can address the cost gap by generating additional revenue streams: i) turning EU ETS free allocation into innovation funding, for example by including climate-neutral products in the ETS or putting EU ETS Allowances from free allocation into a Climate Investment Fund and ii) creating informed demand and ambitious timelines for climate-neutral products. Both policy tools are available to be implemented within a short time.