European industry associations support EC’s original REPowerEU financing proposal

A number of European industry associations have written a joint letter to EU presidency, calling for co-legislators to return to the original European Commission proposal of financing the REPowerEU plan from the Market Stability Reserve, or MSR, with an agreement expected to take place in the week starting Dec. 12.

In a Dec. 8 letter to Minister Zbynek Stanjura and Minister Marian Jurecka, European Steel Association Eurofer Director General Axel Eggert said on behalf of a number of associations, including Eurometaux, Cembureau, Fertilizers Europe, FuelsEurope, EuroMines, among others, that the agreement should go back to the EC’s proposal to increase the Recovery and Resilience Facility, or RRF, financial envelope with Eur20 billion ($21.1 billion) in grants from the sale of EU Emission Trading System, or EU ETS, allowances currently held in the MSR.

This would be in addition to most of the financial resources required for the implementation of REPowerEU — aimed at making Europe independent from external energy supplies before 2030 — having been budgeted under the RRF.

However, this was amended by the European Parliament to collect the Eur20 billion from frontloading of future EU ETS allowances, while the European Council proposed to collect 75% of such amount from the Innovation Fund and the remaining 25% from the frontloading.

“We are worried that the Council proposal will be in harsh contradiction with an industrial policy making the green transition a business case for our companies,” Eggert wrote, adding that the Council’s proposal would divert around 170 million allowances at current carbon prices out of the 405 million allowances of the Innovation Fund.

He said the associations were also worried about the Council position on the ETS revision to reduce the Innovation Fund by further 50 million allowances, as the first call of the Innovation Fund in 2021 could not even provide 5% of the financing applied for by all projects.

“The Innovation Fund represents one of the core EU-wide instruments for supporting the roll out and uptake of low carbon projects,” Eggert said, adding that reducing its size was the opposite of what Europe needed.

Unprecedented challenges

“Energy intensive industries, which represent the foundations of strategic value chains in Europe, are currently facing unprecedented challenges from skyrocketing energy prices,” Eggert said.

“At the same time, the business case for low carbon investments in these sectors in Europe is heavily challenged by more favorable and effective domestic industrial policies by some of the EU’s major trading partners, such as the US Inflation Reduction Act,” he added.

This meant that it was “essential” that EU strengthened its industrial policy with more attractive, predictable and robust incentives for industrial investment, Eggert said.

The associations represented in the joint letter supported REPowerEU, as it would help provide the energy carriers and infrastructures needed by the EU to achieve climate objectives and energy resilience, Eggert said.

Although he added that the EU should urgently secure investment in the technologies to decarbonize energy intensive sectors in order to stop the EU’s de-industrialization.

“We urge you to take our request into consideration in the final negotiations and support the business case for our industries to invest in Europe,” Eggert said on behalf of the signatories.


The joint letter was in support of a Dec. 6 statement by BusinessEurope saying that by proposing to re-dedicate funds intended for the ETS Innovation Fund to finance the expenditures of RePowerEU, the European Council was “suggesting to largely deactivate one of the few instruments dedicated to support innovative low-carbon solutions being developed and deployed by the industry in the EU.”

“In the upcoming trilogues, Finance Ministers must let go of this idea and instead return to the original Commission proposal, which would have made use of the flexibility inherent in the ETS’ Market Stability Reserve,” BusinessEurope Director General Markus Beyrer said.

He added that instruments like the ETS innovation fund were needed to implement low-carbon solutions and build business models around those and it was essential that the EU improved the investment climate for industry decarbonization, but that, with their current proposals, EU finance ministers were trying to do the exact opposite.

— Jacqueline Holman