EXCLUSIVE: EU Widely Seen Tweaking its Market Structure, Cutting the Risk of a Dramatic Cut in Emissions (3)

— Germany confirms it’s considering funky new carbon contracts to spur green hydrogen sooner than expected

Trade union umbrella group says carbon contracts for difference can soon support the wide investment that workers need, cutting anxiety about the energy shift

–New state-aid rules next year seen giving boost to green shift

–Demand for hydrogen not a risk to jobs but seen spurring industrial revolution: Star Scientific

By Mathew Carr

Nov. 20, 2020 — LONDON: The EU and Germany are serious about using markets to cut the cost of their transition to cleaner tech.

Big changes are seen during the next several months.

The largest economy in the EU confirmed Friday it’s considering offering carbon contracts for difference as one option to protect industries that make big investments to cut emissions and help the bloc achieve ambitious greenhouse-gas targets for 2030 and 2050.

“Carbon contracts for difference are one possible option for encouraging investment in low-carbon technologies and we are looking into it,” the Federal Ministry for Economic Affairs and Energy said in an emailed response to questions. “However, there are a number of issues related to such an instrument, namely the associated cost and state-aid questions.”

CCfDs issued by countries or the EU Innovation Fund would pay out the difference between the price of EU emissions allowances and the contract price, thus ensuring a guaranteed carbon price would protect the green-hydrogen-production project, for example, from competition from otherwise-cheaper fossil fuels.

The CCfDs would also protect taxpayers, because if carbon prices are higher, the hydrogen project would return the difference to the government, which could use the money to help support poorer people whose finances are being hurt by the climate transition, or those made unemployed.

For more information on CCfDs and how they work to protect clean investment and taxpayer costs, see this:
https://carrzee.org/2020/11/15/green-hydrogen-is-already-in-the-money-in-britain-portugal-this-is-why-boris-can-drop-petrol-cars-early/

The German economy ministry is determined to support energy-intensive industry “in its transition toward the carbon-free production of steel,” it said in its emailed response. “If we want to achieve  this, we need to solve the challenge of high operational costs for green hydrogen in the starting phase.”

Green hydrogen can be created from surplus solar and wind power, via electrolysis. In theory, this fuelmaking could help balance power grids.

With 30 years to wipe out emissions under its 2050 target, the EU needs to make sure that any factories and equipment being replaced now is compatible with zero emissions. Some equipment built to last 30 years actually remains operational 50 years, so that is why a net-zero target in 2050 — as the EU has — is important to investors right now.

The EU this week signalled it might use CCfD auctions to distribute cash from its Innovation Fund.

See this: https://carrzee.org/2020/11/18/eu-carbon-prices-wont-be-adequate-for-industrial-decarbonisation-official/

For the period 2020-2030, the fund is set to hand out about 10 billion euros, depending on the carbon price, according to its website. Projects already pitched for support by last month (see below).

Support for clean investment is sorely needed because without it the energy and climate transition will scare workers and voters, as shown the U.S. presidential election. It’s an acute political risk that explains why the world has timidly tried to cut emissions for 30 years.

South London deer park

Workers are worried they will get caught between the strategies of multinational companies and government climate policy and lose their jobs, said Judith Kirton-Darling, deputy general secretary at industriAll, the umbrella trade union group in Brussels.

“This is where the anxiety is coming from,” she said Friday by phone.

CCfD can help reduce those fears by encouraging spending now as fossil-fuel demand wanes, rather than in 10 or 20 years, she said. “Our technical experts inside the trade union movement are optimistic about the role that they could play in supporting investment in energy intensive industry,” Kirton-Darling said.

Europe has about 1 trillion euros of green projects ready to go, but probably only a small portion of them would be supported by CCfDs.

See this: https://carrzee.org/2020/10/09/europe-has-about-1-trillion-euros-of-green-projects-in-its-pipeline-ey-at-oecd-forum/

“We are pressing for further investment,” Kirton-Darling said. The CCfDs would probably offer “a kind of certainty and investment stability.”

Bicyclist rides past graffiti at night, East London



As for Germany’s concern about state-aid rules, Kirton-Darling said that if the EU is serious about reaching net zero in just 30 years, the state-aid rules will need to be adjusted to “follow that logic.”

That adjustment in the rules is seen happening in the first half of next year. Use of the Innovation Fund itself may partly get around the state-aid rule concern. Those rules are meant to prevent member states from unfairly supporting “national-champion” companies and are designed to keep cross-border competition fair.

If done properly, the new state-aid rules won’t just underpin big business, they’ll upgrade the EU’s entire industrial base, Kirton-Darling said.

Some hydrogen-catalyst technology allows the fuel to be used in a clean way, without the need for initial big heat: this is creating heat without the need for heat, potentially replacing fossil fuels in industrial processes to make electricity, cement and steel. See this video to see how 680C is created in a lab:

https://www.youtube.com/watch?v=i1VLLqq-Nkk&authuser=0

Emission cuts, and big ones, can happen in 10 years, easing plans by nations from the U.K. to China to reach net zero greenhouse-gas output by 2050 or 2060.

***********

See Innovation Fund website for call for projects of more than 7.5 million euros:
https://ec.europa.eu/info/funding-tenders/opportunities/docs/2021-2027/innovfund/wp-call/call-fiche_innovfund-lsc-2020-two-stage_en.pdf

For more on EU worker anxiety:
https://carrzee.org/2020/11/20/eu-seen-underestimating-worker-anger-at-rapid-climate-transition/

(Updated Saturday morning with Innovation Fund, recast Saturday afternoon, tweaked Tuesday morning to remove garble and make smoother, adds Star Scientific at top, bottom)

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