Simone Borghesi, Director, FSR Climate (European University Institute)
Gregory Nemet, Professor, La Follette School of Public Affairs, University of Wisconsin–Madison
Karsten Neuhoff, Head of Department for Climate Policy, German Institute for Economic Research (DIW Berlin)
The objective of the European Emission Trading System (EU ETS) is “to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner” (European Parliament and Council, 2009). If static (or short-term) efficiency is almost a natural feature of cap-and-trade schemes like the EU ETS, dynamic (or long-term) efficiency depends on the ability of the system to promote and sustain innovation and diffusion of low-carbon technologies. For this to happen, significant carbon price levels are a necessary condition, but equally important are the stability of the EU ETS and low price volatility of allowances. Moreover, climate finance can play a significant role in supporting innovation and green investments.
The reform of the EU ETS for Phase IV introduces the Innovation Fund (IF), which will be an enhanced version of the NER 300. The scope of the IF programme will be wider compared to that of NER 300, both in terms of the resources made available and in terms of the range of eligible beneficiaries. Outside the EU ETS, climate finance plays a very important role and a framework aligning financial institutions with the long-term climate goals is taking shape. The European Investment Bank Group guided by EU policy, including the commitments to the Paris Agreement and to the United Nations Sustainable Development Goals, fosters sustainable growth within the EU and abroad. The EIB inaugurated the green bond market in 2007 and is the largest issuer to date with more than EUR 21 bn with allocations to 160 renewable energy and energy efficiency projects all over the world.
This debate was carried out under the LIFE SIDE project aiming at supporting European policy makers with the design and implementation of the new EU ETS legislation.
Gregory Nemet is a Professor at the University of Wisconsin–Madison in the La Follette School of Public Affairs. He teaches courses in energy systems analysis, policy analysis, and international environmental policy. Nemet’s research focuses on understanding the process of technological change and the ways in which public policy can affect it. He received his doctorate in energy and resources from the University of California, Berkeley. His A.B. is in geography and economics from Dartmouth College. He received an Andrew Carnegie Fellowship in 2017 and is using it to write a book on how solar PV provides a model for low carbon innovation.
Karsten Neuhoff leads the Climate Policy Department at the German Institute for Economic Research (DIW Berlin) and is Professor at Technical University Berlin. He holds a Master in Physics from Heidelberg University and a PhD in Economics from Cambridge University. His research interests focus on the economics and financing of a low-carbon transformation in the power, industry and building sector. He investigates how policies and markets can be designed to achieve carbon neutrality. In research and advice projects for national governments, EU Commission and international organizations and as board member of the research network Climate Strategies he brings together multi-disciplinary teams and engages stakeholders to enhance quality, relevance, and uptake of the research. He published 60 journal articles and (co-)authored the books “Planetary Economics: Energy, Climate Change and the three domains of sustainable development” and “Climate Policy after Copenhagen – The Role of Carbon Pricing.”