The policymakers, investors and industry experts in Europe are in unison about the need for coherence in policy and public funding for funding innovation to scale up projects on climate change. The ecosystems feel that climate change initiatives will be driven by predictability of the value chain within European industry and not by just increasing ambitions, reducing free allocation or having a high CO2 price.

The investment and the trust is what they call for during this transition period as a big part of the industry still needs to operate and create value despite emission reduction pressures.

“Last summer, we saw horrible flooding in central Europe, we saw fires, and also a drought. Climate change is coming closer and closer, but for people in India and Africa it's even worse. So we need to act and I'm happy that this movement for climate neutrality has now become international. Almost every country of the world has now targets for climate neutrality. Yet I find it a bit embarrassing that some European states don't have it and of course when it comes to China, it has only committed to carbon neutrality and not climate treaty, and it's too late. The European Union Emissions Trading System (EU-ETS) has to help us come closer to climate neutrality and play a very important role in achieving our 2030 targets, says Peter Liese, Member of European Parliament.

Liese spoke at the webinar, ‘EU resilience on the road to climate neutrality: What features of emission trading schemes can pave the way?’.

Sharing his roadmap, Liese adds, “To decarbonize European industry, we need to have a pathway where companies are determined to be climate neutral. I am in favour of a position that gives companies free allowance for a limited time. On the way from carbon neutrality to climate neutrality, the companies will go bankrupt because they just cannot stand the international competition. So that's why a mixture of ambition and carbon leakage protection is necessary. Companies that don't have credible climate neutral plans will get less free allowances but those that do their job can get more free allowances. As I said, feel the pressure when you don't act, but feel supported when you act.”

“The industry committee has voted on giving free allowances to the export industry, but unfortunately we have a big challenge here with WTO compatibility. Therefore, if anyone has another solution that is also helpful and more in line with WTO rules, I would be happy to put that on the table,” commented Leslie. 

According to Domien Vangenechten, Policy Adviser, E3G, “The increased financing from the public sides, support for low carbon infrastructure, access to renewable low carbon gases will help in achieving emission targets. We need to think about this as a holistic policy package. Ultimately the investors will turn to the companies they invest in and ask, what's your plan, how are you planning to meet those targets, how are you planning to transition your business. So the pressure is on and I think that's where we are looking at the ETS reform. We need to see how far is the ETS mechanism sufficiently stable to provide the signals for the Capex investments or is it maybe too volatile an instrument? If you translate it into financial terms, Europe has, like the rest of the world, a massive capital expenditure challenge to change its economy. That's a complex change and long term incentives need to be the right ones.”

“Incentivising emission reductions  becomes difficult like some of the solutions are. A few options that are being discussed are making more money available through the Innovation Fund for sectors that are more exposed. That could be one of the solutions, but again it needs to be something holistic and these are support mechanisms that are layering on top of each other rather than just looking at the sea bound to try to solve everything," adds Vangenechten.

Victor Van Hoon, Executive Director, Eurosif emphasizes scaling up of projects and technologies through risk sharing collaborations, dialogue between sectors and with policymakers, besides making the innovation funds available via different EU programmes.

Hoon commented, "The risk sharing mechanism could help alleviate the burden and get those projects launched. It's something we have seen in different sectors, for example it was considered very risky to invest in wind energy projects a few years ago but now technology has matured and we see projects being funded virtually by only private financing. At the same time, the Innovation Fund is massively oversubscribed due to the number of applications that have gone in for it and presumably there is going to be a limit to how much public money will be available.

Hoon feels that one of the holistic solutions is dialogue and that's where it will also be very helpful for him as an investor to understand about financing needs and whether there are bottlenecks in the market.

“We find it interesting when I hear from a lot of industries going for transition that the capital is not there. When I talk to my members, they say there's a lot of capital and would love to invest in green solutions. They complain that there are not many projects out there and don't know where to find them. Therefore, these are the kind of bottlenecks about matching the demand for capital with the offer capital in the right way," adds Hoon.

Els Brouwers, Chair-Carbon Market Issue Team, Cefic says, "I am working for the Belgian chemical industry and we have a flagship CCS project in the Antwerp harbour called the Kairos project and there for example, we will have a pilot project which is funded by the TSC Innovation Fund for reducing 14 million tonnes of CO2 in the coming 10 years. So that's very big and its pilot, but it has to be done as per project and it will show how new technologies can really contribute in the shorter term to bigger emission reductions. In order to make it viable afterwards, as in product terms, legislation needs to be coherent, for example, in that project we will be able to produce blue hydrogen. So now you see what they're going to do with their product that they will produce and doesn't fit for a green hydrogen market. The Commission is pushing towards green hydrogen, making the policy inconsistent." 

"We are the biggest chemical exporting region in the world. We have a surplus reserve of 41 billion euros. So in all the legislation we need provisions that ensure that our products can compete with others not only here but also elsewhere. At this moment, there's a broad view from policymakers on climate policy and what has to happen, but the coherence between the different pieces is also very important. An immediate certain carbon leakage framework is foreseen but the chemical industry is just no longer on the list to be eligible for such compensation. So this means it's not fit for the climate solutions for tomorrow. Also, for hydrogen, where the renewable directive recognizes only green hydrogen. Those kinds of incompatibilities should be solved to have a predictable and firm framework for the industry,” concludes Brouwers.