- Carbon Contracts for Difference – Too many open questions for implementation?
- Daniel Wragge and Ellen De Vocht
- European Energy Exchange
- September 2021
- 6 p.
- Carbon Contract for Difference, Innovation Fund
This paper explores the open questions which require answering before carbon contracts for difference (CCfDs) are widely adopted as a tool in the larger climate policy framework. Given the variety of potential negative implications and different design options of this subsidy, EEX considers that a dedicated impact assessment is justified before adoption.
We question whether CCfDs are the right subsidy instrument, yet not whether or to what extent certain industries require subsidies such as investment support, tax relief or any other form of direct payment in order to be able to considerably reduce their CO2 emissions.
We highlight a number of open questions on the potentially harmful interaction between CCfDs and the EU ETS, and, CCfDs and the broader climate policy framework. Important, we ask for an impact assessment and provide a first indication of how CCfDs may be designed with an eye to keep any negative interference to a minimum.