A draft delegated act published last week looks at ways of monetizing allowances in the EU ETS to finance the REPowerEU plan. The program, which responds to the energy market crisis caused by the Russian invasion, aims to stop the EU’s fossil fuel dependence while tackling climate change.

In December 2022, to finance parts of the RepowerEU, the European institutions agreed to raise additional money through auctioning allowances in the EU ETS between 2023-2026.

The additional allowances worth €20 billion will come from the Innovation Fund (60%) and frontloading allowances that would otherwise be auctioned from 2027 to 2030 by the Member States (40%).

The agreement reached last December, offered no details regarding the specific volumes of allowances while early market estimates suggested around 200-250 million EUAs, assuming a carbon price between €80-100.

However, according to the document published late Friday, additional 266,7 million EUAs need to be auctioned until 31 August 2026. The amount, higher than previously expected, assumes a carbon price of around €75.

Carbon prices plunged more than 5% since Friday’s settlement and are now trading at levels last seen two months ago. However, the current level, which participants suggest reflects higher than expected REPowerEU volumes, is still way above the price assumed by the executive. “The Commission currently has a relatively conservative price target”, said Lewis Unstead, carbon analyst at Icis, quoted by Montel News.