Where? What?
How does it work?
Classification
US
Inflation Reduction Act (IRA)
Key provisions include tax incentives for constructing or producing low-carbon hydrogen (up to $3/kg) and sequestering carbon dioxide ($65-$185/ton CO 2 ). Market-based mechanism that caps the carbon intensity (CI) of transportation fuels. Penalties are paid by high-CI producers to low-CI producers. ETS uses the dynamics of supply and demand to drive the transition to lower emission alternatives within the EU. Supports investment to modernise the energy systems in 13 lower-income EU Member States. Mandated biofuel and e-fuel percentages for each transport sub-sector. Penalties for non-compliant fuels to make them more expensive than compliant fuels. A phased increase in carbon price to CA$ 170 /ton CO 2 e by 2030, to reduce carbon pollution. Refundable investment tax credit of up to 30% of the capital cost of 'clean technology property' acquired by taxable Canadian corporations. Bi-lateral contract between government and producers that ensures a fixed revenue and return for producing a low-carbon hydrogen project. Bilateral contract between emitters and government whereby the government ensures emitters are in no way disadvantaged financially from the addition of a carbon capture facility, provided that the facility meets specified performance criteria.
US
California Low Carbon Fuel
Standard (LCFS)
EU
Emission Trading Scheme (ETS)
EU
Innovation and Modernisation Funds
EU
Refuel EU Aviation / Fuel EU
Maritime
Canada
Carbon Price
Canada
Clean Technology Investment
Tax Credit
UK
Hydrogen Business Model
UK
Carbon Capture Business Model
Table 1 Key energy transition-focused regulations around the world
reform, governments have either adopted or are considering policies to stimulate a market for low-carbon commodities. These policies can be broadly classified into two metaphorical buckets – carrots and sticks. The carrots, or incentives, aim to reduce the Green Premium by lowering the cost of low-carbon commodities through tax credits, grants, low-interest loans, and revenue support mechanisms. By contrast, the sticks, or
penalties, are designed to increase the cost of traditional carbon-intensive pathways through carbon taxes, mandates, stricter pollution standards, and non-compliance penalties. Table 1 provides some key policies announced by major economies around the world. Both strategies have their shortcomings. While the carrot approach can facilitate rapid commercialisation, such as in the
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