Instrument
Instrument
Instrument
Instrument
Instrument
| Instrument | Functions | Description of instrument |
|---|---|---|
| Mandates | Scaling Demand via Regulation | Governments mandate the use of green products and thereby guarantee a certain (and typically increasing) demand volume, forcing the creation of a market |
| Public Procurement | Scaling Demand via Regulation | Governments purchase a green product for use in public expenditure (e.g., infrastructure or public sector flights) and thereby bridging the initially high green premium. |
| Fixed Subsidy | Reducing the Green Premium | A fixed subsidy is a fixed financial incentive provided by the government to the supplier in order to either reduce the capital investment required, or to (either partially or completely) bridge the green premium of each unit of output for a fixed period of time. |
| Tax Incentive | Reducing the Green Premium | A government measure which reduces the amount of tax that must be paid by the supplier if certain criteria are met. |
| Financial Guarantees | Absorbing Risks | A financial guarantee by a government taking over counterparty credit risk in case of delays/failures of payments. Performance risk in contrast could be addressed through (a) inventory buffers, (b) changed regulation (e.g., exemption from penalties in case blending mandates are missed), or (c) changed SBTi rules to allow for delays in meeting SBTs if the delivery of the low-carbon product is delayed or fails. |
| Risk-sharing Models for Shared Infrastructure | Absorbing Risks, Supporting Infrastructure | A contract between multiple parties undertaking/operating shared capital intensive infrastructure projects e.g., in industrial hubs, which stipulates a sharing of financial responsibilities and therefore risk between each of the involved parties. |
| Infrastructure Funding | Absorbing Risks, Supporting Infrastructure | The identification, funding and/or coordination of key infrastructure projects e.g. hubs, pipelines, geological storage etc. |
| Infrastructure Coordination Entity | Supporting Infrastructure, Absorbing Risk, Supply Demand Matching, Standard Procurement | Synchronises information exchange between supply, demand side, and enablers for infrastructure planning coordination |
| Contract for Difference (CfD) | Reducing the Green Premium, Absorbing Risks | A CfD is a long-term contractual agreement between the government and a low carbon product supplier, designed to provide the supplier with price certainty over the lifetime of the contract. This is achieved through government funding to cover cost premiums between the base prices originally quoted by producers and actual production costs |
| Private Suppliers & Buyers Alliances | Enabling Price Discovery Process, Unlocking Premium Markets, Supply Demand Matching, Standardising Procurement | A buyers alliance bundles the demand from several buyers, while suppliers’ alliances concentrate the supply whereby both individually and in coordination defragment and stimulate the market creation. |
| Book and Claim System | Enabling Price Discovery Process, Unlocking Premium Markets, Supply Demand Matching, Standardising Procurement | A system which allows companies to purchase and claim the emissions benefits of low-carbon products, even if they are not physically using them. |
| Market / Trader Exchange Creation | Enabling Price Discovery Process, Unlocking Premium Markets, Supply Demand Matching, Standardising Procurement | A platform which enables the trading of products between multiple suppliers and offtakers, based on supply and demand, avoiding the need for individual transactions. |
| Value Chain Coalitions | Enabling Price Discovery Process | A coalition which brings the value chain together to create a shared understanding of what is required to unlock the business case and decarbonise the sector |
| Accounting and Reporting Frameworks | Standardising Procurement | Independent organisations who have set guidelines on reporting against the production of green products and their associated GHG reductions. |
| Product Standards & Certification Schemes | Creating Robust Standards & Certifications | The development of a set of criteria which must be met in order for a product to be labelled as e.g. “green”, “low carbon” etc. Certification providers verify whether a product meets the criteria of a certain standard and awards the product a certificate, signalling its compliance. |
| Producer - Offtaker Intermediary | Absorbing Risk, Supply Demand Matching, Enabling Price Discovery Process, Standardising Procurement | Intermediary that actively participates in a market by buying and selling low-carbon products (e.g., through double-sided auctions, often at different contract durations that are adjusted to the needs of suppliers/offtakers) |
