Funding REPowerEU - What impact would frontloading EUA sales have on carbon prices?

The EU must invest an extra €200bn over the next 5 years if it is to secure energy independence from Russia and accelerate the decarbonisation of the EU economy.

That’s according to a leaked draft of the REpower EU package, due to be presented on Wednesday 18th May, and seen by news organisations including the Financial Times.

Funding Europe’s energy transition does not come cheap, and it’s about to get even more expensive. The EU does have a piggy bank set up to help finance low carbon investments. Known as the Innovation Fund its funded through sales of EU carbon allowances. But how to ramp up that funding without distorting the carbon market?