This report is on possible improvementson management of revenues from auctioning ofEuropean UnionEmissions Trading System (EU ETS) allowances and use offlexibility mechanisms in Romania. The principal objectiveof this report is to propose improvements on management ofrevenue from the auctioning of EU ETS allowances, as well asdescribe possible use of flexibility mechanisms in Romania,in order to mobilize and enable both public and privateactors to reduce greenhouse gas (GHG) emissions fromeconomic activities in non EU ETS sectors in line with EUtargets. The report focuses on possible actions in thetimeframe 2016-2020, aligned with EU ETS phase and EU targetfor 2020 and 2030. The report is positioned amid the widercontext of a vision for Romania to become a climateresilient, low-carbon economy, which has mainstreamed itsclimate policies and actions into smart, green, andinclusive growth, described in the National Climate Changeand Low Carbon Green Growth Strategy for Romania 2016-2030and 2015-2020 Climate Action Plan prepared by the World Bankfor Romania. The report found that until now, there had beenno clear and effective procedure for the administration ofETS auctioning revenue, and no selection and prioritizationcriteria. The lack of selection and prioritization criteriaand guidance for using ETS auctioning revenue to finance GHGemission reduction projects allowed for the selection ofprojects without proper assessment in terms of theirreduction of GHG emissions, as well as cost effectivenessand other important factors. In order to maximize theenvironmental, social, and economic impact of possiblesectoral climate investment programs, and based oninternational experience, the World Bank’s expert teamproposes to use the following criteria for prioritizing andselecting non-EU ETS sectoral programs to be financed withEU ETS auctioning revenue: (i) cost efficiency of EmissionsReduction; (ii) leverage of public money to private finance;(iii) possibility for rapid development and scale up; (iv)lack of other financing mechanisms; and (v)support for jobcreation. Based on these criteria, the report recommendssupporting the following climate investment programs for theyears 2016-2020:(a) replacing household light bulbs, airconditioning units, individual heating systems,refrigerators, and washing machines with more performantones; (b) upgrading household buildings insulation; (iii)implementing local, small- and household-scale renewableenergy production; and (iv) forestry and biomass production,and land use improvements. It was concluded that theproposed improvements on managing revenue from theauctioning of EU ETS allowances laid out in this reportcould be used by the Ministry of Environment, Waters andForests, as a responsible body for climate policy, forinternal discussions with other Romanian ministries andagencies to reach consensus on the next steps.
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