The long-term transformation to a low-carbon economy requires innovation in technology and existing practices in all sectors of the economy. The Innovation Fund under the EU Emissions Trading System is meant to support such innovation projects in industry and energy. According to analysis by the Ecologic Institute, the IF should focus on break-through projects with a high additional emission reduction effect and provide adequate financing conditions that allow also for high risk projects to be supported.

With this project, the Ecologic Institute supports the German Emissions Trading Authority (DEHSt) at the Federal Environment Agency and the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety with the further development of the emission trading scheme of the European Union (EU ETS), for the period after 2020. The project focuses especially on the design of the carbon leakage guidelines within the fourth trading period (2020–2030) and beyond. It is the goal of the project to shed new light on the carbon leakage discussion, to assess the validity of current assumptions and to discuss potential design options.