Innovation Fund - Performance

Programme in a nutshell

Concrete examples of achievements (*)

^{(*) Key achievements in the table state which period they relate to. Some come from the implementation of the predecessor programmes under the 2014-2020 multiannual financial framework. This is expected and is due to the multiannual life cycle of EU programmes and the projects they finance, where results often follow only after completion of the programmes.}

Budget for 2020-2030

The revised EU emissions trading system directive defines the basic elements of the Innovation Fund, such as its size, scope, maximum funding rate (i.e., the maximum support that can be given to a project) and disbursement rules. It stipulates that the Innovation Fund will be endowed with the revenues from the auctioning of around 530 million allowances from 2020 to 2030 and any unspent revenues from the second call of the predecessor programme, the NER 300, which translates into around EUR 40 billion (at a carbon price of EUR 75 per tonne of carbon dioxide). 

Rationale and design of the programme

The Innovation Fund aims at catalysing funding for highly innovative technologies and flagship projects in all Member States that can yield significant emission reductions.

Budget

Budget programming (million EUR):

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Budget performance – implementation

Cumulative implementation rate at the end of 2023 (million EUR):

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Contribution to horizontal priorities

Green budgeting

Contribution to green budgeting priorities (million EUR):

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• The entire Innovation Fund contributes to green budgeting priorities, with a specific focus on climate-mitigation investments.
• In terms of taxonomy-relevant expenditure, the Innovation Fund only finances the most innovative decarbonisation projects on the basis of their potential for greenhouse gas emissions reduction. Since the revision of the emissions trading system directive in 2023, projects are also assessed on the basis of their contribution to environmental and circularity objectives. From 2025, only projects that meet the ‘do no significant harm’ criteria contained in the EU taxonomy will be eligible for support from the Innovation Fund.
• It is important to note that the fund is not part of the multiannual financial framework and does not count towards the achievement of the 30% climate target. 

Gender

Contribution to gender equality (million EUR) (*):

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• Gender balance is not relevant for the programme, as it does not target gender policies. However, the programme may have a likely positive impact on gender equality.

Digital

Contribution to digital transition (million EUR):

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Budget performance – outcomes

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• The third round of Innovation Fund calls contributed significantly to increasing the planned volumes of greenhouse gas emissions to be avoided and to diversifying the Innovation Fund’s beneficiaries in terms of sectors and Member States covered. The calls continue to be oversubscribed, especially in terms of large-scale projects, and the quality of applications was relatively higher. With a special focus on the priorities of the repowerEU plan, the third call for large-scale projects provided additional support towards ending the EU’s dependence on imports of Russian fossil fuels and key priorities relating to the deployment of clean-technology manufacturing. The evaluation results still showed a very good project pipeline for large-scale projects, which were rejected due to insufficient budget being available.
• In terms of its specific objectives, the Innovation Fund has performed well in terms of supporting projects with highly innovative technologies, processes or products that are sufficiently mature and have significant potential to reduce greenhouse gas emissions. At the end of 2023, there were 104 projects in the fund’s portfolio, planning to avoid 442 million tonnes of carbon dioxide equivalent in terms of absolute greenhouse gas emission reduction ⁽²⁾. Of these, 19 projects have already reached financial close ⁽³⁾ and four have entered into operation ⁽⁴⁾. For the first time, the projects started to report on the actually achieved greenhouse gas avoidance (the reporting takes place 1 year after entry into operation). The programme outcomes are aligned with the goals of the proposed Strategic Technologies for Europe Platform to support investment in clean technologies, as the portfolio of projects covers a wide range of sectors, from renewable energy to sustainable alternative fuels, hydrogen, and carbon capture, utilisation and storage.
• In addition, the public funds invested in these grants have a positive effect on attracting additional resources – public or private – as many of the successful projects are benefiting from other types of support. The overall amount of investment mobilised by the portfolio of projects under implementation at the end of 2023 was around EUR 35 billion, compared to around EUR 6.5 billion worth of grants provided, meaning that EUR 1 of grants leverages EUR 5 in total investment in clean technologies. Lastly, through the Innovation Fund design and eligibility criteria, it can also be stated that the fund’s revenues are managed in accordance with the objectives of the EU emissions trading system of cost-effectively reducing greenhouse gases emissions and combating climate change. In 2023, Delegated Regulation (EU) 2019/856 (the legal basis of the Innovation Fund) was amended to accommodate the modifications made necessary by the revision of the EU emissions trading system directive. The changes covered the expansion towards new sectors (such as maritime), new types of projects (medium-scale), project development assistance, technical assistance for Member States with a low level of effective participation in the context of more focus on geographical balance, etc.
• However, one of the most important amendments of the delegated regulation was the possibility to run competitive bidding procedures under the Innovation Fund, with the first such auction launched on 23 November 2023 within the framework of the European Hydrogen Bank. The auction was prepared following a broad process of consultation with stakeholders carried out in May 2023. The budget of EUR 800 million will be awarded in the form of a fixed premium payment upon production of verified and certified renewable hydrogen. Projects participating in the auction are expected to enter into operation within 5 years after signing the grant agreement. The auction also included the auctions-as-a-service scheme, through which Member States can allocate national budget to be awarded under the Innovation Fund’s auction criteria for projects located in their territory and that cannot be funded within the fund’s available budget. For the pilot auction, Germany contributed an additional EUR 350 million to the scheme. 
• Further to the auction, a new call for regular grants was also launched in 2023, with a total budget of EUR 4 billion, the highest so far. The call is open to large-, medium- and small-scale projects, defined as follows:
  • ‘small-scale project’ means a project with a total capital expenditure not exceeding EUR 20 000 000;
  • ‘medium-scale project’ means a project with a total capital expenditure above EUR 20 000 000 and not exceeding EUR 100 000 000;
  • ‘large-scale project’ means a project with a total capital expenditure above EUR 100 000 000.
• The call also features topics dedicated to clean-technology manufacturing (with an indicative budget of EUR 1.4 billion, double the previous call) and pilot projects (focused on testing and validating the breakthrough technologies). The deadline to submit applications is 9 April 2024, and the results will be known in the last quarter of the year. This is in line with the priorities put forward in the Net-Zero Industry Act, which aims to scale up the manufacturing of clean technologies in the EU.
• The project development assistance feature of the Innovation Fund was also amended to ensure the greater eligibility of projects.
   

^{(2) An additional project that expects to avoid 36.9 million tonnes of carbon dioxide equivalent over 10 years of operation (as calculated based on the methodology for calculating greenhouse gas emission avoidance for the specific call for proposals) is to be considered an outlier for statistical purposes and is thus excluded from the main indicator (project Greenfoil).}

^{(3) Financial close is defined as the moment in the project development cycle when all the project and financing agreements and permits have been signed and all the required conditions contained in them have been met.}

^{(4) Entry into operation is defined as the moment in the project development cycle when all elements and systems required for operation of the project have been tested and activities resulting in effective avoidance of greenhouse gas emissions have commenced. For projects with multiple phases (meaning several entry-into-operation dates in connection with the implementation of successive phases, e.g. for manufacturing projects), the entry into operation is defined as the entry into operation of the last phase of the project.}

Contribution to the sustainable development goals