The Innovation Fund is one of the world’s largest funding programmes for the demonstration of innovative low-carbon technologies.
The Innovation Fund will provide around EUR 38 billion of support from 2020 to 2030 (at EUR 75 / tCO2), depending on the carbon price, for the commercial demonstration of innovative low-carbon technologies, aiming to bring to the market industrial solutions to decarbonise Europe and support its transition to climate neutrality.
The goal is to help businesses invest in clean energy and industry to boost economic growth, create local future-proof jobs and reinforce European technological leadership on a global scale.
This is done through calls for large and small-scale projects focusing on:
- innovative low-carbon technologies and processes in energy-intensive industries, including products substituting carbon-intensive ones
- carbon capture and utilisation (CCU)
- construction and operation of carbon capture and storage (CCS)
- innovative renewable energy generation
- energy storage
How is the Innovation Fund funded?
The EU Emissions Trading System (EU ETS), the world’s largest carbon pricing system, is providing the revenues for the Innovation Fund from the auctioning of 450 million allowances from 2020 to 2030, as well as any unspent funds from the NER300 programme.
As the successor of the NER300 programme, the Innovation Fund improves the risk-sharing for projects by giving more funding in a more flexible way through a simpler selection process and is also open to projects from energy-intensive industries.
For the period 2020-2030, the Fund may amount to about EUR 38* billion, depending on the carbon price (* at EUR 75 / tCO2). In parallel to the Innovation Fund, the EU ETS provides the main long-term incentive for these technologies to be deployed.
The Innovation Fund is a key funding instrument for delivering the EU’s economy-wide commitments under the Paris Agreement and its objective to be climate neutral by 2050, as recognised in the European Green Deal Investment Plan.
What will be funded?
The Innovation Fund focuses on highly innovative technologies and big flagship projects within Europe that can bring on significant emission reductions. It is about sharing the risk with project promoters to help with the demonstration of first-of-a-kind highly innovative projects.
It aims to finance a varied project pipeline achieving an optimal balance of a wide range of innovative technologies in all eligible sectors and Member States, Norway and Iceland.
At the same time, the projects need to be sufficiently mature in terms of planning, business model as well as financial and legal structure.
The fund supports cross-cutting projects on innovative low-carbon solutions that lead to emission reductions in multiple sectors, for example, through industrial symbiosis.
The Fund is also open to small-scale projects with total capital costs under €7.5 million.
The Commission must report annually to the Council and to the European Parliament on the progress of the implementation of the Fund.
The first Innovation Fund progress report was adopted on 26 August 2022. It fulfils the requirement for 2020 and 2021 by summarising the results of the first two calls of the Fund that were available only at the end of 2021: the first call for large-scale proposals (defined as projects with total capital expenditure above EUR 7.5 million) and the first call for small-scale proposals (defined as projects with total capital expenditure below EUR 7.5 million).
Check out the video which highlights key data from the report.
There will be regular calls for proposals in the lifetime of the Innovation Fund.
Project proponents can apply via the EU Funding and Tenders portal by submitting their proposals when there is an open call for projects.
Projects will be selected based on:
- effectiveness of greenhouse gas emissions avoidance
- degree of innovation
- project maturity
- cost efficiency
The detailed scoring and ranking methodology, as well as possible additional criteria for geographical and sectorial balance, are set in each call for proposals. For small-scale projects, the selection criteria are simplified.
For the criteria of the first call for proposals for large-scale projects, check the Funding and Tenders Portal and for the criteria of the call for the small-scale projects, check the small-scale projects tab.
The Innovation Fund will support up to 60% of the additional capital and operational costs of large-scale projects and up to 60% of the capital costs of small-scale projects.
The grants will be disbursed in a flexible way based on project financing needs, taking into account the milestones achieved during the project lifetime.
Up to 40% of the grants can be given based on pre-defined milestones before the whole project is fully up and running.
The European Commission, assisted by the implementing bodies CINEA and EIB, is tasked with the overall management of the Innovation Fund. The final responsibility for the selection of projects that will be awarded the Innovation Fund grant or the PDA support lies with the Commission.
For the development of the Innovation Fund, the Commission is assisted by the Innovation Fund Expert group. Information on the group and its meetings is available in the Register of Commission Expert Groups, while its work in preparing the first call for proposals is available under the large-scale projects tab.
European Climate, Infrastructure and Environment Executive Agency
The Commission has designated the European Climate, Infrastructure and Environment Executive Agency (CINEA) as the implementing body of the Innovation Fund. CINEA is in charge of:
- managing the calls for proposals and all related procedures
- providing guidance and support for applicants
- managing the project proposal submission and evaluation processes, including eligibility checks
- the signature of grant agreements
- the disbursement of the Innovation Fund grants
- monitoring the technical/financial management of projects in the Innovation Fund portfolio
- providing expert technical support and services to project promoters
- monitoring and controlling projects ex-post, including management of recoveries
- ensuring visibility of the programme, available funding, results and achievements via communication actions and products, including events
CINEA reports regularly to the Commission and provides feedback on general orientations for further development of the Innovation Fund.
European Investment Bank
The European Investment Bank is responsible for the provision and management of the Project Development Assistance (PDA) support. The EIB is also in charge of the monetisation of the Innovation Fund allowances and the management of the Innovation Fund revenues. The EIB reports regularly to the Commission.
Member States actively participate in the implementation of the Innovation Fund. They are consulted on key decisions, including:
- decision to launch the call for proposals,
- maximum amount of the Innovation Fund support to be made available for the PDA,
- list of pre-selected projects for PDA support and
- list of pre-selected projects for the Innovation Fund grants, prior to the award of grants.
If requested by the Commission, Member States also advise and assist the Commission in setting general orientations for the Innovation Fund, as well as in addressing problems in the implementation of a project. Regulatory and financial support from a government or local authority are be an important element to evaluate the maturity of projects.
Other forms of support and funding synergies
Innovation Fund grants can be combined with funding from other support programmes, for example:
- InnovFin Energy Demo Projects
- Connecting Europe Facility provides grants for the roll-out of key infrastructure -
- Horizon 2020 (link to H2020 GD call) and Horizon Europe
- InvestEU Programme (link once operational) provides debt and equity financing
- Modernisation Fund
- Just Transition Fund
- Enhanced European Innovation Council (EIC) pilot – grants and equity financing mainly targeted to SMEs or their consortia
- Private capital
A paper provides more clarifications on the combination of Innovation Fund support with other public support.
Innovation Fund and State aid
The Innovation Fund grant is not considered to be State aid. To cover the remaining costs, a project applicant can combine the Innovation Fund grant with public support by a Member State.
The amount of public support for a project will depend on the cumulation thresholds of the applicable State aid rules, such as:
- the Guidelines on State aid for environmental protection and energy – EEAG (2014/C 200/01);
- the General Block Exemption Regulation – GBER (651/2014);
- the State aid rules applying to the Important Projects of Common European Interest – IPCEI (2014/C 188/02).
The above-mentioned State aid measures are currently under review and possibly subject to update.
In 2019, the Commission organised an Innovation Fund Tour of workshops hosted by sector associations and Member States to prepare the first call for proposals.
The Commission presented the new funding instrument and the essential elements to be developed for the first call, while companies came forward with their project ideas and discussed key sector-specific issues.
The list of projects presented at the workshops helped the Commission gather real life examples as test cases for various methodologies on the selection criteria.
- Watch the video of the Innovation Fund Tour 2019
- Calendar of workshops, presentations and conclusions
- 02/05/2019 - Member State workshop: Belgium (Flanders)
- 04/06/2019 - Steel (minutes, presentations)
- 05/06/2019 - Chemicals (minutes, presentations)
- 13/06/2019 - Waterborne sector (minutes, presentations)
- 18/06/2019 - Paper (minutes, presentations)
- 24/06/2019 - Cement (minutes, presentations)
- 25/06/2019 - Solar energy (minutes, presentations)
- 28/06/2019 - Member State workshop: Netherlands (minutes, presentation)
- 03/07/2019 - Wind energy (minutes, presentations)
- 10/07/2019 - Ocean energy (minutes, presentations)
- 06/09/2019 - Carbon Capture and Storage (CCS) (minutes, presentations)
- 12/09/2019 - Bioenergy (minutes, presentations)
- 16/09/2019 - Refineries (minutes, presentations)
- 17/09/2019 - Fertilizers (minutes, presentations)
- 18/09/2019 - Member State workshop: Austria (minutes, presentations)
- 18/09/2019 - Member State workshop: Sweden (minutes, presentations)
- 19/09/2019 - Carbon Capture and Use (CCU) (minutes, presentations)
- 23/09/2019 - Geothermal energy (minutes, presentations)
- 30/09/2019 - Hydrogen (minutes, presentations)
- 11/10/2019 - Ceramics (minutes, presentations)
- 21/10/2019 - Member State workshop: Slovenia (minutes, presentations)
- 21/10/2019 - Member State workshop: Italy (minutes)
- 24/10/2019 - Member State workshop: Denmark (minutes, presentations)
- 19/11/2019 - Member State workshop: Spain (minutes, presentations)
- 29/11/2019 - Member State workshop: Czechia (minutes, presentations)
- 02/12/2019 - Member State workshop: France
- 03/12/2019 - Circular Economy (programme, minutes, presentations)
- 10/12/2019 - Member State workshop: Ireland (minutes, presentations)
- 15/01/2020 - Member State workshop: Finland (minutes, presentations)
- 05/02/2020 - Energy Storage (minutes, presentations)
- 07/02/2020 - Member State workshop: Germany (North Rhine-Westphalia) (presentations)
- 25/03/2020 - National workskshop - Iceland (minutes, presentations)
For more information you can contact the Innovation Fund Team at DG Climate Action at CLIMA IF EXPERTGROUP.