Innovation Fund

 

What is the Innovation Fund?

The Innovation Fund is the European Union’s flagship programme dedicated to financing the industrial deployment of innovative net-zero technologies. It lies at the heart of the European Union’s climate policy, with a focus on energy and industry. Its main objective is to support the transition of European industry towards climate neutrality while safeguarding its competitiveness.

How is the Innovation Fund financed?

The EU Emissions Trading System (EU ETS) funds the Innovation Fund through the monetisation of 530 million CO2 allowances. The Fund’s total financing depends on the carbon price and could reach around €40 billion between 2020 and 2030, based on a carbon price of €75/tCO2. The European Commission manages the overall framework and direction of the Innovation Fund, while the European Climate, Infrastructure and Environment Executive Agency (CINEA) is responsible for the calls for proposals, the management of submissions, the evaluation, the distribution of grants and the monitoring of projects.

Which types of projects are eligible for funding?

The Fund mainly finances projects in the following areas, which must be located in the European Union, as well as in Norway, Liechtenstein or Iceland:

• Low-CO2 technologies in energy-intensive sectors
• The capture, use (CCU) and storage (CCS) of CO2
• Innovative renewable energy production
• Energy storage
• Net-zero mobility (maritime, aviation, road transport) and buildings.

The Innovation Fund is structured into several categories of calls for proposals, tailored to the size and maturity of the investments:

• Pilot Projects: demonstration of innovative technologies at a pre-commercial stage, with a high emissions-reduction requirement;
• Small-scale Projects: CAPEX between €2.5 million and €20 million;
• Medium-scale Projects: CAPEX between €20 million and €100 million;
• Large-scale Projects: CAPEX above €100 million;
• Clean-tech Manufacturing: industrial projects manufacturing strategic net-zero components for the energy transition (batteries, electrolysers, heat pumps, solar panels, wind turbines, etc.).

This breakdown replaces the single historical threshold (large-scale above €7.5 million of CAPEX, small-scale below) that applied during the early calls.

What does the Innovation Fund finance?

The Innovation Fund finances up to 60% of the additional Capex and Opex compared with the carbon-based reference solution. However, it is a highly competitive funding programme (average success rate below 15%, with significant variation across calls and topics), and the projects’ cost-efficiency criterion encourages applicants not to overstate the grant amount requested. In addition, for each project, payment of 60% of the grant is conditional on the actual achievement of the emissions reductions. Finally, Innovation Fund funding can be combined with other European or national public funding, the ceiling being determined by the funding gap.

By way of illustration, the most recent grant call to open, Net-Zero Technologies 2025 (IF25 NZT, opened on 4 December 2025, closing on 23 April 2026), has a budget of €2.9 billion allocated across these five topics.

What are the evaluation criteria for Innovation Fund projects?

Projects are assessed in detail against the following criteria:

• Greenhouse gas emissions reduction (absolute and relative)
• Degree of innovation compared with the state of the art in Europe
• Project maturity in terms of technology, planning, business model and financial/legal structure
• Scalability and replicability in other contexts or sectors
• Cost efficiency in terms of grant per tonne of CO2 avoided.

Developments for 2026

The European Commission is preparing a significant evolution of the Innovation Fund for 2026 (the so-called “IF26” call). The guidelines, presented at a stakeholder consultation event organised by DG CLIMA on 19 June 2026, envisage a structure based on five instruments:

• a dedicated call for maritime projects (new);
• a dedicated call for SMEs (new), with a simplified application process;
• the continuation of the Net-Zero Technologies call (grants);
• the fourth European Hydrogen Bank auction;
• the second Industrial Heat Auction, with an expected budget of around €1 billion.

At this stage, these are guidelines subject to consultation: the final texts (Terms and Conditions) and the opening of the calls have not yet been published. The Commission indicates that calls generally open at the end of the year.

How does european economics support its clients with the Innovation Fund?

Since 2020, european economics has:

• supported 17 applications to the Innovation Fund;
• a 35% success rate, 2.4 times the applicant average (14.8%);
• an average grant of €111 million, compared with €68 million for other successful applicants.

We have supported companies wishing to apply to the Innovation Fund for large-scale projects since the first call for proposals in 2020. We put in place a milestone-based process to prepare the application over three months, ensuring that the quality of your project is conveyed in the best possible way. We also support companies in building the financial engineering required to integrate Innovation Fund funding into a turnkey, integrated public-funding solution.

Anticipation is a key success factor in preparing applications. We recommend starting work several months before the calls for proposals open, ideally as early as September for the following year’s call.

Contact us to find out more.