The Innovation Fund is the European Union’s flagship program dedicated to financing the industrial deployment of innovative net-zero emissions technologies. It is at the core 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 guaranteeing its competitiveness.
The EU Emissions Trading System (EU ETS) feeds the Innovation Fund through the monetization of 530 million CO2 allowances. The size of the Innovation Fund therefore depends on the carbon price and could amount to around €40 billion from 2020 to 2030, calculated using 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 calls for proposals, management of submissions, evaluation, grant distribution and project monitoring.
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
- CO2 capture, utilization (CCU) and storage (CCS)
- Innovative production of renewable energies
- Energy storage
- Mobility (maritime, aviation, road transport) and net-zero emissions buildings.
There are different calls for projects for large-scale projects (Capex > €7.5M) and smaller-scale projects. The budget of the 2023 large-scale call for projects was 3.6 billion euros, which will be shared by 41 projects selected from 239 candidates – the grant amount is therefore €88 million per project on average. Projects are carefully evaluated based on the following criteria:
- Reduction of greenhouse gas emissions (absolute and relative)
- Degree of innovation compared to the state of the art in Europe
- Maturity of the project in terms of technology, planning, business model and financial/legal structure
- Scalability and reproducibility to other contexts or sectors
- Cost-effectiveness in terms of subsidy per tonne of CO2 avoided.
The Innovation Fund finances a maximum of 60% of the additional Capex and Opex compared to the traditional fossil reference solution. But it is a very competitive financing program (less than 10% winners on average for the first three calls for projects), and the cost-effectiveness criterion of the projects encourages applicants not to be too greedy in terms of subsidies. In addition, for each project, 60% of the subsidies are paid conditionally on the effective achievement of emissions reductions. Finally, Innovation Fund funding can be combined with funding from other European or national public sources, the ceiling being determined by the project’s funding gap.
Regular calls for projects are launched each year. Generally, calls for large-scale projects are launched during the last quarter of the year. The fourth call for large-scale projects will be opened on November 23, 2023 and closed on April 9, 2024.
Starting with the first call for projects in 2020, european economics has been supporting companies wishing to apply for the Innovation Fund for large-scale projects. We have designed a three-months stepwise process for the preparation of the application file which guarantees that the quality of your project is fully transcribed in the best way. european economics also supports companies in building financial engineering to integrate Innovation Fund financing into a turnkey integrated public funding solution.