The EU Innovation Fund will begin financing innovative energy and carbon capture technologies with funding from the Emissions Trading System.
The European Commission (EC) has provided the first details on the first call of the newly set-up Innovation Fund foreseen for mid-2020, with €1 billion to be disbursed in grants for projects in renewable energy, energy storage, carbon capture and storage, and carbon capture and utilisation. The Innovation Fund is financed by using the revenues from the auctioning of Emission allowances under the EU Emissions Trading System (ETS). The fund may amount to about €10 billion, depending on the carbon price, and aims to create the right financial incentives for projects to invest now in the next generation of technologies needed for the EU’s low-carbon transition.
The Innovation Fund complements existing and future EU programmes, and seeks to fill a gap in the EU’s support for innovation necessary for the energy transition. While Horizon Europe will finance earlier stage proof of concept and pilot projects, and InvestEU and the Connecting Europe Facility (CEF) will support scaling up and rolling out new technologies, the Innovation Fund will fill the gap in between, supporting demonstration projects. It will focus on highly innovative technologies and big flagship projects in the EU member states that bring on significant emission reductions. The Fund will also support cross-cutting projects on innovative low-carbon solutions that lead to emission reductions in multiple sectors, for example through industrial symbiosis or business model innovation. Only projects with a total capital expenditure above €7.5 million will be eligible for the first call. It will be followed by regular calls until 2030. The EC aims to publish a dedicated call for small-scale projects at a later stage.
The Innovation Fund provides support in the form of grant financing covering up to 60% of the additional capital and operational costs linked to innovation, with funding disbursed in a flexible way depending on the project needs and milestones achieved during the project lifetime. Innovation Fund grants can be combined with other sources of funding such as InvestEU, Horizon Europe, European Innovation Council, CEF, and Cohesion Fund. Eligible projects have to be implemented in one of the EU member states, Norway or Iceland. However, the project applicant does not need to be controlled by EU investors. As Switzerland does not participate in the ETS, Swiss-based projects are not eligible.