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Greening cohesion policy through eco-innovation

03/10/2011

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A recent study by WWF Germany suggests that a greater emphasis on eco-innovation within EU regional innovation policy could significantly increase ERDF environment-related expenditure.

In January 2011, the European Commission published a Communication calling on EU Member States and regions to make greater use of cohesion funds to finance projects promoting sustainable growth. Cohesion policy accounts for around one-third of the total EU budget – €347 billion for 2007to 2013 – and the aim of the Communication was to underline its key role in ensuring the successful implementation of the sustainable growth aspects of the Europe 2020 strategy.

In the current programming period, about 30% of the cohesion funds have been allocated to measures supporting sustainable growth. However, a recent study commissioned by WWF Germany suggests that this could be significantly increased if a greater proportion of the funding allocated to innovation was channelled to eco-innovation.

Cohesion funding and eco-innovation in Germany

Germany will receive €26.4 billion in cohesion funding from 2007 to 2013, of which around €16.1 billion will come from the European Regional Development Fund (ERDF), the largest of these funds. Expenditure linked to sustainable development accounts for about 19% of this ERDF allocation, while over 48%, or about €7.8 billion, is to be spent on innovation.

The WWF study suggests that this innovation budget represents untapped potential in terms of achieving important environmental objectives. It proposes that spending linked to sustainable development could be significantly increased if ERDF innovation policy in Germany adopted a stronger environmental orientation, with a much greater focus on eco-innovation.

At present, the focus of ERDF innovation policy in Germany is on the overall development and implementation of new ideas, knowledge and technologies into marketable products, as well as on efficient processes and solutions that can compete on the world market. While this approach may lead to efficiency gains, the study suggests that, because of the lack of goal directedness in environmental terms, its eco-innovation potential is currently underexploited.

Despite this lack of environmental targeting, an analysis of ERDF support for innovation in Germany shows that all environmentally relevant industries, lead markets and technologies of the future are addressed in its operational programmes. However, there is no indication of how much funding has been set aside for these areas and whether such funding is contributing to eco-innovation.

To overcome this, an eco-efficiency analysis of the different economic sectors was conducted and a comparison made with the actual use of financial resources under the German ERDF. This analysis highlights those sectors that are underperforming and thus have an urgent need for eco-innovation. It also shows to what extent these critical sectors are benefiting from ERDF funding in Germany.

Targeting energy and biotech sectors

The results show that eco-efficiency varies significantly between the different sectors, with the energy-supply sector having the lowest eco-efficiency rate, and therefore a high need for funding. Although this sector is the focus of a number of ERDF programme measures – for example: use of renewable energy, research into energy technologies and measures to increase energy efficiency – it currently receives only a small part of the budget. This was about 3.3 % of the total available funding and only 0.2 % of funds actually used by the end of 2008.

Various instruments are identified that could be used to promote eco-innovation in the energy sector. Competition-based project selection procedures could also help to ensure better targeting of eco-innovation, better mobilisation of projects and greater transparency of procedures. Moreover, in future, it is recommended that ERDF funding should be aligned with the guiding principles of sustainable-energy supply, with progress measured on the basis of fact-based criteria, such as the amount of energy saved or the amount of energy generated from renewable sources.

White or industrial biotechnology (IBT) is identified as another sector with considerable potential for eco-innovation. The analysis suggests that environmental goals are only a minor consideration in the current promotion of IBT under the ERDF, undermining the potential to benefit the environment and climate.

The study therefore proposes some essential criteria for the promotion of eco-innovation in IBT. These include the requirement that funding should be linked to specific environmental objectives and the prioritisation of projects capable of providing radical environmental improvements.

Promoting sustainable transport

Transport is identified as an area with potential for a greater focus on the environment and on eco-innovation. Over €3 billion in ERDF funding is allocated to the transport sector in Germany from 2007 to 2013, representing 18.75% – of the total ERDF budget. However, currently, only a third of this is linked to the environment. In contrast, almost €2 billion –over 63% – is designated for the construction and maintenance of roads and motorways.

A reorientation of this funding is proposed to ensure a much greater focus on sustainable transport. In particular, WWF identifies the need for greater investment in sustainable-mobility technologies, especially alternative propulsion systems such as fuels from biomass, electric and hybrid drive systems, building and extension of efficient logistic systems for freight transport and the development of green-transport infrastructure.

WWF concludes that the ERDF contribution to environmental protection and sustainable development in Germany could be increased considerably if requirements for eco-innovation were integrated into the various funding measures. The analysis shows that, at present, ERDF funding is only slightly focused on industrial eco-efficiency, and where such an orientation occurs, for example in the energy sector, only a small proportion of the funding is available.

ERDF and eco-innovation post 2013

With regard to cohesion policy after 2013, the WWF makes a number of recommendations for boosting investment in sustainable growth and eco-innovation, including:

  • A higher commitment to objectives for a sustainable economy, particularly concerning climate protection, within the framework of the regulations, guidelines and other regulative conditions at the EU level;
  • Improved coordination between ERDF funding and European and national strategies for sustainable development and climate protection, eco-efficiency, environmental technologies, etc;
  • Upgraded support for smart eco-innovation concepts, linked to specific requirements for climate and environmental protection;
  • A greater focus of funding on industries with the highest eco-efficiency potential;
  • Increasing the share of and earmarking funding for measures directly linked to energy and climate; and
  • The development of quality criteria for project selection as well as for monitoring and evaluation of the results that fulfill the new requirements.

The WWF also warns that German and European policies on sustainability and eco-innovation should not over-emphasise eco-efficiency at the expense of the concepts of sufficiency and consistency. Such an approach, it suggests, would “risk losing sight of the critical level of energy and material consumption, as well as of total emissions”.

In this context, it advocates the need to adopt an integrated concept of sustainable development that not only promotes a further increase in the eco-efficient use of resources, but also the replacement of non-renewable raw materials and sources of energy with renewables linked to recycling processes, as well as the application of social self-limitation, where critical limits could be achieved.

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