Environment

Experts put forward ideas for EU low-carbon Innovation Fund

20/10/2017

The European institutions have decided to establish a new Innovation Fund for the period post-2020, to be financed through the EU's emissions trading system. Ahead of a public consultation, over 250 industry experts have given their views on how this fund could support innovative low-carbon energy solutions. 

The legislative proposal to revise the EU Emissions Trading System (EU ETS) includes the creation of a new Innovation Fund, to support demonstration projects in renewable energy, carbon capture and storage, and low-carbon innovation in energy-intensive industries. A key challenge will be to ensure effective use of the available funds – expected to total several billion euros – and address specific market needs.

The EU Emissions Trading System is a cornerstone of our climate policy and a key tool for reducing greenhouse gas emissions cost-effectively. Creating an Innovation Fund will help us to achieve large-scale deployment of innovative low-carbon technologies in the power and industrial sectors, which will contribute to delivering on our climate and energy goals.

Miguel Arias Cañete, EU Commissioner for Climate Action and Energy

Consequently, during the first half of 2017, the European Commission consulted a range of experts from energy-intensive industries and the energy and finance sectors. The aim was to gather their views on the design of the proposed Innovation Fund, including eligible technologies and financial modalities. The results are presented in a summary report, published ahead of a forthcoming public consultation on the fund.  

Funding priorities

The report highlights key messages from the expert consultations: first, that there is an abundance of low-carbon, highly innovative technologies or solutions that could be demonstrated in the coming decade. These vary from breakthrough technologies to new business models, and the experts recommend that solutions with major decarbonisation potential should be prioritised for investment.

Secondly, it is clear from previous experience that markets, technologies and investments change and evolve rapidly. The Innovation Fund should pay particular attention to the definition of eligible technologies and allow for competition while also ensuring comparability and robustness.

Thirdly, there is consensus that cross-sectorial cooperation may unlock new value chains and economic benefits for the companies involved, especially in relation to carbon capture and storage (CCS) infrastructure, hydrogen, energy storage and integration of renewables.

A fourth key message is that financial support should be linked to a project’s risk profile. As the investment landscape is heterogeneous and dynamic, flexibility should also be an important feature of the Innovation Fund.

Furthermore, experts agreed that the timing of the support provided by the fund should be aligned with financial needs as each project progresses and disbursement based on project milestones. This would allow financing to be redirected from underperforming to more successful projects.

Finally, many experts called for the Innovation Fund to be a kind of ‘one-stop shop’ to ensure complementarity between this and other EU and national financial instruments for low-carbon innovation. 

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