The European Union’s Emissions Trading System (EU ETS) is a cornerstone of the EU's policy to combat climate change and has been a key tool for reducing greenhouse gas emissions cost-effectively.

Introduced in 2005, the EU ETS managed to cut emissions by about 35% up to 2019.

The EU ETS was coupled with NER 300 - a funding programme set up in 2012 to boost environmentally safe Carbon Capture and Storage (CCS) and innovative renewable energy technologies on a commercial scale within the EU.

From the returns of the EU ETS and unspent funds from the NER 300 programme, the European Commission launched the new Innovation Fund for Low-carbon Technologies in late 2020.

During the period 2020-2030, the EU is expected to auction off €450 million in allowances to help fund this programme. This Innovation Fund follows in the Commission’s push for a European Green Deal, focusing on more innovative and environmentally friendly technologies which will make the EU’s economy more sustainable and reduce Green House Gas emissions.

The Innovation Fund will focus on five areas: i) Innovative low-carbon technologies and processes in energy intensive industries, including products substituting carbon intensive ones; ii) Carbon capture and utilisation (CCU); iii) Construction and operation of carbon capture and storage; iv) Innovative renewable energy generation, and v) Energy storage.

The programme will look to make around €10 billion in funds available to projects through two calls, one for large-scale projects and another for small-scale projects.

The large-scale call operates in a two-stage application process. Applicants apply first through an expression of interest, and once the project passes this stage, it can then proceed to the full application. For projects to be viable for this call, they need to have a total expenditure above €7.5 million. In cases where the concept of the project is proven to be strong during the expression of interest stage, applicants may also receive financing for project development, so that the project idea can be developed further for the full application stage.

The objectives of the large-scale call are two-fold: i) to support projects demonstrating highly innovative technologies, processes, or products, that are sufficiently mature and having a significant potential to reduce greenhouse gas emissions, and; ii) to offer financial support tailored to market needs and risk profiles of eligible projects, while attracting additional public and private resources.

To achieve such objectives, projects funded under this call should support innovation in low-carbon technologies, such as environmentally safe CCU, activities which stimulate construction and operation of environmentally safe capture and geological storage of CO₂ and activities which stimulate the construction and operation of  innovative renewable energy and energy storage technologies.

Alongside the large-scale call, the Innovation Fund also provides funding for smaller projects, through the small-scale call. As this call deals with projects of a smaller nature, projects must have a total expenditure ranging between a minimum of €2.5 million and a maximum of €7.5 million. Similar to the large-scale call, the objectives of the call are to: i) Support small-scale projects demonstrating highly innovative technologies, processes, or products, that are sufficiently mature and have a significant potential to reduce greenhouse gas emissions; ii) Offer financial support tailored to market needs and risk profiles of eligible projects, while attracting additional public and private resources, and; iii) Complement the large-scale call by targeting smaller-scale projects, thereby offering another opportunity, in particular for small and medium-size companies, to have their project supported.

Entities eligible for funding under these calls must be legal persons and be either private, public and/or international organisations.

The co-financing for both these calls stands at 60% with the remaining 40% of the project costs being covered by the applicant.

The first deadline to apply for large-scale projects was in October 2020 and other calls for large-scale projects will be issued later on. On the other hand, the first deadline to apply for small-scale projects is on March 10, 2021.

For more information on the Innovation Fund or any other matter related to EU Funding, kindly contact MEUSAC on [email protected] or 22003300.

Andrea Camilleri, EU Funding Executive at MEUSAC