Sun. Oct 6th, 2024

EU background: A STEP towards supporting critical technologies in the EU

Sep 25, 2024 , , , ,

Brussels, 25 September 2024

For its industry to remain competitive and sustainable, Europe needs to keep the pace with other big global players and allowing novation to bloom in the Union. This is the mission of the Strategic Technologies for Europe Platform (STEP): a support to European industry and a booster for investment in critical technologies.

Europe needs to STEP up its game to achieve its green and digital transitions and compete with other global powers as an equal. This, in short, was also the conclusions drawn by Competitiveness Czar Mario Draghi in his report, presented on the 9 September of this year. This is why the aptly named Strategic Technologies for Europe Platform (STEP) aims at supporting European investment in critical technologies, allowing the EU to reduce it strategic dependencies on critical goods like pharmaceuticals and microprocessors.

Launched in March 2024, STEP is not a new fund, but it pools resources of 11 pre-existing EU funding programmes and steers towards critical technologies. The list includes four cohesion policy funds: the European Regional Development Fund, Cohesion Fund, European Social Fund Plus and the Just Transition Fund. The benefit of this approach is not limited to the funding perspective. In fact, STEP projects will also be able to make use of the financial and technical advice made available through STEP. 

A boost for development and manufacturing

STEP is intended to prompt the development and manufacture of critical technologies and to help address labour and skills shortages. Critical technologies are understood as those bringing to the EU’s single market innovative, emerging, or cutting-edge elements with significant economic potential, while reducing or preventing the EU’s dependency on external suppliers.

Funding is steered towards three areas relevant to the green and digital transitions: (1) digital technologies and deep-tech innovation, including artificial intelligence, quantum technologies, advanced semiconductors, and robotics; (2) clean and resource-efficient technologies, such as carbon capture and storage solutions and heat pumps; and (3) biotechnologies, including molecular and crop technologies and pharmaceuticals.

More specifically, digital projects backed by STEP will tackle pressing issues like climate change, connectivity, and navigation. Work on clean technologies will secure European leadership in areas like clean energy. Finally, biotechnology activities will ensure that European citizens’ needs are met in key sectors like healthcare, farming, and the bioeconomy.

Support for development and manufacturing starts from the prototype stage, with critical technologies and their components’ potential to be produced at industrial scale.

Value chains and skills

STEP also strengthens value chains. In line with the scope of the Critical Raw Materials Act, STEP promotes investment in raw materials as well as essential services for critical technologies. For example, semiconductors need to be manufactured in contaminant-free environments, and cleanroom services are essential to their production. Other such services include cloud and high-performance computing, testing, and experimentation and cybersecurity.

The development and manufacturing of critical technologies requires a sizeable skilled workforce. Another aim of STEP is to tackle labour and skills shortages. The initiative prompts the industry, public authorities and education institutions to identify skills needs and bring about the appropriate education and training programmes to fill the gap in available skills.

These programmes will target skill sets relevant to critical technologies, such as cybersecurity and data analytics in the digital technology field or advanced battery for clean technology. Some of the programmes will be run through European net-zero industry academies, which STEP complements. It is also complementary to the European skills agenda and initiatives such as those developed by the EU Pact for Skills. 

EU funding instruments

STEP is expected to mobilise up to € 50 billion of investment from public and private sources. Three types of support are available through 11 EU funding instruments. One type is directly managed by the European Commission. It is offered under the Digital Europe Programme, the European Defence Fund (to which € 1.5 billion has been added specifically for STEP projects), the EU4Health Programme, Horizon Europe and the Innovation Fund.

Another type is managed jointly by the European Commission and national authorities. This leverages national and local insight and expertise to ensure that projects are aligned with both EU and national priorities. Instruments for such actions are the cohesion policy funds: the Cohesion Fund, the European Regional Development Fund, the European Social Fund+ and the Just Transition Fund, as well as the Recovery and Resilience Facility.

In August, the Commission approved are programming of cohesion funds under STEP. In Germany, North Rhine-Westphalia will benefit from over € 501 million reallocated from the European Regional Development Fund (ERDF) and the Just Transition Fund (JTF). This funding will support SMEs, large enterprises (in the JTF regions), as well as vocational training and research institutions in the fields of critical digital technologies, biotechnologies, and the circular economy. Denmark will also support with over EUR 52 million the development and manufacturing of clean and resource efficient technologies in the JTF regions of North and South Jutland, including the related value chains, and competence and skills development in the enterprises. More reprogramming actions from Member States are expected soon.

For cohesion policy funds, STEP projects will benefit from a 100% co-financing rate during the 2021-2027 funding period, meaning that 100% of their costs will be financed by EU resources, with no financial commitment by Member States.

Member States also have the option to top-up the EU guarantee under InvestEU by shifting up to 6% of their Recovery and Resilience Facility (RRF) envelopes. These additional resources will exclusively support investments in the scope of STEP.

Following the entry into force of STEP, EU Member States have designated national contact points to closely work with the European Commission and support STEP’s implementation at national level.

In an effort to make it more accessible, STEP-related information is centralised on a dedicated user-centric portal, which allows project promoters to quickly identify opportunities centralises all the that meet their investment needs.

De-risking investment

While STEP will boost investment in critical technologies, investment needs across the EU remain huge. Companies aiming to grow and establish themselves in critical sectors often find it hard to get financing. Private capital is vital to allow European industry to fulfil its potential.

STEP will help attract capital by de-risking projects where risks would otherwise be too high due to underlying market failures. Firms of various sizes looking to scale up will benefit, along with universities, research and technology bodies, non-profit organisations, and public entities.

One of the features of STEP is to help individual projects benefit from cumulative funding under several instruments of the EU budget. This will be facilitated, by introducing the STEP Seal: a new EU label certifying high-quality projects. This will ensure such projects are showcased on the STEP portal, giving them the visibility they need to secure additional funds. 

State aid

EU regional aid guidelines set out rules under which Member States can grant aid to companies to generate investment in disadvantaged regions. Following the launch of STEP, the EU amended the regional aid guidelines to allow Member States to grant higher amounts of aid for STEP projects.

The increases can be up to 10 percentage points in areas with abnormally low living standards or serious underemployment and in outermost regions. They can be up to 5 percentage points in other disadvantaged regions to facilitate development of certain economic activities or areas.

A testing ground

By offering a faster, more structured, and focused response to the investment needs of European industry, STEP will help scale up the development and manufacturing of strategic technologies, making the most of the EU budget. In addition, it provides a testing ground and valuable insights for future EU funding activities (for example the recently announced European Competitiveness Fund) to reinforce Europe’s competitiveness under the next long-term EU budget.

More information

Source – EU Commission Regional Policy

Forward to your friends