EU invests €4.8bn of emissions trading revenues in innovative net-zero projects

1. What projects are selected by the Innovation Fund’s 2023 call?

337 applications were received under the Innovation Fund 2023 call with total requests exceeding the initially earmarked €4 billion budget by over 6 times. 283 were eligible and admissible for evaluation and 85 innovative net-zero projects were finally selected in 18 countries to receive grants of €4.8 billion. The results also show that the geographical scope of the Fund is expanding to 26 European countries, with innovative projects selected in Estonia and Slovakia for the first time.

These projects cover a wide range of sectors from the following categories: energy-intensive industries, renewable energy, energy storage, Industrial Carbon Management and net-zero mobility (dedicated provisions were included for maritime, aviation and road transport) and buildings. All selected projects in this call are set to enter into operation before 2030 and have the combined potential to avoid 476 million tonnes of CO₂ equivalent emissions in their first 10 years of operation (based on the projects’s greenhouse gas calculations).  

The call supports projects in five different topics: general decarbonisation for large-scale, medium-scale, and small-scale projects, clean-tech manufacturing and pilots.

In the ‘general’ decarbonisation large-scale topic (for projects with CAPEX above €100 million), there are 19 projects selected for grant, receiving a total of €2.28 billion. They include two projects from refineries, three projects from cement & lime, three from hydrogen, one from each of the following sectors (iron and steel, aviation and road transport), four from chemicals, and the remaining four from the ‘other’ category, related to Industrial Carbon Management. These projects are located in Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Spain and Sweden. This topic showed the highest budget oversubscription with over 10 times the initial budget of €1.7 billion.

In the ‘general’ decarbonisation medium-scale topic (for projects with CAPEX between €20 million and €100 million), there are 16 projects selected for grant, receiving a total of €461 million. They include four projects from the maritime sector, two from iron & steel, one from each of the following sectors (hydrogen, intra-day electricity storage, non-ferrous metals, refineries and solar energy), and four projects in ‘other’ which are related to Industrial Carbon Management and biorefineries. They are located in Denmark, Finland, France, Greece, Hungary, Italy, the Netherlands, Norway, Poland, Portugal, Spain and Sweden.

For the ‘general’ decarbonisation small-scale topic (for projects with CAPEX between €2.5 million and €20 million), there are 8 projects selected for grant, together receiving €32 million. They include three projects from solar energy and one from each of the following sectors (chemicals, glass ceramics and construction materials, intra-day electricity storage and iron and steel), and a final project in the ‘other’ category related to heat recovery. They are located in Belgium, Croatia, Italy and Spain.

In the ‘cleantech manufacturing’ topic (for projects with CAPEX above €2.5 million focusing on the manufacturing of components for renewable energy, energy storage, heat pumps and hydrogen production), there are 25 projects selected for grant, together receiving €1.6 billion. They include nine projects on electrolyser manufacturing, seven projects on batteries (including recycling and components) and nine projects on renewable energy components, including photovoltaic panels and wind turbines. They are located in Belgium, Denmark, Estonia, Finland, France, Germany, Greece, Italy, the Netherlands, Norway, Poland, Spain and Sweden.

In the ‘pilots’ topic (for projects with CAPEX above €2.5 million focusing on deep decarbonisation where the relative GHG emission avoidance should be a minimum of 75%), there are 17 projects preselected for grant, together receiving €440 million. They include five projects in the chemical sector, two in hydro/ocean energy, two projects in hydrogen, two projects on maritime, and one each from the following sectors (intra-day electricity storage, manufacturing of components for renewable energy storage, non-ferrous metals, other energy storage, wind energy), and a further project in the ‘other’ category related to biomass. They are located in Austria, Belgium, Denmark, France, Italy, Norway, Slovakia and Sweden.

For the first time, this call included specific provisions to support the decarbonisation of the maritime and aviation sector. There are six selected maritime projects focusing on electrification and sustainable fuel use, receiving a total of over €200 million, located in France, Italy, the Netherlands and Norway. In the aviation sector, one project has been selected.

2. How does the Innovation Fund’s 2023 call contribute to EU policy objectives? 

The Innovation Fund uses revenues from the auctioning of allowances under the EU Emissions Trading System (ETS) to invest in Europe’s green transition. This is at the heart of Europe’s climate policies, driving down emissions in a fair and economically efficient way, and stimulating the transition to clean energy, technologies and industries.  In 2023, the revision of the EU Emissions Trading System Directive strengthened the Innovation Fund to lead the way in clean tech investments and set the example on a global stage to contribute to the goals of the European Green Deal by increasing its budget and introducing new auctioning tools. The Fund is one of the key tools of the European Green Deal Industrial Plan.

Clean manufacturing:

The Innovation Fund supports the REPowerEU Plan to phase out Europe’s dependency on Russian fossil fuels and is fully aligned with the priorities of the Net-Zero Industry Act, providing funding for a low- and net-zero-carbon economy, helping to bridge the cost gap between conventional and clean energy industries and accelerating the demonstration and deployment of innovative low-carbon solutions in Europe.

The ‘Cleantech Manufacturing’ category under the Innovation Fund 2023 call targets manufacturing components for renewable energy, energy storage, heat pumps and hydrogen production. With a total budget of €1.6 billion, 25 projects will develop, build and operate manufacturing plants for key components in wind and solar energy and for heat pumps, as well as components for electrolysers, fuel cells, energy storage technologies and the batteries value chain (including anchoring of key parts of the value chain in Europe such as cathode and anode active materials production).

The Innovation Fund is also contributing towards the NZIA target of reaching 50 million tonnes per year of operational CO2 storage injection capacity by 2030. This will facilitate the capture and injection of CO2 from diverse hard-to-abate sources in energy-intensive industries, such as cement and lime, (bio)-refineries, chemicals and waste-to-energy. Projects selected in this call will capture CO2 and contribute 13% of the NZIA target. This call not only emphasises the importance of CO2 storage sites, which is a slower-developing aspect of the value chain but will support the development of four new CO2 storage projects and two projects developing CO2 storage as an integral part of their scope.

Projects selected in this call and in previous calls will contribute to 9.8 GW of solar photovoltaic (PV) manufacturing capacity in the EU (3 GW from this call) and 12.2 GW of electrolyser manufacturing capacity in the EU (9.3 GW from this call).

Energy intensive industries:

The energy intensive industries will also be supported by a variety of climate mitigation technologies with a total of 40 projects in this call and 117 projects in total in all sectors covered by the ETS covering various indispensable innovations: integration of renewable energy, heat and energy storage solutions, recycling/reuse as well as electrification. 

Renewable hydrogen: 

The Innovation Fund is fully in line with the Renewable Energy Directive‘s targets to increase renewable energy sources across Europe. The Fund plays a substantial role in supporting the uptake of RFNBO (renewable fuel of non-biological origin) hydrogen in hard to abate applications in industry and transport. In total, projects selected in this and previous calls will contribute to the yearly production of 631.5 kilotonnes of RFNBO hydrogen. The projects selected in this call alone will deliver 61 kilotonnes annually.  

Net-Zero mobility: 

This call made an important contribution to emission reductions in the mobility sector with the maritime sector benefiting the most. As a result, six projects were selected out of 18 maritime applications received. The technologies cover building and retrofitting vessels for use of renewable fuels of non-biological origin (RFNBO) and electricity. For instance, one project will design and start serial production of a 19-seater hybrid electric aircraft and two other projects will reduce emissions in manufacturing of components for road transport. This is in addition to the important support for sustainable fuels for transport. Selected projects will support the production of a total of 525 kilotonnes per year of renewable fuels.

3. Is there a pre-allocation of funding per Member State or other measures that aim to achieve geographical balance?

The Innovation Fund allocates its resources through competitive calls for proposals, applying the main award criteria described in the recently adopted Delegated Regulation for the operation of the Fund, the Financing Decision and previous call texts. These criteria are the greenhouse gas emission avoidance potential, degree of innovation, operational, financial, and technical maturity, replicability and cost efficiency. Projects are selected based on the highest scores across all five award criteria. Those that score the highest in the evaluation process in each category are selected within the available budget, irrespective of the sector or location.

The legal basis of the Innovation Fund provides for the possibility to use a specific award criterion to ensure geographical balance. However, as Innovation Fund-supported projects are now located in 26 countries, and since the overall balance is improving with each call, the Commission did not believe it necessary to resort to this specific criterion. This improved geographic spread is also the result of other measures taken to support applications from all eligible Member States, such as supporting National Info Days and reinforcing the application helpdesk, as well as the option for small-scale projects to define innovation based on the state of the art at national level, and not at European level.

To stimulate this broader geographical balance, there are already several initiatives in place to support Member States in their efforts to develop a high-quality national innovative project pipeline:

• Following the revision of the EU Emissions Trading System (EU ETS) Directive dedicated Technical Assistance is provided for Member States with low effective participation, aiming to increase the overall quality of the Innovation Fund applications. This assistance was contracted in 2024 and Member States will start benefitting as of the beginning of 2025.
• Training sessions for all Member States National Contact Points and the Innovation Fund Expert Group representatives on award criteria, outreach and communication.
• Support from the Commission’s Technical Support Instrument (TSI).

More Information

Press release – EU invests €4.8 billion of emissions trading revenues into innovative net-zero projects

Soure – EU Commission