BAKGRUNN (fra Kommisjonens rapport 12.12.2024)

The Innovation Fund (IF) is one of the world’s largest funding programmes for demonstrating innovative commercial zero-carbon and low-carbon technologies. Its aim is to bring to market novel solutions to decarbonise sectors covered by the EU Emissions Trading System (EU ETS) in support of Europe’s transition to climate neutrality. The IF is funded by revenues from auctioning the EU ETS allowances. In turn, it provides funding, mostly in the form of grants, to support projects in five key areas (se figure 1 below). Under the IF funds are currently mainly awarded through open competitive calls for proposals or through competitive bidding procedures (‘auctions’). The IF also supports projects through advisory services (Project Development Assistance – PDA) and through contributions to blending operations with other EU instruments (e.g InvestEU).

Figure 1: Key components of the Innovation Fund

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The European Commission’s Directorate-General for Climate Action (DG CLIMA) has overall responsibility for IF policy development and implementation. The Commission is also responsible for adopting decision on the amounts of financial assistance awarded and has entrusted the European Climate Infrastructure and Environment Executive Agency (CINEA) for launching and evaluating calls for proposals and for managing grant agreements.

Under Article 10a (8) of the EU ETS Directive 1 , the Commission will report annually to the Climate Change Committee on IF implementation. This report provides a breakdown of projects that have been awarded funding by sector and by Member State, and an analysis of how these projects will contribute to the EU’s goal of achieving climate neutrality by 2050.

This report covers the implementation of the Innovation Fund up until 31 December 2023.

1.1 Innovation Fund’s contribution to EU policy objectives

The IF’s main objective remains that of supporting decarbonisation in the sectors covered by the EU ETS and contributing to the EU’s greenhouse gas reduction objectives as defined in the European Climate Law  2 , while at the same time supporting urgent policy priorities and aiding the economic transition by creating new ‘clean industry’ business cases.

• The 104 projects in the IF’s portfolio by the end of 2023 are expected to avoid 442 million tonnes of carbon dioxide equivalent (CO2-eq) emissions during their first decade of operations, contributing to the goals of reducing GHG emissions set out in the European Climate Law  and achieving climate neutrality by 2050. A project such as NorthSTOR+  is expected to avoid 34.5 million tonnes of CO2-eq during its first decade of operation by developing an innovative stationary energy storage system for lithium batteries based on technology originally intended for the electric vehicle industry. 
• The IF awarded EUR 715 million to fund 16 projects within the hydrogen sector. In total, projects in the IF’s portfolio are set to produce 6.54 million tonnes of hydrogen during their lifetimes. This figure is expected to contribute to the EU’s aim of ramping up renewable hydrogen production, as outlined in legislation such as REPowerEU 3 ,and the Renewable Energy Directive, as well as in the European Hydrogen Strategy. For example, the Holland Hydrogen  project is set to produce 1.3 million tonnes of renewable hydrogen in the Port of Rotterdam from a 400 MW electrolyser, 10 times greater than any electrolyser currently installed in Europe.
• The IF awarded EUR 177 million in grant funding to four projects that involve biofuels and bio-refineries, contributing to the objectives of developing alternative fuels outlined in the ReFuelEU Regulation and the biomethane action plan, as well as supporting the implementation of FuelEU Maritime Regulation 4 . For example, the FirstBio2Shipping  project is expected to produce and supply biofuel to the maritime sector worth 6 million normal cubic metres per year (Nm3/year) of biogas, 2 400 tonnes per year of biomethane and 5 000 tonnes per year of bio-CO2.
• The IF awarded a total of EUR 360 million to 11 projects that directly involve solar, wind and geothermal energy. This IF support is directly contributing to the objectives in the Renewable Energy Directive and REPowerEU on rolling out renewable energy generation and developing the EU’s strategy for offshore energy 5 . In particular, five projects in the wind sector will receive EUR 135 million, which will directly help the deployment of technology targeted under the EU Wind Power Package. For example, the HIPPOW project is developing a new offshore wind turbine model in Denmark. The prototype alone will be able to supply energy to power 7 000 households annually with a possible 700-fold increase or more by 2030.
• The IF awarded EUR 91 million in grants to fund six projects that involve intra-day electricity storage and EUR 190 million to projects manufacturing energy storage components, thus contributing to the Batteries Regulation 6  goal of promoting a domestic circular economy for batteries, as exemplified by projects such as GigaArctic , a lithium-ion battery giga factory in Norway that will produce 29 Gigawatt-hours per year (GWh/y).
• The IF awarded EUR 709 million to fund 11 projects that involve manufacturing components to produce renewable energy or store energy. It also awarded EUR 1.08 billion to six projects that involve carbon capture and storage (CCS) technologies, and EUR 3.45 billion to 59 projects that involve energy-intensive industries. The IF is therefore already contributing to the overall objectives of the Net-Zero Industry Act (NZIA) 7 and the Industrial Carbon Management (ICM) strategy 8 . One example of this contribution is the HynCrease project, which is designing, constructing and demonstrating manufacturing lines for electrolysis and fuel cells using innovative coating techniques and automation processes. Another project,  TopSOEC , will construct a 500 Megawatt solid oxide electrolysis cell (SOEC) stack module manufacturing facility. The Elan project will manufacture anode graphite materials that are expected to be used in 846 000 electric vehicles. Lastly, the Silverstone  project in Iceland is deploying CO2 capture and permanent mineral storage on a commercial scale.