COMMENT: MEPs take a ‘bigger is better’ approach to the EU Innovation Fund

Published 18:37 on December 15, 2016  /  Last updated at 13:08 on December 19, 2023  / Carbon Pulse /  Contributed Content, EMEA, EU ETS, Other Content

In adopting “Compromise 12” during Thursday morning's vote, the European Parliament's environment committee (ENVI) added its weight to the industry committee’s (ITRE) push for a bigger post-2020 Innovation Fund. Director Greg Arrowsmith discusses what to expect next.

By Greg Arrowsmith

In adopting “Compromise 12” during Thursday morning’s vote, the European Parliament’s environment committee (ENVI) added its weight to the industry committee’s (ITRE) push for a bigger post-2020 Innovation Fund. The committees want 600 million allowances for the Fund, not the 400 million proposed by the European Commission, as well as its scope enlarged to include energy storage technologies. The other areas they underline – CCU (carbon capture and use) and bio-based materials – were already implicitly in the new instrument’s scope.

The EC had proposed that a maximum of 15% of the allowances could go to one project, and MEPs did not decrease this limit to compensate for the increased size of the Fund.

In the Innovation Fund’s predecessor, NER300, “relevant costs” were capped at 50%, and this equated typically to around 30-40% of project CAPEX. ENVI voted to be more generous with the Innovation Fund, allowing requests of up to 75% of relevant costs, but MEPs never put forward analysis to support that decision. The Commission did not set a good example: its defence of a 60% cap, set out in the Impact Assessment accompanying its proposals, is threadbare (see this article for more).

MEP and ENVI Rapporteur Ian Duncan was keen to break the link between a project’s performance and its right to keep its award, and the committee took up his suggestion to allow up to 60% of the award to be paid out on effort alone.  Provided a project meets milestones in construction and commissioning, it can keep up to 60% of its award, meaning that in extreme cases only 40% would be payable on the project actually working.

ITRE had adopted an amendment on Nov. 10 that would have allowed the Innovation Fund to fund product development, and not just greener manufacturing processes, but it did not get past ENVI. This is just as well, as simply producing a better product is no inoculation against the lure of transferring industrial production to low-cost countries.

The MEPs want fuzzier selection criteria compared to the NER300 and failed to beef up knowledge-sharing rules (essential if pay-outs are to get more generous). They also missed an opportunity to underline that the 50 million allowances to be taken from the MSR will be an integral part of the Innovation Fund. The Council, by contrast, seems interested in an amendment that will make this clear.

It is hard to think of a hotter area of EU low-carbon innovation policy than the Innovation Fund. The groundwork is now being laid for a scheme that will distribute billions of euros in the next decade, and the Commission, via secondary legislation, will have the opportunity to create a carefully calibrated funding instrument that should give support to as many promising projects as possible.

Greg Arrowsmith is Director of, an unofficial site dedicated to news and analysis of the Innovation Fund.