EU Investors and Thought-Leaders Join to defend Innovation Fund

The EU is considering slashing the size and diluting the focus of the ETS Innovation Fund, its main vehicle for financing the scale-up of clean technologies, to finance the REpowerEU plan. This at a time when the US is announcing unprecedented hundreds of billions of dollars of tax credits, grants and loans for clean technologies.

8 cleantech investors and 11 policy leaders have signed an open letter to the European Parliament, the European Commission and the Czech Presidency of the Council of the European Union, urging policymakers to avoid this historic mistake. The next three years are critical for the global innovation race, and for moving emerging technologies that mitigate GHG emissions towards a place, where heading to the 2030s, these technologies can be commercialised.

The letter contains the following proposals:

• Grow the Innovation Fund, instead of shrinking it: the current Innovation Fund was created in 2017-2018 and corresponds to what we thought we would need for innovation back then; with inflation also hitting the European Union and the geopolitical context asking us to urgently move away from a dependency on fossil fuels, doubling the Innovation Fund is the bare minimum.

• Maintain the fund’s focus on innovation: Proposals in the European Parliament to mainstream specific innovation funding into a general Climate Investment Fund (alongside many others) would be counterproductive to the goals of the EU.

• Make it more accessible to the new generation of industry: currently the IF calls have gone to big corporations and have not supported SMEs and scale-ups, which is where most of the actual innovation comes from

• Use the ‘near-miss’ projects to develop a sharper selection criteria

• More support is needed for innovative renewables and renewable energy value-chains

“The global geopolitical context is showing us that the EU has waited too long in going full speed towards deploying the available innovative clean technologies which would secure our energy autonomy away from fossil fuels”, says Suzana Carp, Deputy Executive Director of Cleantech for Europe. “It is worrying that negotiators on the EU ETS are considering delaying this process further by reallocating Innovation Financing available under the Fund to other programmes.”

Equally worrying is the idea that the Market Stability Reserve of the EU ETS, which is the reason for the stability of the carbon market should be interfered with, which would only yield instability at a time when SMEs and citizens simply can’t afford it. Should the price of carbon permits drop as a result of this proposal, the Innovation Fund would directly be reduced to an inadequate level for the task ahead.

The Innovation Fund is the EU’s most important financial instrument supporting the scale-up and early deployment of innovative low-carbon technologies. It is the EU’s most effective financial instrument to support ‘First of a Kind ’projects.