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Summaries of EU Legislation

Emissions Trading System — Innovation Fund rules

SUMMARY OF:

Delegated Regulation (EU) 2019/856 with regard to the operation of the Innovation Fund

WHAT IS THE AIM OF THE REGULATION?

The Innovation Fund introduced in Directive 2003/87/EC is designed to support innovative initiatives as part of EU emissions trading system (ETS)1, the EU’s cornerstone policy to tackle climate change by reducing greenhouse gas (GHG) emissions.This regulation sets out detailed rules about how the fund operates.

KEY POINTS

The regulation sets out detailed rules for the Innovation Fund, including

  • operational objectives;
  • forms of support provided;
  • application procedure;
  • how projects are selected;
  • how the fund is governed;
  • reporting, monitoring, evaluation, control, and publicity.

Objectives and forms of support

The fund provides financial support for projects demonstrating highly innovative technologies, processes or products with significant potential to reduce GHG emissions, while attracting additional public and private resources.

Support will be in the form of grants, or combining EU grants with financial instruments under the EU’s unified investment support instrument (InvestEU), which replaces the current European Fund for Strategic Investments for the period 2021-2027. Funding can also take any of the other forms outlined in Regulation (EU, Euratom) 2018/1046 (the ‘Financial Regulation’), in particular prizes, and procurement.

Application and selection

Applicants are invited to apply for financial support for eligible projects following a call for proposals issued by the European Commission after consultation with EU countries. Projects are selected based on criteria including:

  • the potential to avoid GHG emissions;
  • degree of innovation of the projects compared to the state of the art;
  • maturity of planning, business model, financial and legal structure; prospect of concluding the financial close of the project within a pre-defined time period of no more than 4 years;
  • technical and market potential for widespread application or future cost reductions;
  • cost efficiency of the project based on a formula balancing costs against GHG emissions avoided, energy generated, or CO2 stored (carbon capture and storage) in the first 10 years of operation.

Governance and administration

The Commission directly manages the Fund’s operation except where implementing bodies are delegated. EU countries are consulted about short-listed projects before any decisions on awards are made.

Entities receiving aid should display on their websites information about projects supported under this regulation, including explicit reference to the Innovation Fund support received, as well as ensuring that coherent, effective and targeted information on the support reaches multiple audiences, including the media and the public.

FROM WHEN DOES THE REGULATION APPLY?

It has applied since .

BACKGROUND

For more information, see:

KEY TERMS

  1. EU Emissions Trading System (EU ETS): the first, and by far the largest, international system for trading GHG emission allowances, it covers nearly 11,000 power stations and manufacturing plants in the EU, Iceland, Norway and Liechtenstein, as well as aviation activities.

MAIN DOCUMENT

Commission Delegated Regulation (EU) 2019/856 of supplementing Directive 2003/87/EC of the European Parliament and of the Council with regard to the operation of the Innovation Fund (OJ L 140, , pp. 6-17)

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