REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Annual Report on Research and Technological Development Activities of the European Union in 2011

1. background to the annual report on RTD activities

The Annual Report on research and technological development activities of the European Union is prepared pursuant to Article 190 of the Treaty on the Functioning of the European Union (TFEU).

Although formally not within the scope of this Report, some information related to the Euratom Treaty has been included.

2. The broader political context in 2011

At the 4 February European Council meeting, the heads of state and government showed their commitment to put research and innovation at the top of the political agenda for growth and jobs. During tough economic times support for research and innovation is crucial for boosting job-creating investments. The EU leaders took a collective decision to maintain or increase investment in research and innovation at both national and EU levels.

The European Council also called for the need to rapidly address remaining obstacles to ensure a unified research area in Europe to attract talent and investment. The completion of the European Research Area by 2014 would mean the creation of a genuine single market for knowledge, research and innovation.

In addition, the heads of state and government supported the concept of a Common Strategic Framework for EU research and innovation funding to ensure that the full range of research and innovation financing instruments work together and to improve the efficiency of research and innovation funding in the EU[1].

In its communication 'A Budget for Europe 2020'[2] from 29 June 2011, the Commission presented its proposal on the next Multi-annual Financial Framework (MFF) for the period 2014-2020. The programmes and instruments included in the proposal had been redesigned to ensure that their outputs and impacts would push forward the key policy priorities of the EU.

Regarding research and innovation, the Commission proposed to set up a single Common strategic Framework covering the areas of the present Seventh Framework Programme (FP7) and the innovation part of the Competitiveness and Innovation Framework Programme, as well as the European Institute of Innovation and Technology (EIT). This in order to systematically address the significant innovation gap the EU is facing and in order to serve the Europe 2020 strategy target of raising spending on research and development to 3 % of GDP by 2020.

The concept of a common strategic framework was subsequently supported by the European Parliament in its resolution of 27 September 2011[3].

3. Horizon 2020 – The Framework Programme for Research and Innovation

On 30 November 2011 the Commission adopted the Horizon 2020 package[4] with a budget of EUR 80 billion[5] investment in research and innovation to help boost new growth and jobs in Europe. Drawn up fully in line with the MFF-proposal, Horizon 2020 wholly supports the Europe 2020 strategy, which identified research and innovation as key drivers to achieve the objectives of smart, sustainable and inclusive growth. The programme would run from 2014 to 2020.

Bringing together for the first time all EU research and innovation funding under a single programme, Horizon 2020 will focus funds on three key objectives. It will:

· Strengthen the EU's position as a world leader in science. This will provide a boost to top-level research in Europe, including a significant increase in funding for the European Research Council (ERC);

· Strengthen industrial leadership in innovation. This includes major investment in key technologies, greater access to capital and support for SMEs;

· Help address major concerns shared by all Europeans, across six key themes: Health, demographic change and well-being; Food security, sustainable agriculture, marine and maritime research and the bio-economy; Secure, clean and efficient energy; Smart, green and integrated transport; Climate action, resource efficiency and raw materials; and Inclusive, innovative and secure societies.

Through a full range of support that is integrated across the research and innovation cycle, Horizon 2020 will be the key instrument implementing the Innovation Union, the Europe 2020 flagship initiative aimed at securing Europe's global competitiveness. Support will be provided to all stages in the innovation chain, especially activities closer to the market, including innovative financial instruments, as well as non-technological and social innovation, and aims to ensure the widest possible use and dissemination of knowledge generated by the supported activities up to its commercial exploitation.

In addition, a number of concrete measures will encourage the strong participation by SMEs in Horizon 2020. This includes a new SME instrument, building on the Small Business Innovation Research model, allowing SMEs to put forward their most innovative ideas and making it easier for SMEs to access the programme.

International cooperation will also be further promoted in Horizon 2020, and the programme will be complemented by further measures to complete the European Research Area by 2014.

Major simplification is another key element. Horizon 2020 funding will be easier to access due to the simple programme architecture, a single set of rules and less red tape. In practical terms, the simplification measures have been designed to reduce the administrative costs of the participants, to accelerate all processes of proposal and grant management and to decrease the risk of error. These simple funding rules and a revised control strategy will achieve a new balance between trust and control, as called for by all stakeholders, the European Parliament and the European Council.

With the aim of achieving the greatest possible impact of Union funding, Horizon 2020 is to develop close synergies with other Union programmes such as Cohesion Policy funds, with national and regional research and innovation programmes, as well as with the private sector in key areas to the benefit of Europe.

3.1. Preparing Horizon 2020

The preparation of the Horizon 2020 package took full account of the responses to an extensive public consultation based on a Green Paper, "From challenges to opportunities: towards a common strategic framework for EU research and innovation funding"[6]. Views were expressed by the Member States and a wide range of stakeholders from industry, academia and civil society during the course of Spring 2011.

The set of proposals also rely on two in-depth impact assessments highlighting that the Horizon 2020 option would bring more clarity of focus, best achieve the necessary critical mass, and lead to greatest impact on the policy objectives and downstream economic, competitiveness, and social benefits, while at the same time helping to simplify matters.

4. The Innovation Union, including ERA policy achievements

Launched by the Commission in October 2010, the Innovation Union aims to improve conditions and access to finance for research and innovation in Europe to ensure that innovative ideas can be turned into products and services that create growth and jobs.

4.1. Monitoring progress in innovation

The first year of Innovation Union has seen economic and financial crisis reaching a new phase with recovery at risk, public confidence deteriorating and high pressure to cut investments in future sources of economic growth.

At the same time, the shift in economic power from West to East is accelerating. The message from both the Innovation Union Scoreboard and the Innovation Union Competitiveness Report is clear. Europe's research and innovation performance has declined over recent years causing a broadening of the already sizeable innovation gap vis-à-vis the U.S. and Japan, while countries like China, India and Brazil are rapidly catching up with the EU. Moreover, the innovation divide within the EU is also increasing. Against this backdrop, achieving the Innovation Union objectives has thus become even more important and urgent.

There was good progress in 2011 with 30 out of the 34 Innovation Union commitments launched. A comprehensive progress report was issued by the Commission in December 2011[7].

4.2. Improving framework conditions

There have also been important measures put forward to create the conditions that will smooth the path from idea to market and help boost private investments in research and innovation:

– In April 2011, the Commission tabled legislative proposals for a unitary patent protection which will reduce translation and related costs of patents in Europe by up to 80%;

– In June 2011, the Commission presented a standardisation package aiming to modernise European standard-setting in the face of present and future challenges. The target is to speed up standard-setting processes by 50% by 2020;

– In December 2011, the Commission proposed a new regime for venture capital funds so that capital can be more easily raised across Europe. In addition, new concrete measures to facilitate innovation in the context of the revision of the EU public procurement legislation was put forward. These include a new procedure for buying innovative products and services and facilitating joint procurements across borders;

– Looking ahead, the Commission has investigated options to enhance exploitation of intellectual property rights and will discuss in 2012 the way forward.

4.3. Enhancing access to finance

In December 2011, the Commission and the European Investment Bank (EIB) responded to the European Council's and European Parliament's requests to develop and improve the Risk-Sharing Finance Facility (RSFF). With the objective to provide loans to public and private sector promoters of any size and ownership, the RSFF agreement was amended, thus allowing the facility to assume a higher risk for a higher multiplying effect of its contribution. The Risk-Sharing Instrument for SMEs, a new guarantee facility for SMEs to help them access finance from banks, was also launched. With a budget of EUR 120 million, the aim of this new instrument is to reach up to 500 beneficiaries with a total loan volume of at least EUR 1 billion.

Innovative financial instruments will be further developed for Horizon 2020 to improve access to risk finance for research and innovation, in particular for innovative SMEs. They will include equity and debt-financing instruments, set up in conjunction with the Programme for the Competitiveness of Enterprises and SMEs. This will build on current achievements, notably on the success of the RSFF.

4.4. Tackling societal challenges: European Innovation Partnerships

The Commission has piloted the first European Innovation Partnership (EIP) in the area of Active and Healthy Ageing with the aim of adding two years of healthy life for the average European citizen by 2020. The Strategic Implementation Plan of the pilot partnership was presented in November 2011.

EIP is a novel concept to speed up innovations addressing a well-defined target within a specific societal challenge. It provides a platform mobilising stakeholders across policy areas, sectors and borders to commit and contribute to supply and demand side measures across the research and innovation cycle. The experienced gained in setting up the pilot partnership will pave the way for others.

4.5. Promoting the European Institute of Innovation and technology (EIT)

In November 2011, the Commission adopted a proposal for the EIT's Strategic Innovation Agenda which defines the framework for the Institute's operations in the years to come. It focuses on consolidating the three existing Knowledge and Innovation Communities (KICs) and gradually setting up new ones with the aim to address major societal challenges in line with the Horizon 2020 objectives.

4.6. Related initiatives

Key milestones have been reached on many other Innovation Union commitments during 2011. The Social Innovation Europe initiative was launched in March and "The Smart Specialisation Platform" was released in June. A European Design Leadership Board has been set up and a pilot project for Knowledge Alliances between business and academia has been launched. The Commission has also piloted a EU-level support for public procurers through collaborative projects on procurement for innovative products and services.

2011 also saw the first Innovation Convention, a major innovation-related event in Europe, take place on 5-6 December in Brussels. At this convention, the first EU Women Innovators Prizes were awarded with the aim to raise public awareness of the need for more innovation and more women innovators.

4.7. Delivering the European Research Area

Research activities and policies in Europe still suffer from fragmentation, sub-optimal levels of coherence and coordination and constraints on the free movement of knowledge. The completion of the European Research Area (ERA) aims to overcome these deficiencies. As one of the activities under the Innovation Union initiative detailed preparation of the ERA communication was one of the key tasks in 2011.

4.7.1. Researchers

While continuing the implementation of the European Partnership for Researchers, the Steering Group for Human Resources and Mobility also contributed to the preparation of building-blocks for the ERA communication in the areas of research career, training and mobility. In May 2011, it also adopted a European Framework for Research Careers as a voluntary transparency instrument to facilitate mobility and comparability on career development.

Other key actions were the setting up of an expert group on the research profession looking into open recruitment issues and the launch of a feasibility study about a future European Researchers' information and data infrastructure.

4.7.2. Joint Programming

In its 2011 Communication on Partnering in Research and Innovation[8], the Commission drew the lessons learnt to date with regard to Public-Public Partnering[9] and Public-Private Partnering[10] and defined the way forward in further developing those partnerships.

The main conclusions acknowledged that partnering activities have proved their potential to contribute to the objectives of Europe 2020 and will therefore continue to be an important element of future European research and innovation policy. At the same time, there is a need for increased long-term commitment to partnering from all stakeholders, including Member States and industry, and the partnering instrument landscape needs to be simplified.

Commission Recommendations and related Council Conclusions were adopted in 2011 launching six more Joint Programming Initiatives (JPIs). Altogether, 10 JPIs are now up and running.

4.7.3. Research Infrastructures

In May 2011, the European Strategy Forum on Research Infrastructures (ESFRI) published its Strategy Report and Roadmap Update. The roadmap contains six new infrastructure projects in fields such as energy supply, health, climate change, and food supplies. ESFRI intends to embark on an ambitious programme, by striving to implement as many of the research infrastructures on the Roadmap as possible. To this purpose, ESFRI set up an Implementation Working Group in June 2011 that will play a vital role in easing the implementation process.

The regulation setting up a legal framework for a European Research Infrastructure Consortium (ERIC) was designed to facilitate the establishment and operation of large research infrastructures involving several European countries. Although the uniform and timely implementation of this regulation in the various Member States remains a challenge, the first ERIC, the SHARE ERIC (Survey of Health, Ageing and Retirement in Europe), was established in March 2011 and since then the CLARIN, ECRIN, and EURO-ARGO projects have all applied to be set up as ERICs.

4.7.4. External Dimension of ERA

The European Partnership for International Science & Technology Cooperation aims to develop greater coherence between the EU and the Member States activities. Progress was ensured by the Strategic Forum for International S&T Cooperation (SFIC) in the following areas:

– The 'India Pilot Initiative' was significantly advanced by developing a Strategic EU-MS Research & Innovation Agenda which identifies common challenges, shared objectives, priority areas and instruments of cooperation between Europe and India for the years to come. Five strategic areas have been selected: water, bio-resources, energy, health and ICT;

– The 'China Pilot Initiative' was also further developed, notably through two workshops;

– Under the 'U.S. Pilot Initiative', two information and outreach events were prepared in 2011.

4.7.5. Knowledge Transfer

During 2011, the European Research Area Committee Working Group on Knowledge Transfer produced a stakeholder guide on intellectual property and knowledge transfer management for cooperation with third countries. It provided guidance and feedback for the study tracking the progress of the implementation of the Commission's intellectual property recommendation from 2008, a study which has continued in 2011 and has recorded good progress. Additionally, an expert report on international knowledge transfer was published, presenting an overview of European practices.

4.7.6. Universities: Modernisation Agenda

A feasibility study was launched on a European accreditation mechanism for good human resources management in Universities and public research institutions basing their policy on the principles of the European Charter for Researchers and the Code for their Recruitment. Another feasibility study was completed on Innovative Doctoral schools, to progress towards a common approach across ERA which would encourage institutions to fulfil certain principles such as: research excellence, interdisciplinary research, industry exposure, excellent working conditions and career development including gender issues.

5. The Seventh Framework Programme

5.1. Implementation of the 2011 work programmes

46 calls for proposals were concluded in 2011 for a total indicative budget of EUR 4.4 billion. A total of 14,567 eligible proposals, of which 2,813 were retained for funding[11] resulting in a success rate of 19.3 % on a proposal basis.

A total of 59,955 applicants took part in all eligible proposals, for a total project cost of EUR 23.1 billion and a total requested EU contribution of EUR 17.9 billion. A total of 12,932 applicants were in the retained proposals, for total project costs of EUR 4.9 billion and a total requested EU contribution of EUR 3.7 billion. The overall success rate was 21.6 % in terms of applicants

5.2. The 2012 work programmes

Adopted in July 2011, the 2012 calls for proposals worth nearly EUR 7 billion were the Commission's biggest funding package to date to boost research and innovation. These calls for proposals were also the first tailored to fully fit the new policy framework set out with the Innovation Union initiative. The work programmes include some of the following features:

– EUR 220 million of the EUR 656 million available for health research and EUR 192 million of the EUR 1.1 billion in funding for ICT will be allocated to work aimed at tackling the challenge of providing for an ageing population and thus supporting the pilot EIP on active and healthy ageing;

– The ERC will award close to EUR 1.6 billion to the best senior and young researchers working in Europe. To help bridge the gap between frontier research results and commercialisation, a small 'Proof of Concept' initiative has been introduced;

– Around EUR 900 million in support for researchers' mobility and careers will be provided through 'Marie Curie Actions' for around 10,000 highly-qualified researchers. This will include a pilot project to fund European Industrial Doctorates, to stimulate entrepreneurship and cooperation between academia and industry;

– In addition to newly simplified rules, the investment package of almost EUR 1 billiong for Small and Medium-sized Enterprises (SMEs) provides special incentives for SMEs to participate;

– In response to the increasing demand for safer, healthier food and sustainable bio-resources, EUR 307 million will be invested in building a strong bio-economy that will improve production methods, create new industries and jobs;

– EUR 365 million has been earmarked for three challenge-driven public private partnerships: The European Green Cars Initiative, Factories of the Future, and Energy Efficient Buildings;

– EUR 40 million will be spent on the 'Smart Cities Initiative' to help find more efficient ways to use energy and provide urban transport.

5.3. Related initiatives

In October 2011, Europe's five Joint Technology Initiatives – ARTEMIS (embedded computing systems), Clean Sky (aeronautics and air transport), ENIAC JU (nano-electronics), FCH JU (fuel cells and hydrogen) and IMI (innovative medicines) – jointly presented the first achievements of their EUR 10 billion research and innovation programmes in the European Parliament. Of the total budget, around one third comes from the Union to support these public-private partnerships aimed at pooling public and private talent and investment.

Another important achievement was the adoption by the Council on 19 December 2011 of the Euratom Framework Programme for nuclear research and training activities for the years 2012-2013, which includes the supplementary funding for ITER of EUR 1.3 billion. The Commission proposed to fund ITER outside the next Multi-annual Financial Framework for the period 2014-2020 through a Supplementary Research Programme.

Information on the direct actions of FP7 for the year 2011 can be found in the annual report of the Commission's Joint Research Centre[12].

5.4. Highlights

5.4.1. Innovation

The 2012 work programmes strengthen many aspects of innovation, in particular the market uptake of innovation, and promote actions for a smooth transition towards Horizon 2020.

Several themes under the Cooperation Specific Programme place increasing emphasis on activities like prototyping, testing and demonstrating. A number of themes have accentuated application-orientation, up-scaling and pilots, not only through the selection of priority topics, but also through earmarked budgets.

Some themes pay particular attention to the translation of funded project results into innovative applications, and some have included support actions for promoting technology transfer and intellectual property management. More support is also being placed on demand-driven measures that will help the uptake of innovation in public and private markets, notably through standardisation related activities and more support to pre-commercial procurements.

New approaches for stimulating and speeding-up innovations are also introduced. An inducement prize is launched by the Health theme to encourage the development of a novel alternative to cold-chain technologies for vaccine formulation, preservation and transportation.

In general, the 2012 work programmes apply a broader approach to innovation. Besides research and technology and product innovation, service innovation including process and organisational innovation is also being supported. Other types of innovation are included as well, notably social innovation, exploration of new business models, and innovation in design with close user involvement.

A number of Cooperation themes encourage more industry and in particular SME participation. Some are implementing this through earmarked budgets, others make it part of the evaluation criteria, and a few themes apply a bottom-up approach to increase the scope for SMEs to propose solutions of their own choice. The Health theme supports a specific SME scheme addressing small close-to-market technology development projects with SMEs in the lead.

5.4.2. Dissemination

The dissemination of results of EU-funded research plays a pivotal role in delivering the European Research Area, promoting openness and capitalising on Europe's creative potential. The Commission supports the dissemination of research results by providing funding within the projects to actively disseminate the results. The Commission also actively raises public awareness of the funded research results and provides on-line access to the results via CORDIS[13], the Commission's Community R&D Information Service, and the Joint Research Centre's Publications Repository[14].

In August 2008, the Commission launched the Open Access Pilot in FP7, covering seven research areas representing nearly 20% of the total FP7 budget. This in order to increase the dissemination of research results via free-of-charge access. According to the 2011 survey on the pilot, the majority of respondents find it easy to comply with the open access requirements and three quarters of the respondents would agree with an open access mandate for data in their research area.

In addition, the Commission is investigating to go beyond current activities and further improve the dissemination, communication and exploitation of the EU-funded research results.

5.4.3. Simplification

Activities in 2011 have built on the impetus given by the April 2010 Communication on simplification[15] and the ensuing debate. A series of measures receiving overall support were implemented in practice. Among these, a package of three measures was adopted by Commission Decision on 24 January[16], comprising:

– The possibility to use average personnel costs, without prior certification, for all beneficiaries where this is their usual accounting practice;

– The possibility for owner-managers of SMEs, and natural persons not paying themselves a salary, to charge personnel costs to FP7 projects on the basis of a scale of unit costs;

– The creation of a research clearing committee between the Directorates-General managing FP7 grants, to assure a consistent interpretation and implementation of the FP7 rules.

The development of the Research and Innovation Participant Portal was further pursued with deployment of new services for participants and further improvements to the user-friendliness of the system.

The outcome of the simplification debate has also fed into discussions on revising the Financial Regulation. Funding provisions for EU grants are being clarified and simplified, and would allow, once the legislator adopts the new Regulation for a broad acceptance of usual accounting practices of beneficiaries, subject to minimum boundary conditions. This would also include:

– Revised rules related to the eligibility of VAT. This would simplify the financial management of research and innovation grants e.g. for universities and other public research bodies;

– The abolition of the obligation to create and report interests. This obligation exists today, and has created considerable administrative effort and costs in terms of opening and managing separate accounts, and for managing a register of exceptions for organisations that due to national legislation cannot open interest-bearing accounts.

6. Outlook for 2012

Following the Commission's adoption and presentation of Horizon 2020, the package is to be discussed by the Council and the European Parliament during 2012 and onwards, with a view to adoption before the end of 2013. The negotiations are taking place during one of the most difficult periods the EU has ever faced. While slowly recovering from the downturn, Europe is now faced with a public debt crisis and fears of a new recession. European leaders and public authorities therefore need to act decisively to ensure sustainable growth and new jobs which is what Horizon 2020 is all about. At the same time, the proposal for the overall EU budget is being negotiated, including the overall amount for research and innovation. As well as supporting the negotiations, the Commission will be working hard to put in place all of the arrangements necessary for a smooth start and implementation of the programme.

In 2012, the Commission will continue to deliver on the Innovation Union actions, notably by presenting two of the remaining initiatives: the communication on the ERA, which completion by 2014 was called for by the 2012 Spring European Council, and the new innovation headline indicator. In addition, it will continue to push forward innovation in other societal challenges by tabling proposals for EIPs on "Agricutural Productivity and Sustainability", "Raw Materials", "Water", and possibly "Smart Cities".

With the coming 2013 work programmes, the final years of FP7 implementation have also been reached. Aligned with the Europe 2020 growth and job creation strategy, these work programmes will be the Commission's biggest ever funding package to boost research and innovation, and at the same time, they will provide for a smooth transition towards Horizon 2020.

7. Sources of further information

For further information, the following are publicly available:

· Annual Monitoring Reports for the Framework Programme and its Specific Programmes[17];

· Regular Science, Technology and Competitiveness Key Figures reports[18];

· Statistics on science and technology in Europe[19];

· Studies and analyses published in connection with European Union research activities and policies[20];

· Annual Activity Reports of the research Directorates-General[21];

· State of the Innovation Union[22];

· Innovation Union Competitiveness report[23];

· The Innovation Union scoreboard[24];

· Commission report on the evaluation of the Union's finances based on the results achieved[25]

Most of these documents can be obtained or ordered from the following websites:

· The Commission's Research and innovation website: http://ec.europa.eu/research;

· The ERA website: http://ec.europa.eu/research/era;

· The Investing in European research website: http://ec.europa.eu/invest-in-research;

· The ERAWATCH website: http://erawatch.jrc.ec.europa.eu/

[1] EUCO 2/1/11

[2] COM(2011)500

[3] P7 TA(2011)0401

[4] http://ec.europa.eu/research/horizon2020/index_en.cfm?pg=home

[5] In constant 2011 prices

[6] COM(2011)48

[7] COM(2011)849 – for the state of play of all 34 commitments, see the Innovation Union Information and Intelligence System: http://i3s.ec.europa.eu/home.html.

[8] COM(2011)572

[9] ERA-NETs, Article 185 initiatives, Joint Programming Initiatives, etc.

[10] Joint Technology Initiatives, Recovery Plan PPPs, etc.

[11] Passed all evaluation thresholds and were main listed in the selection procedure

[12] http://ec.europa.eu/dgs/jrc/index.cfm?id=2530

[13] http://cordis.europa.eu/

[14] http://publications.jrc.ec.europa.eu/repository/

[15] COM(2010)187

[16] COM(2011)174

[17] http://ec.europa.eu/research/evaluations/index_en.cfm?pg=fp7-monitoring

[18] http://ec.europa.eu/research/era/facts/figures/key_figures_en.htm

[19] http://epp.eurostat.ec.europa.eu/portal/page/portal/science_technology_innovation/introduction

[20] http://ec.europa.eu/research/evaluations/index_en.cfm

[21] http://ec.europa.eu/atwork/synthesis/aar/index_en.htm

[22] http://ec.europa.eu/research/innovation-union/pdf/state-of-the-union/2011/state_of_the_innovation_union_2011_en.pdf

[23] http://ec.europa.eu/research/innovation-union/index_en.cfm?section=competitiveness-report&year=2011

[24] http://ec.europa.eu/enterprise/policies/innovation/files/ius-2011_en.pdf

[25] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0040:FIN:EN:PDF