COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE EVALUATION of the Innovation Fund's operation
Date: 2026-07-17
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Emissions Trading Scheme, EU emission allowance, clean technology, fund (EU), greenhouse gas, innovation, pollution control measures, project evaluation, reduction of gas emissions, renewable energy

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   EUROPEAN COMMISSION  Brussels, 17.7.2026  SWD(2026) 228 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE EVALUATION  of the Innovation Fund's operation {SWD(2026) 199 final}  
 
 
The evaluation is an interim check required under EU law to assess the Innovation Fund’s 
performance from its launch in 2020 through early 2025. It addresses five core questions: 

-  how effectively the Fund achieves its goals; 
-  whether it uses resources efficiently; 
-  how well it aligns with other EU and national policies; 
-  whether it is still relevant to today’s needs; 
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and what added value it brings at the EU level compared with national action alone. 

Its results will inform future decisions on how to adjust the Fund  (1) and will feed into 
broader  reforms of the EU Emissions  Trading  System (EU  ETS), as the  Fund’s budget 
comes from the sale of EU ETS allowances. 

The evaluation was supported by an external study that combined desk research, surveys, 
interviews,  case  studies,  quantitative  analysis  and  stakeholder  consultations,  and  a 
dedicated  workshop  with  practitioners  in  late  2025.  As  most  projects  are  still  in  early 
stages,  the  evaluation  focuses  on  processes,  early  results  and  expected  impacts  (e.g. 
projected emissions cuts and investment mobilised), rather than on long-term, measured 
outcomes. Data gaps, confidentiality constraints and the difficulty of isolating the Fund’s 
impact from that of other funding sources mean that some findings are indicative rather 
than fully representative, even though the overall evidence base is robust. 

The Fund was created with the 2018 revision of the EU ETS Directive to help bridge the 
gap  between  promising  innovative  pilot  technologies  and  full  commercial  deployment, 
especially,  though  not  exclusively,  in  sectors  with  ‘hard-to-abate’  emissions.  Many 
technologies  needed  to  meet  the  EU’s  long-term  climate  targets  were  then  still  at 
demonstration or early commercial stages. They faced barriers such as high upfront costs, 
uncertain  performance,  missing  infrastructure  and  weak  market  demand.  The  Fund  has 
thus been uniquely positioned to bring low-carbon technology to commercial application 
(crossing the ‘valley of death’) by helping overcome technical, commercial, regulatory and 
infrastructural risks. 

National schemes alone could not tackle these challenges, as they were fragmented, varied 
in scale and often could not support large projects or ensure a level playing field across the 
internal market. The Fund was designed as an EU-level mechanism to de-risk investments 
in these technologies, create a competition for support based on excellence, attract added 
public and private finance, and accelerate deployment. 

The  Fund  supports  projects  through  ‘regular’  calls  for  proposals,  competitive  bidding 
(auctions) and blending operations. Through ‘as-a-service’ features, Member States may 
finance projects selected in Innovation Fund calls that cannot be directly supported by the 
Fund  due  to  limited  budget.  The  Fund’s  financial  support  is  complemented  by  project 
development assistance (for mature proposals that were not selected) and dedicated support 
for National Contact Points. Grants are awarded to projects that can deliver the greatest 
greenhouse  gas  emissions  reductions,  with  the  highest  levels  of  innovation,  maturity, 
replicability and cost-efficiency (award criteria). Payments are tied to milestones (financial 
close  and  entry  into  operation),  which  helps  manage  risk  and  ensure  accountability.  In 

(1)  Commission  Delegated  Regulation  (EU)  2019/856  of  26  February  2019  supplementing  Directive 
2003/87/EC  of  the  European  Parliament  and  of  the  Council  with  regard  to  the  operation  of  the 
Innovation Fund, Article 24(2), available at: Delegated regulation - 2019/856 - EN - EUR-Lex 

 
 
 
parallel, the Fund also invests in communication and knowledge sharing to spread lessons 
learned and support applicants. 

Demand for Innovation Fund support has been high. Between 2020 and 2024, calls were 
consistently  oversubscribed,  with  applicants  requesting  more  than  seven  times  the 
available budget on average. In the first large-scale call in 2020, the requested funding was 
about 21 times the budget. Oversubscription is still highest for general large-scale calls, 
while some more targeted or small-scale application windows show lower pressure and, in 
certain  years,  even  receive  fewer  applications  than  the  budget  can  support.  Since  the 
Fund’s  launch,  EUR  12.7  billion  have  been  awarded  to  projects  through  nine  calls  for 
proposals. 

The expansion of the project portfolio across sectors and countries shows that the Fund is 
successfully  attracting  and  backing  large  decarbonisation  investments,  even  if  their  full 
impacts will not materialise until later. Given the technical, financial, infrastructural and 
regulatory complexities of large-scale, innovative commercial projects, beneficiaries have 
four years to reach financial close. Hence, by early 2025, many projects were still before 
financial  close.  Progress  varies  by  technology  area:  nearly  half  of  renewable  energy 
projects had reached financial close, compared with less than one-fifth in energy-intensive 
industries,  nine  in  energy  storage,  one  in  industrial  carbon  management  and  none  in 
mobility, as these latest categories tend to be more complex and capital intensive. At the 
time of the evaluation, 13 projects (7 % of the portfolio) had entered operation. Several 
projects have been delayed or ended due to cost increases and other external challenges. 

Effectiveness, efficiency, coherence 

The Fund is broadly effective in spotting and supporting innovative projects with strong 
potential  to  reduce  greenhouse  gas  emissions.  Its  design  allows  it  to  attract  additional 
public and private investment, reduce perceived risks for investors, and accelerate project 
implementation (which might not otherwise occur or would do so more slowly). However, 
intense  competition  combined  with  a  limited  budget  means  that  many  high-quality 
proposals remain unfunded. The portfolio also shows some imbalances across sectors and 
countries, shaped by differences in project maturity, national innovation ecosystems and 
applicants' capacity. 

Procedures for application, selection, grant preparation and disbursements are transparent 
and well-controlled. Nonetheless, stakeholders report that application and reporting rules 
are  complex  and  resource  intensive,  placing  a  heavy  burden  on  smaller  companies  and 
evaluators. Oversubscription and the need to manage a growing and diverse portfolio with 
limited internal administrative resources create operational pressures both at national and 
Union levels, indicating that further simplification and adequate staffing will be essential 
as the Fund expands. 

The Fund aligns well with EU climate and industrial policies (the European Green Deal, 
the European Climate Law, the Clean Industrial Deal) and complements other programmes 
(Horizon  Europe,  the  Connecting  Europe  Facility,  InvestEU,  LIFE,  the  Modernisation 
Fund, the Recovery and Resilience Facility). It is also the funding programme which has 
so far awarded the majority of STEP Seals, an excellence label aiming to support projects 
seeking additional or alternative funding from private and public investors, at both EU and 
national  levels.  However,  these  linkages  could  be  exploited  more  systematically.  The 
Fund’s broad scope and competitive selection deliver unique benefits that national schemes 
alone could not easily provide, such as cross-border support, improved proposal quality 
through  EU-wide  competition  and  knowledge  spillovers.  Tools  such  as  ‘auctions-as-a-

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service’  have  also  delivered  efficiency  gains  by  standardising  procedures  and  reducing 
duplication of effort with national administrations. 

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EU added value and relevance 

The Fund finances high-risk, large-scale, capital-intensive climate innovation projects that 
individual countries would struggle to fund or coordinate on their own, particularly in hard-
to-abate sectors. Its main strength lies in its EU-level design: it helps bridge funding gaps, 
foster  cross-border  knowledge  spillovers, 
de-risk  emerging 
complementing rather than replacing national policies. To fully  unlock its potential, the 
Fund needs better alignment between its design and the risk profiles of projects, and closer 
coordination with other financing sources. 

technologies  and 

The  Fund’s  goals  stay  highly  relevant  given  ambitious  EU  climate  targets,  the  need  to 
decarbonise  hard-to-abate  sectors  and 
in  clean 
technologies.  Continued  oversubscription  for  Fund  calls  confirms  that  there  is  still  a 
significant financing gap that the instrument is designed to address. 

intensifying  global  competition 

Conclusions 

The  evaluation  highlights  several  lessons  and  options  for  improvement,  including 
simplifying application and reporting rules to reduce upfront effort for potential applicants, 
especially for small and medium enterprises. Stronger capacity building in countries with 
lower participation, better-resourced National Contact Points and closer coordination with 
other  public  funding  schemes  could  help  broaden  participation  and  raise  the  quality  of 
proposals  across  Europe.  The  evaluation  also  underlines  the  need  to  improve  internal 
monitoring  and  reporting  so  that  the  Fund’s  impact  is  even  more  visible  in  the  next 
evaluation period. 

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