The EU has only paid out a fraction of the money it says it has committed for green technologies, as companies spend up to 3,000 hours and an average €85,000 to access funds from a flagship programme.
Of €7.1bn awarded from the bloc’s Innovation Fund since it was established in 2021, only 4.7 per cent has been paid out to companies because of the red tape required to access the money, according to European Commission figures.
The application process is also extremely lengthy and bureaucratic. In an internal presentation this month, seen by the Financial Times, the commission said that 77 per cent of those seeking funding had to subcontract parts of the application process to consultants because of the “high burden”.
Average administrative costs were €85,000 per application, it said, even higher than the average €32,000 spent to access the EU’s research grant scheme, Horizon Europe.
Less than 20 per cent of applications to the Innovation Fund are successful, according to the presentation. Of the projects that had been awarded grants, only 6 per cent were operational, while 15 to 20 per cent face delays.
The hold-ups in disbursing the funds are the latest example of how bureaucracy is stifling the EU’s competitiveness. In a major report last year, the former European Central Bank governor Mario Draghi said that administrative burdens were one of the main reasons for Europe’s “static industrial structure with few new companies rising up to disrupt existing industries or develop new growth engines”.
The Innovation Fund, which uses revenues generated from the bloc’s emissions trading system, is one of the world’s largest financing programmes “for the demonstration of innovative low-carbon technologies”, the commission claims.
It was touted as one of the main funding platforms to help the bloc compete with the US after former president Joe Biden announced $369bn of funding and tax credits for green technologies through the Inflation Reduction Act.
Victor van Hoorn, director of trade body Cleantech for Europe, said some businesses have reported spending 3,000 hours on applications to the Innovation Fund — if carried out by one person alone this would be equivalent to more than a year and a half based on the EU’s 36-hour average working week.
“The biggest challenge [we hear] is the amount of resources, the amount of documentation and all of that for a frankly very low success rate,” said van Hoorn.
Eoin Condren, executive director for corporate development at cement company Ecocem, said for its last application to the fund, it had an entire team dedicated to it for five months “costing hundreds of thousands of euros”.
“Large companies can absorb that, but smaller firms developing breakthrough technologies can’t,” he added.
Condren also noted that much of the money went to “big umbrella technologies like [carbon capture and storage] and green hydrogen . . . yet these large, often lossmaking projects are notoriously hard to finance, causing long delays in actually deploying funds”.
An EU official said the low payment rate reflected “the normal or expected implementation milestones for Innovation Fund projects”, adding that “first-of-a-kind projects generally also need more time to reach financial close, be built and enter into operation compared to, for example, research projects”.
“While the application process is demanding, it is also an opportunity to improve the project and the effort is commensurate with the size of the support that is offered,” the official added.
Another issue with the fund is that market conditions in Europe make it difficult even for companies that receive grants to establish themselves and turn a profit.
Vianode, a company making low-carbon synthetic graphite for electric vehicle batteries, was awarded a €90mn grant in 2023 but decided not to go through with its European facility because of the flood of cheap Chinese graphite into the market. It instead set up in Canada, where it secured an offtake agreement with General Motors.
“In the end it comes down to what price you can compete for and with the Chinese dominance, the European market is very, very challenging for us now. It’s different in North America: there the battery producers have an incentive to choose non-Chinese,” said Andreas Forfang, vice-president for sustainability and public affairs at Vianode.
Leon de Graaf of the Brussels-based consultancy Sustainable Public Affairs, said the Innovation Fund “clearly serves a purpose”. Its application rounds were often several times subscribed, he said, adding that “the way the money is currently given is not fit for purpose”.
The commission has estimated that about €40bn could flow from the ETS into the Innovation Fund by 2030.
But De Graaf said the small proportion that had so far been paid out showed that “most money is just sitting there due to complex milestones” resulting in a “huge opportunity cost” for the EU.