A European Commission staff working document published on 17 July 2026 evaluates the Innovation Fund's operation from 2020 to 2025, covering all eligible European Economic Area countries. The evaluation assesses the Fund's contribution to EU climate, industrial and energy objectives, and will inform a potential revision of the EU ETS Directive. It identifies key challenges including administrative burden for small-scale projects, geographical imbalances in funding distribution, and the need for simplified application processes.
The Innovation Fund is sourced from EU ETS allowance auctioning and finances innovative low-carbon technologies in energy-intensive industries, renewable energy, storage, carbon management, buildings, and transport. The evaluation assessed effectiveness, efficiency, coherence, relevance, and EU added value. Data was collected up to Q1 2025, using surveys (190 public consultation respondents, 124 beneficiaries, 154 unsuccessful applicants, 27 national contact points, 79 Horizon Europe beneficiaries), 79 interviews, and a November 2025 workshop.
The evaluation finds broad support for the Fund's decarbonisation role but highlights several shortcomings. Administrative burden is particularly noted for small-scale projects, which may deter smaller actors from applying. Geographical imbalances mean that funding is concentrated in a few member states, raising questions about equitable access across the EU. The evaluation also points to data gaps: many projects are still at early stages, not yet reaching final investment decisions, and incomplete data on economic indicators makes it difficult to attribute effects due to parallel funding sources.
For small and medium-sized enterprises and smaller project developers, the administrative burden may reduce their ability to access funding, potentially limiting innovation from smaller actors. For energy-intensive industries, the Fund remains a key source of support for decarbonisation, but the complexity may slow uptake. For EU member states with lower current success rates, the geographical concentration could widen the innovation gap. For the European Commission and EU ETS policymakers, the evaluation provides evidence to simplify procedures and possibly adjust allocation criteria in a future ETS Directive revision.
The evaluation is a staff working document and does not itself change rules, but it will feed into the Commission's review of the EU ETS Directive. The European Parliament and Council will likely examine the findings as part of the legislative process. No prior coverage of this evaluation exists in the available record.