The European Commission has published an evaluation of the Innovation Fund's operation covering 2020 to 2025, assessing its contribution to EU climate, industrial and energy objectives. The evaluation, released on 20 July 2026, covers all European Economic Area countries and examines the Fund's effectiveness, efficiency, coherence, relevance and EU added value.
The Innovation Fund is financed from EU ETS allowance auctioning and supports innovative low-carbon technologies in energy-intensive industries, renewable energy, energy storage, industrial carbon management, buildings, and transport (maritime, aviation, road transport). The evaluation used a mixed-methods approach: a call for evidence and public consultation that drew 190 respondents, 79 structured interviews, four targeted surveys (beneficiaries, unsuccessful applicants, national contact points, and Horizon Europe beneficiaries), and a reality check workshop held on 12 November 2025.
Key challenges identified include administrative burden for small-scale projects, geographical imbalances in project distribution, and the need for simplified application processes. The evaluation also notes significant data limitations: many projects are still in early implementation, preventing valid conclusions on overall greenhouse gas emissions avoidance, and economic performance indicators such as job creation are not collected.
The evaluation will inform potential proposals to ensure the Fund progresses towards objectives set out in Directive 2003/87/EC and the impact assessment of the EU ETS Directive revision. A Knowledge Sharing Digital Solution (KSDS) is planned for launch in the fourth quarter of 2026 to standardise data collection across projects.
The Innovation Fund's administrative complexity disproportionately affects small-scale and geographically disadvantaged applicants, potentially limiting access to funding for smaller firms and less-developed regions. For beneficiaries, the lack of standardised data collection and early-stage project maturity means the Fund cannot yet demonstrate realised emissions reductions, which may affect future funding decisions. EU taxpayers and ETS participants fund the scheme through allowance auctioning, so the absence of proven outcomes raises questions about cost-effectiveness. The planned KSDS and simplification measures could reduce compliance costs for future applicants, but the timeline for improvements remains unclear.
The Commission is expected to use the evaluation to prepare formal proposals for the Innovation Fund's improvement, likely as part of the broader EU ETS Directive revision process. The European Parliament and Council will scrutinise these proposals, with potential implications for the Fund's budget, scope, and application procedures.