In another landmark initiative, the European Commission recently unveiled its groundbreaking €4.6 billion fund to drive decarbonisation technologies, clean hydrogen ventures, and the mass manufacture of electric vehicle battery technologies. Funding under this mechanism is provided from revenues drawn from the EU ETS, signifying further ambition by the EU toward hitting their climate neutrality goals as well as making net-zero sectors increasingly competitive.
This major investment comprises two new calls for proposals with a value of €3.2 billion within the EU Innovation Fund. Of this, €2.4 billion is placed on net-zero technologies-projects such as renewable energy component manufacturing, energy storage, hydrogen production, and heat pumps. The €1 billion in the last call is set to pursue electric vehicle battery cell manufacturing, which focuses on innovations in production techniques and scaling European battery manufacturing capacity. In addition, €1.2 billion will go to the production of renewable hydrogen, through the European Hydrogen Bank.
EU ETS Fostering Innovation
Money for these plans will come from the EU ETS, which has been implemented since 2005 with the aim to put a price on carbon emissions within the GHG-intensive sectors including electricity and heat, steel and cement, as well as aviation. The system has been transformed significantly, with lawmakers in 2023 expanding its scope to include more sectors and tightening emissions reduction requirements. The ETS is expected to raise around €40 billion in revenues between 2020 and 2030, forming the backbone of the EU’s financing for net-zero technologies.
It is the largest international funding mechanism for net-zero technologies supported by ETS revenues; it acts as a powerful tool for the European Green Deal Industrial Plan in fostering competitive clean industries and accelerating climate neutrality transition within the Union.
Some of the Funding Initiatives are:
The European Commission will invest €2.4 billion under the newly announced funding plan in net-zero technologies. The selected projects will be evaluated according to their capacity to decrease greenhouse gas emissions, degree of innovation, maturity of the project, cost efficiency, and replicability. For the first time, a “Grants-as-a-Service” model will be presented, which will allow member states to complement EU funding with their national schemes.
The €1 billion for electric vehicle battery cell manufacturing is set to further innovative techniques and increase Europe’s share in the global battery supply chain. As part of this, the Commission is teaming up with the European Investment Bank (EIB) to provide a €200 million loan guarantee under the InvestEU programme. The cooperation will further boost investments in the European battery manufacturing value chain.
The European Hydrogen Bank, established in 2023, will spearhead the €1.2 billion investment in renewable hydrogen. The bank’s auction mechanism allows producers to bid for subsidies in the form of a fixed premium per kilogram of hydrogen produced. The winners will receive financial support for up to 10 years, provided they begin hydrogen production within five years. This year’s auction marks a substantial increase from the inaugural €800 million auction held in 2023.
Strategic Objectives and Resilience
Resilience is a word that the Commission is promoting in its new funding criteria for projects that would strengthen the reliability of the supply chain and reduce dependency on imported goods from outside the European Union, like China. For net-zero technology, this includes considering the scope to improve the resilience of the supply chain. For both battery and hydrogen, it addresses suppliers and tackles dependency risk on critical materials and equipment.
Speaking on the announcement, Wopke Hoekstra, Commissioner for Climate, Net Zero, and Clean Growth, stated, “We are investing €4.6 billion to back cutting-edge European projects in net-zero technologies, electric vehicle batteries, and renewable hydrogen. Under the Innovation Fund, we’re putting revenues from the Emission Trading System to work, once again.”
Teresa Ribera Rodríguez, Executive Vice-President for Clean, Just, and Competitive Transition, added, “By investing more than €4.5 billion in clean technologies at the very beginning of the mandate, the Commission is showing its commitment to deliver on its decarbonization objectives and to support European industries’ competitiveness in key strategic sectors.”
These investments form part of a larger EU agenda to scale up domestic production of renewable hydrogen to 10 million tons by 2030, alongside imports into the EU of another 10 million tons of hydrogen. The initiative aligns with the EU’s announced Hydrogen Accelerator, which was launched in February 2022 and strives to make Europe a global player in renewable hydrogen production and application.
As part of these ambitious funding programs, the European Commission will thus lay the groundwork for groundbreaking improvements in deploying clean technology and further consolidate its leadership in global climate action. Such measures will certainly improve Europe’s industrial competitiveness as well as energy security and strategic autonomy.