The EU Innovation Fund is one of the largest funding programmes globally dedicated to demonstration of highly innovative low-carbon technologies.
It was established under Article 10a(8) of the EU Emissions Trading System Directive (ETS Directive) to support projects which can decarbonise EU industry and help Europe achieve climate-neutrality.
Funding comes from revenues generated by the EU ETS — estimated at about €40 billion for the period 2020-2030 (depending on the carbon price) for eligible demonstration projects.
Key objectives & supported technologies
The Innovation Fund aims to:
- Provide financial incentives for investments in next-generation low-carbon technologies.
- Strengthen European competitiveness by enabling businesses to become global leaders in clean technologies.
- Support projects that deliver significant greenhouse-gas (GHG) emission reductions.
It supports a wide array of technologies and sectors, including:
- Innovative low-carbon processes in energy-intensive industries (steel, chemicals, cement, etc.)
- Renewable energy generation and its manufacturing/facilities
- Energy storage solutions, CCS/CCU (carbon capture, utilisation, storage)
- Clean hydrogen production and hydrogen applications across sectors
- Medium-scale and new sectors added in recent revisions: maritime, aviation, buildings.
Project size and eligibility
Projects fall into two broad categories:
- Small-scale projects (CAPEX < €7.5 million) — suitable for earlier stage demonstration.
- Large-scale projects (CAPEX > €7.5 million) — flagship demonstrations pushing first-of-a-kind technologies.
Applicants must be legal entities and projects must be located in an EEA Member State (EU + Iceland, Liechtenstein & Norway). They need to show maturity in terms of business model, financial and legal structure, as well as readiness to deliver measurable results.
Funding support can cover up to ~60% of the “relevant costs” (i.e., extra costs incurred by deploying the new technology) for large-scale projects; for small-scale projects the grant can apply up to 60% of CAPEX.
Recent developments & why it matters in 2025
By mid-2025, the Innovation Fund has awarded over €12 billion to more than 210 projects across the EEA.
It has also introduced competitive bidding (auctions) as a new funding mechanism alongside traditional calls, to accelerate market roll-out of certain technologies.
The Fund has updated its scope following the revision of the ETS Directive: more sectors (maritime, aviation, buildings), the “Do Not Significant Harm” (DNSH) principle from 2025, stronger focus on geographical balance and new financial instruments.
For organisations planning to apply in 2025 or later, this means:
The opportunity to access very large grants for breakthrough low-carbon solutions.
The need to show strong innovation, scalability, maturity and impact in terms of emission reduction.
Strategic alignment with EU priorities such as the Green Deal, Net-Zero Industry Act, Hydrogen Bank, etc.
The advantage of applying early and with well-prepared proposals, given high competition.
The Innovation Fund represents a strategic gateway for European organisations aiming to lead in the clean-tech transition. By supporting large-scale, highly innovative projects that deliver substantial emission reductions, it plays a crucial role in shaping Europe’s industrial and energy future.
For forward-looking companies and innovators, the time to act is now — well-prepared proposals, strong teams and aligned technology concepts will be key to unlocking these major funding opportunities.
