A European Innovation policy shaped to deliver the European Green Deal

A clear destination imposing to amplify our effort with no delay

Since July 2019, the ambition of President von der Leyen is crystal clear: making Europe the first climate-neutral continent by 2050. This echoes a rising movement led by civil society to push global leaders to listen to the scientific community alerting us about the threat that climate change represents for our civilisation, now considered by the European Commission as “this generation’s defining task”.

While 2050 could seem far-away, the risk of reaching tipping points combined with the system inertia and the lifetime of investments, imposes to accelerate and amplify the effort with no delay. All sectors of the economy will have to adapt to climate-neutrality, or will eventually have to be substituted or to disappear.

This indeed implies simultaneous socio-technico-economic changes at all levels of the system. We can think of electromobility requiring the deployment of charging stations in locations adapted to the drivers’ needs and behaviours, the corresponding grid reinforcement and the impact of tariff schemes, together with the development of battery technologies. That will leave no economic activity unaffected. Furthermore, dealing with a transition to mitigate climate change and adapt society to its impacts implies taking decisions in a context of very high uncertainty.

A new set of policies to rewire the entire economy

For the concrete delivery of this ambition, the Union must aim at deeply and irreversibly impacting the structure of the economy, by encouraging resources to move into some specific sectors aligned with climate-neutrality by 2050. This requires to set up the appropriate enabling framework for the structural changes to unfold in all economic activities.

This should notably be based on sunrise policies, such as subsidies for innovative technologies, rising economic incentives to better reflect carbon price, incentives to upskill and reskill the entire workforce and to facilitate its geographical mobility, in particular in carbon-intensive regions. In addition, mitigating the very high level of uncertainty imposes to set long-term targets and to define pathways in order to maintain this perceived uncertainty and the related investment risk as low as possible.

Some initiatives already delivered, such as the taxonomy on sustainable finance, or announced in the European Green Deal, will undeniably contribute to create this favourable context. We can notably mention the initiatives on the EU ETS, on the Energy Taxation directive, on the Energy Efficiency Directive, on the Renewable Energy Directive, on the CO₂ standards for vehicles, or the proposal for a Just Transition Fund.

On top of that, the European Climate Law proposed by the European Commission in March 2020 is decisive to anchor climate neutrality as the clear destination and will play a critical role in mitigating the perceived uncertainty in the eyes of investors, by locking polices in, protected from future political turbulences.

The EU Innovation policy: the beating heart of our industrial strategy

Beyond that, this climate-neutrality endeavour also advocates to rethink the Union’s innovation policy. Innovation and entrepreneurship are an imperative for any organisation to develop a competitive advantage, from SMEs to multinationals. That’s why, as proposed by the Commission in the New Industrial Strategy for Europe published in March 2020, the Union’s innovation policy should be at the heart of the industrial strategy, which will be the engine driving towards a climate-neutral future.

The European way of fostering Innovation is unique. The European innovation system is co-created by the public and private sectors, and involves national and European levels. Along the innovation value chain from laboratories to markets, the EU plays a lead role, via collaborative initiatives to facilitate a European approach: at operational (e.g. with the competitive calls of the Framework Programme and the co-programmed partnerships), strategic (e.g. SET Plan and the ETIPs) and political (e.g. the upcoming co-funded partnerships) levels.

It also acts as a financier and investor, through the InnovFin programme of the EIB or the European Innovation Council (EIC) Accelerator programme, which will offer equity investments. This approach of innovation based on multi-stakeholder ecosystems is a genuine strength and a way to provide agility and resilience to the economic fabric.

The Union can count on various instruments and programmes supporting the emergence of innovation from labs to markets (see figure 1) within these innovation ecosystems. EIT InnoEnergy already seeks to make the best use of the European Union’s instruments to support its portfolio of assets at each step of their journey: by organizing regular interactions with public financiers like the European Investment Bank with potential future candidates, by contributing to source large-scale demonstration projects qualifying for financial support for Innovation Fund, or via a pilot action with the EIC Accelerator to provide Business Acceleration Services to energy-related SMEs, in preparation of a future more structural collaboration.

It is now critical to make sure that these synergetic and complementary stakeholders work all hand-in-hand to offer a seamless and entrepreneur-centric experience, to exploit most of their collective potential, and to ensure that industry starts thinking at the scale of the continent.

An ambitious European Industrial Strategy to increase the pulse

We should go further: the Union should facilitate the coordination of large investments in cutting edge solutions offered by a highly skilled industrial fabric made of SMEs, and foster the deployment of key enabling technologies.

This proactive coordinating approach at the interface of policy, finance, and industry could be achieved via the European Alliances to be founded along some strategic value chains, as announced in the new EU Industrial Strategy. This approach has indeed demonstrated its merit notably on Batteries, with the European Battery Alliance championed by Vice-President Maroš Šefčovič.

As the European Public-Private Partnership accelerating and de-risking the market uptake of innovations in sustainable energy, EIT InnoEnergy was entrusted to mobilise and steer the industry across the battery value chain. The aim was to foster a vivid pan-European ecosystem made of SMEs, large corporates, RTOs, financiers, and policymakers, driven by the shared ambition to deliver technological leadership and competitive products and services for Europe (such as Northvolt which became the first European unicorn in this field), to eventually catch up with Asian players and protect our sovereignty.

The feedback collected along this process should be used to mobilise industry around the future strategic value chains which will have to play a key role towards climate-neutrality of the continent such as Clean Hydrogen and Low-Carbon Industries.

In addition, the Strategy pledges to develop a more entrepreneurial mindset to become more “failure-tolerant”. In this direction, the upcoming Communication on the Future of Research and Innovation will be the suitable opportunity to align the European Innovation policy with the industrial strategy and primarily with the climate-neutrality objective, as well as to ground it on the concept of “Think big, move fast”, notably by ensuring the seamless and entrepreneur-centric experience from idea to European leadership mentioned earlier.

All in all, a full-fledged industrial strategy aligned with the European Green Deal should deliver EU prosperity and competitiveness, prepare our businesses and citizens to the uncharted waters of a world impacted by climate changes, and secure Union’s future relevance, at home and abroad.

The next five years will be decisive for the achievement of climate-neutrality by mid-century while leaving no one behind. In this endeavour, by propelling promising European innovative start-ups and SMEs bringing the European Green Deal and industrial policy to life (see figure 2), and by leveraging its expertise to mobilise strategic value chains and eventually serve the Union, EIT InnoEnergy is committed to keep acting as a catalyst of low carbon solutions’ leadership for Europe.