Evaluating the Innovation Fund

The EU Innovation Fund is one of Europe’s biggest climate funding mechanisms, yet it risks missing the mark when it comes to carbon dioxide removal (CDR). In our response to the European Commission’s consultation, Carbon Gap called for bold changes to ensure the Fund supports the full spectrum of solutions needed to reach net-zero.

Carbon Gap supports the Fund’s objectives to drive innovation, scale clean technologies, and help the EU meet its climate targets. But these goals cannot be achieved without CDR. That’s where the Innovation Fund currently falls short.

Despite the IPCC’s clear message that carbon removal is essential for climate neutrality, the Innovation Fund still doesn’t treat it as a core objective. In fact, CDR remains largely ineligible unless it fits existing CCS categories, an approach that excludes many promising removal methods.

We recommended a simple fix: update the Fund’s core objectives to explicitly include support for carbon removal technologies alongside emissions reductions.

Participating in the Innovation Fund is still too burdensome for smaller or newer players — especially those working on novel carbon removal methods. The application process is complex, reporting requirements are heavy, and guidance is often ill-suited to early-stage projects.

To lower these barriers, we call for:

• Simplified processes tailored to smaller actors;
• Dedicated CDR categories with relevant criteria and MRV standards;
• Clearer guidance for projects that don’t neatly fit existing CCS pathways.

We highlighted several urgent gaps:

• No CDR-specific window in regular calls means projects compete unfairly with mitigation projects on mismatched criteria.
• Future mechanisms — such as CDR-dedicated auctions, Contracts for Difference (CfDs), and Grants-as-a-Service — must be prepared now.
• The Fund should coordinate better with earlier-stage funding (e.g. Horizon Europe) to help CDR innovations move from lab to market.

CDR won’t scale on its own. It needs the same strategic support as other net-zero technologies — and the Innovation Fund is a key lever to provide it.

The Fund’s current selection criteria don’t reflect the reality of carbon removal innovation. We proposed:

• A new criterion for storage durability, recognising CDR’s distinct role.
• A broader view of innovation, including first-of-a-kind projects and robust MRV.
• A flexible approach to cost-effectiveness that acknowledges high upfront costs in early-stage removal technologies.

Without these changes, Europe risks excluding the very solutions it needs to reach net-zero — and eventually, net negative.

We welcomed the Innovation Fund’s alignment with wider EU strategies — from the European Climate Law to the Green Deal Industrial Plan. But its full potential lies in championing frontier climate solutions that national funding often won’t touch.

To make this happen, the Fund must:

• Integrate CDR into its design — not just as a checkbox, but as a strategic priority;
• Work in synergy with research, demonstration, and deployment tools;
• Help the EU lead in a growing €220 billion global CDR market.

The Innovation Fund can be a powerhouse for carbon removal — if it evolves. As Europe enters the decisive decade for climate action, ensuring that the Fund supports permanent, verifiable carbon removal isn’t just a climate imperative — it’s a smart industrial strategy.