Brief

The European recovery plan as a breakthrough for green innovation? Challenges and opportunities for an innovative green recovery

| 17/12/2021

The importance of green innovation for climate neutrality

The EU and its Member States have set themselves the objective to reduce their CO2 emissions by 55% (by 2030 in comparison to the level of 1990) and be carbon-neutral by 2050. To achieve  these climate ambitions, they will not only have to massively invest in already existing technologies but also develop and implement innovative technologies, especially to decarbonise the industrial and transport sectors. The size and speed of investment in green innovation will be a deciding factor for the success of the green transition.

The European recovery plan as an opportunity for green innovation

In response to the Covid-19 crisis, the EU and its Member States have set up a European recovery plan (called NextGenerationEU) based on common EU debt. Through its central instrument, the recovery and resilience facility (RRF), the European recovery plan finances national recovery and resilience plans (NRRPs) through both grants and loans. To receive European funding, a number of criteria are attached to these national investment and reform plans, including the obligation that they spend at least 37% of the overall plan on the green transition. The RRF regulation provides a methodology for climate tracking, detailing to which extent specific types of investment are supporting this objective. While giving a 100% green coefficient (rather than 40%) to many investments financing particularly innovative technologies, it remains up to each individual country, to decide which types of green investment to include in their NRRPs. While all of the 22 NRRPs that have been approved so far by the European Commission and the Council of the EU fulfil the 37% green investment objective, reaching close to 40% taken altogether, we know less to which extent Member States use the European recovery plan to finance innovative green technologies and in which types of green innovation they invest.

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