From deadline to delivery: What the ECA report confirms about the Innovation Fund

A post-deadline reflection from Innovayt 

23 April 2026 was, once again, deadline day for the EU Innovation Fund (EUIF), the world’s largest grant programme for net-zero technologies and industrial decarbonisation. 

For everyone involved in the programme, it marked the culmination of months of intense work: turning large-scale, first-of-a-kind projects into proposals that had to demonstrate not only technological innovation and ambition, but also financial maturity, implementation readiness and measurable climate impact. 

Now that the deadline has passed, it is worth stepping back, something we have made a habit of in recent years, such as in this previous article. 

This time, post-deadline reflection comes with an additional perspective: the European Court of Auditors’ Special Report 11/2026, Innovation Fund: High potential, but slow progress and little impact on emissions reduction, which provides a timely message and largely aligns with challenges we have been highlighting in earlier reflections. Its central message is clear: the Innovation Fund has strong strategic potential, but it is “not delivering the expected level of reductions in greenhouse gas emissions” (ECA Report, p. 6). 

From Innovayt’s perspective, that conclusion does not come as a surprise. Rather, it confirms a pattern we have observed consistently across multiple calls: the Innovation Fund is a uniquely strong idea as a funding vehicle, but one that remains difficult to execute in practice. Its continuous adjustment and calibration have become critical issues in their own right, with consequences for funded projects and for the Fund’s overall impact. 

A one-of-a kind instrument, challenging to deliver 

It is important not to lose sight of what the Innovation Fund achieves successfully. 

The Innovation Fund remains the most important public funding instrument in Europe for industrial decarbonisation and novel clean technologies. Its core logic is sound: Europe needs an instrument that can support large, risky, first-of-a-kind projects in sectors where conventional financing alone will often not be enough. And what better way to support this than through the EU ETS contributions themselves? 

But ambition alone is not enough. There are real challenges to be addressed in the delivery of the instrument. As the ECA report puts it, by the end of 2024, projects supported by the Innovation Fund had “only achieved 5% of the expected amount of GHG reduction” (ECA Report, p. 9). The report also concludes that the “Innovation Fund portfolio has delivered lower-than-anticipated results” (ECA Report, p. 9). 

This is largely due to serious implementation issues. Notably, the ECA report states that “one in five projects has failed” (ECA Report, p. 19) and that “postponed deadlines and delays in project implementation are common” (ECA Report, p. 21). More precisely, by 30 June 2025, 40 out of 228 initially selected projects had been cancelled, either before or after grant agreement (ECA Report, p. 20).  

Our perspective, from working with applicants across multiple calls, is that this gap reflects a structural tension in the programme: namely between promising concepts on paper and projects that can actually be delivered in the real world. The EUIF is not meant simply to support interesting ideas. It is rather meant to accelerate the deployment of novel technologies that reduce emissions and that can be put in practice in the real economy. 

That distinction is important. The truth is, Innovation Fund projects do not fail because they lack ambition. More often, it comes down to insufficient readiness across the full project chain: permitting, financing, procurement, governance and commercialization. 

This is where the ECA’s findings resonate strongly with our own experience. The most successful Innovation Fund projects are rarely just the most innovative on paper or the ones promising the highest GHG abatements. They are the projects that combine technological strength with a high level of project maturity, strategic positioning and operational credibility. 

Project maturity: the real bottleneck 

One of the clearest lessons, both from the report and from hands-on experience, is that project maturity is decisive. For one thing, the ECA report says that the over-representation of projects failing post-award is linked to projects being less mature than initially assessed, with difficulties ranging from permitting and financing to changes in supply chains and project scope. These challenges slow down the deployment of funded innovations and reduce the EUIF’s overall effectiveness. If a significant share of selected projects cannot progress, overall portfolio performance will inevitably fall short.  

At this point it is clear that, despite its focus on innovation, the EUIF ultimately rewards projects that are already well advanced:  

• Technical solutions must be proven beyond the conceptual stage  

• Financial structures must be credible and well developed 

• Permitting and implementation pathways must be realistic  

In practice, this creates a narrow window: projects must be innovative enough to qualify, but mature enough to deliver. This is where most applicants run into trouble. A project can look strong in theory and still fall short when tested against execution reality. That is why bankability, governance and commercialization matter so much. A compelling decarbonisation story is not enough on its own. The proposal has to show that the project can actually be built, financed and operated. 

This raises an important question about where, in the evaluation of project maturity, the Innovation Fund places the greatest stress on project proposers. 

Historically, financial maturity has been the sub-criterion where most proposals fail at evaluation stage. By contrast, operational and technical maturity appear to be a much less frequent point of failure: according to the EUIF24 results, only around 7% (operational) and 13% (technical) of proposals failed under these sub-criteria; in contrast with the 32% failure in financial maturity. 

Seen against the broader context of delays, postponements, and project terminations, this imbalance deserves closer attention. It may suggest that the evaluation is particularly strict where more support may actually be needed — namely in helping credible projects reach financial close — while being comparatively less demanding on the applicant’s demonstrated capacity to deliver the project once awarded. In other words, the key question is not only whether the project can be financed, but also whether it has already reached a convincing stage of technical maturity and if the applicant/consortium has the operational capacity, experience, track record, and implementation plan required to develop, build, and operate it within the proposed timeframe. 

This is especially relevant in light of the recently introduced incentive for SME-led projects through a dedicated bonus point. In principle, encouraging SME participation and coordination is sound and desirable. However, if this incentive is not matched by a sufficiently rigorous assessment of operational maturity, it may unintentionally favour projects with less implementation capacity or weaker delivery structures. 

Notably, when combined with the limited availability of funding before financial close, this could create a problematic combination: projects may be selected despite having insufficient operational capacity to overcome the practical barriers that typically lead to delays, postponements, or termination. 

At the same time, it is important to recognise that delays are not always the result of poor project design. They also reflect the reality of the sectors targeted by the Innovation Fund. Many supported projects are large-scale, capital-intensive, and located in emerging or rapidly changing markets, where permitting, supply chains, offtake arrangements, technology integration, and financing conditions can evolve significantly between application and implementation. This is particularly visible in areas such as hydrogen and fuel cells, where market conditions have shifted considerably in recent years. 

This does not weaken the case for stricter maturity assessment; rather it confirms that if delays and adjustments are to some extent inevitable in these sectors, then the ability of the applicant to manage complexity, absorb shocks, renegotiate project conditions, and keep implementation on track becomes decisive.

Impacts overestimated

A particular instance of the implementation gap highlighted in the ECA report concerns the overestimation of expected results. 

The report states that the Fund’s contribution to emissions reductions “falls far short of the Commission’s overall estimates” (ECA Report, p. 9). By December 2024, the 208 funded projects were expected to deliver 0.59 million tonnes of CO2 equivalent in reductions, but by June 2025 the portfolio had achieved only 5% of the expected amount. 

In our view, this gap reflects two closely connected realities. 

First, EUIF projects are first-of-a-kind industrial projects operating in highly uncertain and rapidly evolving markets. Delays in permitting, financing, supply chains, market uptake, technology integration or offtake conditions can significantly affect implementation timelines and operational ramp-up. In practice, much of the current shortfall appears linked to these implementation realities rather than to fundamental flaws in the technologies themselves. 

Second, the report also highlights limitations in the methodology used to estimate greenhouse gas avoidance. As the ECA notes, the GHG avoidance calculation may “lead to overoptimistic expectations” (ECA Report, p. 30). The methodology has evolved significantly across successive calls, becoming progressively more detailed and restrictive in response to concerns around overestimated impact assumptions. 

This is an important signal for future applicants. GHG avoidance has always been a decisive criterion in the Innovation Fund, but the increasing sophistication of the methodology confirms that applicants should expect much greater scrutiny of their assumptions, baselines and calculation approaches in future calls. 

The implication is not that ambitious GHG impacts should matter less. On the contrary, it reinforces the importance of combining ambitious climate targets with realistic delivery assumptions, credible implementation pathways and rigorous GHG modelling from the earliest stages of project development. 

Disbursement logic and the role of public funding 

For the very same reasons cited above, earlier and better-targeted financial support may play an important role in helping credible projects bridge the gap between award and financial close. In other words, the more volatile and uncertain the sectors and participants targeted by the Innovation Fund become, the more important it is to combine robust operational capacity with funding disbursements that can genuinely de-risk implementation at the right moment.  

This point deals with another key issue highlighted by the ECA report, namely the Fund’s disbursement model, currently strictly performance-based. 

Grants are released only once key milestones, such as financial close and entry into operation are achieved and after verification of actual greenhouse gas reductions. While this ensures accountability, it also limits flexibility in how funding is deployed. 

Combined with project delays and cancellations, this has resulted in very low disbursement rates: by mid-2025, only €331.8 million, representing around 2.9% of total awarded funding had been paid out. 

The question effectively raised here is a broader one about the role of public funding for large FOAK projects. If support is only unlocked at later stages, it may come too late to effectively de-risk projects and mobilise private investment. 

This invites reflection on whether complementary mechanisms, such as earlier-stage financial support, could help mitigate delays and improve overall delivery performance.  

A practical example from the current EUIF application template illustrates this point. The framework already allows for Work Package 1 (WP1) activities – activities carried out before financial close – to be flagged as eligible for funding. This means that a first WP could, in principle, cover preparatory activities up to the completion of the FEED study, with a dedicated milestone triggering an early payment. And only then, a second WP would cover the remaining activities until financial close. 

In our view, a simple and meaningful adjustment would be to ensure, and to make explicit in the call documentation, that well-justified early milestone payments before financial close are possible and not penalised in the evaluation. If properly designed, such flexibility would not weaken financial discipline; rather, it would strengthen the Fund’s capacity to de-risk projects and reduce potential delays. 

Selection versus strategy 

Another important finding from the ECA Report, which we also highlighted in previous reflections, is that the European Commission steered Innovation Fund resources “without a specific strategy or carried out a structured analysis” (ECA Report, p. 15) of the technological landscape and the emissions-reduction potential of different options. The auditors recommend allocation decisions to be guided by “a structured and forward-looking analysis of the technological landscape” (ECA Report, p. 7). This can mitigate the volatility inherent in the EU ETS contributions, which ultimately dictate both EUIF eligibility and available budgets. 

From our perspective, this is an important point. In a funding instrument expected to serve several objectives at once, including climate impact, industrial policy, innovation and competitiveness, strategic clarity becomes essential. Otherwise, funding decisions risk becoming fragmented or difficult and applicants are left navigating an uncertain landscape. 

Familiar pattern, now officially recognised

Looking back at our 2025 reflection piece, many of the challenges previously identified are now explicitly confirmed by the ECA report: 

• Continuous programme changes create uncertainty for applicants  

• Sector prioritisation can distort competition  

• Evaluation outcomes do not always align with implementation success  

• A significant share of effort, both from applicants and evaluators, is invested in projects that ultimately do not reach deployment. The ECA report approaches the EUIF from a different angle, but the point is clear. A programme characterised by the absence of strategic guidance; but more by shifting priorities; frequent changes, and increasingly complex criteria, will inevitably create pressure not only on applicants, but also on delivery. 

Likewise, where selection systems do not sufficiently distinguish between requirements of technological promise and ex ante maturity, the result is what the Court of Auditors now observes: slower progress, higher attrition and lower realised impact than expected.  

In a nutshell, this suggests that the next phase of the Innovation Fund, and future instruments such as the European Competitiveness Fund, will need to significantly sharpen the focus on strategy and execution logic. This is crucial not only to make sure that impact from EUIF projects will come at scale; but also that applicants – past and future – for the EUIF will stay interested in the programme. 

 

Contact us to learn more about the EUIF

 

EUIF is managed by the European Climate, Infrastructure, and Environment Executive Agency (CINEA) and funded through the EU Emissions Trading System (EU ETS).