by Ciaran Humphreys*
Translating innovation into world-leading industries is critical, and FP10, the EU’s next flagship R&D funding programme after Horizon Europe concludes, offers a chance to bridge this gap.
The Green Deal era saw Europe embrace ’Cleantech 2.0’, with record investments and new projects. Yet 2024 has brought a reckoning. Slowing demand in sectors like heat pumps and electric cars, Chinese industrial overcapacity, and attractive subsidies in the US and Canada have left European cleantech struggling to compete.
Closures, layoffs, and stalled projects - including the high-profile collapse of Swedish battery maker Northvolt - have shaken the sector. The EU’s Net Zero Industry Act and the upcoming Clean Industrial Deal aim to support cleantech manufacturing, but catching up isn’t enough.
To lead globally, the EU must focus on the next wave, including new battery chemistries and next-gen renewables - ’Cleantech 3.0.’
EU Innovation Competitiveness Is Falling Behind
The EU remains a leader in cleantech innovation, responsible for 30% of global green inventions between 2016 and 2021. However, patenting activity has slowed, and China’s R&D investment, which feeds into a state-of-the-art industrial ecosystem, threatens Europe’s position.
EU R&D intensity - spending as a percentage of GDP - was 2.25% in 2023, well below the 3% target and far behind the US (3.59%) and South Korea (4.85%). Only five Member States exceed the 3% threshold, and revised EU fiscal rules are forcing countries like France to cut public research budgets.
Horizon Europe, the EU’s flagship R&D funding programme, has a critical role to play. By leveraging the Single Market, it supports collaboration across borders, unlocking innovation at a scale which can compete with the world’s economic heavyweights to east and west.
However, Horizon is not without its flaws.
Applicants face low success rates, with only 16% of proposals funded, and cumbersome bureaucracy. Meanwhile, its €95.5 billion budget has been raided repeatedly to cover other priorities, such as interest payments on the EU’s Recovery Fund. T
he additions which have been successful, like the European Innovation Council (EIC) - which turns innovations into scalable businesses - are significantly underfunded.
Policymakers in Brussels now have an opportunity to change course. Debates on FP10 are already gathering momentum.
FP10 Can Drive the EU’s Green Industrial Policy
The new Commission is planning an Innovation Act to close the R&D gap, alongside a revamped FP10 funding package. However, the initial signs suggest a disconnect between the EU’s innovation agenda and its green industrial strategy under the Clean Industrial Deal.
Keeping these two areas separate would be a mistake. Innovation policy is a cornerstone of industrial strategy, and supporting next-generation cleantech is essential for securing the EU’s long-term competitiveness - and for developing the solutions needed to achieve net-zero.
As FP10 takes shape, policymakers should connect it explicitly to the Clean Industrial Deal. This requires the right governance to guide funding decisions, and to align R&D with other EU tools like the Innovation Fund.
The Heitor Report, on the future of EU R&D policy, proposed an independent European Technology and Industrial Competitiveness Council, staffed by researchers and business leaders - but leaving governance purely in the hands of the private sector would be a step too far.
Instead, FP10 should look to better use existing expert structures, such as the Commission’s SET Plan for cleantech, to guide decisions and identify the next generation technologies that can build the EU’s competitive advantage.
Industrial strategy needs a harmonised approach, and Member States need to be incorporated into the EU’s R&D plans for cleantech. The Commission has announced, following Draghi’s recommendation, a new Competitiveness Coordination Tool to be launched in the next mandate.
This could be a platform for joined-up R&D policy across the EU, and joined-up financing.
FP10 could combine with national budgets to co-finance promising projects, freeing Member States to support these next generation industries, even when constrained by the bloc’s fiscal rules.
Mario Draghi has warned of the “slow agony” of economic decline without bold action. Making FP10 part of a truly European green industrial strategy would be just that - and secure the bloc’s place in the technologies of the future.
*research fellow at the Institute of Climate Economics’ (I4CE)
**first published in: Euractiv.com
By: N. Peter Kramer
