Le Gouvernement du Grand-Duché du Luxembourg
Net-zero flagship programme

Understanding the Innovation Fund

The Innovation Fund is a significant initiative within the European Union that focuses on driving innovation and sustainability. It is one of the world’s largest funding programmes for the deployment of net-zero and innovative technologies.

The Innovation Fund is a key component of the EU's strategy to combat climate change and promote sustainable growth. It is a substantial financial instrument designed to support innovative projects that contribute to reducing greenhouse gas emissions and advancing Europe's transition to a low-carbon economy. Launched as part of the European Green Deal, the Innovation Fund plays a pivotal role in achieving the EU's climate objectives.

Innovation Fund objectives

The primary objectives of the Innovation Fund include: 

  • Carbon neutrality: The Innovation Fund aims to accelerate the transition towards carbon neutrality by funding projects that develop and deploy innovative technologies and processes capable of significantly reducing carbon emissions. 
  • Sustainable innovation: It supports projects that foster sustainable innovation across various sectors, including energy, industry, transportation, and agriculture, to promote environmental sustainability and resilience.
  • Job creation: By investing in green and sustainable technologies, the fund contributes to the creation of green jobs and economic growth while ensuring the long-term viability of industries.
  • International leadership: The Innovation Fund positions the EU as a global leader in clean and sustainable technologies by funding projects that can serve as models for other regions. 

Key programme components

The Innovation Fund comprises various components and funding streams:


  • Project financing: The fund provides financial support to innovative projects that aim to reduce greenhouse gas emissions, with a focus on breakthrough technologies and large-scale demonstrations.
  • Innovative technologies: It targets a wide range of innovative technologies, including renewable energy solutions, energy efficiency measures, carbon capture and storage, and sustainable transportation systems.
  • Cross-sectoral approach: The fund encourages cross-sectoral collaboration and the integration of innovative solutions across different industries.
  • Sustainable transition: It supports projects that facilitate the transition of energy-intensive industries towards more sustainable and environmentally friendly practices.


The Innovation Fund operates through different funding schemes. At the moment, it implements a competitive application process, where projects with the potential to make a significant impact on emissions reduction and sustainability are selected for funding. It involves collaboration between the EU, member states, industry stakeholders and research institutions. 

Currently, the Innovation Fund is revising the scale of the projects that will be financed through the competitive application scheme:

Small-scale projectsMedium-size projectsLarge-scale projects
Current IF RegulationsUp to €7.5 millionn/aAbove €7.5 million
Proposed changesUp to €20 millionAbove €20 million and up to €100 millionAbove €100 million

Following the revision of the ETS directive, the Innovation Fund is foreseeing the introduction of new financial instruments (“Competitive Bidding”): Fixed premium, Contracts for Difference (CfDs) or Carbon Contracts for Difference (CCfDs). The first initiative under these new financial instruments is an auction in the framework of the European Hydrogen Bank, targeting hydrogen production, which will have a call budget of €800 million.


The Innovation Fund is expected to have a profound impact on Europe's efforts to combat climate change and promote sustainable development. By investing in innovative and green technologies, it helps the EU achieve its ambitious climate targets and contributes to a more sustainable and resilient future. Additionally, it strengthens Europe's position as a global leader in sustainable innovation and clean technologies.

In summary, the Innovation Fund is a crucial financial instrument within the European Union's broader strategy to address climate change and advance sustainability. It plays a pivotal role in supporting innovative projects that have the potential to transform industries and reduce carbon emissions, thereby shaping a more sustainable and environmentally friendly future for Europe.

Contact us
Interested in applying for funding?

Luxinnovation is the National Contact Point for the Innovation Fund in Luxembourg. We can guide you in finding the right opportunities and partners, and on legal and financial issues associated with submitting your proposals.

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