Commission Delegated Regulation (EU) 2019/856 of 26 February 2019 supplementing Directive 2003/87/EC of the European Parliament and of the Council with regard to the operation of the Innovation Fund (Text with EEA relevance.)

CHAPTER I

General provisions

Article 1

Subject matter

This Regulation lays down detailed rules supplementing Directive 2003/87/EC as regards:

(a) the operational objectives of the Innovation Fund established by Article 10a(8) of Directive 2003/87/EC;

(b) the forms of support provided under the Innovation Fund;

(c) the application procedure for the Innovation Fund support;

(d) the procedure and criteria for project selection under the Innovation Fund;

(e) disbursement of the Innovation Fund support;

(f) the governance of the Innovation Fund;

(g) reporting, monitoring, evaluation, control, and publicity concerning the operation of the Innovation Fund.

Article 2

Definitions

For the purposes of this Regulation the following definitions apply:

(1) ‘financial close’ means the moment in the project development cycle where all the project and financing agreements have been signed and all the required conditions contained in them have been met;

(2) ‘entry into operation’ means the moment in the project development cycle where all elements and systems required for operation of the project have been tested and activities resulting in effective avoidance of greenhouse gas emissions have commenced;

(3) ‘small-scale project’ means a project with a total capital expenditure not exceeding EUR 20 000 000 ;

(4) ‘medium-scale project’ means a project with a total capital expenditure above EUR 20 000 000 and not exceeding EUR 100 000 000 ;

(5) ‘decision launching a call for proposals’ means a financing decision by which the Commission enables the financing of a call for proposals in accordance with Article 110 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (¹) (‘the Financial Regulation’);

(6) ‘competitive bidding procedure’ means a procedure whereby producers of low or zero carbon products that have applied for Innovation Fund support are selected on the basis of the most competitive bid, in accordance with Article 13d of this Regulation;

(7) ‘qualification requirement’ means a condition that shall be fulfilled by a bidder in a competitive bidding procedure in order for its bid to be ranked;

(8) ‘ranking criterion’ means the criterion used in competitive bidding procedures to rank proposals that meet the qualification requirements. The ranking criterion is always the bid price, put in direct relation to the product or objective forming the subject of the competitive bidding procedure, but may exceptionally be supplemented by other ranking criteria;

(9) ‘competitive bidding procedure design’ means the description of the main economic parameters of a competitive bidding procedure that directly influence the incentive structure and bidding behaviour of project proponents;

(10) ‘clearing price’ means the price of the marginal bid that fulfils the applicable qualification requirements in a competitive bidding procedure.

Article 3

Operational objectives

The Innovation Fund shall have the following operational objectives:

(a) to support projects demonstrating highly innovative technologies, processes or products, that are sufficiently mature and have a significant potential to reduce greenhouse gas emissions;

(aa) to support projects that are sufficiently mature, have a significant potential to reduce greenhouse gas emissions and are aimed at scaling up innovative technologies, processes or products to achieve their broad commercial roll-out across the EU;

(b) to offer financial support tailored to market needs and risk profiles of eligible projects, while attracting additional public and private resources;

(c) to ensure that the revenues of the Innovation Fund are managed in accordance with the objectives of Directive 2003/87/EC.

Article 4

Forms of the Innovation Fund support

The Innovation Fund support may take the following forms:

(a) grants;

(b) contributions to blending operations under the Union investment support instrument;

(c) where necessary to achieve the objectives of Directive 2003/87/EC, funding in any of the other form laid down in the Financial Regulation, in particular prizes and procurement.

CHAPTER II

Specific provisions applicable to grants that are not awarded on the basis of Chapters IIa, IIb or IIc

Article 5

Relevant costs

For the purposes of the fifth sentence of the sixteenth subparagraph of Article 10a(8) of Directive 2003/87/EC, the relevant costs shall be the net extra costs that are borne by the project proponent as a result of the application of the innovative technology related to the reduction or avoidance of the greenhouse gas emissions.

The net extra costs shall be calculated as the difference between (i) the best estimate of economic costs (covering investment and operation) and economic revenues and operational benefits, and (ii) the best estimate of the economic costs and revenues and operational benefits of a project using a conventional technology with the same capacity in terms of effective production of the analogous final product.

The Commission may also decide that the relevant costs shall be the net extra costs, calculated as the difference between the best estimate of (i) the economic costs (covering investment and operation) and (ii) the economic revenues and operational benefits.

Article 6

Disbursement of grants

For all projects, the milestones referred to in paragraph 1 shall be based on the project development cycle and shall be at least the following:

(a) financial close;

(b) entry into operation.

Article 7

General recovery rules

Article 8

Special recovery rules

Article 9

Calls for proposals

The Commission decision launching the calls for proposals shall include at least the following:

(a) the overall amount of the Innovation Fund support available for the call;

(c) the types of solicited projects or sectors;

(d) a description of the application procedure, specifying whether a one-stage or two-stage procedure applies, and specifying the information and documentation to be submitted with the application;

(e) detailed information on the selection procedure, including the methodology for evaluation and ranking;

(f) where small-scale projects are subject to a simplified application procedure in accordance with Article 10(4) and to a specific selection procedure in accordance with Article 12b, the rules on those specific procedures;

(g) if the Commission is reserving a part of the total amount of the Innovation Fund support available for the call to small-scale or medium-scale projects, the amount of that part;

(h) whether additional award criteria are applied in accordance with Articles 11(2) and 11(3).

Article 10

Application procedure

If the two-stage application procedure is being used, it shall consist of the following consecutive stages:

(a) the expression of interest stage;

(b) the full application stage. During the expression of interest stage, the project proponent shall submit a description of the key project characteristics in line with the requirements laid down in the relevant call for proposals. This description shall include a description of the project’s effectiveness, degree of innovation, and maturity as specified in Article 11(1), points (a), (b) and (c). During the full application stage, the project proponent shall submit a detailed description of the project and all supporting documentation, including the knowledge-sharing, communication and dissemination plans.

Article 11

Award criteria

Grants shall be awarded on the basis of the following criteria:

(a) effectiveness of the proposed projects in terms of their greenhouse gas emission avoidance potential and in terms of reducing overall climate impact using, where applicable, the benchmarks referred to in Article 10a(2) of Directive 2003/87/EC;

(b) the degree of innovation of the proposed projects compared with the state of the art;

(c) project maturity in terms of planning, the business model, the financial and legal structure as well as the prospect of reaching the financial close within a pre-defined period of time not exceeding four years after the award decision;

(d) technical and market potential of the proposed projects for widespread application or replication, or for future cost reductions, and in terms of the proposed projects’ potential to address multiple environmental impacts and its contribution to the EU’s zero pollution and circularity objectives;

(e) efficiency in terms of the requested Innovation Fund grant amount plus any other public support that is part of the project’s financial model, divided by the total projected amount of greenhouse gas emissions to be avoided in the first 10 years of operation.

Article 12

Selection procedure for the two-stage application procedure

The list of pre-selected projects referred to in paragraph 3 shall be communicated to the Commission and shall include at least the following:

(a) a confirmation of compliance with the eligibility and award criteria;

(b) details on project evaluation and ranking;

(c) total project costs and relevant costs referred to in Article 5 in euro;

(d) the amount of the requested grant in euro;

(e) the projected amount of greenhouse gas emissions to be avoided.

Article 12a

Selection procedure for the one-stage application procedure

The list of pre-selected projects referred to in paragraph 2 shall be communicated to the Commission and shall include at least the following:

(a) a confirmation of compliance with the eligibility and award criteria;

(b) details on project evaluation and ranking;

(c) total project costs and relevant costs referred to in Article 5 in euro;

(d) the amount of requested grant in euro;

(e) the projected amount of greenhouse gas emissions to be avoided.

Article 12b

Selection procedure for small-scale projects

By derogation from Articles 12 and 12a, a specific selection procedure may be applied to small-scale projects.

CHAPTER IIa

Project development assistance

Article 13

Project development assistance

The following activities may be funded by way of project development assistance:

(a) improvement and development of project documentation or of components of the project design with a view to ensuring the sufficient maturity of the project;

(b) assessment of the feasibility of the project, including technical and economic studies;

(c) advice on the financial and legal structure of the project;

(d) capacity building of the project proponent.

CHAPTER IIb

Specific provisions applicable to competitive bidding procedures

Article 13a

Competitive bidding procedure design and principles

Article 13b

Calls for proposals

The Commission decision launching the calls for proposals shall clearly set out the following:

(a) the policy objectives pursued by the call;

(b) the precise definition and requirements of the low or zero carbon product for which support may be granted;

(c) the budget provided by the Innovation Fund;

(d) whether a maximum bid price or volume per bid will apply;

(e) whether restrictions to cumulation or combination of the support awarded on the basis of a competitive bidding procedure with EU or national support measures will apply;

(f) whether criteria other than the bid price will apply in order to rank the proposals;

(g) the maximum duration of the support awarded on the basis of the competitive bidding procedure;

(h) a description of the application and selection procedures.

Article 13c

Qualification requirements

Article 13d

Ranking procedure

The implementing body shall draw up the list of pre-selected proposals and communicate it to the Commission. The list shall contain:

(a) a confirmation of compliance with the qualification requirements;

(b) details on the ranking;

(c) the amount of support requested;

(d) the projected volume of the auctioned product.

Article 13e

Cumulation

Article 13f

Deposits

CHAPTER IIc

Specific provisions applicable to technical assistance provided to Member States with a low level of effective participation

Article 13g

Technical assistance provided to Member States with a low level of effective participation

CHAPTER III

Specific provisions applicable to other forms of Innovation Fund support

Article 14

Provision of Innovation Fund support through contributions to blending operations under the Union investment support instrument

Article 15

Provisions of the Innovation Fund support in any other form laid down in the Financial Regulation

CHAPTER IV

Governance

Article 16

Implementation of the Innovation Fund

Article 17

Designation of implementing bodies

The Commission and the designated implementing body shall enter into an agreement laying down the specific terms and conditions under which the implementing body is to perform its tasks.

Article 18

Tasks of the implementing body

The implementing body designated in accordance with Article 17(1) of this Regulation to implement the Innovation Fund in accordance with Article 17(2) may be entrusted with the overall management of the calls for proposals, the disbursement of the Innovation Fund support and the monitoring of the implementation of selected projects. For that purpose, the implementing body may be entrusted with the following tasks:

(a) organising the call for proposals;

(b) organising the application procedure, including collecting the applications and analysing all the supporting documents;

(c) organising the selection procedure, including the proposals’ evaluation and ranking;

(d) advising the Commission on the projects to be awarded the Innovation Fund support and on projects to be included in the reserve list;

(e) awarding or providing project development assistance;

(f) signature of the grant agreements and other contracts depending on the form of Innovation Fund support;

(g) preparing and managing the contractual documentation concerning the awarded projects;

(h) checking if the conditions for the financing are met and disbursing the Innovation Fund revenues to the project proponents;

(i) monitoring of the project implementation;

(j) communicating with the project proponents;

(k) reporting to the Commission, including on general orientation for the further development of the Innovation Fund;

(l) financial reporting;

(m) information, communication and promotion actions, including the production of the promotion materials;

(n) management of knowledge sharing;

(o) supporting the Member States in their efforts to promote the Innovation Fund and to communicate with the project proponents;

(oa) fostering synergies between the Innovation Fund and other EU funding programmes (including Horizon Europe);

(p) any other tasks relating to the implementation of the Innovation Fund

Following the closure of each call for proposals organised pursuant to Articles 9 and 10, the implementing body shall share information with the Member States on the applicants, their projects, their contact details, the requested grant amount, the greenhouse gas emission avoidance potential and envisaged dates of financial close and entry into operation.

Following the closure of each call for proposals organised pursuant to Article 13b, the implementing body shall share with the Member States information on the project proponents, their projects, their contact details, the amount of Innovation Fund support requested and, where relevant, envisaged dates of financial close and entry into operation.

The sharing of information referred to in second and third paragraphs is subject to the project proponents’ consent and EU legislation.

Article 19

Specific provisions applicable to the implementation of the Innovation Fund in direct management

Article 20

Management of the Innovation Fund revenues

Article 21

Role of the Member States

The Member States shall be consulted on:

(a) the list of the pre-selected proposals, including the reserve list, established in accordance with Articles 12, 12a and 13d;

(b) draft Commission decisions referred to in Articles 9(1), 13b, 14(2) and 15(1);

(c) the maximum amount of the Innovation Fund support to be made available for the project development assistance in accordance with Article 13;

(d) the maximum amount of the Innovation Fund support to be made available for technical assistance and the list of Member States with a low level of effective participation, in accordance with Article 13g.

The Member States shall, if requested by the Commission, advise and assist the Commission in:

(a) setting general orientations for the Innovation Fund;

(b) addressing existing or emerging project implementation problems;

(c) dealing with any other issue relating to the project implementation.

Article 22

Role of the stakeholders

The Commission may involve stakeholders in the discussions relating to the implementation of the Innovation Fund, including on the issues listed in Article 21(3).

CHAPTER V

Monitoring reporting, and evaluation

Article 23

Monitoring and reporting

Implementing bodies, other than executive agencies, and entities to which the management of the Innovation Fund revenues has been delegated pursuant Article 20(3) shall provide the Commission with the following:

(a) by 15 February, unaudited financial statements covering the preceding financial year, which shall run from 1 January to 31 December, in respect of the activities delegated to those implementing bodies and entities;

(b) by 15 March of the year of the transmission of the unaudited financial statements, the audited financial statements covering the preceding financial year, which shall run from 1 January to 31 December, in respect of the activities delegated to those implementing bodies and entities.

The Commission shall prepare annual accounts of the Innovation Fund for each financial year, which shall run from 1 January to 31 December on the basis of the financial statements provided pursuant to the first subparagraph. Those accounts shall be subject to an independent external audit.

Any financial statements and accounts provided for in this paragraph shall be drawn up in compliance with the accounting rules referred to in Article 80 of the Financial Regulation.

Article 24

Evaluation

CHAPTER VI