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EU Fears Its Energy Plans May Fail and Invests Another €4.6 Billion
EU Innovation Fund launches new calls, hoping auctions to strengthen European Industry’s Green Transition
In the first week of its new mandate, the European Commission is intensifying its support for net-zero technologies and manufacturing capacity in Europe. With a total of €4.6 billion in fresh funding, the Commission aims to accelerate cutting-edge clean energy solutions, including electric vehicle battery cell production and renewable hydrogen. This major investment – delivered through the Innovation Fund and backed by EU Emissions Trading System revenues – could help bolster Europe’s industrial competitiveness, secure resilient supply chains, and meet the EU’s ambitious climate targets?
By Paolo Licandro
Brussels, 16 December 2024 - 6 MINUTES READ
Brussels, 16 December 2024 - 6 MINUTES READ
Europe is currently suffering from a severe loss of competitiveness in its automotive sector. Analysts point to a dramatic collapse in profits for European car manufacturers throughout 2024: industry giants like Audi and Volkswagen report a staggering 70% decrease in net earnings compared to the previous year. In addition, at least a dozen major factories have shut down across Germany, France, and Italy, and several ambitious industrial plans have simply evaporated.
This economic downturn represents the other side of the coin in the EU’s quest to position itself as a world leader in the clean energy transition—an ambition pursued without adequate financial resources, concrete plans, or the right investment strategies.
Meanwhile, consumers—who seem to have been overlooked—are increasingly hesitant. Millions of Europeans have stopped purchasing cars altogether. The root causes are manifold: perpetually shifting EU regulations offer no certainty that a newly bought vehicle will remain road-legal long enough to amortize its cost, while electric vehicle prices and fluctuating charging fees remain well beyond the reach of many households. This volatility has spurred a growing number of EU Member States to threaten blocking the Commission’s green ambitions, hinting at the possibility of entirely overhauling plans drawn up in Brussels.
Although millions of laid-off automotive workers are not yet protesting in the streets, governments and policymakers know such unrest could erupt at any moment, jeopardizing political stability. Many national governments are already bracing themselves for the fallout, fully aware that mass layoffs could destabilize not only the automotive sector but also their own political futures.
Against this backdrop, European Commission President Ursula von der Leyen is pressuring Teresa Ribera, the newly appointed Executive Vice-President for a Clean, Just and Competitive Transition, to deliver a gesture that might quell the growing dissent among governments, political leaders, and the workforce. Von der Leyen, who once supported former Commissioner Frans Timmermans’ vigorous efforts to dismantle the carbon-based development model in favor of electrification, is now facing fierce resistance from multiple fronts.
Just three days into her mandate, EU Commissioner Teresa Ribera is unveiling two new funding calls worth €3.4 billion to scale up next-generation net-zero technologies and electric vehicle (EV) battery cell manufacturing. Simultaneously, the Commission is launching a second auction from the European Hydrogen Bank, injecting an additional €1.2 billion—plus significant national co-financing—into the production of renewable hydrogen across the European Economic Area (EEA).
This push to fund hydrogen production is essentially a belated effort to compensate for how little has been done in this sector so far. It has provoked considerable irritation in Germany, which has long argued that the energy transition must not exclude the use of hydrogen, including for the production of zero-impact methane. Such methane could potentially preserve internal combustion engines for the future.
These three initiatives, financed by the EU’s Innovation Fund, embody the EU’s strategic focus on achieving climate neutrality, bolstering energy security, and ensuring industrial resilience. By reinforcing domestic supply chains and curbing overreliance on single suppliers, the Commission’s measures aim to protect European businesses and consumers. Yet the question remains: Can these moves restore confidence, stability, and competitiveness fast enough to avert economic hardship, political backlash, and social unrest in an industry that stands at a crossroads? Only time will tell.
But this is still a relatively modest figure: the seven largest Western automotive manufacturers collectively invest about €90 billion annually. Meanwhile, the global surge in EV production highlights Europe’s struggles, and current trends among major European companies indicate growing uncertainty about the future.
And this does not even include the investments made by Asian carmakers, which Europe attempts—so far unsuccessfully—to hinder with its new astronomical tariffs.
This economic downturn represents the other side of the coin in the EU’s quest to position itself as a world leader in the clean energy transition—an ambition pursued without adequate financial resources, concrete plans, or the right investment strategies.
Meanwhile, consumers—who seem to have been overlooked—are increasingly hesitant. Millions of Europeans have stopped purchasing cars altogether. The root causes are manifold: perpetually shifting EU regulations offer no certainty that a newly bought vehicle will remain road-legal long enough to amortize its cost, while electric vehicle prices and fluctuating charging fees remain well beyond the reach of many households. This volatility has spurred a growing number of EU Member States to threaten blocking the Commission’s green ambitions, hinting at the possibility of entirely overhauling plans drawn up in Brussels.
Although millions of laid-off automotive workers are not yet protesting in the streets, governments and policymakers know such unrest could erupt at any moment, jeopardizing political stability. Many national governments are already bracing themselves for the fallout, fully aware that mass layoffs could destabilize not only the automotive sector but also their own political futures.
Against this backdrop, European Commission President Ursula von der Leyen is pressuring Teresa Ribera, the newly appointed Executive Vice-President for a Clean, Just and Competitive Transition, to deliver a gesture that might quell the growing dissent among governments, political leaders, and the workforce. Von der Leyen, who once supported former Commissioner Frans Timmermans’ vigorous efforts to dismantle the carbon-based development model in favor of electrification, is now facing fierce resistance from multiple fronts.
Just three days into her mandate, EU Commissioner Teresa Ribera is unveiling two new funding calls worth €3.4 billion to scale up next-generation net-zero technologies and electric vehicle (EV) battery cell manufacturing. Simultaneously, the Commission is launching a second auction from the European Hydrogen Bank, injecting an additional €1.2 billion—plus significant national co-financing—into the production of renewable hydrogen across the European Economic Area (EEA).
This push to fund hydrogen production is essentially a belated effort to compensate for how little has been done in this sector so far. It has provoked considerable irritation in Germany, which has long argued that the energy transition must not exclude the use of hydrogen, including for the production of zero-impact methane. Such methane could potentially preserve internal combustion engines for the future.
These three initiatives, financed by the EU’s Innovation Fund, embody the EU’s strategic focus on achieving climate neutrality, bolstering energy security, and ensuring industrial resilience. By reinforcing domestic supply chains and curbing overreliance on single suppliers, the Commission’s measures aim to protect European businesses and consumers. Yet the question remains: Can these moves restore confidence, stability, and competitiveness fast enough to avert economic hardship, political backlash, and social unrest in an industry that stands at a crossroads? Only time will tell.
But this is still a relatively modest figure: the seven largest Western automotive manufacturers collectively invest about €90 billion annually. Meanwhile, the global surge in EV production highlights Europe’s struggles, and current trends among major European companies indicate growing uncertainty about the future.
And this does not even include the investments made by Asian carmakers, which Europe attempts—so far unsuccessfully—to hinder with its new astronomical tariffs.
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The New EU Funding: Overview and Objectives
The newly announced budget allocations total €4.6 billion and are spread across three major initiatives:
a) Accelerating Innovation and Resilience
All three calls are conceived to incorporate robust resilience criteria, ensuring that Europe’s supply chains remain secure and diverse. By incentivizing European production of crucial components and technologies, the Commission seeks to avoid overdependence on single suppliers and ensure stable, competitive pricing in the long term.
However, implementing this vision will require careful balancing of market forces, regulatory frameworks, and available funding. The success of this approach will depend on the EU’s ability to foster collaboration across Member States, facilitate technology sharing, and ensure that these resilience criteria do not stifle innovation or raise trade barriers that could slow overall progress.
b) Private-Public Synergy and Financing Solutions
The Commission, in partnership with the European Investment Bank (EIB), is setting up top-ups and loan guarantees under InvestEU. A €200 million guarantee from the Innovation Fund will stimulate investments along the battery manufacturing supply chain, supporting venture debt operations and complementing public grants.
Public-private financing and strategic investments can help mitigate divisions in Europe, but they are not a standalone solution. Europe’s internal divisions stem from a complex interplay of economic disparities, political differences, and varied industrial specializations among Member States. While well-designed public-private partnerships and funding mechanisms can generate tangible economic benefits—such as job creation, competitive industries, and technology leadership—they do not automatically resolve deeper structural issues.
Key challenges include:
In short, public-private investments and financing mechanisms are valuable tools for fostering innovation, resilience, and competitiveness. They can be part of a broader strategy to reduce economic disparities and encourage cooperation. However, to truly mitigate divisions within Europe, these financial initiatives must be accompanied by inclusive policymaking, transparent governance, social dialogue, and policies that ensure benefits are widely shared.
- Net-Zero Technologies Call (IF24 Call – €2.4 billion):
Supports projects that decarbonize industry and power generation and accelerate manufacturing of components for renewable energy, energy storage systems, heat pumps, and hydrogen production. It introduces the ‘Grants-as-a-Service’ option, enabling Member States to complement Innovation Fund support with their own national funding. This innovative synergy aims to streamline state aid approvals and boost investment uptake. Consult this Call. - Electric Vehicle Battery Cell Manufacturing Call (IF24 Battery – €1 billion):
For the first time, focuses on scaling up EV battery cell production and innovative manufacturing techniques across Europe. The measure is part of a broader strategy to strengthen Europe’s battery value chain, reduce economic and supply barriers, and advance the continent’s position as a global leader in clean mobility. Consult this Call. - Second Auction for Renewable Hydrogen (IF24 Auction – €1.2 billion):
Facilitated by the European Hydrogen Bank, this initiative supports the production of renewable hydrogen (RFNBO). The increased budget from €800 million to €1.2 billion reflects the Commission’s commitment to making renewable hydrogen a cornerstone of Europe’s decarbonized future energy mix. The ‘Auctions-as-a-Service’ mechanism allows Member States to add their own funds to support projects that are promising yet not selected under the EU allocation, optimizing the use of public resources and reducing administrative burdens. Consult this Call.
a) Accelerating Innovation and Resilience
All three calls are conceived to incorporate robust resilience criteria, ensuring that Europe’s supply chains remain secure and diverse. By incentivizing European production of crucial components and technologies, the Commission seeks to avoid overdependence on single suppliers and ensure stable, competitive pricing in the long term.
However, implementing this vision will require careful balancing of market forces, regulatory frameworks, and available funding. The success of this approach will depend on the EU’s ability to foster collaboration across Member States, facilitate technology sharing, and ensure that these resilience criteria do not stifle innovation or raise trade barriers that could slow overall progress.
b) Private-Public Synergy and Financing Solutions
The Commission, in partnership with the European Investment Bank (EIB), is setting up top-ups and loan guarantees under InvestEU. A €200 million guarantee from the Innovation Fund will stimulate investments along the battery manufacturing supply chain, supporting venture debt operations and complementing public grants.
Public-private financing and strategic investments can help mitigate divisions in Europe, but they are not a standalone solution. Europe’s internal divisions stem from a complex interplay of economic disparities, political differences, and varied industrial specializations among Member States. While well-designed public-private partnerships and funding mechanisms can generate tangible economic benefits—such as job creation, competitive industries, and technology leadership—they do not automatically resolve deeper structural issues.
Key challenges include:
- Unequal Economic Development: Some regions may benefit more than others due to existing industry clusters, skilled labor pools, or favorable policy environments. Without careful calibration, investments risk reinforcing existing inequalities rather than bridging them.
- Differing National Interests: Not all Member States share the same priorities. For example, a country heavily reliant on legacy industries may view rapid green transitions as economically disruptive, while others see them as necessary and beneficial. Financing tools alone cannot reconcile these divergent interests.
- Varying Regulatory and Political Landscapes: The success of public-private initiatives often depends on stable policy conditions. Political turnover, regulatory uncertainties, or contentious domestic debates can hinder the consistent support needed for long-term projects.
- Public Perception and Social Cohesion: Economic investments need to be paired with social policies and clear communication. Without addressing public concerns—such as the fear of job losses in traditional sectors—large-scale projects risk fueling resentment rather than promoting unity.
In short, public-private investments and financing mechanisms are valuable tools for fostering innovation, resilience, and competitiveness. They can be part of a broader strategy to reduce economic disparities and encourage cooperation. However, to truly mitigate divisions within Europe, these financial initiatives must be accompanied by inclusive policymaking, transparent governance, social dialogue, and policies that ensure benefits are widely shared.
Application Timelines and Support
How the Innovation Fund is financed
The Innovation Fund, financed by the EU ETS, anticipates revenues of €40 billion by 2030. It has already committed over €12 billion to more than 200 innovative projects, driving Europe’s transition to climate neutrality.
From previous calls, €7.2 billion in grants supported 120 projects, ensuring continuous momentum in clean technology innovation. The first hydrogen auction also disbursed nearly €700 million for RFNBO projects, showing that Europe’s push toward renewables and low-carbon solutions is both ambitious and sustained.
- Net-Zero Technologies & Battery Calls:
Application Deadline: 24 April 2025, 17:00 (CET)
Info Day: 17–18 December 2024 (online)
- Renewable Hydrogen Auction:
Application Deadline: 20 February 2025
Successful bidders will finalize grant agreements within nine months of the call closure.
How the Innovation Fund is financed
The Innovation Fund, financed by the EU ETS, anticipates revenues of €40 billion by 2030. It has already committed over €12 billion to more than 200 innovative projects, driving Europe’s transition to climate neutrality.
From previous calls, €7.2 billion in grants supported 120 projects, ensuring continuous momentum in clean technology innovation. The first hydrogen auction also disbursed nearly €700 million for RFNBO projects, showing that Europe’s push toward renewables and low-carbon solutions is both ambitious and sustained.
Conclusion
We do not know whether this small breath of fresh air will help keep the European automotive sector from tumbling into the abyss.
The crucial point is to stop it from falling, because if it does, it could drag down some of the most important governments in Europe. If that were to happen, the continent’s plans for an energy transition—designed to reduce global warming—would also be swept away.
What could prevent such a potential disaster? Perhaps a genuine, long-term vision that not only invests in the necessary next-generation technologies and robust supply chains, but also fosters close collaboration among governments, industries, and environmental advocates. By ensuring balanced regulations, financial support for sustainable innovations, and incentives for responsible production and consumption, Europe might still steer its automotive sector—and indeed the broader economy—toward a future that is both economically resilient and environmentally sound.
We do not know whether this small breath of fresh air will help keep the European automotive sector from tumbling into the abyss.
The crucial point is to stop it from falling, because if it does, it could drag down some of the most important governments in Europe. If that were to happen, the continent’s plans for an energy transition—designed to reduce global warming—would also be swept away.
What could prevent such a potential disaster? Perhaps a genuine, long-term vision that not only invests in the necessary next-generation technologies and robust supply chains, but also fosters close collaboration among governments, industries, and environmental advocates. By ensuring balanced regulations, financial support for sustainable innovations, and incentives for responsible production and consumption, Europe might still steer its automotive sector—and indeed the broader economy—toward a future that is both economically resilient and environmentally sound.
