(Science|Business) Climate research funding moves closer to the market, for better or worse

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EU research funding related to climate change is shifting towards the market, according to observers, with less money available for work on climate mechanisms, early-stage technologies and societal drivers. This trend is expected to increase in the next iteration of Horizon Europe, which will be closely coordinated with the new European Competitiveness Fund (ECF).

“EU policymakers nowadays frame climate policy through the lens of closing the innovation gap with the US and China,” said Virginie Robin, founder and chief executive of Euronovia, a consulting firm supporting EU projects relating to energy and climate. “Calls increasingly frame climate action as accelerating the deployment of clean technologies,” she told Science|Business.

While the late Horizon 2020 and early Horizon Europe programmes contained robust calls on topics such as sufficiency and demand reduction, social and institutional drivers of emissions and alternative economic models, the later Horizon Europe work programmes often display these topics as sub-parts of larger industrial and technological calls, Robin said.

“Socio-ecological research, e.g. understanding behaviours, institutions, governance, inequalities, is a precondition for successful technology uptake, political feasibility, and long-term climate stability,” she added. “Without research on the underlying drivers, tech solutions risk rebound effects, lock-ins, and insufficient adoption.”

Greg Arrowsmith, secretary general of the Association of European Renewable Energy Research Centers, has also observed “a shift of focus towards competitiveness” for sustainable and competitive energy supply calls under the energy and climate cluster of Horizon Europe. Since 2024, the budget granted to the related Innovation Actions, a type of collaborative project that backs near-market research, has grown continuously, while allocations to its Research and Innovation Actions, which explore the feasibility of new technologies, will drop all the way to zero in 2027.

“We don’t approve of a one-sided innovation policy that stakes everything on close-to-market research,” Arrowsmith said. Instead, Europe’s industry should be supported by more “speculative” work that could lead to higher future rewards.

Not everyone sees this trend as negative, of course. 

For Victor van Hoorn, director at industry group Cleantech for Europe, the shift in emphasis is “not an accident but by design,” since “addressing concerns around climate change and decarbonisation is inseparable from strengthening Europe’s competitiveness and energy security.”

“What we observe is greater alignment rather than a reduction,” said Camino Correia, director of consultancy group Zabala Innovation’s European Projects Business Unit. “Rather than shifting resources away from climate research, the EU is embedding climate action in areas that also strengthen Europe’s industrial resilience: energy systems, clean industrial processes, circular value chains, and advanced digital and manufacturing solutions,” she told Science|Business.

Just the beginning

This trend is set to deepen in the next few years. For the final two years of the current Horizon Europe programme, the European Commission will set up horizontal activities that directly support its Clean Industrial Deal policy. With a budget of €540 million, the two open topics will be: decarbonising energy-intensive industries and advancing clean technologies for climate action. 

Their focus on bringing more innovations to the market is clear: researchers applying for funds must present a business plan and a market-readiness strategy backed by the companies involved in their project.

Van Hoorn sees this as a positive development, “a realisation that the past model of publicly funding R&D and leaving the issue of commercialisation to the market no longer works in a world of unfair competition and geopolitical rivalry.”

Correia, meanwhile, finds that it strikes a balance that benefits both the research community and industry. While the new horizontal calls illustrate an alignment with industrial needs, “topics addressing the socio-economic and systemic enablers of climate action remain central, recognising that technological solutions alone are not enough.”

It also implies maintaining clarity of purpose across the various EU instruments, she said. The Framework Programme must continue to drive scientific excellence and breakthrough innovation, whereas the scaling and deployment of projects are better supported through the Innovation Fund, InvestEU and, when the times comes, the ECF, she added.

Competitiveness sets the agenda

Yet, the emphasis on competitiveness in EU innovation policy that has prompted the creation of the ECF is also likely to shape the next iteration of Horizon Europe, also referred to as Framework Programme (FP) 10. According to Robin, we can expect to see a move toward fewer, broader clusters or cross-cutting “missions,” funding technologies with higher technology readiness levels, where industrial competitiveness is seen as a selection criterion. “FP10 is extremely likely to deepen the shift toward tech-industrial climate action, not revert to earlier socio-ecological orientations,” she said.

Adriana Rodríguez Rivera, climate and public finance analyst at Climate Strategy and Partners, is more optimistic about the prospect of a more integrated funding toolbox for climate innovation. For example, linking early-stage Horizon Europe projects with the ECF’s financial instruments for later-stage projects could facilitate their access to private capital. 

But she also sees risks in blending funding for climate change and the clean transition under a single heading that is overly focused on industry. 

“This is where [. . .] socio-ecological research is key, with a focus on developing clean technologies and solutions that generate positive social and economic impacts locally,” she said. “Horizon Europe grants are the most valuable EU currency and should be kept to an ambitious level [. . .] to meet our 2040 and 2050 climate targets, while the ECF should mainly focus on de-risking these solutions via financial instruments.”