A month of climate diplomacy and policy action

In November 2022 a set of climate and innovation policy developments crossed Brussels desks and international venues. For innovators supported by the European Innovation Council these items matter because they change the regulatory and funding environment while also signalling what public and private actors consider priorities.

COP27 in context: a political step, not a technical fix

COP27 in Sharm El-Sheikh took place against a backdrop of compounding crises. Delegations pointed to rising extreme weather events, record atmospheric greenhouse gas concentrations and overlaps between food and energy security. The summit is best understood as a political forum for negotiating burden sharing and solidarity rather than a venue that produces immediate emissions cuts.

Private sector engagement was prominent in Sharm El-Sheikh. Companies and investors signalled greater interest in low carbon technologies and adaptation. Official statements referenced an adaptation market that could be worth as much as two trillion dollars per year by 2026. That figure is sizeable but should be treated cautiously because it depends on assumptions about what counts as adaptation spending and on future policy and capital mobilisation that have not been locked in.

Many national leaders reiterated support for limiting warming to 1.5 degrees Celsius. Reaffirmations matter politically but global emissions pathways are collectively determined by national policies, economic trends and technology deployment. Commitments at COP do not automatically translate into the deep near-term emissions cuts required for the 1.5 degree trajectory.

Corporate Sustainability Reporting Directive moves forward

The Council of the European Union gave final approval to the Corporate Sustainability Reporting Directive. The CSRD expands the amount and quality of sustainability information companies must publish. Its goal is to increase transparency, reduce inconsistent reporting practices and give investors and civil society better information on companies' environmental and social impacts.

The CSRD is meant to make sustainability information investible and comparable. That is an important objective but enforcement, auditing capacity and the evolution of delegated reporting standards will determine whether the directive delivers on its promise or primarily raises compliance costs for firms.

Horizon Europe funding for 2023 and what it means for innovation

On 14 November 2022 EU institutions reached agreement on the 2023 EU budget and on how Horizon Europe funding will be allocated within it. The package increased the 2023 budget modestly relative to 2022 and earmarked funds to priorities ranging from research to cohesion and external action.

The pattern of allocations shows continued prioritisation of frontier research via the ERC and of strategic, mission-oriented funding for areas such as climate, energy and digital transition. For EIC beneficiaries this means continued opportunities for grant, equity and acceleration support. At the same time competition for Horizon funding remains intense and applicants will need to show credible plans for deployment and market impact to secure resources.

Stricter EU rules for non-ETS greenhouse gas emissions

EU negotiators sealed a deal to set binding greenhouse gas emission reduction targets for sectors not covered by the EU Emissions Trading System. The legislative package is part of the Commission's wider Fit for 55 policy effort to reduce net EU emissions by at least 55 percent by 2030 and to reach climate neutrality by 2050.

Not everyone welcomed the deal. Climate Action Network Europe described the ambition as disappointing and warned that excessive reliance on flexibilities and loopholes could allow countries to avoid real decarbonisation in buildings, transport, agriculture and other sectors.

What these developments mean for innovators and EIC awardees

Taken together these developments create a more demanding policy and market environment. Stricter non-ETS targets push demand for decarbonisation technologies, energy efficiency, low carbon fuels and nature-based solutions. Meanwhile, mandatory sustainability reporting will increase demand for measurement, verification and assurance services. Horizon Europe funding and EIC instruments will remain important levers for technology development and scale-up.

Note on the GHG calculation tool. The EIC community pages indicate that the earlier EIC GHG Tool that allowed users to calculate footprints following the GHG Protocol and to simulate mitigation potential has been retired. The EIC has stated it will announce new activities. This matters for project teams that relied on the tool for reporting or internal planning and will need to identify alternative methods or software for greenhouse gas accounting.

Practical takeaways and cautions

1. Policy signals create markets but do not guarantee investment. COP27 outcomes and EU regulation increase clarity about future demand but implementing finance and regulation is what determines commercial opportunity. Innovators should combine policy-readiness with clear business cases.

2. Reporting requirements will generate new compliance and product opportunities. CSRD-driven demand for verified sustainability data is a business opportunity for vendors of measurement, reporting and verification services. However companies must budget for compliance costs and for changes to internal data systems.

3. Watch the detail on flexibilities. Banking, borrowing and trading of allocations provide short-term smoothing but can weaken incentives for immediate emissions reductions. NGOs have already signalled that the negotiated targets may fall short of what science requires for a 1.5 degree pathway.

4. Use EIC networks and funding but verify tools and services. EIC Business Acceleration Services remain a relevant entry point for market access, procurement and investor readiness. Beneficiaries should verify which EIC tools are active and seek alternative GHG accounting platforms where needed.

Further information and resources

EIC beneficiaries and applicants should monitor the EIC Community Platform and the EISMEA pages for updates on Business Acceleration Services, open calls and on the evolution of the EIC GHG programme. For policy detail consult the European Commission and Council press releases, the CSRD legislative text and the Fit for 55 legislative dossiers including the Effort Sharing Regulation changes.