EU Innovation Fund: Calculation of greenhouse gas savings

+++ Innovation Fund blog series (part 5) +++ Calculating greenhouse gas savings is a core topic of the Innovation Fund. This is because the EU programme is about promoting innovative projects with high greenhouse gas (GHG) savings potential. The projects supported by the Innovation Fund are intended to help the EU achieve its goal of climate neutrality by 2045. The calculated savings can also be referred to as the "CO₂ handprint", as the ecological handprint does not consider the negative GHG footprint of the project, but rather the positive impact of the CO₂ savings. The larger the handprint, the better.

In this blog article, you will learn how GHG savings are calculated and what to look out for when applying the Innovation Fund's specific calculation methodology, which is mandatory to follow.

How is the greenhouse gas saving calculated?

As the focus is on the savings potential, the project scenario (Proj) is always compared with a reference scenario (Ref). The first ten years after the start of production ("entry into operation") are assumed as the time frame. Measurement is in CO₂ equivalents (CO₂e). Two assessment indicators are calculated from the footprints of the two scenarios:

2. The second indicator used is the relative GHG saving (rel), which is calculated from the ratio between the absolute saving and the reference emissions.

The following example shows the motivation for using two indicators instead of just one. Two projects with an absolute saving of 100 t CO₂e can achieve significantly different relative savings depending on their reference emissions and project emissions. At the same time, two projects that both achieve a relative saving of 100 % can achieve different absolute savings:

The two evaluation indicators thus show the GHG savings potential from two perspectives: projects should achieve high absolute savings and at the same time have a high relative savings potential compared to the reference scenario.

To determine the GHG emissions in the reference scenario, the main product(s) should first be determined. These are all products that account for a large proportion of sales revenue. All other products count as by-products. The corresponding emission factors must then be applied to the main products in accordance with the calculation methodology. For energy-intensive industries (e.g. steel, aluminium, cement, chemicals), for example, these are the ETS Product Benchmarks.

Project emissions include all relevant input materials and energy as well as emissions from the project itself (e.g. from the combustion of fuels). In addition, the disposal of the main products, if they contain carbon from fossil sources, must also be taken into account. Details on the calculation methodology and corresponding emission factors are provided by the EU in a document.

Calculate GHG savings: What should you look out for? 

When calculating greenhouse gas savings, particular attention should be paid to certain points. In principle, the calculation methodology must always be followed and every decision, assumption or deviation from the methodology must be justified in detail and robustly. The most important step, where most errors can occur, is the identification of the main products, the sector and the reference scenario with the correct emission factors.

When planning the project, you should also make sure that all assumptions are realistic, because if the project is approved, there is a monitoring phase in which the achievement of the GHG savings is checked. If the actual savings achieved are less than 75% of the planned figure (e.g. because fewer products were sold than planned), the funding will not be paid out in full.

Finally, care must be taken not only to ensure that the calculation of the relevant costs and the GHG savings match, e.g. in the annual production volumes, but also that the figures in the entire application and across all annexes match.

What is scored in the Innovation Fund?

In addition to the absolute and relative GHG savings, the quality of the calculation is also assessed. The absolute GHG savings are also included in the calculation and scoring of cost efficiency (funding euro applied for per tonne of greenhouse gases saved). Certain threshold values must be observed here: Projects must achieve at least 50% relative savings (projects in the PILOTS call at least 75%) and 3 out of 5 points in calculation quality in order to be eligible for funding.

Do you need support with your application?

EurA has gained extensive experience with the EU Innovation Fund since the first call in 2020 and has achieved success for its clients. Are you also interested and would like to find out more? Then contact our EU team and we will be happy to help you!

🖊️Text: Levin Winzinger