Executive Agency for Small & Medium Enterprises (EASME) Analysis of the results achieved by CIP Ecoinnovation market replication projects (EACI/ECO/2013/001) Executive Summary 29 th February 2016
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Analysis of results achieved by CIP Ecoinnovation market replication projects (EACI/ECO/2013/001) Executive Summary A report submitted by ICF in association with VITO Máté Péter Vincze ICF Consulting Services Limited 146 Rue Royale B-1000 Brussels T +32 (0) 2 275 01 00 F +32 (0) 2 275 01 09 mate.vincze@icfi.com www.icfi.com i
Document Control Document Title Analysis of the results achieved by CIP Eco-innovation market replication projects (EACI/ECO/2013/001) Job number 30300021 Prepared by Checked by Executive Summary Máté Péter Vincze, Jonathan Lonsdale (ICF), Dirk Nelen (VITO) James Medhurst (ICF) Date 29 th February 2016 This report is the copyright of the European Commission and has been prepared by ICF Consulting Services Ltd under contract to the European Commission. The contents of this report may not be reproduced in whole or in part, nor passed to any other organisation or person without the specific prior written permission of the European Commission. ICF has used reasonable skill and care in checking the accuracy and completeness of information supplied by the client or third parties in the course of this project under which the report was produced. ICF is however unable to warrant either the accuracy or completeness of such information supplied by the client or third parties, nor that it is fit for any purpose. ICF does not accept responsibility for any legal, commercial or other consequences that may arise directly or indirectly as a result of the use by ICF of inaccurate or incomplete information supplied by the client or third parties in the course of this project or its inclusion in this project or its inclusion in this report. ii
Contents The CIP eco-innovation initiative... 1 Environmental benefits... 2 Economic benefits... 3 Benefits to SMEs... 4 iii
The CIP eco-innovation initiative The CIP eco-innovation initiative was a pioneer grant programme of the European Commission, supporting private-sector beneficiaries in the commercialisation of their late-stage innovation projects that promised significant environmental benefits combined with economic viability. The aim was to bridge the gap between successful demonstration of innovative technologies and their effective broad market uptake, with an emphasis on targeting SMEs from the EU27 and other countries participating in the programme. 1 The funding thus contributes not only to protecting the environment but also to strengthening the competitiveness of European SMEs and the European economy in general. The initiative was part of the EU s Competitiveness and Innovation Programme (CIP), with annual calls for proposals published from 2008 through 2013. It was managed by the Executive Agency for Small and Medium-sized Enterprises (EASME). The initiative targeted projects along five priorities: Recycling: containing projects aimed at developing enhanced sorting processes and methods for waste materials; facilitating the recycling of material; and innovative products using recycled material. Buildings and Construction: aimed at the rational use of natural resources, the reuse and recycling of construction and demolition waste; focussing in later calls on the use of environmentally friendly construction products and processes. Food and Drink: reducing environmental impact throughout the food and drink consumption cycle from labelling through to purchasing, mostly through the introduction of more resourceefficient production processes and packaging methods. Greening Business (including a distinct Clean Production sub-priority): the largest priority in terms of number of projects, covering a range of possible innovation topics with a systems Figure 3.4 Breakdown of projects selected by priority area (calls 2008-2011) Source: EASME monitoring database approach, ranging from sector level such as the promotion of innovative approaches to the EU Eco-Management and Audit Scheme (EMAS) scheme - to the level of individual organisations, such as the introduction of re-manufacturing mechanisms and repairing services. Water: targeting projects which reduce water consumption in production by at least 30%, especially emphasising water-free processes; as well as wastewater treatment projects. The study examined the main benefits from projects funded under the first four annual calls, launched between 2008 and 2011. A grant agreement was concluded with a total of 185 projects under these calls 2, and the amount of EU funding provided reached nearly 130 million. The overwhelming majority of these projects were closed as planned (or were still ongoing at the time of the analysis), delivering all the outputs required: only 23 projects were terminated early as of September 2015. 1 Iceland, Liechtenstein and Norway; Albania, Croatia (which became member of the EU in 2013), the Former Yugoslav Republic of Macedonia, Israel, Montenegro, Serbia and Turkey. 2 The agreement was not concluded with 4 projects initially selected for funding. 1
The projects were typically transnational cooperation projects, with around 70% of the projects involving partners from more than one country. The funding was disbursed among 663 participants. Few of them took part in more than one project. Participants came from all EU member states save for Latvia and Slovakia, and from 6 of the 10 non-member participating countries. 3 The highest share of EU funding went to organisations from Spain, Italy, Germany, Netherlands, the UK, and France. Relating the total amount of funding to the overall significance of innovative enterprises in the given countries however, a number of smaller countries - Slovenia, Estonia, Denmark, Croatia and Greece appear to be the most represented. Although most consortia were led by private companies (mostly SMEs), academic and research institutes as well as industry associations and chambers of commerce also played a significant role. Source: EASME monitoring database The findings of the study confirm that the initiative enabled the accumulation of significant environmental benefits as well as the successful generation of economic value and the creation or safeguarding of jobs in Europe. These benefits exceeded the EU resources spent on supporting the projects by a wide margin. Although the eco-innovation initiative is now closed, the lessons learnt from the initiative inform EU action under the LIFE+ programme in the period 2014-2020. Environmental benefits The main goal of the eco-innovation initiative was to achieve environmental benefits through the creation and marketing of new, commercially viable products, processes and services. The benefits were estimated using a full life cycle approach and concern the savings of resources and/or emissions, broken down to eight indicators. Considerable annual savings were already present at the closure of the innovation projects, but these are expected to further expand for the successfully continued business initiatives by a multiple two years after. Table 1.1 Figure 3.5 Breakdown of EU funding allocated to beneficiaries ( m), by country (calls 2008-2011) Estimated annual environmental savings from the project portfolio 2008-2011 Environmental indicator Year of project closure Two years after project closure Greenhouse gas emission reductions (Ton CO2 eq.) 527,634 5,104,009 Water savings (m³) 5,691,413 198,384,331 Energy savings (Ton oil eq.) 214,417 2,175,683 Waste savings: Hazardous waste (Ton) 24,705 29,503 Waste savings: Non-hazardous waste (Ton) 252,856 1,155,735 Waste savings: Radioactive waste (Ton) (nuclear energy) 14 155 Renewable materials savings (Ton) 59,597 176,558 Non-renewable materials savings (Ton) 198,027 2,222,096 The above annual environmental savings measured two years after project closure would correspond to: 3 Albania, Croatia, Israel, Montenegro, Norway, and Turkey 2
Greenhouse gas emission reductions: the average annual emission of 1.8 million cars, i.e. all passenger cars registered in Ireland Water savings: the 2012 use of water in the domestic sector of 2.8 million Spanish inhabitants Energy savings: the final annual energy use of the total Danish industry Hazardous waste savings: the annual hazardous waste production of 150,000 Europeans Non-hazardous waste savings: the volume of annually landfilled municipal waste in Slovakia Radioactive waste savings (from nuclear energy generation): the monthly production of radioactive heavy metals from nuclear power plants in Europe Raw materials savings: filling 111,000 standard shipping containers, more than what six of the world s largest container ships can carry Overall, for the full portfolio of 189 selected projects, the estimated monetised environmental savings reach an annual 1.2 billion two years after the projects closure. This value is calculated in terms of damage and avoidance costs: the money that would be needed to avoid or repair the effects of damages to our environment. In conclusion, the supported project portfolio offers, whilst producing the same or greater consumer value than the old solutions they replace, a very substantial environmental benefit, generating already in a single year environmental savings which exceed the EU funding by a multiple. Economic benefits The CIP eco-innovation initiative supports the commercialisation of market-ready innovation projects that can be quickly turned into successful businesses, generating new income from existing or new markets. Most participants intended to use the outcomes of the innovation in-house, serving their existing markets and client base. Further to that, a considerable number of innovators planned to sell the new solution to other market actors. The participants put considerable funds into the project. The 115 million EU funding provided to the 185 successfully closed or still ongoing projects was complemented with 117 match funding (the requirement was generally half of total eligible project costs). But this was just one part of the actual investment of the participants in their innovation project. Many of the companies working on exploiting their innovation made additional investments outside the project budget an estimated 320 million. Consequently, match funding and additional investment together added up to 437 million own resources. Each euro of EU funds have thus leveraged almost 4 euros of private investment. The total portfolio of 185 eco-innovation projects is expected to generate a considerable volume of market revenues. The annual revenue generated has reached or is estimated to reach over 500 million in the second year after the closure of the projects, corresponding to a grand average of 2.7 million for each of the 185 projects - including a number of projects which did not plan to generate revenues but rather to save costs internally. The following modifying effects were also considered: some of the innovation actions would have taken place even in the absence of EU funding new revenues will displace revenues of competitor products along the supply chain there will be possibly increased sales in complementary products a cascading effect of the new business activity to the overall economy can be expected. Allowing for these modifying effects, the net revenue effect of the initiative is estimated to be at around 600 million per year, measured at the second year after projects closure. If the projected business revenues materialise as planned by the second year of projects closure and stay constant afterwards for another three years, each 1 of CIP grant funding will have generated 21.5 in additional business revenue in the European economy over this period. 3
The contribution of individual projects to the Figure 1.2 GVA as a share (%) of sales European economy (their gross value added GVA, i.e. revenue generation net of the value of supplies procured elsewhere) is expected to amount to about 220 million in the second year following the individual projects closure, or 261 million when the modifying effects listed above are counted in. If companies can maintain this level gross value added for another three years, 1 euro of EU funding will have made a contribution of 11 euros to the European economy. Apart from being a source for growth and profits, the eco-innovation projects supported by the initiative also generate employment. The new business activities funded are estimated to generate around 1,500 additional full-time equivalent (FTE) jobs at the participants by the second year after project closure and more than 1,700 when the full supply chain and deadweight effects are Source: ICF estimation considered. This corresponds to an average of 9 full time equivalent jobs generated per project (the oneoff cost to the EU for one job created would be 67,000). This is complemented by an estimated 4 fulltime equivalent jobs safeguarded. Benefits to SMEs The CIP eco-innovation initiative has been conceived with a particular emphasis on the needs and potential of innovative European SMEs. Access to the CIP grant was considered especially important for these companies, given that the smaller the company, the more difficult it usually is to secure external financing for innovation. Although application to the grant scheme was never restricted exclusively to SMEs, smaller enterprises were prioritised, and the project portfolio was indeed dominated by them. The proportion of SME participants among the 663 beneficiaries in the four years analysed was 68%. SME participation was strong in certain EU member states that have an economy relying heavily on SMEs, such as Austria or Greece, and in all Nordic countries. 4
Figure 1.3 Proportion of SME and non-sme beneficiaries across participating countries Source: ICF based on EASME monitoring data SMEs also had a large weight among ultimate clients of the innovative solutions as well as suppliers of the new or transformed supply chains. Around two thirds of innovation projects that sell their innovative products or services to other businesses expect that this demand will be mainly from SMEs, and small businesses are also equally well represented among current and prospective supply chains. Altogether, the economic and environmental benefits of the innovation projects accrued to SMEs to a similar extent as their participation rate. 5