What is the objective of STEP?
The aim of this instrument is to support the uptake and scaling up of the development and manufacturing of critical emerging technologies relevant to the green and digital transitions in the EU and to the strategic sovereignty of the Union. Those are deep and digital technologies, clean technologies and biotechnologies. It will also support investments aimed at reinforcing their value chains, thereby reducing the EU’s strategic dependencies, strengthening European sovereignty and economic security, and addressing labour and skills shortages in those strategic sectors. This will allow to enhance the long-term competitiveness of the EU and strengthen its resilience.
Why does the EU need STEP?
Strengthening the competitiveness of the European economy through the green and digital transformations has been the EU’s strategic goal over the last years.
Despite its inbuilt resilience, the EU industry is being challenged by high inflation, labour shortages, supply chain disruptions, rising interest rates, and spikes in energy costs and input prices.
The EU has already put forward several initiatives to support its industry. While these bridging solutions provide fast and targeted support, the EU needs a more structural answer to the investment needs of its industries.
This will support the uptake and scaling up of development and manufacturing of strategic technologies in the EU, and help companies seize the opportunities and meet the objectives of the green and digital transitions, therefore strengthening European sovereignty.
The Commission is therefore proposing a new platform, which will reinforce and leverage existing EU instruments in view of a quick deployment of financial support to the benefit of business investments.
Why is the Commission not proposing a new instrument?
The choice of streamlining and making a better use of existing instruments under the EU budget over creating a brand-new instrument has three main advantages.
First, timing. With the creation of a new instrument taking at least 12 to 18 months, bringing existing instruments together will enable the beneficiaries of EU funding to get access to EU financing more quickly.
Second, adapting the existing instruments would lead to a more efficient use of resources by increasing the possibilities to blend different sources of financing under direct, indirect and shared management.
Third, with the help of the ‘Sovereignty Portal’, all information about existing funding opportunities will be centralised, making it simpler for project promoters and programme managers to make a better use of EU funding, while minimising the risk of overlaps amongst instruments.
Will the platform take money away from cohesion and social policies?
The platform will mobilise available funding within the scope of existing instruments and deploy them in a more flexible manner. This will help to provide timely and targeted support in strategic sectors. All decisions on reprogramming and transfers of relevant funds remain in the hands of competent national authorities.
The new financial incentives proposed for cohesion policy funds are expected to accelerate the implementation and the disbursements of EU funds to Member States. The exceptional pre-financing of 30% and financing of 100% will make it possible for all regions to benefit from increased support as of 2024, with the less developed regions benefitting the most in view of their higher funds’ allocation. Those financial incentives help all less developed European regions and counter unequal capacity to grant State aid. Moreover, enabling investments in large enterprises will ensure that key projects that contribute to the Union’s resilience can have greater access to funding possibilities across the EU, including in regions that rely on cohesion funding to finance such projects.
The funds mobilised through the ESF+ will help address shortages of labour and skills critical to quality jobs in the area of deep and digital, clean and biotechnologies.
What are the main areas of action which STEP will support?
STEP will support the development and manufacturing of critical technologies in the Union in the following fields:
- deep and digital technologies, such as microelectronics, high-performance computing, quantum computing, cloud computing, edge computing, artificial intelligence, cybersecurity, robotics, 5G and advanced connectivity, and virtual realities, including actions related to deep and digital technologies for the development of defence and aerospace applications;
- clean technologies, such as renewable energy; electricity and heat storage; heat pumps; electricity grid; renewable fuels of non-biological origin; sustainable alternative fuels; electrolysers and fuel cells; carbon capture, utilisation and storage; energy efficiency; hydrogen; smart energy solutions; technologies vital to sustainability such as water purification and desalination; advanced materials such as nanomaterials, composites and future clean construction materials; and technologies for the sustainable extraction and processing of critical raw materials;
- biotechnologies, such as biomolecules and its applications, pharmaceuticals, medical technologies and crop biotechnology, and biomanufacturing.
Those technologies are essential to seize the opportunities and meet the objectives of the green and digital transitions, thus promoting the competitiveness of the European industry and strengthening European sovereignty.
The Platform will also help safeguarding and strengthening the respective value chains, steer investments in critical raw materials, and address shortages of labour and skills in those sectors.
What companies can benefit from STEP?
STEP will support investments in companies that contribute to preserving a European edge on critical technologies, throughout companies’ full life cycle. Through sustained support the companies will be able to take off, grow and become mature in the Union. The types of companies include: small and medium enterprises (SMEs), including start-ups; middle-sized enterprises (mid-caps), which lie in between SMEs and larger companies; and larger companies.
The different financing possibilities that STEP brings together will make it possible to target companies in different stages of business development:
- Equity support to non-bankable SMEs, including start-ups; and non-bankable small mid-caps through the European Innovation Council under Horizon Europe;
- Equity and debt support to EU companies under InvestEU;
- Grants to clean tech projects, including large ones, under the Innovation Fund and grants to deep and digital tech projects for defence applications under the European Defence Fund;
- Any type of support to any type of undertaking active in deep tech, clean tech and bio tech sectors through the cohesion policy funds and the Recovery and Resilience Facility, in accordance with State aid rules.
Will it be possible to combine funds from different EU programmes for the same project?
Yes, as one of the objectives of STEP is to help individual projects to benefit from cumulative funding under several instruments of the EU budget. For instance, grants under the Innovation Fund combined with grants under cohesion funds or the Recovery and Resilience Facility.
Projects will also be able to benefit from the complementarity between Horizon Europe (via the European Innovation Council) and InvestEU. The European Innovation Council will finance projects run by SMEs, including start-ups, and small mid-caps, which are either not yet able to generate revenues, or not yet profitable, or not yet able to attract sufficient investment to implement fully their business plans. Once they become bankable, those projects could be financed under the InvestEU programme.
How will the Sovereignty Seal operate?
A Sovereignty Seal will be awarded to projects contributing to STEP objectives, provided that the project has been assessed and complies with the minimum quality requirements of a call for proposals under Horizon Europe, the Digital Europe programme, the European Defence Fund, the EU4Health programme, or the Innovation Fund, and regardless of whether the project has received funds under those instruments.
This Seal offers a unique opportunity to build on the applicable high-quality evaluation processes under those instruments. This Seal will serve as a quality label and will help projects attract public and private investments by certifying their contribution to the STEP objectives. It will thus serve to guide market participants in their investment decisions.
The Seal will also promote better access to EU funding, notably by facilitating cumulative or combined funding from several EU budget instruments. This would, for instance, enable Member States to grant support from cohesion policy funds to projects having been awarded a Sovereignty Seal directly, without any additional selection procedures. The cumulation rules can also apply to strategic projects identified under the Net Zero Industry Act and the Critical Raw Materials Act.
How will the Sovereignty portal operate?
The objective of the Sovereignty portal is to help project promoters and companies seeking funds to find the relevant information about funding opportunities under EU budget programmes.
The portal will bring together information about the calls for proposals from the different funds managed by the Commission, funding opportunities under indirectly managed programmes such as InvestEU, as well as the funding opportunities stemming from the managing authorities under the cohesion policy funds and the Member States under the Recovery and Resilience Facility.
Moreover, the Sovereignty portal will help increase the visibility for STEP investments towards investors, by listing the projects that have been awarded a Sovereignty Seal.
What are the financial incentives proposed for the implementation of cohesion funds targeting sovereignty objectives?
In order to help accelerate investments and provide immediate liquidity for STEP investments an additional amount of exceptional pre-financing is provided in the form of a one-off payment in 2024.
Moreover, the possibility for an increased EU financing rate of 100% for STEP priorities is also made available to Member States.
What are the benefits for Member States using the Member State compartment of InvestEU for sovereignty objectives?
To incentivise that Member States use their recovery and resilience funds under the Member State compartment of InvestEU, it is proposed to increase the existing limit from from 4% to 10%.
This additional flexibility to use Member States’ resources under InvestEU will help them benefit from the established structures and market expertise of the InvestEU implementing partners, to select and finance the most promising companies in the STEP sectors. Moreover, where a Member State decides to transfer resources to InvestEU national compartments for implementing an existing InvestEU financial product developed for the EU compartment by certain implementing partners, such a decision does not entail State aid requiring additional Commission approval.
When will the new platform be operational?
Once the STEP proposal is formally adopted by the European Parliament and the Council, it will be possible to proceed with a swift implementation. Different timelines may apply, depending on the programmes of the EU budget and their specific characteristics.
For instance, to finance STEP projects under cohesion policy funds, Member States would be required to revise their operational programmes to reflect the new STEP priorities, while keeping in mind that the additional pre-financing is only proposed for 2024.
Regarding InvestEU, it will be possible to provide support to STEP projects through the existing agreements with implementing partners, and the new policy window will have to be reflected once new agreements are concluded.
As regards directly managed programmes (e.g. Horizon Europe, Digital Europe Programme, EU4Health, European Defence Fund), the new STEP priority will be mirrored in the next annual work programmes, which will allow to publish the relevant calls for proposals swiftly.
How will you monitor STEP investments?
To monitor the implementation of STEP, the Commission will put together the expenditures related to STEP from the relevant programmes. This requires a few targeted and proportionate amendments to existing legislation. To monitor and assess the performance of the programme, the Commission will compile the results for the following performance indicators: enterprises supported, investment mobilised, jobs created or maintained, and number of participants in trainings.
What is the relationship between STEP and the other measures proposed under the Green Deal Industrial Plan?
STEP is one of the instruments announced under the Green Deal Industrial Plan, which is the EU’s roadmap to secure the long-term competitiveness of Europe’s industry and support the fast transition to climate neutrality.
The Green Deal Industrial Plan lies on four main pillars: (i) a predictable and simplified regulatory environment; (ii) faster access to sufficient funding; (iii) skills; and (iv) open trade for resilient supply chains. The Plan calls to speed up access to funding for net-zero industry because the EU industry’s market shares are under strong pressure, to a great extent because subsidies abroad are unleveling the playing field. This concerns private and public funding (both at national level and EU level). STEP helps mobilise additional funding to support European industry.
This instrument will complement other measures in the Green Deal Industrial Plan which pursue similar objectives, such as the Net-Zero Industry Act, the Critical Raw Materials Act, as well as other initiatives such as the European Chips Act.
How will State aid rules support STEP investments?
The Commission is working to maximise synergies between the rules of selected EU instruments, such as the Innovation Fund, and the State aid rules to ensure a more streamlined process. For instance, by further aligning criteria and ensuring that the decision on State aid is taken at the same time as the funding decision, provided a complete notification by the Member State occurs in due time.
The Commission will also consult Member States on a proposal to enable higher rates of aid via a bonus for projects within the scope of STEP in assisted regions, to spur further economic development while preserving cohesion objectives.