“I am a very, very happy woman” the Belgian Socialist MEP, Kathleen Van Brempt, told reporters on Tuesday. She was reacting to a narrow vote in the European Parliament defeating a €2.7 billion diversion of funds away from the EU’s R&D budget (Horizon2020) into President Juncker’s all-purpose stimulus package, the European Fund for Strategic Investments (EFSI). EFSI aims to use €16 billion of EU money and €5 billion of European Investment Bank funds as investor risk guarantees, to unlock a potential €315 billion of public and private investment over the next three years.
Van Brempt was appointed as the Industry, Research and Energy Committee’s (also known as ITRE) rapporteur for the stimulus package earlier in the year. Her attempt to guard research funding in a dedicated pot and to ring-fence EFSI funding for energy efficiency projects has faced stiff opposition from centre right MEPs. In the end, she won the latter battle by only two votes in her committee, after an alliance of Greens, Socialists and Liberals backed her plan. Anyone looking for evidence of the unpredictability of this fledgling European Parliament could use this week’s voting in the ITRE Committee as a good case study. While Van Brempt’s own amendment - to ring-fence €4 billion for energy efficiency - was actually defeated, an alternative amendment tabled by her colleagues - to ring fence €5 billion - passed.
Why does all this matter?
The terms are being set in Brussels at the moment on a range of financing mechanisms designed to complement the EU’s policy objectives. ESFI – to take one – aims to unlock the huge amount of private sector capital sitting on balance sheets across Europe to achieve the EU’s core aim of sustainable economic growth. Horizon2020 meanwhile (around €80 billion over 7 years) seeks to fund a new generation of strategic research and development projects, often “higher risk, higher return”. Around a fifth of that budget is earmarked for sustainable development. The battle over ring-fencing and for the protection of research funding as grants reflects a difference of views as to how the EU’s objectives should be met. When the eminent British scientist Sir Paul Nurse met the EC Commissioner for Research, Carlos Moedas, in London last month he argued that leveraged finance was not the best way to fund scientific research. The President of Universities UK made a similar plea in the FT last week.
This may be right for universities, especially given how they are structured and the vital importance for them of long term capital. For SMEs, though, the battle for funding remains tough, with the current success rate for SMEs getting grant funding only at 11%.
ITRE is now making a series of proposals to the Commission on “Green Growth Opportunities for SMEs” including the huge importance of taking a sector specific approach to funding approaches and to spreading understanding of the financing options. Clearly this has worked well for companies operating in the energy efficiency sector but other sectors deserve a similar hearing. For example, fuel cells or storage generally has massive potential, as do transmission innovators and data analytics pioneers. Do SMEs working in these sectors deserve their own ring-fence or are they operating in the energy efficiency space? All this is yet to be seen.
Either way, despite the many opportunities for funding there are, the impetus is still on SMEs themselves to bang the drum for their sector and to demonstrate that their innovations fit into Europe’s sustainable future.