1. Financing Eco-Innovation: A critical perspective on the Austrian experience of financial support programmes Wolfram Tertschnig Federal Ministry of Agriculture, Environment and Water Management, Austria Sustainable Development and Environmental State Aid Policy Division wolfram.tertschnig@lebensministerium.at

2. Eco-innovation requires more than just €€€ … Eco-innovation is generated out of a policy-driven market (European and national agendas determine investment schemes) -requires political stability and predictability Government authorities act as investors (e. g. water and waste management sectors) -requires security and longevity of financial resources Eco-innovation occurs at the interface of R&D policies, aid regimes and fiscal instruments, the economic and environmental policy framework -requires coherent polices and good public governance Inconsistencies on any of the above and associated political risks deter private investors to take financing decisions

3. Eco-innovation may happen if Multi-annual financial provisions A broad range of financing mechanisms / fiscal instruments Technology Clusters / Clearing Houses Political strategies and action plans Federal environmental State aid Policy Cooperation across various funding schemes Cofinancing by structural funds

4. The Austrian Environmental Fund – Facts & Figures established in 1984 administration: since 1993 MoE & Kommunalkredit Public Consulting (PPP) grants awarded to enterprises cover 20-30 % of environmental costs 2009 – 2013: annual 90 M€ “regular” funding budget + 100 M€ 2009/10 dedicated for thermal insulation of buildings as part of the economic recovery package (to be continued in the 2011-2014 period)

5. The Austrian Environmental Fund – Facts & Figures Funding priorities reflect environmental policy targets (from acid rain in the 1990ies to climate protection measures) since 1996: increasing share dedicated for climate effective projects (2009: 98%) at present, the fund identifies some 25 target categories reflecting objectives derived from national/European strategies 1993 – 2009: 35.000 projects 4,4 B€ total investment volume 830 M€ total grant volume

6. The Austrian Environmental Fund – Terms and Procedures Our instrument is technology driven -predefined BATs, with minimum requirements defined -extra boni for state of the art and peak cost-effectiveness approaches within each target category Ex-ante and ex-post evaluation as well as monitoring schemes addressing various focal areas (internal reviews, peers and researchers) to optimize cost benefit ratios and other objectives Institutional cooperation with the national R&D funding schemes providing custom-fit solutions for demonstration projects

7. The Austrian Environmental Fund – Effects I impact on technology diffusion -varying influence of the instrument on the total market (thermal solar plants: 5 %, small biomass units: 15 %, biomass district heating: 100 %) impact on generating environment and climate protection investments -based on a grant: investment volume ratio of 1:5, the Fund triggers environmental investments of approx. 450 M€ p.a. impact on public revenues and avoided spendings -fiscal return on investment ranging from 200% (regular year) to 500% (economic recession / crises) -aggregate value added : 0,64% of annual investment volume

8. The Austrian Environmental Fund – Effects II impacts on jobs -per M€ of funding some additional 60 green jobs impacts on CO 2 reduction -2008: 11.7 Mio. t -2009: 8.2 Mio. t impacts on CO 2 abatement costs covered by public financing -6 €/t CO 2 – 15 €/t CO 2 (life time)

9. Outlook environmental policy and public funding remain major drivers in the environmental technology and eco-innovation development and diffusion targets set for shares of renewable energy will increase this role since the public sector will be financing most of the corresponding measures (by means of subsidies or via tariffs/taxes) higher energy / resource prices (taxation) will increase the role of private financing institutions (banks, venture capital funds) in addressing energy efficiency and resource productivity goals, allowing for a subsequent decrease in public spending

10. European dimension as regards resource efficiency innovations: - enhancement of non-monetary approaches fostering eco- innovations, such as: platforms, networks and clearing houses, promoting technology exchange and diffusion, dissemination of innovations, long term and integrated environmental policy and SD planning, a level playing field for various means of private capital as regards renewable energy innovations: - continuing need for long term financing provisions, a greater harmonisation between European and national energy strategies and corresponding funding schemes, a greater focus on the removal of environmentally harmful subsidies growing impact of the European innovation programmes (LIFE+, CIP)