In a Nutshell

The European Competitiveness Fund (ECF) is a proposed EU funding instrument aimed at closing the EU’s innovation gap by channelling large-scale investment into strategic sectors. The ECF consolidates fourteen individual funding instruments from the current Multiannual Financial Framework (MFF) into a single, unified framework.

In pooling the EU’s fragmented funding landscape, the ECF aims to target financial support towards its four strategic policy windows, ensuring that the budget is consistently aligned with the EU’s competitiveness priorities. This consolidation is expected to simplify funding processes, reducing administrative burden on beneficiaries, particularly SME’s and start-ups. It is also intended to strengthen the EU’s ability to act as a coordinated industrial player by allowing flexible budget allocation.

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What’s on the Horizon?

• The ECF proposal is undergoing the ordinary legislative procedure following its publication by the Commission in July 2025.
• November 2025: The Committee on Industry, Research and Energy (ITRE) was appointed as the lead committee in Parliament, and the Rapporteurs (co-leads) were appointed.
• The ITRE Committee is working on its draft report and amendments to the Commission’s proposal. The timeline for a full committee vote and subsequent first reading position in Plenary is uncertain but is likely to extend through 2026.
• 2026-2027: The legislative negotiations between the Parliament, the Council, and the Commission are expected to be intense throughout 2026 and 2027, as both the overall MFF and the details of the ECF must be agreed upon. The final MFF Regulation must be adopted unanimously by the Council and with the consent of the European Parliament.
• January 2028: The new Multiannual Financial Framework, including the European Competitiveness Fund, is scheduled to enter into force for the 2028-2034 period.

Deep Dive

The ECF’s “seamless investment journey”  

The ECF was designed to establish a “seamless investment journey” by overcoming funding fragmentation that exists in the current structure. While the ECF consolidates multiple existing EU funding programmes, Horizon Europe (HEU) and the Industrial Decarbonisation Bank (IDB) represent the major funding components that define the scope and boundaries of the ECF without being fully absorbed within it. The relationship between HEU and the IDB with the ECF illustrates how the new structure creates an uninterrupted funding pathway for innovative projects spanning from the initial research phase through to industrial deployment and market manufacturing.

Horizon Europe

• HEU is the EU’s research engine which provides the initial funding for innovative ideas before they move to the ECF for scaling.
• While HEU remains a self-standing programme, both HEU and ECF will operate under the single rulebook and are bound together through integrated work programmes.
• This coordination ensures that the ECF steers the HEU research pipeline toward market goals without directly controlling HEU’s entire research budget or mission.

Industrial Decarbonisation Bank

• The IDB is a proposed financing vehicle designed to mobilise large-scale public and private investment for the clean industrial transformation in Europe.
• It is placed directly within the governance of the ECF and represents the market-end point for clean technology within the Clean Transition Policy Window.
• This structure ensures that ECF-backed clean technology projects can transition smoothly to secure the large-scale financing necessary for their final industrial deployment and manufacturing.

ECF governance – decision-making bodies

The ECF’s governance moves away from funding traditionally managed jointly with national authorities, such as the Common Agricultural Policy, or strictly centrally by the European Commission, like Horizon Europe. It adopts a hybrid model that uses the European Commission’s direct oversight for grants and delegates financial tools (loans/guarantees) via the InvestEU Instrument to implementing partners to maximise private sector leverage.

• • European Commission: The Commission holds the overall responsibility for implementing the ECF and supervises its execution. It adopts the annual work programmes through implementing acts, giving it substantial executive power over how resources are allocated across the four policy windows.
  • Committees: The Commission will be assisted by a committee that can convene in specialised configurations corresponding to the four policy windows (e.g., Clean Transition Committee, Digital Committee, Defence Industry Committee).
  • Implementing partners: Implementation of the ECF InvestEU Instrument will be handled by a wide network of partners, such as the European Investment Bank (EIB) Group, international financial institutions, national promotional banks (NPBs), and export credit agencies.
  • Investment committee: This is an independent committee established under the ECF InvestEU Instrument to examine proposals for financing and investment operations. The proposals are submitted by implementing partners.
  • Advisory Board on ECF InvestEU Instrument: Composed of one representative from each implementing partner and one representative from each Member State, this board advises on the design of financial products and strategic/operational direction.

ECF selection criteria

• The current proposal outlines that excellence must be the sole criterion for awarding ECF funds, meaning proposal are evaluated on a merit, with funds awarded to projects based on their scientific quality and potential for strategic impact.
• This rationale is to help create the largest strategic impact to compete with global technology giants like the US and China.
• However, smaller and less affluent Member States argue for the inclusion of territorial quotas or mechanisms to ensure fair and inclusive participation. Their concern is that a pure excellence criterion risks further concentrating innovation and competitiveness in well-developed regions, leaving less-equipped Member States behind.
• The ongoing debate therefore reveals a trade-off between EU global competitiveness versus the inclusive participation for smaller Member States through the ECF.

Carbon Gap’s position

• The Clean Transition and Industrial Decarbonisation window must support a broad portfolio of technologies. While Article 33 of the Commission’s proposal lists several areas eligible for support, carbon dioxide removal (CDR) is not explicitly included, only carbon capture and storage (CCS).
• The explicit omission of CDR risks reinforcing existing maturity and knowledge biases in EU funding, favouring more established technologies, such as hydrogen, while sidelining less mature but strategically essential solutions like CDR, or conflating CDR with CCS.
• The current wording also suggests that ECF priorities could shape Pillar II of Horizon Europe. If CDR is not recognised within the ECF, it could constrain early-stage research and innovation support under Horizon Europe. Both programmes must explicitly allocate sufficient, targeted funding for CDR across the whole innovation chain, ensuring continuity from early R&D to commercial readiness.

Explicitly recognising and defining CDR as a strategic investment area is therefore critical. Doing so in the legislative text will help ensure the necessary funding, policy visibility, and long-term continuous support needed for the development and deployment of CDR solutions.