Category 18 April 2019

Large-scale industrial demonstration projects: the Environmental Innovation Programme

The "Programme to promote investment in demonstration projects aiming at environmental impact reduction, or, in short, Environmental Innovation Programme (Umweltinnovationsprogramm, UIP), supports companies with large-scale pilot projects that focus on the development and application of environmental innovations. This policy measure focuses mainly on demonstration projects and technology transfer. The funding comprises loans with interest subsidy, and in special cases investment subsidies. 

The challenge

The UIP was created in 1979 as a response to ongoing air pollution debates. Over the years it has broadened its scope to tackling global challenges such as climate change, energy use and resource depletion.

The innovation

UIP aims at promoting the development and application of large-scale environmental technology innovations through major industrial pilot projects. The programme supports projects that are novel to the market with high demonstration character. They should be transferable to similar companies and unfold multiplier effects by demonstrating how new or existing technologies and advanced procedures can be combined and integrated.

UIP focuses on all eco-innovation related investments (if they significantly reduce environmental pollution, e.g. GHG emissions, waste, water, noise, soil, etc.) including building and construction, management of resources, fostering eco-design in manufacturing, renewable energy, carbon footprint reduction, energy efficiency in industry, etc. To purposefully create new impulses, however, UIP reacts with thematic priorities to the most pertinent environmental pressures, currently comprising (1) waste reduction and material efficiency in production (including eco-design and sustainable manufacturing), (2) energy efficient design of water and wastewater treatment plants, (3) “IT goes Green”, and (4) energy efficient urban lighting.

The programme further aims to significantly advance clean technology regulation and standards and best demonstrated available technology (BDAT) - in this way setting regulatory requirements.

The programme is governed by three state-owned institutions: The Federal Environment Agency (Umweltbundesamt, UBA)
reviews the applications and provides technical and scientific support to ongoing projects. The German development Bank KfW examines the projects administratively and financially. The Federal Environment Ministry takes the final funding decision.

Its main beneficiaries are SMEs, but also large enterprises in industry, local and municipal authorities including entities operated by municipalities, and other associations/unions. Foreign companies are eligible for funding if the investment is carried out in Germany.

Not only investments in innovative production facilities, process technologies or products are eligible for funding; funds also cover implementation as well as costs for measurements and expert assessments of performance.

KfW is providing financing, which comprises low-interest public loan funding for development and demonstration and interest rate subsidies covering up to 70% of eligible costs. In addition, public grant funding for demonstration in the form of investment subsidies covering up to 30 % of eligible costs may be granted under certain conditions. No funding is granted for R&D; UIP’s function is to build a bridge between R&D in the areas of clean technology and large-scale industrial implementations.

Until 2009, the UIP had funded over 700 pilot projects, which in sum significantly reduced environmental pollution. It also helped update clean technologies and performance standards, economic benefits for companies, reduction of technical and economic risks, and created multiplier and job effects. The measurements accompanying the projects deliver data and environmental indicators, which directly feed into policy making at national and European level.

Why did it work?

By providing support to the innovation competences of firms and improved environmental performance, UIP leads to cost savings and higher competitiveness of companies.
The KfW scheme is attractive due to the amount and duration of the funding.
The programme helps to improve the development of indicators for eco-innovation through continuous data collection.

Further deployment

UIP is implemented and validated at full-scale in Germany (Maturity Level estimated to be 7 on the GML scale). The programme design is hence transferable to countries with similar governance and financing infrastructure. Flexibility for scaling down the measure is limited as UIP focuses on large-scale industrial innovations.