Innovation: A key pathway to Europe's green deal and economic security

Date July 19, 2023
Speaker H.E. Jean-Eric PAQUET (Ambassador of the European Union (EU) to Japan)
Commentator TAMURA Akihiko (Consulting Fellow, RIETI / JETRO (Japan External Trade Organization) Paris)
Moderator TANABE Yasuo (Consulting Fellow, RIETI / Managing Director, EU-Japan Centre for Industrial Cooperation)

Innovation plays an increasingly important role in the EU and globally; it is essential to creating better jobs, building a greener society, improving quality of life, as well as to successfully competing in global markets. As the interface between research and technological development policy and industrial policy, innovation policy aims to create a framework that is conducive to bringing ideas to market.
During this lecture, H.E. Jean-Eric Paquet, the Ambassador of the European Union to Japan will present the key elements and achievements of the EU innovation policy, including the Innovation Union; the European Innovation Scoreboard and a regional innovation scoreboard; the EU Research and Innovation Framework Programme (currently Horizon Europe), with the emphasis of the European Innovation Council and European Partnerships; the European Institute of Innovation and Technology; and recently adopted initiatives, including a New European Innovation Agenda, the proposals for European Critical Raw Materials Act and the Net-Zero Industry Act. Innovation policy plays an increasingly important role in the context of economic security, where multilateral collaboration in research and innovation among like-minded partners brings high added value.
In this context, the lecture will also be an opportunity to learn about the EU-Japan collaboration in addressing the common objective of achieving carbon neutrality by 2050, digitalizing our economies, and de-risking supply chains, which, among many other topics, will be on the agenda of the EU and Japan leaders at the 29th EU-Japan Summit, which took place in Brussels on 13 July.
Finally, Ambassador Paquet will present key tools and modalities to boost the EU-Japan collaboration in research and innovation, and in particular, the possibility of associating Japan to Horizon Europe.


The European green deal

The European Union (EU) decided in 2019 to put the European Green Deal at the center as a compass of public policy in Europe for the transformation of its societies and economies around the global challenge of climate mitigation and adaptation, and the deep biodiversity, and environmental degradation which is occurring globally.

This European Green Deal is at the heart of EU’s industrial policy and also has significant impact on its security and external policy. The EU is deploying a large set of instruments to achieve an ambitious target of at least 55% reduction in CO2 emissions by 2030. For this, the EU has significant funding with many different EU instruments in their toolbox. During the recovery from the pandemic, it also deployed additional funding largely focused on that European transformation. However, Europe is also known for having a robust regulatory setup with specific targets. These regulations ensure that public policy design and the behavior of various entities, including economic actors, regional governments, and local authorities occur within the regulatory frameworks, often imposing strict obligations on these entities.

The European Green Deal plays a central role in policymaking, encompassing a broad toolbox that goes beyond funding, industrial policy, and regulatory frameworks to support technological development. Achieving the energy transformations that are being promoted both by Japan and the EU will require significant technological advancements and paradigm shifts in some industries. As a result, the European research and innovation effort is targeted at providing instruments and solutions to facilitate this green transformation.

European innovation scoreboard and performance change

Regarding the innovation and research policy, the European innovation scoreboard annually ranks the individual EU Member States based not only on their static position but also on developments over time. The EU Member States have been ranked according to the Union average between innovation leaders and emerging innovators. There is a strong diversity in starting positions within the EU, both in innovation and research, which poses challenges but also enriches policymaking. Notably, the Nordic countries and Benelux, along with Germany, France, Austria, and Ireland, are leading in innovation, while many other EU Member States are progressively catching up.

This scoreboard also includes a ranking of the EU in the broader international competition; the EU (27 Member States) is placed at 100 as the reference point, almost on par with Japan. The U.S. and Canada are performing better in the ranking compared to EU. A more interesting point is the performance change happening over the last seven years, and China’s progress has been particularly spectacular in comparison with other countries. The indicators used in the scoreboard include, among others: human resources, digitalization, finance and venture capital, R&D expenditure, publications, and patents data.

Horizon Europe

The EU is well-known as a research powerhouse, particularly in recent years, as demonstrated by a large number of Nobel Prize awarded to European scientists, many of whom have been supported by the European Research Council (ERC), which was established in 2007 to promote cutting-edge research. The EU is becoming also a leader in innovation. European innovation is characterized by a robust science and engineering foundation, particularly in life sciences, biotech, and deep tech. However, it is still lagging in terms of venture capital and venture capital financing, which can be partially attributed to the as-yet partial integration of capital markets at the EU level. So, there is a need for further efforts in this area of EU’s internal market (as set out in the EU Capital Markets Union action plan).

Each of the EU 27 Member States, has its own research and innovation ecosystem, including public funding frameworks. To integrate and leverage this diversity effectively, in 1984 the EU established the EU Framework Programme for Research and Innovation, currently Horizon Europe, which is the largest publicly funded research and innovation programme in the world, with a budget of approximately 100 billion euros. It represents around 9% of research and innovation public funding in the EU and accounts for approximately a quarter of project funding available across the Union.

Horizon Europe pillar I

Under pillar I, “Excellent Science”, Horizon Europe supports frontier research, particularly through the ERC; researchers’ mobility under Marie Sklodowska-Curie Actions (e.g. Postdoctoral Fellowships and Doctoral Programmes established across the 27 EU Member States and Associated Countries and providing opportunitites to collaborate with third countries like Japan); and Research Infrastructure.

Horizon Europe pillar II

The core of Horizon Europe is Pillar II, which focuses on addressing key challenges faced by the EU and the like-minded countries, notably health, culture, digital industry, space, climate, energy, mobility, agriculture, and natural resources.

Pillar II – “Global Challenges & European Industrial Competitiveness” receives approximately 55% of Horizon Europe’s budget. The research topics under this pillar are determined through “co-creation”; this involves discussions within the European Commission across various research and policy directorates (, so that both, research and innovation priorities and the policy priorities are taken into account). The European Commission has established a robust governance structure, encouraging everyone involved to engage in this collective creation modality, including private sector, local governments, and, importantly, citizens.

The process of determining research topics is complex and provides a significant added value as it ensures that choices regarding, for instance, digital research, not only encompass the cutting-edge aspects of one industry but also address regulatory needs in areas such as Artificial Intelligence and quantum computing. Similarly, topics related to climate, energy, and mobility are closely linked to finding solutions for the European Green Deal.

The European Commission serves as the platform for the program. This approach is extended to the external world, where the same methodology is applied when working with Member States and external countries associated with the program, such as Norway, Ukraine, Turkey, Israel, and New Zealand. Universities, research organizations, and other partners also play a vital role in this challenging process, which in the end leads to the identification of dozens or hundreds of research topics each year. These topics are then published under the EU funding and tender opportunities website and the financial resources are allocated in a competitive fashion to the selected research proposals. This is the first key dimension of Horizon Europe.

The second key dimension involves the consortia. The program encourages research consortia to collaborate across EU Member States and beyond, typically consisting of 8 to 12 participants. These consortia develop proposals based on presented topics and then compete against each other for funding. Successful projects receive significant funding, ranging from 5 million to 15 million euros allowing Horizon Europe to support the best research across the EU, benefiting from diverse scientific and innovation cultures and enabling complementarity between different initiatives. This is the core of Horizon Europe’s DNA.

The third dimension of Horizon Europe involves partnerships with industry. Under the second pillar, the program has established 49 European partnerships, each aimed at specific objectives. For instance, there is a partnership focused on clean hydrogen and clean aviation under cluster 5. A noteworthy example is the clean aviation partnership, in which the European aviation industry collaborates with engine industry representatives and universities in aeronautics. In this partnership, the industry is contributing around 4-5 billion euros and the program is providing 3.5 billion euros, totaling approximately 10 billion euros. The goal of this partnership is to develop a range of low-carbon or zero-carbon aircraft and aimed at equipping Europe with a range of aircraft to achieve decarbonization goals in the ‘30s and ‘40s. This partnership also complements those efforts with cutting-edge technologies like hydrogen and electric. The collaboration fosters a regulatory dialogue between research and administration, ensuring that cutting-edge research is funded and deployed but also aligns with future policy possibilities.

Horizon Europe pillar III

Horizon Europe pillar III, “Innovative Europe” was created in 2018. One of its key creations is the European Innovation Council (EIC), serving as the innovation counterpart to the ERC, which is known as Europe’s “Nobel Prize factory.” Researchers funded by the ERC are now receiving Nobel Prizes every year, reflecting the programme’s success. With the establishment of the EIC, it is expected that the innovation ecosystem will significantly improve and as a result the number of unicorns in the EU will steadily grow. EIC aims to support the most innovative deep-tech startups, encouraging them to compete for scale-up funding, ranging from 5 million to 10 million euros. The added value of the EIC lies in its approach, which both provides grant funding and takes equity in these startups. By doing so, it becomes an anchor, attracting additional investors, thus creating a significant leverage effect.

For the period until 2027, the EIC has allocated 10 billion euros, and it is expected to make a substantial difference for many companies. The startups supported by the Council are likely to deploy their solutions not only in Europe but also in other global markets. This was the snapshot of the EU-level toolbox for research and innovation. The goal is to continue improving these efforts, including through collaborations with partners like Japan.

Addressing critical dependencies

The EU Net-Zero Industry Act and the Critical Raw Materials (CRMs) Act aim to create conductive regulatory environment to foster Europe’s twin transition i.e. digital and green transformation and net-zero targets in Europe.

A crucial aspect involves examining critical supply chains for these twin transformations and ensuring a reduction in over-dependency on single suppliers in strategic sectors. The main concern lies not in the logic of industrial policy, as Europe is content being a part of the multilateral trade world order governed by the World Trade Organization, but in a strategic over-dependency on a single supplier, which is also a concern for Japan.

The war in Ukraine made the EU realize its excessive reliance on energy from Russia, which proved to be challenging and costly. However, Europe successfully managed to reduce this dependency within a short period. Hence, this issue of strategic dependencies itself is considered highly critical. This matter has been extensively discussed within the G7 during Japan’s leadership and is an ongoing topic of discussion between Japan and the EU.

The Net-Zero Industry Act aims to address critical dependencies in three main ways. First, by creating a better industry base where both Europe and Japan are working on developing a stronger industrial base in areas like solar, wind, battery, heat pumps, and electrolyzers to reduce key dependencies. Second, by collaborating with reliable, like-minded partners such as Japan to create resilient supply chains (de-risking supply chains). Third, technology plays a crucial role in reducing dependencies. Researching and developing alternative technologies can help mitigate immediate dependencies on existing technologies.

For instance, accelerated research in solar technologies could lead to alternative industrial supply chains, reducing reliance on China’s solar supply chain, which was placed on their export control list in November 2022. This technological approach is a key component of the Net-Zero Industry Act.

Similarly, the CRMs Act focuses on diversifying and enhancing the resilience of EU CRMs supply chains, including by strengthening our cooperation with reliable trading partners globally to reduce the EU's current dependencies on just one or a few countries. Developing capacities within Europe and internationally and advancing research and innovation will help to reduce critical dependencies on raw materials. Recycling is also considered a critical aspect in reducing these dependencies. Overall, both Europe and Japan are actively working on various areas of development to address critical dependencies and create more sustainable industrial and raw material supply chains.

The discussions on these topics took place during the 25th EU-Japan Summit in Brussels on 13 July 2023. The Summit was highly productive, influenced by the positive outcomes of the G7 meetings in Hiroshima. The conclusions of the recent Summit includes a strong will of the leaders to enhance collaboration under the EU-Japan Green Alliance, which focuses on hydrogen, wind energy, batteries, and other relevant areas, as well as the Digital Partnership on chips and secure connectivity. Concrete outcomes and expectations were identified, and both sides pledged to work together on specific areas of cooperation.

Partners in research and innovation

The ongoing discussions regarding Japan’s association to Horizon Europe began formally after the EU-Japan Summit, held in May 2022. This is a new opportunity as in the past only countries in geographical proximity to the EU could be associated to the EU Framework Programme for Research and Innovation. However, under Horizon Europe, the EU offers this opportunity to like-minded countries with a strong research capacity, including Japan. Association would revolutionise the way the EU and Japan collaborates - until now, the research collaboration between the two sides has been very modest, far below its potential.

The primary challenge for Japanese participants in EU consortia is the issue of funding. Many consortia would like Japanese entities to join, but the requirement for Japanese participants to secure their part of the research funding often hinders their involvement. Association to Horizon Europe would solve this problem. By associating, Japanese participants would be funded automatically; putting Japanese entities on par with their European counterparts.

While association brings practical challenges that are currently under discussion, Ambassador Paquet expressed hope that the official negotiations for Japan’s association could begin very soon. Similar agreement has been reached already with New Zealand and the negotiations with Canada are well advanced. Europe stands to benefit greatly from having Japanese participants in research consortia, and Japanese entities and the Government of Japan, in turn, can gain valuable opportunities by being associated to the programme which supports research and innovation topics that are critical for the societal transformations.

Comments and Q&A

TAMURA Akihiko:
Ambassador Paquet’s presentation was multifaceted and complex, making it challenging to provide feedback. Horizon Europe is a significant EU innovation policy framework for the period 2021 to 2027, based on five primary missions, namely, cancer, climate change, oceans, smart cities, and food security. Realizing these missions would help realize Europe’s long-term goals, but this project is constantly developing and is being upgraded.

The concept of mission-oriented innovation policies (MOI) is one of the most remarkable traits of Horizon Europe. MOI policies emphasizes that projects should aim to transform society rather than focusing solely on technology development. This originated from the fact that global society has been facing many societal problems, which require stronger government intervention to address.

Furthermore, Horizon Europe is based upon the idea of multi-level perspective (MLP), another global innovation policy setting concept, where transforming society requires more than just technological advancements. The EU has been a leading player in implementing MOI policies and is famous for its strengths in rulemaking and regulatory strategies. The concept and direction of MOI policies are based upon many discussions and inputs from the Pascal Lamy Committee in 2017 and Mariana Mazzucato Report in 2018. Additionally, recent OECD outcomes such as the Science, Technology and Innovation (STI) Outlook 2023 and Science and Technology (S&T) Policy 2025 have been heavily influenced by the concept of MOI.

Regarding Japan’s engagement with Horizon Europe, being an associated member should be carefully considered in the context of the overall bilateral relationship between Japan and Europe. Japan’s innovation policy also aligns with the idea of MOI, as seen in the 6th Science, Technology and Innovation Basic Plan. Japan could learn from Horizon Europe’s inclusiveness and backcasting approaches within the EU innovation policy.

Therefore, discussing how Japan can engage with Horizon Europe or in European innovation policy should be approached holistically, considering the common agendas and issues shared by Japan and Europe in various fields, including societal and geopolitical matters, and other ongoing policies such as the EU-Japan Economic Partnership Agreement and data privacy regime.

Jean-Eric PAQUET:
The main point is the desire to collaborate between Japan and Europe in tangible areas, particularly focusing on de-risking supply chains. The argument is that there would be various forms of engagement needed to achieve this goal including industry involvement and the establishment of platforms for European industries and Japanese players to engage in dialogue, such as the European Center and the Business Roundtable.

The recent EU-Japan Summit joint statement identified hydrogen as an area where leaders requested the establishment of an industrial forum for collaboration. Several EU-level associations and industries would be interested in engaging with Japan on hydrogen, but a strategic element to de-risking is technology. So, Japan and Europe should enhance their technological development together. The most effective way to achieve this is through association to Horizon Europe.

Several important questions need to be addressed for this collaboration to happen. If Japan finds satisfactory answers to these questions, then the association could be realized. The EU is offering this opportunity, not is making a request. Nonetheless, research cooperation would continue regardless of the outcome of the association talks.

Regarding mission-oriented innovation, this approach is an important way of looking at research and innovation and trying to develop a framework where they are connected from the initial stages to the deployment in society or the economy. The deployment of research and innovation itself should also consider the role of technology and knowledge in transforming society and the economy. The state, along with private actors and local governments, is well-suited for this role. The five missions under Horizon Europe are examples of this approach.

To illustrate the concept, there was a call initiated two years ago asking European cities if they had the ambition to become climate-neutral by 2030 and if they wanted to join the mission. More than 360 cities expressed interest and 100 were selected. The collaboration with these cities involved not just research but also using research outcomes to drive decisions, engaging citizens, industries, and various levels of government to deploy the technologies effectively. It recognized that technology alone would not be sufficient, and societal involvement and change were crucial for successful transformation. Mission-oriented research and innovation is a complex endeavor, involving both public policy and research and innovation. It is considered an experiment, but if successful, it has the potential to significantly shape research and innovation in Europe moving forward.

There are several questions from the audience.

Out of the 49 European partnerships of the Horizon program, are there any specific areas that are particularly interesting, such as batteries, data security, or AI robotics or clean steel which could promote the EU-Japan partnership?

Jean-Eric PAQUET:
It is not within the role as the European Union’s Ambassador to determine which partnerships are relevant for Japan and Europe. Japanese industrial actors, policymakers, and administrators should examine the list to identify potential areas of collaboration with Europe. These 49 European partnerships are not directly accessible to third countries and association with the program would grant access to these partnerships. However, it could be some specific partnerships like the Innovative Health Initiative, Key Digital Technologies, Clean Hydrogen, Clean Aviation, batteries, including recycling and reducing the CO2 footprint, would be potential areas for collaboration with partners in Japan The association to Horizon Europe would connect Japan with existing partnerships and consortia; Japan’s unique contributions would add significant value due to its diverse scientific and innovation culture. The EU is offering this opportunity because it believes in the value of diversity and collaboration.

What are Europe’s expectations from the Economic Partnership Agreement (EPA) and ongoing negotiations on data flows issues?

Jean-Eric PAQUET:
The EPA is a spectacular and relatively young development, agreed upon in 2018 and implemented since 2019 amidst the challenges of the pandemic. The trade flows have already grown by 20% since its enforcement, making Japan and the EU the largest integrated market . The EPA is operating smoothly and has facilitated industry-to-industry supply chains work through integration and common standards. There are some areas where progress could be made (and the EU and Japan are working on it), but Japanese and European actors are making great use of it. Please stay informed regarding the EPA and take advantage of the opportunities it offers.

*This summary was compiled by RIETI Editorial staff.