(1)

Strengthening the competitiveness and resilience of the European economy through the green and digital transformations has been the Union’s compass over recent years. The green and digital transitions, anchored in the European Green Deal, set out in the Commission communication of 11 December 2019 entitled ‘The European Green Deal’, and the Digital Decade Policy Programme 2030 established by Decision (EU) 2022/2481 of the European Parliament and of the Council (4), spur growth and the modernisation of the Union’s economy, opening up new business opportunities and helping the Union to gain a competitive advantage on the global markets. The European Green Deal sets out the roadmap for making the Union’s economy climate-neutral and sustainable in a fair and inclusive manner, tackling climate- and environmental-related challenges. The Digital Decade Policy Programme 2030 sets out a clear direction for the digital transformation of the Union and for the delivery of digital targets at Union level by 2030, in particular concerning digital skills, digital infrastructures, and the digital transformation of businesses and public services.

(2)

The Union’s industry has proven its inbuilt resilience but its competitiveness must also be ensured in the future. High inflation, labour shortages, post-COVID supply chain disruptions, Russia’s war of aggression against Ukraine, rising interest rates, and increases in energy costs and input prices are weighing on the competitiveness of the Union’s industry and have highlighted the importance for the Union to secure its open strategic autonomy and reduce its strategic dependence on third countries in various sectors. Those pressures on the Union’s industry are paired with strong, but not always fair, competition on the fragmented global market. The Union has already launched several initiatives to support its industry, such as the Green Deal Industrial Plan, set out in the Commission communication of 1 February 2023 entitled ‘A Green Deal Industrial Plan for the Net-Zero Age’, a Regulation of the European Parliament and of the Council establishing a framework for ensuring a secure and sustainable supply of critical raw materials (the ‘Critical Raw Materials Act’), a Regulation of the European Parliament and of the Council establishing a framework of measures for strengthening Europe’s net-zero technology products manufacturing ecosystem (the ‘Net-Zero Industry Act’), the new Temporary Crisis and Transition Framework for State aid, set out in the Commission communication of 17 March 2023 entitled ‘Temporary Crisis and Transition Framework for State aid measures to support the economy following the aggression against Ukraine by Russia’, the European Union Recovery Instrument established by Council Regulation (EU) 2020/2094 (5) and Regulation (EU) 2023/435 of the European Parliament and of the Council (6). While those solutions provide fast, targeted and, in some cases, temporary support, the Union needs a more structural answer to the investment needs of its industries, safeguarding cohesion, creating quality jobs, and preserving the level playing field in the internal market, while facilitating access to funding. The Union should work to prevent relocation, to transfer production facilities of critical technologies back from third countries, and to attract new facilities to prevent strategic dependencies.

(3)

The internal market has brought significant economic, social and political advantages to the entire Union, including its citizens and businesses. While those benefits are widely recognised, it is imperative to continue finding solutions to further harness its untapped societal potential. The internal market must remain adaptable in the face of evolving geopolitical dynamics, technological advancements, and the green and digital transitions, while fostering the resilience of health systems in the face of an ageing population and contributing to enhancing the Union’s long-term competitiveness and productivity.

(4)

The deployment and scaling up in the Union of digital technologies and deep tech innovation, clean and resource-efficient technologies, and biotechnologies will be essential for the purpose of reducing the Union’s strategic dependencies, and seizing the opportunities and meeting the objectives of the green and digital transitions, thus ensuring the sovereignty and strategic autonomy of the Union and promoting the competitiveness and sustainability of the Union’s industry. Therefore, immediate action is required to support the development and manufacturing in the Union of critical technologies, which constitute the Union’s primary strategic deficiencies. Developing and manufacturing critical technologies, builds upon the value chains of interlinked economic actors, operating across firms of different sizes, including small and medium-sized enterprises (SMEs), sectors and borders. Therefore, the Union should also safeguard and strengthen the value chains of those critical technologies and their associated services that are critical for and specific to the activities of developing or manufacturing those critical technologies, thereby reducing the Union’s strategic dependencies and preserving the integrity of the internal market, and should address existing labour and skills shortages in those sectors through life-long learning, education, training projects and apprenticeships and the creation of attractive quality jobs accessible to all.

(5)

To qualify as critical, technologies should be required either to bring an innovative element with a significant potential to the internal market, or to contribute to reducing or preventing the strategic dependencies of the Union. When assessing the economic potential of critical technologies to the internal market, account should be taken of the fact that measures carried out in a single Member State can have spillover effects in other Member States. When assessing whether a technology contributes to reducing or preventing the strategic dependencies of the Union, account should be taken of the analysis carried out at Union level to identify the risks which have potential effects on the entire Union. The Commission should issue guidance on how the technologies in the three sectors within the scope of this Regulation could be considered to be critical, as well as the conditions on the basis of which those technologies can qualify as critical, in order to promote a common interpretation of the projects, companies and sectors to be supported under the relevant programmes in light of the common strategic objectives of the relevant programmes and this Regulation. In that guidance the Commission should also clarify the notion of value chain and associated services that are critical for and specific to the development or manufacturing of the final products. That guidance should be without prejudice to other guidance on specific programmes.

(6)

There is a need to support critical technologies in the following sectors: digital technologies and deep tech innovation, clean and resource-efficient technologies, and biotechnologies. Deep tech innovation should be understood to be those that have the potential to deliver transformative solutions, rooted in cutting-edge science, technology and engineering, including innovation that combines advances in the physical, biological and digital spheres. Digital technologies should include, in particular, those that contribute to the targets and objectives of the Digital Decade Policy Programme 2030, as well as multi-country projects as defined in Decision (EU) 2022/2481. Clean and resource-efficient technologies should include, in particular, net-zero technologies as defined in the Net-Zero Industry Act. Biotechnologies should be understood to be the application of science and technology to living organisms, as well as parts, products and models thereof, to alter living or non-living materials for the production of knowledge, goods and services, including the technologies referred to in the statistical definition of biotechnology of the Organisation for Economic Cooperation and Development, as well as the Union List of Critical Medicines as referred to in the Commission communication of 24 October 2023 entitled ‘Addressing medicine shortages in the EU’ and their components. Projects recognised as strategic under the Net-Zero Industry Act, where those projects comply with the criteria of resilience and competitiveness defined in the Net-Zero Industry Act, and under the Critical Raw Materials Act should be automatically deemed to contribute to the objectives of this Regulation. Digital technologies and deep tech innovation, clean and resource-efficient technologies and biotechnologies which are the subject of an important project of common European interest (IPCEI) approved by the Commission pursuant to Article 107(3), point (b), of the Treaty of the Functioning of the European Union (TFEU) should be deemed critical, and individual projects within the scope of such an IPCEI should be eligible for funding, in accordance with the rules of the relevant programme, to the extent that the identified funding gap and the eligible costs have not yet been completely covered.

(7)

Strengthening the development and manufacturing capacity of technologies in the Union will not be possible without a sizeable skilled workforce. However, labour and skills shortages, which have increased in all sectors including those considered key for the green and digital transitions, are expected to increase further in light of demographic change and endanger the rise of technologies in the relevant sectors identified in this Regulation. It is therefore necessary to boost the participation of more people in the labour market of the relevant sectors, in particular through investments in learning and life-long learning, the enhancement of relevant skills and the creation of quality jobs and apprenticeships for young and disadvantaged persons who are not in employment, education or training. Such support will complement a number of other actions that have the aim of meeting the skills needs stemming from the green and digital transitions outlined in the EU Skills Agenda set out in the Commission communication of 1 July 2020 entitled ‘European Skills Agenda for sustainable competitiveness, social fairness and resilience’. Those actions have an important role to play in promoting a mindset of reskilling and upskilling, boosting the competitiveness of Union undertakings, in particular SMEs, and contributing to the creation of quality jobs with a view to realising the full potential of the green and digital transitions in a socially fair, inclusive and just manner.

(8)

The scale of investment needed for the green and digital transition requires a full mobilisation of funding available under existing Union programmes, including those granting a budgetary guarantee for financing and investment operations and implementation of financial instruments and blending operations. Such funding should be deployed in a more flexible manner, to provide timely and targeted support for critical technologies in strategic sectors. Therefore, a Strategic Technologies for Europe Platform (STEP) should be set up in order to contribute to providing an answer to Union investment needs by helping to better channel the existing Union funds towards critical investment, including in Union-wide and cross-border projects, that have the aim of supporting the development or manufacturing of critical technologies in strategic sectors, while preserving a level playing field in the internal market, preserving cohesion and that have the aim of achieving a geographically balanced distribution of projects financed under the STEP in accordance with the respective programme mandates.

(9)

When implementing programmes and activities under this Regulation, the Commission and Member States are encouraged to promote and prioritise projects in Net-Zero Acceleration Valleys as defined in the Net-Zero Industry Act, projects in territories included in the territorial Just Transition Plan referred to in Regulation (EU) 2021/1056 of the European Parliament and of the Council (7), and in less-developed and transition regions, as well as in more developed regions in Member States whose average GDP per capita is below the EU-27 average measured in purchasing power standards and calculated on the basis of Union figures for the period 2015 to 2017.

(10)

The STEP should mobilise resources within the existing Union programmes, including InvestEU established by Regulation (EU) 2021/523 of the European Parliament and of the Council (8), Horizon Europe established by Regulation (EU) 2021/695 of the European Parliament and of the Council (9), the European Defence Fund established by Regulation (EU) 2021/697 of the European Parliament (10) and the Innovation Fund established by Directive 2003/87/EC of the European Parliament and of the Council (11), the European Regional Development Fund (ERDF) and the Cohesion Fund established by Regulation (EU) 2021/1058 of the European Parliament and of the Council (12), the European Social Fund Plus (ESF+) established by Regulation (EU) 2021/1057 of the European Parliament and of the Council (13),

the Just Transition Fund (JTF) established by Regulation (EU) 2021/1056 of the European Parliament and of the Council (14), the Recovery and Resilience Facility established by Regulation (EU) 2021/241 of the European Parliament and of the Council (15), the EU4Health Programme established by Regulation (EU) 2021/522 of the European Parliament and of the Council (16), and the Digital Europe Programme established by Regulation (EU) 2021/694 of the European Parliament and of the Council (17). Resources mobilised with those Union programmes should be accompanied by additional funding of EUR 1,5 billion to the European Defence Fund for projects that contribute to the STEP objectives.

(11)

A Sovereignty Seal should be awarded to projects contributing to the STEP objectives, provided that the project has been assessed and complies with the minimum quality requirements, in particular eligibility, exclusion and award criteria, provided in calls for proposals under Horizon Europe, the European Defence Fund, the Innovation Fund, the EU4Health Programme or the Digital Europe Programme, regardless of whether the project has received funding under one of those instruments. Those minimum quality requirements are established with a view to identifying high-quality projects. The Sovereignty Seal should be awarded in line with the specific eligibility conditions defined in the calls for proposals under the programmes concerned, which may include geographical limitations, if appropriate and foreseen in the respective legislative acts governing those programmes. When preparing the scope of the calls for proposals that could be awarded a Sovereignty Seal, the Commission should include, where appropriate, the requirement for project proposals to indicate how they are expected to contribute to the strengthening and structuring of local networks of industrial actors and to job creation. Those calls should, where possible and appropriate, be continuously open. The Sovereignty Seal should be used as a quality label, to help projects attract public and private investments by certifying its contribution to the objectives of STEP. Moreover, the Sovereignty Seal should promote better access to Union funding, in particular by facilitating cumulative or combined funding from several Union instruments. Member States should also be encouraged to take into account the Sovereignty Seal when granting financial support through their own programmes.

(12)

To that end, it should be possible to rely on assessments made for the purposes of other Union programmes in accordance with Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (18), in order to reduce the administrative burden for beneficiaries of Union funds and encourage investment in priority technologies. Provided that they comply with the provisions of Regulation (EU) 2021/241, Member States should consider including projects that have been awarded the Sovereignty Seal when revising their recovery and resilience plans and should be able to consider including projects when deciding on investment projects to be financed from their share of the Modernisation Fund established pursuant to Directive 2003/87/EC. The Sovereignty Seal should also be taken into account by the Commission in the context of the procedure provided for in Article 19 of Protocol No 5 on the Statute of the European Investment Bank annexed to the Treaty on European Union (TEU) and the TFEU (the ‘EIB Statute’) and of the policy check laid down in Regulation (EU) 2021/523. In addition, the implementing partners should be required to examine projects that have been awarded the Sovereignty Seal where they fall within their geographic and activity scope in accordance with that Regulation. Authorities in charge of the programmes that fall within the scope of this Regulation should consider supporting strategic projects recognised in accordance with the Net-Zero Industry Act and the Critical Raw Materials Act that fall within the scope of this Regulation and for which rules on cumulative funding could apply.

(13)

The STEP should be implemented in an effective, efficient, fair and transparent manner. To that end, the Commission should be charged with the awarding and promotion of the Sovereignty Seal, with the management of a new publicly available website (the ‘Sovereignty Portal’) and with liaising with national competent authorities and stakeholders that are relevant to achieve the STEP objectives. The Commission should also promote consistency, coherence, synergy and complementarity among Union programmes to support projects contributing to the STEP objectives.

(14)

The Sovereignty Portal should be set up by the Commission to provide information on available support for projects contributing to the STEP objectives. To address the needs of companies and project promoters seeking funds for STEP projects under Union funding programmes, the Sovereignty Portal should display in an accessible and user-friendly manner the funding opportunities for STEP investments available under the Union budget. That should include information about directly managed Union programmes, such as Horizon Europe, the European Defence Fund, the Innovation Fund, the EU4Health Programme, the Digital Europe Programme and other Union funding sources, such as InvestEU, the Recovery and Resilience Facility, the ERDF, the Cohesion Fund, the ESF+ and the JTF. Moreover, the Sovereignty Portal should help increase the visibility for STEP investments towards investors, by listing the projects that have been awarded a Sovereignty Seal. The Sovereignty Portal should also list the national competent authorities responsible for acting as contact points for the implementation of the STEP at national level. The Commission should ensure the complementarity of the Sovereignty Portal with similar platforms and avoid overregulation and administrative burden.

(15)

The Commission should monitor the implementation of the STEP objectives to track progress towards the Union’s policy objectives. That monitoring should be conducted in a manner that is targeted and proportionate to the activities carried out under the STEP to avoid overregulation and administrative burden, in particular for the beneficiaries of funding. In order to ensure accountability to Union citizens, the Commission should report annually to the European Parliament and to the Council on the progress of the implementation of the STEP objectives under the respective programmes, on the overall expenditure of the STEP broken down by programme, and on the performance of the STEP based on the performance indicators provided for by those programmes. Where available, information should be provided on the STEP’s qualitative and quantitative contribution to cross-border projects and to projects per Member State.

(16)

While the STEP relies on the reprogramming and reinforcement of existing programmes for supporting strategic investments, and reducing the Union’s strategic dependencies, it is also an important element for testing the feasibility and preparation of possible new interventions to support sovereignty and competitiveness in strategic sectors and to strengthen the Union’s industrial policy. The STEP should in particular serve as a basis for considering possible similar actions, such as a European Sovereignty Fund.

(17)

The Commission should carry out an interim evaluation of this Regulation, in which it should assess the relevance of the actions undertaken under this Regulation in reducing the Union’s strategic dependencies and in strengthening its autonomy. It should also assess the feasibility of expanding the Sovereignty Portal to combine all existing publicly available websites and provide information on Union programmes under direct, shared and indirect management in a single portal as well as the feasibility of setting up a simulator to provide guidance to project promoters on the Union programmes or funds for which their particular project could be eligible.

(18)

The Innovation Fund supports investments in innovative low-carbon technologies, which fall within the scope of this Regulation. The Innovation Fund will therefore be instrumental in supporting the development or manufacturing in the Union of critical clean and resource-efficient technologies. When designing and implementing calls for proposals or competitive bidding under the Innovation Fund, the Commission should consider projects recognised as strategic under the Net-Zero Industry Act, which are deemed to contribute to the STEP objectives.

(19)

In order to extend possibilities for supporting investments that have the aim of strengthening industrial development and reinforcement of value chains in strategic sectors, the scope of support from the ERDF should be extended by providing for new specific objectives under the ERDF, without prejudice to the rules on eligibility of expenditure and climate spending laid down in Regulation (EU) 2021/1058 and Regulation (EU) 2021/1060 of the European Parliament and of the Council (19). In strategic sectors, it should also be possible to support productive investments in enterprises other than SMEs, while preserving a focus on SMEs, that could make a significant contribution to the development of less developed and transition regions, as well as in more developed regions of Member States with a GDP per capita below the EU-27 average. Managing authorities are encouraged to promote the collaboration between large enterprises and local SMEs, supply chains, innovation and technology ecosystems. That would allow for the reinforcement of the Union’s overall capacity to strengthen its position in those sectors by providing access to all Member States for such investments, thus counteracting the risk of increasing disparities. The resources programmed for those new specific objectives should be limited to a maximum of 20 % of the initial national allocation of the ERDF in accordance with Regulation (EU) 2021/1060.

(20)

In order to keep a high level of ambition in meeting climate objectives in cohesion policy, while at the same time allowing for flexibility between the Cohesion Fund and the ERDF, the amount of the climate contribution of the Cohesion Fund that exceeds 37 % of its total allocation should be allowed to be taken into account when calculating the climate contribution of the ERDF on the one hand and the amount of the climate contribution of the ERDF that exceeds 30 % of its total allocation should be allowed to be taken into account when calculating the climate contribution of the Cohesion Fund on the other.

(21)

The scope of support of the JTF should also be extended to cover investments in technologies covered by this Regulation and to address shortages of labour and skills that are necessary to realise those investments, contributing to the STEP objectives by large enterprises while preserving a focus on SMEs, provided that such investments are compatible with the expected contribution to the transition to climate neutrality as set out in the territorial just transition plans in accordance with Regulation (EU) 2021/1056. The support provided to those investments should not require a revision of the territorial just transition plan where that revision would be exclusively linked to the gap analysis justifying the investment from the perspective of job creation. In the context of support for enterprises other than SMEs, consideration should also be given to investments contributing to the creation of apprenticeships and jobs or providing education or training for new skills.

(22)

The ESF+, which is the main Union Fund for investment in people, provides a key contribution to promote the development of skills. In order to facilitate the use of the ESF+ for the STEP objectives, it should be possible to use the ESF+ to cover investments that have the aim of achieving a skilled and resilient workforce ready for the future world of work.

(23)

In order to help accelerate investments and provide immediate liquidity for investments supporting the STEP objectives under the ERDF, the ESF+ and the JTF, an additional amount of exceptional pre-financing should be provided in the form of a one-off payment with respect to the priorities dedicated to investments supporting the STEP objectives. The additional pre-financing should apply to the whole of the JTF allocation given the need to accelerate its implementation and the strong links of the JTF to support Member States towards the STEP objectives. The rules applicable to those amounts of exceptional pre-financing should be consistent with the rules applicable to pre-financing provided for in Regulation (EU) 2021/1060. Moreover, to further incentivise the uptake of those investments and ensure their faster implementation, the possibility for an increased maximum Union co-financing rate of 100% should be available for the STEP priorities. When implementing the STEP objectives, managing authorities should be encouraged to apply certain social criteria and promote social positive outcomes, such as creating apprenticeships and quality jobs for young disadvantaged persons, in particular young persons not in employment, education or training, applying the social award criteria set out in the Directives 2014/23/EU (20), 2014/24/EU (21) and 2014/25/EU (22) of the European Parliament and of the Council, where a project is implemented by a body subject to those Directives, and paying the applicable wages as agreed through collective bargaining.

(24)

Regulation (EU) 2021/1060 should be amended in order for projects that have been awarded a Sovereignty Seal to be able to benefit from better access to Union funding, in particular by facilitating cumulative or combined funding from several Union instruments. To that end, it should be possible for managing authorities to grant support from the ERDF or the ESF+ directly, for operations that have been awarded a Sovereignty Seal.

(25)

In order to reduce the administrative burden and to ensure a timely deployment of the STEP, it should be possible, by way of derogation from the applicable rules, to exclude from the mid-term review of the ERDF, the ESF+, the Cohesion Fund and the JTF provided for in Regulation (EU) 2021/1060 priorities that have been included to address investments contributing to the STEP objectives. It should be possible for such programme amendments to definitively allocate the totality or part of the flexibility amount for the years 2026 and 2027. The Commission should approve programme amendments that are exclusively related to the introduction of priorities contributing to the STEP objectives and submitted by 31 August 2024, within two months of their submission by a Member State. Moreover, it should also be possible to introduce any corresponding amendments to the Partnership Agreements referred to in Regulation (EU) 2021/1060 and have them approved in an expedited way by the Commission.

(26)

The regulatory framework for the implementation of the 2014-2020 programmes has been adapted over the past years to provide Member States and regions with additional flexibility in terms of implementation and more liquidity to tackle the effects of the COVID-19 pandemic and Russia’s war of aggression against Ukraine. Those measures, introduced at the end of the programming period, require sufficient time and administrative resources to be fully exploited and implemented, in particular at a time where Member States focus resources on revising the 2021-2027 operational programmes linked to the STEP objectives. With a view to alleviating the administrative burden on programme authorities and to prevent possible loss of funds at the time of closure for purely administrative reasons, the deadlines for the administrative closure of the programmes under the 2014-2020 period in Regulations (EU) No 1303/2013 (23) and (EU) No 223/2014 (24) of the European Parliament and of the Council should be extended. More specifically, the deadline for the submission of the final payment application should be extended by 12 months. Furthermore, the deadline for the submission of the closure documents should also be extended by 12 months. In the context of those amendments, it is appropriate to clarify that distribution of food and material bought until the end of the eligibility period (end of 2023) should be allowed to continue after that date.

In order to ensure a sound implementation of the Union budget and respect for the payment ceilings, payments to be made in 2025 should be capped per programme at 1 % of the financial appropriations from resources under the multiannual financial framework for the years 2021 to 2027, laid down in Council Regulation (EU, Euratom) 2020/2093 (25). Amounts due that exceed the ceiling of 1 % of programme appropriations per fund for 2025 should not be paid in 2025 nor in subsequent years but only used for the clearance of pre-financing. Unused amounts should be decommitted in accordance with Regulation (EU) No 1303/2013 at the time of closure. In order to ensure that the outermost regions can make full use of support from the funds covered by this Regulation, it should be clarified that, for the purposes of the flexibility provided in Regulation (EU) No 1303/2013, the additional special allocations for the outermost regions should be considered to be part of the ERDF allocation to the same category of region as the outermost region concerned. Despite different eligibility rules applicable to the additional special allocation, it should be possible also to apply that flexibility between the additional special allocation and other ERDF allocations to the same category of regions within a programme.

(27)

The flexibilities provided for the 2014-2020 programming period have helped Member States in their crisis response and recovery efforts, and have helped them face the additional strain on public budgets caused by Russia’s war of aggression against Ukraine. In order to allow Member States to deal with continued budget pressure, in line with the possibility provided for in Regulation (EU) No 1303/2013, the extension of the possibility to apply a Union co-financing rate of 100 % to cohesion programmes should be retroactively provided for the final accounting year from 1 July 2023 to 30 June 2024, where a Member State notifies the Commission before the submission of the final application for an interim payment for the final accounting year, in accordance with budget appropriations and subject to available funding.

(28)

InvestEU is the Union’s flagship programme to boost investment, especially the green and digital transition, by providing demand-driven financing, including through blending mechanisms, and technical assistance. That approach contributes to the crowding in of additional public and private capital under the current policy windows. To ensure a full absorption of available funds and provided that implementing partners do not have sufficient capacity to absorb the 25 % of the EU guarantee established by Regulation (EU) 2021/523 that is earmarked for them, the Commission should be able to grant more than 75 % of the EU guarantee to the EIB Group. In that context, the Commission should encourage and assist the implementing partners other than the EIB Group to absorb the funding that is available to them in full. Member States are encouraged to contribute to the Member State compartment of InvestEU to support financial products in line with the STEP objectives under the current policy windows, without prejudice to applicable State aid rules. It should be possible for Member States to include as a measure in their recovery and resilience plans a cash contribution for the purpose of the Member State compartment of InvestEU to support STEP objectives under the current policy windows. That additional contribution to support STEP objectives should be allowed to reach up to 6 % of their recovery and resilience plan’s total financial allocation to the Member State compartment of InvestEU. Additional flexibility and clarifications should also be introduced to better pursue the STEP objectives. For projects contributing to the STEP objectives, best efforts should be made to ensure that, at the end of the investment period, a wide range of sectors and regions are covered and excessive sectoral or geographical concentration is avoided.

(29)

Horizon Europe is the Union’s key funding programme for research and innovation, and the European Innovation Council (EIC) provides for support, in particular for innovations with breakthrough potential and of a disruptive nature with scale-up potential that may be too risky for private investors. Additional flexibility should be provided for under Horizon Europe, so that the EIC Accelerator can provide equity-only support to non-bankable SMEs, including start-ups, and non-bankable small mid-caps, carrying out innovation, in particular to those working on the technologies supported by the STEP, regardless of whether they previously received other types of support from the EIC Accelerator. The implementation of the financial instrument which is the part of the EIC Accelerator that provides investment through equity or other repayable form (the ‘EIC Fund’) is currently limited to a maximum investment amount of EUR 15 million except in exceptional cases and cannot accommodate follow-up financing rounds or larger investment amounts. Allowing for equity-only support for non-bankable SMEs and small mid-caps would address the existing market gap, in particular for investment needs in the range of EUR 15 to 50 million. Moreover, experience has shown that the amounts committed for the EIC Pilot under Horizon 2020 established by Regulation (EU) No 1291/2013 of the European Parliament and of the Council (26) are not fully used. Regulation (EU) 2021/695should also be amended to reflect the increased envelope for the European Defence Fund.

(30)

The EIC plays a pivotal role in offering initial funding to fast-growing start-ups and small mid-caps. With its specialised knowledge, the EIC is ideally positioned to enhance funding opportunities for companies seeking capital for scaling up beyond the initial innovation stage. Considering the central role of the EIC Fund for the success of the STEP, the legislative provisions on the functioning of the EIC should be clarified.

(31)

The European Defence Fund is the leading programme for enhancing the competitiveness, innovation, efficiency and technological autonomy of the Union’s defence industry, thereby contributing to the Union’s open strategic autonomy. The development of defence capabilities is crucial, as it underpins the capacity and the autonomy of the Union’s industry to develop defence products and the independence of Member States as the end users of such products. An additional envelope should therefore be made available to support projects contributing to the development of defence applications within the scope of this Regulation.

(32)

Since the objectives of this Regulation, namely to strengthen the Union’s sovereignty and security, accelerate its green and digital transitions, enhance its competitiveness and reduce its strategic dependencies cannot be sufficiently achieved by the Member States, but can rather be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 TEU. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary to achieve those objectives,