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MEMO/11/520

Brussels, 19 July 2011

Added value of Research, Innovation and Science portfolio

1. Budgetary

Most economists agree that research and innovation are the main motors for sustainable job creation and the only way to achieve sustainable exit from the economic crisis and from the accompanying austerity measures.

So EU leaders have taken a collective decision (February 2011 European Council) to maintain or increase investment in research and innovation at both national and European levels.

Reaching the EU target of investing a total of 3% of GDP (1% from public funding and 2% from business investment) in research and development by 2020 is estimated to create 3.7 million jobs and nearly € 800 billion in additional annual GDP.

Why are taxpayers funding R&D at EU level?

EU research funding generates enormous added value for Europe. €1 of EU Framework Programme funding leads to an increase in industry added value of between €7 and €14.

The long-term macro-economic impact of the current Seventh Framework programme (about €8 bn/year) amounts to 900,000 jobs, of which 300,000 in research, an extra 0.96 percent of GDP, an extra 1.57 percent of exports, and a reduction by 0.88 percent of imports.

The main 2010 "calls for proposals" (competitions for funding) alone, worth €6.4 billion, are estimated to generate at least 165 000 jobs - as well as permanently boosting growth. The 2011 calls are estimated to create 174 000 jobs.

In an online consultation done as part of the interim review of the EU's current research funding programme, known as FP7, 85% of those responding thought the programme was either totally or generally effective.

A June 2010 Eurobarometer poll shows that the public supports the use of EU funding for science and research. 74% of citizens think that collaborative research across Europe funded by the European Union will become more and more important.

Over six out of ten Europeans believe collaborative research is more creative and efficient. Cooperation between Member States is widely supported (72% of Europeans agree).

Why is it more efficient to fund some research at EU level rather than at national level?

The Commission is not proposing that all research should be done at EU level. Much of it is better performed at national and local level.

But some research is both very expensive and needs to be done on a very large scale to provide meaningful results. It is crucial to maximise value for money. Because doing certain research collaboratively at EU level avoids duplication and allows pooling of skills and existing knowledge, this is a greater added value than could be achieved by purely national spending.

For example, two collaborative cancer research projects funded by the Commission, BASIS and CAGEKID, are contributing to an international research effort coordinated by the International Cancer Genome Consortium (ICGC) which aims to elucidate comprehensively the changes in the human genome - the organism's hereditary information including genes - present in many forms of cancer. Understanding these changes is paramount for advancing prevention, early detection, monitoring and treatment of diseases which killed at least 7.6 million people worldwide in 2008

EU funded research supports the kind of pan-European research collaboration required to speedily produce industrial standards that can set the tone and be adopted at the global level. For instance, without the EU Framework Programmes, Europe would not have been at the origin of the global standard for 2G and 3G mobile phone communications.

A significant part of EU research investment is in projects for the collective public good, that would not be done by the private sector alone and can be done more coherently and economically by several countries than by one. For example, the SAFER project received €3.5 million to develop earthquake early warning systems which were developed and tested in several seismic areas across Europe.

In one other example among many, the EU has provided €10 million in funding for LifeValve, which has brought together scientists and doctors from five countries to develop a tissue-engineered, living heart valve that can be implanted in children without the need for an operation. This valve will grow with the children and minimise the need for future surgical intervention.

Why is investing more in research at EU level needed to help Europe to compete worldwide?

Pooling of research resources and knowledge is crucial if we are to compete effectively with the US and Japan, both of which have much larger populations and and therefore larger public and private research and innovation budgets than any single EU country. Emerging economies have also entered the race and are catching up fast.

Although EU research investment in real terms increased by 50% in the period 1995 to 2008, the US saw a 60% increase, while investment grew by 75% in the four most knowledge intensive countries in Asia (Japan, South Korea, Singapore and Taiwan). The pace of investment growth is even higher, at 145%, in the BRIS countries (Brazil, Russia, India, South-Africa), and in China: 855%. At this rate, China will overtake the EU in terms of volume of R&D expenditure by 2014.

Europe also needs to invest more in developing its research workforce especially in the business sector. In 2008, there were 1.5 million full-time equivalent researchers in the EU, compared with 1.4 million in the US and 0.71 million in Japan which both have lower overall populations; the EU needs at least 1 million more researchers to reach comparable per capita levels. In absolute terms China is already ahead with 1.6 million researchers in full time employment. Only 46% of the researchers in the EU work in the business sector, compared to 69% in China, 73% in Japan and 80% in the US.

Why should the EU research budget be increased in a time of austerity?

EU funding from the Framework Programmes is currently only about 5% of total public funding for R&D in Europe. Increasing this percentage very slightly, as we are proposing, would actually improve value for money for EU taxpayers.

Additional funding would help to lever in more national and private sector spending and thus help the EU reach the 3% of GDP target with all the benefits that would bring. For example, the Risk-sharing Finance Facility (RSFF) is a good demonstration of how private investment could successfully be leveraged for innovation. With €1 billion from the EU budget, we have been able to bring an additional €16.2 billion to support R&D. What is more, results from many EU-funded projects establish a knowledge base which attracts innovation investment from many quarters.

A limited increase in the budget would also increase excellence because fierce competition across the whole of Europe for EU funding drives up standards. Some research areas are highly specialized, with only a handful of experts in each country, so there is limited competition between research teams at national level. Similarly, in many industries, competition is really on an international level. EU funding helps to promote more intense competition in research, leading to higher quality. The figures illustrate the tough competition for EU funds: under the 2010 FP7 calls for proposals for collaborative cross-border projects, 12 397 applications were received of which only 2 582 could be funded.

The European Research Council (ERC) - created by the European Commission in 2007- in 2010 received some 4 880 applications for its grants to individual researchers and was able to support around 700. This fierce competition means that the very fact of receiving an ERC grant adds kudos to a scientist's CV and boosts the prestige of the host institution, even more so than any national award. This further stimulates competition and provides a powerful dynamic for driving up the quality of the overall European research system and raising its status, visibility and attractiveness. The ERC's international peer review process has become a "gold standard", and several countries have introduced reforms to their own national systems based on the ERC model.

The budget increase the Commission is proposing would also help give Europe a lead in tackling today's biggest global challenges such as climate change, energy and food security, resource efficiency, health and an ageing population. Only by pooling resources both through EU programmes and further coordination of national funding can the EU achieve the critical mass in science and research to take the lead in solving these problems – and thus at the same time get a lead in the industries of the future.

This pooling of resources also saves money for all the countries involved – a very good example is the EU Joint Programming initiative on Alzheimer's and Neuro-degenerative Diseases which brings together 24 European countries who have decided to work together – with European Commission assistance and coordination funding and steered by a Board of 15 top scientists – to tackle the challenge by making the most of their respective scientific competencies, medical strengths and social approaches. This work will build on progress already made as a result of direct EU investment of €295 million.

The Commission believes our proposals for research and innovation funding post 2013 will generate even more value for every euro, because we will be introducing more coherence and simplification, making things easier for beneficiaries so they have to spend less time dealing with paperwork and can concentrate on their real work.

2. Non-budgetary

Innovation Union

The research, innovation and science portfolio is about far more than just awarding research funding.

Commissioner Geoghegan-Quinn at political level and DG Research and Innovation at administrative level are driving the creation of an "Innovation Union" in Europe, in cooperation with many other Commissioners and services.

As the Commissioner has said : "We face an innovation emergency. We need a pro-growth, anti-crisis micro-economic environment."

So the Innovation Union is a cornerstone of the Europe 2020 Strategy. It has three main characteristics. First, a world beating science base; second, coherent, Europe-wide use of public sector intervention to stimulate the private sector; third, a concerted and determined effort to remove bottlenecks which stop ideas reaching the market. Those bottlenecks include: poor availability of finance, costly patenting, market fragmentation, outdated regulations and procedures, slow standard-setting, the failure to use public procurement strategically and fragmentation and duplication of research efforts between Member States.

The Innovation Union is partly to be achieved by EU-level legislative action – for example to set up a unitary EU patent, to build a more effective system for setting standards and to remove barriers to cross-border venture capital and to the free movement of researchers and knowledge in Europe.

Equally importantly the political commitment and experience of the Commission gives it enormous "soft power" to bring Member States together to share best practice and replace duplication and fragmentation of effort with coordination and voluntary pooling of resources and expertise.

The Innovation Union is just as much an economic policy as, for example, the eurozone governance framework .It aims to back innovators all the way - instead of putting barriers in their way. Not just business innovators but also public service and social innovators, in increasingly crucial areas like the care for the elderly sector.

We need an Innovation Union to help get our 23 million unemployed people back to work and keep them there. We need an Innovation Union to tackle society's biggest challenges: climate change, energy and food security, healthy living and an ageing society. We need an Innovation Union because Europe does not yet have an innovation culture like the US – and China and India are catching up.

The latest figures from the Nemesis economic model suggest that if the EU implements the Innovation Union concept in the three following ways alone:

  • achieve the Europe 2020 target of investing 3% of EU GDP in R&D

  • re-orient €20 billion in EU regional funding to research and innovation;

  • invest €50 billion in pre-commercial Public Procurement

We can create 6 million jobs by 2025 and raise EU GDP by 8.1%

Innovation Partnerships

The European Innovation Partnerships aim to achieve in Europe what the US and China do, which is set clear targets and then mobilise all actors in the relevant sectors to achieve them. That is easier in a unitary state like the US than in a Union of 27, but with political will, we can achieve it here.

First, the Innovation Partnerships will each focus on a specific societal challenge where, by taking a lead, Europe can improve the lives of its people and become a commercial world leader. They will have concrete and measurable goals.

Second, they will be co-driven by political, industrial and scientific stakeholders. Steering Boards will be chaired by the European Commissioner or Commissioners whose portfolio corresponds to the subject matter.

The Board will include national Ministers, MEPs and key stakeholders. Funding will be European, national and private.

Third, the Partnerships will act on the regulatory and demand sides as well as the supply side. They will, for example, help fast-track regulation and standards and deploy co-ordinated public procurement to create lead markets.

The first pilot Partnership launched in early 2011 is on active and healthy ageing. The aim is to increase the average number of healthy life years by two by 2020. That would reduce strain on social security and health budgets and help create an EU and global market for innovative products and services, with new opportunities for EU business.

There will be more Partnerships launched during 2011-12, including on energy, smart mobility and "liveable cities", water efficiency, non-energy raw materials, and sustainable and productive agriculture.

3. Examples of success stories from the Framework Programmes for Research

Here are ten among the many success stories so far:

  • European citizens will get cheaper solar energy and will pay less for solar panels thanks to "CrystalClear", a €28 million project part-funded by the Commission. Sixteen partners from eight different countries demonstrated how to cut by 50% the manufacturing costs of components for solar energy panels and other photovoltaic technology. By working together in a multidisciplinary and multinational consortium using EU funding, they were able to produce results that will increase the market share of the European photovoltaic industry and create skilled jobs.

  • The €1.9 million EU-funded EUROLIVE project has contributed to reducing coronary heart disease and strokes, and therefore also the cost of care for patients. The project demonstrated a direct link between compounds (polyphenols) found in olive oil and protection against "bad" cholesterol (low density lipoprotein). Around a tablespoon of polyphenol-rich olive oil is sufficient to have beneficial effects and can be easily integrated into a balanced daily diet. The research was undertaken on 200 healthy individuals from across Europe and used clinical trials in five different countries. Three types of olive oil were tested containing high, low and negligible levels of polyphenols and the one highest in this compound was shown to lead to higher levels of "good" cholesterol and lower levels of the damaging oxidation arising from "bad" cholesterol. 60% of coronary heart diseases and 40% of strokes can be linked to elevated cholesterol levels.

  • FLY-BAG, an EU-funded consortium of SMEs, researchers and an airline, has developed a new bomb-resistant luggage container for commercial aircraft. Conventional containers burst abruptly in response to an explosive shock-wave, causing potentially catastrophic damage to the airframe. The FLY-BAG approach is to use high strength textiles combined with energy-absorbing composites which soak up the shock-wave reducing the damage to the outer skin of the aircraft and the airframe. In around two years FLY-BAG has become a pioneering standard setter in a potentially huge world market. Spin-offs are likely in other areas such as law enforcement and security-sensitive building design. This €2.2 million EU project was able to succeed so quickly because it brought together partners from several Member States who combined the highest levels of expertise in modelling, design, materials, manufacturing and testing.

  • EU funded research involving 19 partners from 13 European countries is developing a new approach to treating Alzheimer's disease using nanoparticles. The work has shown that treatments based on nanoparticles can decrease the level of "peptides" that accumulate in the brain and characterise Alzheimer's. The goal is to tailor-make nanoparticles able to cross the blood-brain barrier and then selectively recognise and destroy the toxic peptides. The European added value is based on the cooperation between many different scientific and technological disciplines and between academia and businesses, big and small. This would not be possible at national level. In Europe there are currently around 3 million Alzheimer's sufferers and with increasing life expectancy this number is set to double in Western Europe by 2040. Every seven seconds worldwide, one new case of Alzheimer's disease is diagnosed.

  • The European Green Car Initiative is making the widespread introduction of electric vehicles in Europe a commercial reality. Bringing together 51 research projects, large equipment manufacturers such as Siemens, along with leading car manufacturers (Volkswagen and Renault) EGCI has succeeded in getting major stakeholders moving in the same direction. EGCI is tackling issues such as European standards, electricity distribution networks, smart ICT technologies, faster-charging, longer-life batteries, and lighter, stronger car components. As oil becomes scarcer and the pressure on car manufacturers to "green-up" builds, many countries are setting ambitious targets for the introduction of electric cars: China is aiming for 50% of new cars sales in 2020. The world market will be enormous, and Europe must be a mayor player; electric car technologies have the potential to create unprecedented job opportunities and growth. Total investment in EGCI amounts to €5 billion with €4 billion coming from the European Investment Bank and €1 billion mobilised under the EU research programme. Europe can become a world leader in this new sector only through collaboration, setting common standards and reaching agreement on developing compatible and complementary technologies.

  • The first micro-chip in the world smaller than 45 nanometers was developed in 2004 by European engineers receiving EU funding under the NANOCMOS project. The momentum generated by this project and subsequent ones has put EU industry in pole position in this field, opening the door to innovations in products and services ranging from communications to embedded electronics, where Europe is the world leader with a 40% share of a global market worth more than €100 billion per year.

  • A potential treatment has been found for the rare genetically-inherited disease alpha-mannosidosis, thanks to €10 million in EU research funding for three linked projects. The human enzyme product rhLAMAN (LamazymTM) is now undergoing clinical development, to demonstrate its efficacy and safety for patients. EU-funded research bringing together partners from many countries is the only effective way to find cures for rare diseases. There are at least 6 000 rare diseases, and though each one affects less than 1 in 2000 people in EU, taken together, they affect some 30 million European citizens. Member States, especially smaller ones, have neither the financial resources nor sufficient case numbers to act effectively.

  • EU-funded researchers developed groundbreaking computer technology known as Time Triggered Architecture (TTA), now widely commercialised and used in safety-critical systems such as railway signalling, real-time adjustment of speed and route in trains and aircraft, or the regulation of pressure in aeroplane cabins. The Airbus A380, for instance, has already flown more than 5 million passengers across the world using a control system for cabin pressure based on TTA. Transport safety systems are the first applications of this technology but it has the potential to become the worldwide standard for many embedded computer applications. Prototypes for renewable energy generation and medical systems have been built successfully. Other applications are expected for industrial control and automation.

  • The EU funded European and Developing Countries Clinical Trial Partnership (EDCTP) is accelerating the development of new clinical treatments to fight the three main poverty related diseases - HIV/AIDS, tuberculosis and malaria, which affect hundreds of millions of people world-wide. The EDCTP has so far supported 54 trials of new treatments including an anti-retroviral formulation for HIV-infected children, which has subsequently been approved by the US Food and Drug Administration. Developing a new drug, vaccine or microbicide, and conducting clinical trials, is far beyond the reach of the countries currently most affected, and even in Europe before 2003 efforts were fragmented and under-resourced. Only through international collaboration could such a large-scale endeavour be envisaged. The EDCTP brings together 14 EU Member States and two Associated Countries in partnership with 29 sub-Saharan African countries. It is jointly funded by the European Commission (€132 million); participating European countries (€116 million) and third party funding (€63 million) from the private sector and charities.

  • Under the €3.4 million INCLUD-ED project, researchers from 14 Member States working in schools in disadvantaged multicultural settings achieved an increase from 15% to 85% in the number of children achieving basic reading levels. The key to this success was the involvement of families – especially female relatives - and local communities, using a new approach linking education to family circumstances. The results of INCLUD-ED are now being applied in real classroom settings. Through working in an EU funded collaborative project the researchers in INCLUD-ED were able to share knowledge and draw on their different experiences and cultural backgrounds to arrive at solutions that can be applied across Europe, adapted as necessary for local contexts and customs.

4. How results will be improved in future

There have been criticisms of too much red tape in EU research and innovation funding. The Commission agrees that more can and should be done to tackle this, while maintaining and reinforcing tight control of taxpayers' money.

Commissioner Geoghegan-Quinn has already implemented significant reforms of FP7 in order to ensure even better value for taxpayers from every euro:

  • stronger focus on the grand global challenges such as climate change and food and energy security, which can only be tackled effectively through cross-border coordinated research;

  • more emphasis on growth creation and on evaluating the economic effect of research and innovation funding;

  • major simplification of procedures to get researchers out of the office and into the labs and to boost SME participation in FP7.

The Commission's Green Paper on a Common Strategic Framework sets out further radical changes envisaged under the successor programme post-2013 and therefore for the next MFF. These will need to be agreed by Member States and the European Parliament.

There will be an even clearer focus on the key global challenges, for example climate change, energy and food security, resource efficiency, health and an ageing population. This brings with it an even stronger priority for funding the projects which will do most to improve people's lives and most to boost our economy.

The existing research programmes will be brought together with the current SME-targeted Competitiveness and Innovation programme and with the European Institute of Innovation and Technology, which is pioneering a new collaboration at European level between higher education, research and business. This will mean researchers and innovators can apply in one go for different types of funding supporting the whole "innovation chain" from research to the moment when new products hit the retail shelves.

There will be less form-filling, freeing researchers to spend more time in the lab and less in the office. For example, more flat rate lump sum payments based on estimations of average costs will be introduced, replacing the need to account individually for every single test-tube purchased.

The coordination between research and innovation funding and regional funding will be improved so that there is a dual focus on supporting existing excellence in science and building excellence in regions where performance is less strong, usually as a result of a disadvantaged economic and political history.

The European Research Council will be reinforced. Its role is to use FP7 finance to fund groundbreaking research at the pinnacle of excellence, both by established "star" researchers and their most promising younger colleagues. The ERC will also redouble its efforts to attract also top research talent from outside Europe, reversing the "brain drain". There is evidence that the ERC is already helping to retain and attract leading researchers who might otherwise have pursued their careers in the US. For example, two-thirds of the ERC's grant-holders in neurosciences have had post-doctoral experience in the US; and, half of the ERC's economics grant-holders completed their PhD in the US. In 2010, a young ERC grant-holder, Professor Novoselov, received the Nobel Prize for Physics for his work on graphene. In 2011 the ERC was able to attract US Nobel prize winner James Heckman to University College Dublin to do pioneering research on health throughout the lifecycle.

More funding will be allocated to the Commission's current innovative financing schemes which have been successful in leveraging in large amounts of additional public and private funding (see above).


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