Swedish materials startup PaperShell has secured up to €40.3 million from the European Commission under the EU Innovation Fund, marking one of the larger public grants in the advanced materials space in 2026.
The funding is part of a broader €83 million project to expand PaperShell’s existing facility in Tibro, Sweden, into a full scale flagship factory. The company makes a bio based composite material that replaces aluminium, plastics, and glass fibre composites, with CO₂ reductions of up to 99.4% compared to conventional alternatives.
PaperShell presses layers of kraft paper, impregnated with a bio binder derived from agricultural waste streams, into load bearing components that are stronger than plastics, lighter than aluminium, and more versatile than glass fibre composites. That’s the core proposition: an industrial material built from renewable feedstocks that performs at the level manufacturers actually need.
How The Material Works:
PaperShell’s raw material uses residues from the forest and packaging industries, including wood chips, sawdust, and offcuts, which are refined into kraft paper pulp and then processed into kraft paper rolls. The paper is pre impregnated with a proprietary biobinder, ensuring a 100% biogenic composition.
The kraft paper is then cut, stacked, and compressed under heat and pressure, transforming it into 100% biogenic components without compromising on strength and durability. The result is a structural material that contains zero fossil carbon, and when circulated at end of life, becomes carbon negative.
The Numbers That Matter:
Replacing aluminium or glass fibre composites with PaperShell reduces CO₂ emissions by up to 98% per kg of component. Replacing polypropylene plastic delivers up to 90% reduction. The 99.4% figure cited in recent coverage refers to specific comparison scenarios based on the company’s lifecycle assessment data.
The material is NATO approved and is already in use across construction, electronics, defence, and transport sectors. The pilot plant in Tibro has been running since 2023 and has shipped more than 150,000 components to date. That’s a meaningful proof point: this isn’t a lab material, it’s already moving through real supply chains.
The Tibro Factory Plan:
The new facility will be expanded to a total of 15,600 square metres, hosting automated, modular composite production lines for components used in construction, transport, consumer goods, electronics, and defence, with a designed annual capacity of around 23,000 tonnes by 2030.
The factory will also include a production line dedicated to copper clad laminates and printed circuit boards, a strategic category given Europe’s current reliance on Asian PCB supply chains. Construction is scheduled to begin in 2027, with full operations targeted by 2030. Over its first ten years of operation, the project is expected to avoid approximately 2.6 million tonnes of CO₂ emissions.
Why The EU Backed This:
The EU Innovation Fund is financed through revenues from the EU Emissions Trading System and is one of the world’s largest climate innovation programmes. PaperShell was selected from among 359 applicants in the Medium Scale category of the Net Zero Technologies call administered by CINEA.
The grant signals where European industrial policy is heading. Decarbonisation of manufacturing is no longer treated as a long term aspiration. It’s being funded at the infrastructure level, with real capital going to companies that have demonstrated production at scale rather than concept stage technology.
Sectors Watching This Closely:
For product teams in automotive, consumer electronics, construction, and furniture, PaperShell represents a direct drop in alternative for fossil based structural components. The material can be shaped from flat 2D panels through to medium complexity 3D components, which covers a broad range of real world applications.
The new flagship factory in Tibro is explicitly designed as a template: the production system is modular and intended to be reproduced at other European sites once the model is proven at scale. That replication intent matters for procurement teams thinking ahead. Supply availability is directly tied to how quickly subsequent facilities come online.
Founders and operators building physical products in regulated sectors like defence and electronics will find the NATO approval and PCB production capability particularly relevant. It means the material has already cleared significant compliance hurdles in demanding end markets.
What to Take Away:
PaperShell’s €40.3 million EU grant closes a critical funding gap in their €83 million expansion plan. The Tibro factory, once operational by 2030, will produce 23,000 tonnes of fossil free composite material annually and is designed as the first in a replicable network of European facilities. For startups and manufacturers evaluating sustainable material alternatives, PaperShell bio composite material offers verified performance data, existing industrial supply, and a clear production roadmap. That combination is rare in the advanced materials category right now.
