Key facts
- Twelve EU countries are seeking to extend the Modernisation Fund beyond its 2030 termination date.
- The fund, which draws revenue from the EU's carbon market (ETS), has supported energy transition projects since 2021.
- The member states argue that continued funding is essential for their energy security and economic competitiveness.
- These nations are historically more dependent on fossil fuels and face significant investment needs for the shift to renewables.
- The request is made in anticipation of a revision to the Emissions Trading System (ETS).
Twelve European Union member states have formally requested the European Commission to extend and enhance the Modernisation Fund, a key financial instrument supporting lower-income countries in their energy transition efforts. The fund, which has been operational since January 2021 and is financed by a portion of the EU's carbon market revenues, is currently slated to conclude by 2030.
In a letter addressed to Climate Action Commissioner Wopke Hoekstra, the countries—Croatia, Bulgaria, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia—argue that the ongoing geopolitical instability and rising energy prices necessitate continued EU financial support. These nations, historically more dependent on fossil fuels, contend that ending the fund in 2030 would impede the bloc's economic competitiveness and energy security.
The letter, sent in anticipation of an upcoming revision of the Emissions Trading System (ETS), calls for a significant increase in financing aligned with the escalating challenges of the energy transition. The signatories emphasize that the Modernisation Fund has proven effective in enabling ambitious, capital-intensive investments, thereby bolstering their strategic resilience and reducing reliance on imported fossil fuels.
Several of these countries, particularly Poland, have significant reliance on coal, making the transition complex. The fund has channeled over €57 billion for the 2021-2030 period into projects aimed at cleaner energy systems. Gligor Radečić of the Central Eastern Europe Bankwatch Network acknowledged the need for continued support but cautioned against including fossil fuels, waste, and biomass incineration in the fund, warning that such inclusions could undermine the EU's decarbonisation goals and reduce available financial resources.