The Modernisation Fund supports the modernisation of energy systems and the improvement of energy efficiency in 13 lower-income EU Member States. Established in 2018 for the 2021-2030 period, it aims to help the beneficiary Member States achieve their climate targets and the objectives of the European Green Deal.
The beneficiary Member States are Bulgaria, Czechia, Estonia, Greece, Croatia, Latvia, Lithuania, Hungary, Poland, Portugal, Romania, Slovenia and Slovakia.
The Modernisation Fund primarily supports investments in 6 priority areas
- generation and use of energy from renewable sources, including renewable hydrogen
- heating and cooling from renewable sources
- the reduction of overall energy use through energy efficiency, including in industry, transport, buildings, agriculture and waste
- energy storage and modernisation of energy networks, including demand-side management, district heating, grids for electricity transmission and the increase of interconnections between Member States
- support for low-income households, including in rural and remote areas, to address energy poverty and to modernise their heating systems and infrastructure for zero-emission mobility
- just transition in carbon-dependent regions to support redeployment, reskilling and upskilling of workers, education, job-seeking initiatives and start-ups.
A maximum of 20% of the Modernisation Fund can also be used to support non-priority investments. Proposals that do not correspond to a priority area are subject to a technical and financial assessment by the EIB.
How is the Modernisation Fund financed?
The Modernisation Fund is financed by revenues from the auctioning of emission allowances under the EU Emissions Trading System (EU ETS)
- Revenues from the auctioning of 2% of the total quantity of the EU ETS allowances auctioned between 2021 and 2030
- Revenues from the auctioning of 2.5% of the total quantity of EU ETS allowances auctioned between 2024 and 2030
- Revenues from the auctioning of EU ETS allowances that Member States have decided to transfer to the Modernisation Fund. Those transfers come from the allowances distributed for the purposes of solidarity, growth and interconnections or the allowances allocated for free to electricity generators.
| Member States | Member State’s share in the first category of revenues (Annex IIb part A*) | Number of allowances as per Article 10(1) third subparagraph* (2021-2030) | Member State’s share in the second category of revenues (Annex IIb revised part B*) | Number of allowances as per Article 10(1) fourth subparagraph* (2024-2030) | Transfers from Article 10(2)(b) of the ETS Directive | Transfers from Article 10c of the ETS Directive | Total transferred allowances as per Article 10d(4)* | Total number of MF allowances |
|---|---|---|---|---|---|---|---|---|
| Bulgaria | 5.84% | 14 344 600 | 4.90% | 9 427 107 | - | - | - | 23 771 707 |
| Czechia | 15.59% | 38 293 205 | 12.60% | 24 241 131 | 33,332,220 | 95,946,974 | 129 279 193 | 191 813 529 |
| Estonia | 2.78% | 6 828 423 | 2.10% | 4 040 189 | - | - | - | 10 868 611 |
| Greece | - | - | 10.10% | 19 431 383 | - | - | - | 19 431 383 |
| Croatia | 3.14% | 7 712 679 | 2.30% | 4 424 968 | - | 5,146,608 | 5 146 608 | 17 284 256 |
| Latvia | 1.44% | 3 537 025 | 1.00% | 1 923 899 | - | - | - | 5 460 924 |
| Lithuania | 2.57% | 6 312 607 | 1.90% | 3 655 409 | - | 7,486,240 | 7 486 240 | 17 454 255 |
| Hungary | 7.12% | 17 488 622 | 5.80% | 11 158 616 | - | 4,000,000 | 4 000 000 | 32 647 238 |
| Poland | 43.41% | 106 626 556 | 34.20% | 65 797 356 | - | - | - | 172 423 912 |
| Portugal | - | - | 8.60% | 16 545 534 | - | - | - | 16 545 534 |
| Romania | 11.98% | 29 426 080 | 9.70% | 18 661 823 | 70,305,049 | 73,312,923 | 143 617 972 | 191 705 876 |
| Slovakia | 6.13% | 15 056 917 | 4.80% | 9 234 717 | 1,535,009 | 28,603,091 | 30 138 100 | 54 429 734 |
| Slovenia | - | - | 2% | 3 847 799 | - | - | - | 3 847 799 |
| Total | 100% | 245 626 713 | 100% | 192 389 931 | - | - | 319 668 114 | 757,684,758 |
* of the EU ETS Directive.
The total revenues of the Modernisation Fund amount to €57 billion from 2021 to 2030, assuming a carbon price of €75/tCO2.
Financing an investment from the Modernisation Fund
The Modernisation Fund operates under the responsibility of the beneficiary Member States, who work in close cooperation with the European Investment Bank (EIB) and the Commission. Together, they compose the Investment Committee for the Modernisation Fund (Investment Committee). Their roles are defined in the EU ETS Directive.
Key steps in the approval process
- Beneficiary Member States can submit investment proposals to the EIB and the Investment Committee at any time of the year. Interested projects cannot submit direct applications for the Modernisation Fund.
- If the proposed investment falls into a priority area and meets the requirements set out in the EU ETS Directive, the EIB confirms the investment proposal
- If the proposed investment does not fall into a priority area, it is subject to a technical and financial assessment by the EIB. The Investment Committee then decides, based on the EIB's assessment, whether to recommend the non-priority investment or not.
- Once the EIB confirms a proposed investment or the Investment Committee recommends a non-priority investment, the Commission takes a disbursement decision. There are two disbursement decisions per year.
- Once the disbursement decision is adopted, the EIB transfers resources to the Member States who submitted successful investment proposals.
More information: Modernisation Fund: How it works
Governance of the Modernisation Fund
The Modernisation Fund is implemented by the beneficiary Member States, the EIB and the European Commission.
Beneficiary Member States
The beneficiary Member States
- select the investments they would like to support, submitting them and providing the information needed for their assessment
- implement the projects funded by the Modernisation Fund by paying off the support to the project proponents or scheme managing authority(ies)
- participate in the Investment Committee
- monitor and submitg annual reports on the implementation of the Modernisation Fund’s investments
- audit the project proponents or scheme managing authorities and submitting the audit results to the EIB and the Commission
- take appropriate measures to ensure that the financial interests of the Modernisation Fund are protected.
European Investment Bank
The EIB
- manages revenues from auctioned allowances and submits them to approved investments of the beneficiary Member States
- confirms whether an investment is a priority or non-priority
- conducts financial and technical assessment of non-priority investments, which includes verifying the expected emission reductions
- acts as the secretariat of the Investment Committee.
More information: Modernisation Fund: What can be financed
Investment Committee
The Investments Committee counts 18 members: one per beneficiary Member State, three representatives of non-beneficiary Member States (Germany, Netherlands, and Sweden) elected by all non-beneficiary Member States, one Commission representative (chair) and one EIB representative.
The Investment Committee assesses the non-priority proposals and makes its recommendations on financing. The Investment Committee meets twice a year to assess non-priority investment proposals and discuss any other business relevant for the operation of the Modernisation Fund.
More information: Modernisation Fund: Investment Committee
European Commission
The Commission
- adopts disbursement decisions
- chairs the Investment Committee
- ensures compliance with the EU ETS Directive and the Implementing Regulation on the operation of the Modernisation Fund.
Type of support and synergies with other instruments
The Modernisation Fund allows beneficiary Member States to decide on the form of support they can use (grants, premium, guarantee instruments, loans or capital injections).
Co-financing from private and public entities is possible as long as State aid rules are complied with and another EU or national instrument does not fund the same costs.
Member States can also use EU financial instruments, such as:
Annual reports submitted by beneficiary Member States and produced by the Investment Committee are available on the Modernisation Fund website.
- 12/06/2024 - Commission Decision C(2024) 4190 on the disbursement of revenues from the Modernisation Fund under Directive 2003/87/EC of the European Parliament and the Council - First biannual disbursement cycle of 2024 and Annexes
- 14/12/2023 - Commission Decision C(2023) 9054 on the disbursement of revenues from the Modernisation Fund under Directive 2003/87/EC of the European Parliament and the Council - Second biannual disbursement cycle of 2023 and Annex
- 30/05/2023 - Commission Decision C(2023) 3643 on the disbursement of revenues from the Modernisation Fund under Directive 2003/87/EC of the European Parliament and the Council - First biannual disbursement cycle of 2023 and Annex
- 12/12/2022 - Commission Decision C(2022) 9480 on disbursement of revenues of the Modernisation Fund under Directive 2003/87/EC of the European Parliament and of the Council and Annex
- 23/05/2022 - Commission Decision C(2022) 3496 on disbursement of revenues of the Modernisation Fund under Directive 2003/87/EC of the European Parliament and of the Council and Annex
- 06/12/2021 - Commission Decision C(2021) 9135 on disbursement of revenues of the Modernisation Fund under Directive 2003/87/EC of the European Parliament and of the Council and Annex
- 28/07/2021 - Commission Decision C(2021) 5802 on disbursement of revenues of the Modernisation Fund under Directive 2003/87/EC of the European Parliament and of the Council and Annex