The opportunities of the Modernisation Fund for the energy transition in Central and Eastern Europe. State of play and implementation issues

The Bucharest Workshop on the Modernisation Fund was organised on the 23rd of January by the Centre for European Policy Studies (CEPS), the Energy Policy Group (EPG) and the Romanian Energy Centre (CRE).

The workshop was attended by 21 participants representing energy and industrial companies, national authorities and civil society organisations. The objective of the workshop was to discuss the opportunities that the new Modernisation Fund represents for the transition to low-carbon energy systems in Central and Eastern Europe.

Christian Egenhofer (CEPS), Radu Dudău (EPG) and Mihai Macarie (CRE) presented the introductory remarks on the general context of the European Union commitment to the decarbonisation of the economy and the transition to low-carbon energy systems. A discussion paper by Mihnea Cătuţi and Milan Elkerbout focusing on the purpose and the modus operandi of the Modernisation Fund was presented.

The Modernisation Fund is a part of the post-2020 reform of the EU Emissions Trading System (ETS) for its fourth trading. It is an instrument for enabling investments in small-scale energy projects, improvements in energy efficiency, and the modernisation of energy systems in lower income member states, with a GDP per capita of less than 60% of the EU average. The following countries will be beneficiaries: Poland, the Czech Republic, Hungary, Croatia, Slovakia, Estonia, Lithuania, Latvia, Bulgaria, Romania and Greece.

The fund will be financed through the auction of up to 2% of the total EU ETS allowances (EUAs) for the period 2021-2030 (approx. 310 million, estimated to be worth between €6.2 billion and €9.3 billion). Each individual member state will have a fixed allocated share from which projects can be financed (the share of Romania represents 11.98% of the fund, i.e. €928.45 million). The fund can be used for coal power plants only in the case of refurbishments of existing coal power plants for district heating in countries with a GDP per capita lower than 30% of the EU average (i.e. Bulgaria and Romania).

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