Modernisation Fund

The Modernisation Fund is a key financial instrument established by the European Union to support the low-carbon energy transitions in ten Eastern EU Member States: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia. Funded by revenues from the EU Emissions Trading System (ETS), the Modernisation Fund accelerates strategic projects that drive the modernisation of energy systems in these countries, fostering sustainability, innovation and economic growth. The fund is a critical tool to help the EU meet its climate goals under the European Green Deal and the Fit for 55.

The Modernisation Fund is financed through revenues generated by 2-2.5% of the total ETS allowances allocated for the period 2021–2030. Depending on market conditions and the carbon allowance price, the fund is expected to provide up to €48 billion by 2030. These funds are distributed among eligible Member States, with larger allocations to high emission and financially constrained countries – such as the Czech Republic, Poland and Romania. The Modernisation Fund plays a crucial role in ensuring a fair and inclusive energy transition across Europe, particularly for regions with a higher dependency on fossil fuels. This helps balance economic growth with environmental responsibility.

The projects that can be funded through the Modernisation Fund target significant reductions in greenhouse gas emissions, improvements in energy efficiency, and modernisation of the energy infrastructure. This includes generating and using electricity from renewables (including wind, solar, hydropower and hydrogen), reducing overall energy use in industry, transport, buildings, agriculture and waste, district heating networks, modernising electricity grids to support the integration of renewable energy and energy storage, the increase of interconnections among Member States and zero-emission mobility infrastructure. These projects play a vital role in accelerating the EU’s transition to a low-carbon economy.

Project proposals for funding under the Modernisation Fund must go through several key stages:

1. Project proponents must apply for funding through their government, directly or through dedicated calls for projects.
2. Member States select the investments they wish to submit for the Modernisation Fund support.
3. The EIB validates whether the project qualifies as a priority investment.
4. The European Commission and the EIB transfer the financial resources to the beneficiary Member States.
5. The Member State and the project promoter implement the funding agreement to carry out the energy project. This highly structured process ensures that the projects supported under the Modernisation Fund align with EU climate and energy policies.

european economics leverages its expertise in public funding for strategic energy projects to help clients access State aid through the Modernisation Fund. We assist with all aspects of project development, ensuring applications are designed to maximise funding potential and reduce risk of rejection. From preparing comprehensive application files – including the funding gap calculations – to navigating the evaluation process, we provide end-to-end support to secure the funding. With our proven track record in State aid funding procedures, european economics is your trusted partner in securing Modernisation Fund support for strategic energy projects in Eastern EU countries.