More than a third of the funds from the Modernisation Fund, which supports the ‘green’ transition in less affluent EU countries, has been spent on environmentally harmful projects. These include the burning of fossil gas and waste, as well as other initiatives that actually only increase the greenhouse effect and pollution.
This is reported by Euractiv.
Misuse of funds intended for decarbonisation
The fund was established in the late 2010s to mitigate the impact of carbon charges under the EU ETS on power station operators and industrial enterprises. Around €50 billion has been earmarked for financial support for the period from 2021 to 2030. The European Commission intends to extend this for a further ten years – until 2040.
However, the activist group CEE Bankwatch has found that some of the money was not spent on environmental objectives at all. In its report, the organisation noted:
“For every €3 spent on beneficial projects, at least €1 is directed to harmful investments.”
These are projects related to fossil gas, the incineration of waste, and biomass. So far, €7.1 billion has been spent from the Modernisation Fund on such questionable initiatives, which accounts for about 35% of total expenditures. Meanwhile, Gligor Radechich of CEE Bankwatch mentioned that the actual figures may differ slightly due to issues with data transparency.
Even the European Commission’s report states that about 25% of the entire sum went to supporting natural gas projects. However, it was emphasized that following the introduction of stricter subsidy conditions in 2023, the situation has somewhat changed.
Activists nonetheless acknowledge that 2025 has been a record year for truly sustainable investments, with spending on energy efficiency exceeding €4 billion.
For reference, the Modernisation Fund was set up to help lower-income countries decarbonise, primarily targeting states in Central and Eastern Europe. Currently, Lithuania, Hungary, Czechia, Bulgaria, Slovenia, Poland, Croatia, Romania, Estonia, Slovakia, Latvia, and Greece are receiving financing from the Fund.
In June, these countries appealed to the European Commission to increase funding under the Fund. Incidentally, it uses revenue from the sale of carbon emission allowances as part of the EU Emissions Trading System (EU ETS).
In its proposals for revising the European ETS, the European Commission declared its intention to retain the Modernisation Fund as an instrument for supporting decarbonisation in lower-income countries.
