Co-financing rates

  • 70% of the MF’s resources are to be used to support priority investments
  • 30% of the MF’s resources can be allocated to non-priority investments

Up to 70% of the relevant costs of a non-priority investment can be covered by the MF

The Modernisation Fund is a dedicated funding programme to support 10 lower-income EU Member States in their transition to climate neutrality by helping to modernise their energy systems and improve energy efficiency. It is funded from revenues from the auctioning of 2% of the total allowances for 2021-30 under the EU Emissions Trading System (EU ETS) and additional allowances transferred by beneficiary MSs.

The beneficiary Member States are Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia.

Which sectors are supported?

  • Generation and use of energy from renewable sources
  • Energy efficiency
  • Energy storage
  • Modernisation of energy networks, including district heating, pipelines and grids
  • Just transition in carbon-dependent regions: redeployment, re-skilling and upskilling of workers, education, job-seeking initiatives and start-ups

The Modernisation Fund is recognised in the European Green Deal Investment Plan as one of the key funding instruments contributing to the objectives of the European Green Deal.

Conditions for financing

To obtain financing, the beneficiary Member State has to:

  • demonstrate that the investment complies with the ETS Directive requirements
  • have sufficient funds available on its Modernisation Fund account
  • provide evidence that the investment proposal is in line with the State aid rules
  • confirm that the investment complies with any other applicable requirements of Union and national law
  • confirm that there is no double funding of the same costs with another Union or national instrument.

Priority investments have to fall into a priority area as defined by the ETS Directive, with the EIB confirming this.

The share of the funds allocated to priority investments has to be at least 70% of the total amount of funds used by the beneficiary Member State. The Commission will check this for each beneficiary Member State before issuing each disbursement decision.

Financing an investment from the Modernisation Fund

The Modernisation Fund will operate under the responsibility of the beneficiary Member States, who will work in close cooperation with the European Investment Bank (EIB), the Investment Committee set up for the fund and the European Commission.

Key steps in the financing process:

  • Member States select the investments they wish to submit for Modernisation Fund support. No direct applications by project proposals can be sent to the EIB or the Commission.
  • Member States submit the proposed investments to the EIB, the Investment Committee and the Commission. Submissions can be made on a rolling basis, but the Investment Committee will meet twice a year, as of 2021.
  • The EIB confirms if the investment is a priority investment as defined by the ETS Directive. For non-priority investments, the EIB conducts a technical and financial due diligence assessment and the Investment Committee assesses the proposal and makes its recommendation on its financing.
  • The Commission takes a disbursement decision once an investment is confirmed as priority by the EIB, or recommended for financing by the Investment Committee as non-priority. There will be two disbursement decisions per year, covering investments in all beneficiary Member States.
  • The EIB transfers the resources to the beneficiary Member States in accordance with the disbursement decision within 30 days.

Example: Renovation (modernization) of multi-apartment buildings – Lithuania 

Type of investment: priority investment

Date of confirmation: 16/03/2023

Disbursed amount: €1 million 

The main objective of the investment is to improve energy efficiency in multi-apartment buildings and reduce greenhouse gases emissions. The scheme supports energy efficiency measures within renovation of multi-apartment buildings. It addresses buildings that have been constructed in accordance with the technical construction regulations in force before 1993.

For checking the legal background of the Modernisation Fund, click here.