CEPS欧洲政策研究中心-The-opportunities-of-the-Modernisation-Fund-for-the-energy-transition-in-Central-and-Eastern-Europe-_8211-CEPS_8页_624kb

Summary of The Opportunities of the Modernisation Fund for the Energy Transition in Central and Eastern Europe

Core Content

The EU Modernisation Fund is a new financial instrument introduced as part of the post-2020 reform of the EU Emissions Trading System (ETS) for the fourth trading period (2021-2030). It aims to support the modernisation of energy systems in Central and Eastern European (CEE) member states with lower GDP per capita, specifically those below 60% of the EU average. These countries include Poland, the Czech Republic, Hungary, Croatia, Slovakia, Estonia, Lithuania, Latvia, Bulgaria, and Romania.

The fund will be financed through the auctioning of up to 2% of EU ETS allowances, which is estimated to generate between €6.2 billion and €9.3 billion. Additionally, the fund may be increased by up to 0.5% through the transfer of Article 10c derogation and solidarity allowances. This would allow for more substantial investments in the low-carbon transition.

Main Viewpoints

• Purpose: The Modernisation Fund is designed to support investments in renewable energy, energy efficiency, energy storage, interconnections, and just transition in carbon-dependent regions.
• Eligibility: It is available to CEE countries with a GDP per capita at market prices below 60% of the EU average.
• Exclusions: The fund cannot support fossil fuel-based energy generation, except in Bulgaria and Romania, where it may finance refurbishment of coal power plants used for district heating.
• Governance: The European Investment Bank (EIB) will manage the auctioning of allowances, revenue collection, and project selection. Member states will be responsible for fund operations.
• Priority Projects: At least 70% of the fund's resources will be allocated to priority projects, such as renewables, energy efficiency, storage, and interconnections, which can be financed up to 100%.
• Non-Priority Projects: These must align with the EU 2030 Climate and Energy Policy Framework and the Paris Agreement. They can be funded up to 70% if endorsed by the EIB, or require two-thirds majority in the investment committee if not endorsed.
• Comparison with Article 10c Derogation: The Modernisation Fund offers greater flexibility and funding potential compared to the Article 10c derogation, which has a 70% financing limit and is limited to ETS-covered sectors. Transferring allowances to the Modernisation Fund could enhance the relevance and operability of ETS financing for the energy transition.

Key Information

• Estimated Value: The total fund is expected to be €6.2 billion to €9.3 billion based on current EU ETS cap and allowance prices.
• Country Shares: Table 1 outlines the distribution of the 2% allocated to each beneficiary member state, with Poland receiving the largest share (43.41%).
• Funding Mechanism: The EIB plays a central role in selecting and financing projects, ensuring they align with climate and energy goals.
• Long-Term Impact: The fund can support large-scale investments and long-term projects that may not be immediately profitable but are essential for decarbonisation.
• Future Steps: The rulebook for the Modernisation Fund is expected to be finalised in 2020 as an implementing act.

Conclusion

The Modernisation Fund represents a crucial opportunity for CEE countries to finance the energy transition. By streamlining the ETS funding mechanisms and increasing the fund's size, these countries can accelerate investments in renewable energy, energy efficiency, and grid modernisation. The fund's flexibility and long-term focus make it a key instrument in achieving the EU's decarbonisation goals and supporting just transition in carbon-dependent regions.