Latvia’s cohesion policy at a crossroads: Balancing security priorities and green investments

Even before the European Commission announced in April 2025 that it would be seeking to propose a regulation amending EU cohesion policy funds under its mid-term review, the Latvian government had been reviewing its national spending plans for several months with the aim of identifying opportunities to redirect cohesion policy funds towards bolstering its national defence and security infrastructure.  

Latvia’s new policy direction is understood to involve reallocating flexibility amounts and potentially cutting previously planned investments. And while funds will formally remain within the main thematic priorities, including those dedicated to climate and green investments, they may also be used for dual-use purposes such as supporting renewable energy projects that also enhance energy independence and security. 

Though many amendments under the mid-term review are necessary and justified, some changes threaten to weaken climate and environmental policies. For instance, certain shifts appear unrelated to security, raising questions about their true benefits.  

With final decisions still pending, the Commission and the Latvian government must carefully assess the country’s long-term needs and the consequences of all proposed changes before proceeding with the mid-term review reallocations.  

Diverting funds from transport decarbonisation 

One of the most concerning proposals, which affects the Just Transition Fund, would see a reduction in funding for decarbonising the transport sector, undermining Latvia’s climate and energy targets. Specifically, EUR 14.7 million initially allocated for zero-emission electric buses is set to be redirected to industrial park development. 

This would be a considerable setback given the transport sector’s escalating emissions and significant investment gap. Apparently, the rationale for the decision is limited municipal interest due to doubts over the sustainability of electrified transport in rural areas with poor road conditions.  

However, instead of ditching the measure completely, the authorities should engage with municipalities to understand the obstacles and amend the programme rules while maintaining the overarching goal of zero-emission public transport. 

If no viable solution can be found, support should be redirected to other target groups within Latvia’s just transition regions, such as entrepreneurs tasked with promoting zero-emission mobility. In any event, the most important thing is to maintain investment in transport decarbonisation in alignment with the funding allocated under Latvia’s national energy and climate plan. 

There is also the risk that industrial park investments may raise overall emissions. While these parks are expected to promote a climate-neutral economy, municipalities cannot guarantee that the facilities will offer greener alternatives to existing high-emission products and services. Currently, there is no rigorous selection or monitoring mechanism in place that would ensure only climate-positive companies benefit. 

Additionally, significant funding originally designated for railway electrification is now expected to be diverted to Rail Baltica – the large-scale railway infrastructure project connecting the Baltic states and Poland. But while the project is much needed in terms of both sustainable mobility and regional defence, its ballooning costs and funding issues should not jeopardise crucial domestic railroad upgrades aimed at promoting public and zero-emission transport. 

Circular economy investments dropped 

Risks associated with the mid-term review are also evident in the likely elimination of funding for circular economy initiatives involving small and medium-sized enterprises, including projects aimed at improving product design, repair, and reuse. 

EUR 1 million previously earmarked for this purpose is now set to be channelled into energy infrastructure that strengthens Latvia’s energy security, such as mobile transformer substations, emergency generators, and improved grid capacity for industrial parks.  

Unfortunately, delays in developing regulations for the circular economy measure have made it an easy target for reallocation. Its focus on smaller, innovative projects, which typically require more administrative resources than large-scale ventures, may have also played a part. 

One possible solution could be to amend existing waste management programmes under Latvia’s cohesion policy funds, reallocating some resources to small and medium-sized enterprises pursuing waste prevention initiatives. 

Promising renovation programme needs more funding 

The Latvian government recently launched a national multi-apartment renovation programme supported by EUR 173 million in cohesion policy funding. However, the available funds as of now have already been fully reserved. This is partly due to relaxed rules allowing project applications to be submitted before all technical documentation has been finalised, which could lead to some projects failing to reach the contracting stage.  

Nevertheless, the huge interest in the scheme is encouraging. For years, the pace of building renovations in Latvia has lagged due to low public interest fuelled by financial fears and scepticism. Fortunately, the high demand now suggests a shift in public sentiment.   

This latest programme introduces several progressive elements: up to 70 per cent support for prefabricated wood-panel renovations; up to 50 per cent support for cluster renovations involving three or more neighbouring buildings; up to 45 per cent for renovations involving the installation of ventilated façades; and targeted support for individual energy efficiency measures in the Latgale region – one of Latvia’s just transition regions. 

Given this early success, additional funding should be allocated to maintain momentum. Continuity between support schemes is crucial, both for sustaining public interest and for preserving the capacity of the construction sector. 

Striking a balance 

Final decisions on the mid-term review amendments have yet to be made. But while the geopolitical crisis understandably requires funding priorities to be reassessed, this should not come at the expense of Latvia’s long-term sustainability goals.  

Public resources are limited and precious. Their use must be based on thorough and transparent assessments of needs and impacts to ensure that short-term security concerns, however pressing, do not derail the environmental transformation already underway.