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Hungary’s energy transition at risk due to missed EU milestones

No matter how funds are juggled across recovery, cohesion and domestic programmes to give an impression of progress, the money lost due to delays and non-compliance will leave a serious gap in the national economy, slowing the country’s energy transition. 

Recovery and resilience plan under strain 

In late 2022, the Commission approved Hungary’s recovery and resilience plan, making disbursement conditional on the government meeting 27 ‘super milestones’ linked to the rule of law. However, implementation has been sluggish and, despite some progress, significant work remains if the government is to convince the Commission it remains on track to deliver the necessary reforms.  

At a June 2025 meeting of the Recovery and Resilience Facility monitoring committee – which is tasked with overseeing implementation of the recovery and resilience plan – the government reported most measures under the plan were still being implemented, while also indicating the need for potential modifications of measures that have yet to be launched, creating uncertainty over whether they will indeed proceed. 

In October, the government’s draft proposal outlining amendments to the plan was circulated among the monitoring committee for comment and made available for public consultation on the government’s website. Yet the proposed changes indicate that – even if Hungary were to meet all 27 ‘super milestones’ and immediately become eligible for funding under the Recovery and Resilience Facility – it would still be impossible to accomplish a considerable number of the planned reforms and investments by the August 2026 deadline. 

Cohesion policy funds on the brink  

In April 2022, the Commission formally notified Hungary it had triggered the conditionality mechanism under the Rule of Law Conditionality Regulation. 

In December 2022, following lengthy but largely unproductive negotiations with the government, the Council of the European Union decided to suspend 55% of the budgets for Hungary’s three largest cohesion policy operational programmes – Environment and Energy Efficiency (KEHOP Plusz), Integrated Transport Development (IKOP Plusz), and Territorial and Settlement Development (TOP Plusz) – totalling approximately EUR 6.3 billion. 

By late 2024, EUR 1 billion had already been lost permanently. Unless conditions are met, another EUR 1 billion risks being squandered by the end of 2025. 

Uneven cuts to energy efficiency 

The modification proposal cuts the recovery and resilience plan’s total budget of around EUR 10.4 billion by 33%. These reductions would not be spread evenly across the plan. Almost the entire budget would be slashed for the components on water management, sustainable transport, the transition to a circular economy, and the plan’s REPowerEU chapter. Additionally, the green energy transition component would lose around 41% of its budget. 

Within the energy component, the cuts mainly affect smart grid development, residential photovoltaic systems, and energy efficiency investments in public buildings. While the first two areas have already been partly implemented and could, to some extent, continue on a commercial basis, energy efficiency upgrades have long suffered from chronic underfunding. Under the modification proposal, funding for this purpose would be reduced by HUF 103.48 billion (roughly EUR 265 million), including the withdrawal of planned allocations from both the energy and REPowerEU components.  

Households are the most neglected aspect of Hungary’s energy transition, particularly those affected by energy poverty. The Home Renovation Programme – designed to improve residential energy efficiency and alleviate energy poverty, originally included in the REPowerEU chapter with a budget of around EUR 577 million – has so far been implemented to just 12%. 

However, should Hungary ultimately lose all access to Recovery and Resilience Facility funding, the costs of the Home Renovation Program are expected to be covered instead by the Environment and Energy Efficiency operational programme, leave it with less funding available for other priorities. If that happens, more than EUR 500 million earmarked for household energy efficiency under the Recovery and Resilience Facility would effectively be lost for good. 

Alternative funding options fall short 

Allocations had been made to improve the energy performance of various building types under both the recovery and resilience plan and the Environment and Energy Efficiency operational programme, with added potential to support such investments, such as hospital refurbishments, through the Modernisation Fund. 

However, the funds lost due to non-compliance with the conditionality mechanism have created a major gap in the energy transition budget that will be hard to fill. The Modernisation Fund alone cannot be expected to replace all of the lost schemes. 

Though several domestic programmes, including Otthon Start and the Family Home Creation Discount (CSOK), have been launched with support from the state budget, these programmes do not specifically target energy efficiency renovations and are therefore unsuitable for filling the gap. 

Other schemes, including the Energy Efficiency Obligation Scheme (EKR) and programmes focused on energy efficiency renovations, such as the Home Renovation Program, are mostly market-based or require starting capital in the form of initial personal financing. As a result, they primarily benefit middle-to-upper income households and remain out of reach for lower-income households. Specific schemes tailored to the needs of the most vulnerable are badly needed, yet none appear to be on the horizon. 

Unfortunately, planning under the national social climate plan – a potential long-term tool to support energy-poor households affected by the energy transition – seems to have stalled after some initial progress in 2024 and early 2025. 

Saving money at the expense of transparency 

Around 75% of the original components of the recovery and resilience plan have been cut to free up funds for two newly established components: InvestEU and a capital injection to the Hungarian Development Bank (MFB). The MFB injection is intended to support investments in economic development, a competitive workforce, the green economy, and affordable social housing.  

However, there are serious transparency and oversight concerns over the planned investments, as the policies guiding them will not be monitored or approved by the Recovery and Resilience Facility monitoring committee. Instead, oversight will be designated to separate ‘professional committees’ whose composition is not controlled by the monitoring committee. 

At a meeting of the Recovery and Resilience Facility monitoring committee held on 2 December 2025, several members representing non-governmental organisations voiced these concerns, emphasising the need for timely and adequate follow-up information on the new components, which the government and Commission are still negotiating. 

While these oversight concerns are significant, the more fundamental and urgent problem remains: numerous measures previously planned for a resilient, socially just and climate-neutral economic transition – designed through public and expert consultations – will face significant budget cuts or outright cancellation. This threatens to derail the energy transition that the MFB injection seeks to support. 

The Hungarian public, as well as the country’s affected sectors and industries, have long awaited these measures, carefully preparing for a predictable regulatory and financing environment as a precondition for ambitious decarbonisation investments. The future of EU public financing for Hungary’s energy transition hangs in the balance.

Kambarata hydropower project: greater scrutiny from international banks is needed 

However, recent public consultations on the project’s Environmental and Social Impact Assessment (ESIA) have revealed critical, unaddressed risks. The project is being presented as a national priority, but its current plan fails to adequately address serious seismic, social and environmental dangers.  

Kambarata HPP-1 is projected to have an average production of 5.6 TWh of electricity annually. Kyrgyzstan has a 34 per cent share of the project while Uzbekistan and Kazakhstan have 33 per cent each. To complete the project, around EUR 4-6 billion will be required. The EBRD is considering lending EUR 1.3 billion to support the project and the EIB another EUR 900 million.  

Experts from ‘Rivers without Boundaries’ made a detailed Cumulative Impact Assessment where they concluded that the project would result in unmitigated transboundary hydrological risks and would violate biodiversity safeguards. They’ve concluded that the project suffers from a severe deficit of good governance and public accountability and that the project will adversely affect thousands of locals in nine nearby villages.  

These risks and challenges were discussed during the second round of national consultations over the ESIA for the project, which was organised by the Ministry of Energy of the Kyrgyz Republic in Bishkek on 16 October 2025. Around 100 people – including locals, experts and NGO representatives – attended the meetings, and around 30 participated online.

The social concerns from local communities, who are dependent on cattle breeding, were mainly about the loss of their ability to continue this work if construction starts. They also expressed a need for the project to hire more locals.

The ESIA claims ‘only three households’ will be physically displaced. But it also indicates the reservoir will flood over 3,500 hectares of irreplaceable winter pasture land, threatening the livelihoods of over 1,000 households that depend on cattle breeding. Experts from ‘Rivers without Boundaries’ highlight that in the Cumulative Impact Assessment  (CIA) 50 km²  of ‘natural grasslands’ are currently left without biodiversity mitigation. Though the project’s management claims that the ‘aquatic river habitat’ and associated lands are not technically ‘lost’ but are simply being ‘converted into reservoir habitat’ and therefore do not require mitigation, experts from ‘Rivers without Boundaries’ call this a ‘blatant violation’ of the World Bank’s ‘no net loss’ requirements.  

The project will result in the destruction of over 80 kilometres of trails and 11 bridges, thereby severing access to remaining pastures. Authorities have announced plans to build an additional bridge and new roads for shepherds as well as to employ locals in the construction works, but locals did not seem convinced that these plans will actually happen. The ESIA states that construction is expected to create 600 to 3,000 new jobs  and that during the peak construction phase there will be about 7,000 workers onsite. The construction timeframe is estimated at 8.5 years.  

Another important concern comes from the Kyrgyz Republic’s National Academy of Sciences which has issued a serious warning. An active seismic fault is located directly under the proposed dam site. The institute insists that crucial seismic micro-zoning is necessary, but its experts report their warnings have been ignored by project consultants. 

Meanwhile, ecology experts from ‘Rivers without Boundaries’ have labeled the ESIA’s biodiversity section a ‘black box’. It lacks specific data about the project’s impact on the various potentially affected species. Most alarmingly, the ESIA proposes to determine if the area is a ‘critical habitat’ only after a decision has been made to implement the project.   

‘Rivers without Boundaries’ believe that this is a fundamental breach of international best practices, which require such assessments to be made prior to an implementation decision in order to determine if a project should be radically revised or abandoned. They state:

‘The ESIA does not provide a complete picture of the consequences of the hydropower plant construction for the most valuable natural aquatic habitats of the Naryn River. Consequently, the project has no mitigation plans to protect or restore habitat to compensate for degradation of a long stretch of natural river or 50 square kilometers of grasslands, and therefore fails to ensure that there is no net loss of biodiversity as required by the World Bank standards. Instead of habitat protection the largest budget item in the biodiversity management plan is devoted to building a fish farm for artificial breeding of native catfish and invasive trout’.  

In addition, the most well known impacts of the new dam are expected to occur in Uzbekistan, Tajikistan and Kazakhstan downstream of the Naryn Hydropower Cascade and reinforced by the new large Kambarata–1 reservoir.   

The Cumulative Impact Assessment attached to the ESIA explains that seasonal redistribution of flows may affect the whole Syrdarya River down to the Lesser Aral, degrade three Ramsar wetlands and affect irrigation systems important for millions of people. Specific impacts will depend on the flow management regime of the Toktogul and Kambarata-1 reservoirs, but this regime has not yet been agreed upon or designed.

‘Rivers without Boundaries’ also criticizes the ESIA for the absence of a sufficient environmental plan. ‘[The] CIA vaguely recommends designing such transboundary environmental flow management plan as the top priority. However, the whole ESIA does not include such a plan, or any further solid mitigation measures to avoid those negative impacts downstream, while its “environmental flow assessment” does not cover transboundary impacts and cascade regulation effects’.

What should potential financiers do now?  

Given these challenges, the World Bank, EBRD, EIB, Asian Development Bank and other potential financiers have a responsibility to stop overly relying on the developer’s ESIA. Before committing any funds, these institutions must conduct a rigorous gap assessment and ensure the ESIA process is sufficiently comprehensive and participatory to effectively assess all risks and impacts. These steps are vital to ensure the project aligns with their own policies and to avoid financing a social, environmental and economic disaster.  

International financial institutions must acknowledge the political climate. In these countries civil society organisations face reprisals and independent media is banned. Given this environment, international lenders must assess the risks and introduce mitigation measures to ensure transparency and meaningful stakeholder engagement. The international financial institutions must require the government to demonstrate cooperation with local activists and experts and to not threaten the activists. An independent, secure and anonymous grievance mechanism to protect stakeholder voices should be established to address these challenges.   

It is important for the banks to demand a realistic livelihood restoration plan. This should focus on the thousands of locals who are losing their pasture-based incomes. It must also provide specific, verifiable and fully-funded strategies for replacing lost winter pastures and access routes.     

All action points regarding offsets, transboundary monitoring and public safety must not merely be ‘recommendations’ in a plan but must be included as legally binding requirements in the Environmental and Social Action Plan (ESAP) linked to the loan agreement.  

The financiers should ensure that impact on all natural habitats degraded or modified by the hydropower project are dealt with in strict accordance with mitigation hierarchy and that ‘no net loss’ of biodiversity is truly achieved (e.g. by permanent protection of other similar rivers, where additional dams are now planned).   

Before the financing decision is made, potential critical habitats should be explored both upstream from the Kambarata-1 dam and downstream of the Naryn Cascade where the CIA highlights at least three wetlands of international importance dependent on the downstream water regime.   

To prevent conflict and environmental degradation, financial institutions must assert control over the project’s operational framework. They must mandate that the transboundary environmental flow regime downstream of the Naryn Cascade be designed during ESIA finalisation, not afterwards. This regime must be agreed upon and operationalised in binding reservoir cascade management rules, subject to full consultation with local communities in the three downstream countries. Without these binding guarantees, the lenders cannot claim to have mitigated the project’s transboundary risks.  

International banks now have a choice, either enforce their own standards to mitigate these risks or become complicit in funding a project with flawed foundations.  

The ‘do no significant harm’ principle revisited – lessons from Poland for the next EU budget

The Polish Green Network is a member of 15 out of the total 24 monitoring committees of EU funds in Poland. We chair the ‘do no significant harm’ working group at the monitoring committee of the EU’s largest programme (European Funds for Infrastructure, Climate and Environment for 2021-2027 (FEnIKS)) and we coordinated work on the application of the ‘do no significant harm’ principle in the Partnership Agreement Committee 2021-2027. This gives us a unique opportunity to look at the challenges of implementing the ‘do no significant harm’ principle from the perspective of civil society, beneficiaries and the central and regional administrations.

The EU taxonomy for sustainable activities and the  ‘do no significant harm’  principle were primarily designed to explain sustainability principles to investors and were not directly linked to EU funds.  However, this principle was introduced to the Recovery and Resilience Facility and the 2021-2027 Cohesion Policy as a horizontal principle (i.e., it applies to all investments under these instruments). This does not mean the EU taxonomy is fully applied in EU public funding; there is no obligation to demonstrate the positive environmental impact of an investment, but only to examine the risk of causing significant harm to the six environmental objectives.

Moreover, the application of specific  ‘do no significant harm’ criteria, as set out in the EU taxonomy, is not required for EU funded investments. This results in institutions and beneficiaries lacking a uniform understanding of the ‘significance’ of potential ‘harm’. The European Commission has also abandoned plans to publish dedicated  ‘do no significant harm’ guidance for the Cohesion Policy. All this has resulted in a lack of a single, coherent implementation approach to this principle across EU financial streams.

Explanation of the ‘do no significant harm’  principle is included in the Polish Partnership Agreement for 2021-2027 and in the Recovery and Resilience Plan. In practice, the recovery plan and each Cohesion Policy programme are accompanied by a  ‘do no significant harm’  assessment addressing its compliance at the level of types of projects, reforms or investments.  ‘Do no significant harm’ compliance for specific investments and projects is ensured by the adoption of relevant selection criteria and a requirement to produce specific explanations or evidence in the application for funding.

Lessons learnt on the effectiveness and implementation of the ‘do no significant harm’ principle

The introduction of the ‘do no significant harm’ principle raised awareness about EU environmental goals but revealed several weaknesses. Loopholes allowed fossil gas investments to slip through as ‘transition’ projects. Assessments lacked clear standards, resulting in uneven quality and weak verification. Political decisions have further weakened the principle, as some projects deemed essential for EU energy security were exempted from DNSH requirements under the REPowerEU Regulation.

Implementation in Poland pointed to broader regional challenges including unclear and incoherent rules, poor coordination among managing authorities and limited institutional capacity, as an analysis conducted by the DNSH Principle Task Force within the Polish Partnership Agreement Committee for 2021-2027 confirmed. It also confirmed CEE Bankwatch’s findings on this issue: the lack of clear EU guidance and different standards for the application of ‘do no significant harm’ in different financial instruments has led to difficulties in its application. Furthermore, monitoring and compliance varied widely, with insufficient training and expertise.

Despite the obstacles, some solutions in the 2021-2027 programming period showed promise. In Poland, the ‘do no significant harm’ principle was directly incorporated into the Partnership Agreement. As a result, environmentally harmful river regulation projects intended to enable inland navigation became not eligible for funding. The monitoring committee also demonstrated its potential as a forum for collaboration between administrative and non-administrative partners, including civil society.

How to approach the ‘do no significant harm’ principle in the EU budget

Building on the experience of implementing the ‘do no significant harm’ principle in Poland in the recovery plan and 2021-2027 Cohesion Policy, a complex, unified and transparent approach should be applied in the next Multiannual Financial Framework (MFF) for 2028-2034 to address current challenges. The ‘do no significant harm’ principle should apply across the entire MFF and be based on a single, universal guidance, as proposed by the European Commission in July 2025. However, more must be done to ensure the implementation of the ‘do no significant harm’ principle. As European CSOs and Polish organisations demand, this guidance should be supported by sectoral documents containing exclusion lists of investments that cannot be financed due to their clear DNSH non-compliance (this has also been proposed by the European Commission), as well as indicative lists of selection criteria to be used in calls for proposals and evidence to be presented by applicants and beneficiaries.

Designing specific solutions for the ‘do no significant harm’ principle in the next EU MFF for 2028-2034 requires conducting a systemic, in-depth evaluation and verification of the application of this principle in the 2021-2027 Cohesion Policy and RRF across the EU. Member States should be able to use the European Commission’s Technical Support Instrument (TSI) to further operationalise the principle to, for example, explore links between ‘do no significant harm’ and national legislation or to identify good practices. The ‘do no significant harm’ principle should be linked with the partnership principle such that the guidance and related documents are consulted with experts and partners, while working groups programming the next MFF and monitoring committees should be involved in all ‘do no significant harm’ related aspects of their plans and funds. In the next programming period, educational activities about the environment should be strengthened and should include a ‘do no significant harm’ component to build the capacity of institutions and beneficiaries and increase the public’s environmental awareness.

Ukraine Facility’s next chapter: From patchwork to principles

European Commission reports and staff documents on the Ukraine Facility Regulation and Multiannual Financial Framework confirm that the EU’s current ‘crisis response’ approach has led to inconsistencies between internal and external EU policies – from the green transition to the application of international financial institutions’ standards. 

In the next Multiannual Financial Framework, the EU’s financial instrument for Ukraine must be improved by embedding binding climate and environmental safeguards from the outset and preserving funding for democracy, biodiversity, and climate resilience.

Commission lifts lid on Ukraine Facility 

The Commission deserves credit for being candid in its assessment of the Facility’s shortcomings. But recognition must be followed by concrete changes. The Ukraine Reserve represents a once-in-a-generation opportunity – beginning in 2028 – not only to help Ukraine recover from war, but also to anchor its future in democracy, sustainability and EU values.  

In its communication on the 2028–2034 Multiannual Financial Framework, the Commission acknowledges that it treated the Ukraine Facility Regulation as a ‘crisis response-oriented instrument’ designed to absorb the shock of war. Similar to the EU’s other emergency-response instruments, such as the Support to mitigate Unemployment Risks in an Emergency (SURE) and the Health Emergency Response Authority (HERA), the Ukraine Facility Regulation was fast-tracked to deliver urgent funding. 

However, application of this crisis-response strategy has come at the expense of other policy objectives, contributing to what the Commission itself calls a ‘patchwork approach’ to cross-cutting policies, including the green and digital transitions. In its report on the progress towards achieving the objectives of the Regulation, the Commission concedes that the ‘do no significant harm’ principle is applied only ‘to the extent possible’ in wartime, and that the mandatory 20 per cent climate target for the Ukraine Investment Framework will only be assessed at the end of 2027. In this context, the Ukrainian government must develop the necessary tracking systems to ensure reconstruction investments meet evolving sustainability benchmarks.  

Which rules apply? 

In its communication, the Commission also admits that the different rules for internal and external policies have led to ‘double standards’ and a ‘fragmented and overly complex’ financial toolbox. It cites, for example, the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), which operate under different rules depending on whether they are the implementing partners for an internal or an external programme.  

International financial institutions participating in the Ukraine Investment Framework should not apply one set of rules inside the EU and another outside, especially given Ukraine’s status as a candidate country. Harmonised frameworks would enhance legitimacy and ensure a level playing field. 

Accountability and transparency gaps 

This issue is particularly problematic given the current lack of transparency around the Ukraine Investment Framework’s decision-making processes, which remain completely reliant on the policies of international financial institutions. For instance, in cases where urgently needed financing for small and medium-sized enterprises is channelled through Ukrainian financial intermediaries, it is practically impossible to track the final beneficiaries – a gap that must be addressed. 

This lack of transparency is not an isolated issue: our recent monitoring revealed major shortcomings in the environmental and social impact assessment carried out for the EBRD-backed flagship wind power plant in Volyn. Other recent EBRD projects have applied derogations and invoked business confidentiality clauses to justify the late disclosure of information, preventing interested parties from engaging and providing input on potential environmental and social risks.  

The ongoing context of war further limits the extent to which civil society and other stakeholders can engage in public consultations on such projects. According to the Commission’s Ukraine 2025 Report, ‘efforts are needed to set up the legal framework of the partnership principle, requiring the involvement of relevant regional and local authorities, public authorities, socio-economic partners and civil society in all programming stages, preparing the ground for future cohesion policy in line with the European Code of Conduct on Partnership’. 

From Facility to Reserve, but design flaws remain 

This is the backdrop against which the EU is now proposing the Ukraine Reserve – a new instrument of up to EUR 100 billion over seven years from 2028. The Reserve is supposed to finance both Ukraine’s accession process and its long-term reconstruction. Yet there is no sign it will address the structural shortcomings of the Ukraine Facility. Unless designed differently, it risks becoming another reactive, fragmented tool – big on volume but short on accountability, transparency and strategic focus. 

While the Reserve will cover both the accession process and longer-term reconstruction and the ‘full respect of the merit-based process’ stays the underlying principle for providing financial and policy-based support to candidate countries, there are numerous concerns related to the overall design of the instrument, that lacks strong safeguards, democratic oversight, earmarked targets in democracy building, biodiversity and climate-resilient investment principles in the use of these funds.   

The Commission’s new regulation proposal establishing horizontal rules for EU programmes and activities, including those related to Ukraine, sets out provisions linked to horizontal principles such as ‘do no significant harm’. The proposal requires programmes and activities, ‘where feasible and appropriate’, to apply this principle and respect working and employment conditions ‘in line with the principles of economy, efficiency and effectiveness’. 

However, the proposal also allows for exemptions where application of the ‘do no significant harm’ principle may not be feasible or appropriate, citing ‘crisis situations, including emergencies arising from natural catastrophes, or other reasons of overriding public interest’. Given Russia’s ongoing full-scale military aggression against Ukraine, the Reserve will likely fall under this exemption.  

Global Europe’s Ukraine gamble 

Complicating matters, the application of horizontal principles under the Commission’s new proposal for the Global Europe instrument – which tracks EU spending and results in areas such as climate and the environment, social policies, and gender equality – might be affected.   

Under the existing Global Europe instrument, the collective 30 per cent spending target for climate and the environment is calculated across the entire instrument, rather than separately for the Ukraine Facility and the Reform and Growth Facilities for the Western Balkans and Moldova. Moreover, under the new Global Europe instrument, this 30 per cent target may not even be guaranteed. This uncertainty risks undermining the momentum generated by civil society in support of Ukraine’s ‘build back better’ approach and the consistent application of the ‘do no significant harm’ principle in reconstruction projects. 

For the Reserve to be credible and effective, it must include strong safeguards and democratic oversight, supported by mechanisms that ensure genuine and meaningful consultation. These measures are critical for ensuring that EU support not only meets Ukraine’s immediate needs but also strengthens the country’s long-term sustainability and accession process. 

Replicability gone wrong: Demolition of cultural heritage and environmental risks at EBRD project in Kazakhstan

The EBRD’s Almaty Airport Expansion Project, ​​funded with the participation of the International Finance Corporation (IFC), was signed in 2021 in order to build a new international passenger terminal to address growing traffic needs. Local activists have for years raised concerns about the project’s harm to cultural heritage – the historical 1947 VIP Terminal building. The building had the status of protected cultural and historical heritage of local significance and was slated to be relocated in the project description. According to the complaint filed by the environmental organisation Green Salvation, the USD 55 million project has caused irreparable damage to the historical and cultural heritage: instead of relocation, the historical building was demolished in November 2022. This was done despite a resolution from the Almaty City Hall requiring the relocation of the building, since the demolition of protected cultural and historical heritage in Kazakhstan is prohibited by law. The company also ignored public concerns raised at the original public hearings. 

The complaint alleges there has been frivolous interpretation of national law and an application of arguments based on international conservation charters and IFC performance standards rather than national legislation to justify decisions regarding this project. The commissioned cultural heritage study for the EBRD project was not based on national legislation but rather independent analysis and international documents. In fact, some of the arguments and terminology on which the study based its evaluation did not apply to Kazakhstan’s laws at all. For example, the study refers to ‘replicable cultural heritage’ in order to justify only partial preservation of the VIP terminal building, but ‘replicability’ or any related concept or term is nowhere present in Kazakhstan’s national legislation on protected cultural heritage. 

The airport company claimed that the local government supported the idea of preserving only key structural elements of the building. The Almaty City Hall resolution, dated 11 November 2020, ordered to ensure integrity and safety of the cultural monument during the process of relocation. Nevertheless, despite clear inconsistencies and public criticism, the historical building was demolished in November 2022.  

Consequently, Almaty environmentalists ​have ​sent requests to the EBRD and the Almaty International Airport, organised advocacy meetings and engaged in litigation at the municipal level in order to clarify the legality of the demolition of the historical building. In the end, Green Salvation was unable to identify any valid documents related to the relocation process. This lack of any evidence of relocation monitoring reports indicates a failure to properly preserve the building or its original elements.  

Seeking accountability, environmentalists submitted a formal complaint to the EBRD’s IPAM and requested a full compliance review and thorough investigation of this case. Green Salvation alleges there has been a violation of the EBRD’s Environmental and Social Policy in relation to compliance with the national law, potential environmental harm and destruction of cultural heritage, as well as failure to ensure access to information and meaningful public participation. The organisation hopes that a fair investigation will prove wrongdoing, ensure accountability and provide fair remedy. The monitors are also advocating for strengthening of the bank’s policies in relation to heritage protection, responsible risk and impact assessment procedures, meaningful engagement with the public, as well as upholding commitments to national laws.  

In September 2025, an additional USD 60 million loan to the Almaty Airport Expansion Project was proposed and is pending approval by the end of the year. Formally aimed at improving the original project, the additional funding came as an unpleasant surprise to the monitoring organisations, which have been flagging the above-mentioned violations as well as risks connected to the airport company’s failure to establish a sanitary protection zone (SPZ) around the active airport. Despite their steady engagement with the bank and the airport company, the local monitors were not informed about or invited to the public hearings related to the proposed extension project. The EBRD originally stated it would step out of the project unless specific conditions, including establishment of the SPZ, were ensured. In this situation it remains unclear why the bank refused to adhere to this condition and instead proposed further funding. 

The EBRD should carefully consider all implications of this project and the alleged violations by their client under the ongoing compliance review before making a decision on extended funding and further participation. 

Biodiversity loses out in Hungary’s recovery and resilience plan

Back in 2020, the EU proclaimed that the 2021–2027 Multiannual Financial Framework would mark a turning point for nature. In May of that year, the European Council agreed that at least 10% of the total EU budget expenditure should contribute to halting and reversing biodiversity loss. This same ambition was meant to infuse the EUR 672.5 billion Recovery and Resilience Facility, the centrepiece of the EU’s post-COVID-19 stimulus.  

EU Member States were explicitly instructed to align their national recovery and resilience plans with the EU Biodiversity Strategy for 2030, which calls for 30% of land and sea to be placed under protection along with an annual EUR 20 billion for nature. Yet in Hungary, the ambitious goals of the Recovery and Resilience Facility were narrowed into a single, solitary conservation project – one that’s recently been scrapped. 

A token gesture for nature: The Hanság wetland project 

When Hungary submitted its first recovery and resilience plan in May 2021, its almost complete neglect of biodiversity was shocking. Across 10 central and eastern European countries, a measly 0.26% of the total EUR 87 billion Facility grant was earmarked for biodiversity measures. In Hungary, that sliver – EUR 6.4 million – went to just one project, dwarfed by the EUR 456 million allocated to water management. 

That sole project centred on the Hanság, a lowland basin in northwestern Hungary spanning between 400 and 700 km2 – once one of central Europe’s largest contiguous wetlands. But after two centuries of agricultual drainage, the Hanság is now a series of fragmented wetland habitats. 

The project manager – the Fertő–Hanság National Park Directorate – had planned to reverse this decline in several of the basin’s key protected areas, some of which had already been restored, the most famous being the Osli marsh, a 500-hectare refuge where nature is now thriving. The project aimed to build on this success by restoring water retention across 5,000 hectares of Natura 2000 sites. By renovating roughly 75 km of canals, repairing several sluice gates and rebuilding weirs, the plan was to mimic natural flood pulses and support the return of reed beds, wet meadows and stretches of open water. 

These efforts would have supported priority species like the white-tailed eagle, Eurasian bittern, otter, and fire-bellied toad. Once restored, the wetlands would also have created a buffer against the increasing risk of drought, preventing the impacts of further drops in groundwater levels on nature and local communities. 

The winter 2022 edition of the national park’s magazine, Kócsagtoll (Egret Feather), celebrated the securing of a EUR 7.2 million funding call for the project through the Recovery and Resilience Facility, with park director Matthaea Kulcsárné Roth noting that an intervention of this scale would not have been possible without the support of the Facility. Construction had been slated to take place between 2024 and 2026.  

A restored alder bog in the Hanság wetlands (photo: Zsuzsanna Ujj).

Cancellation without explanation 

Regrettably, in early 2025, Hungary quietly tabled a major revision of its recovery and resilience plan that ditched the Hanság project entirely. And although the water management component still exists, funds for biodiversity submeasures have disappeared. As things stand, the European Commission has yet to approve the implementation of Hungary’s legislative reforms in several key areas. This means the disbursement of Hungary’s allocations under the Facility – a EUR 5.8 billion grant and a EUR 4.8 billion loan – has practically stalled. 

In this uncertain funding environment, the Hanság project was among the first projects to be abandoned. The cancellation of funds leaves the Hanság wetlands exposed to climate- and human-induced habitat decline, along with the loss of vital ecosystem services. The national park’s annual report reveals the encroachment of invasive goldenrod – a fast-spreading meadow plant – the disappearance of grasslands and peat ecosystems, and a reduction in groundwater levels. Key species, such as the strictly protected European mudminnow, remain in grave danger. 

Why is biodiversity losing the funding race? 

The Hanság project is a textbook example of the structural flaws in how EU money is allocated: the pressure to spend quickly creates a funding environment in which complex and sophisticated nature-based projects lose out. Wetland restoration requires hydrological modelling, long-term monitoring and adaptive management – processes that can take 5-to-10 years to complete. By contrast, energy projects like solar farms and grid upgrades can deliver measurable results within 18 months, with clear performance indicators. 

Crucially, funds for biodiversity under the Recovery and Resilience Facility are not ring-fenced, leaving the 10% biodiversity target reliant on political goodwill rather than serving as a legally binding obligation under the Facility Regulation. In practice, this means Member States can reallocate expenditures at will – as demonstrated in Hungary, where EUR 6.4 million in essential biodiversity funding has been diverted to general energy and water-management measures. 

National priorities trump EU strategy 

Hungary’s government has consistently prioritised large-scale water infrastructure – over soft, landscape-scale conservation. The cancellation of the only habitat-restoration project in Hungary’s recovery and resilience plan is not an isolated failure; it’s a symptom of a broader structural problem. 

In 2024, the European Court of Auditors noted that EU green spending is often disconnected from actual costs and results. To prevent a repeat under the 2028–2034 Multiannual Financial Framework, the EU must adopt legally binding, ring-fenced biodiversity spending targets. Once allocated, funds must not be diverted. Mandatory ex ante biodiversity audits should also be conducted before any plan is approved. Without such safeguards in place, the EU’s 2030 pledge to protect 30% of the region’s land and restore 25,000 km of its rivers will remain mere rhetoric. 

But there are signs of hope. After a century of absence, two crane couples have decided to nest and raise their chicks in the Hanság once again – a clear result of the national park’s tireless efforts. Yet the Hanság’s dry creeks during summer months provide a stark warning: biodiversity cannot compete in an open market for EU funds. It must be guaranteed a seat at the table – before the last crane flies away. 

Bird’s paradise (photo: Zsuzsanna Ujj).