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EU climate fund commits over half a billion to fossil gas expansion

The largest share of the EUR 1.8 billion approved was allocated to much-needed investments in electricity grids, renewable energy, batteries, and the decarbonisation of transport. Yet, some funding has once again been directed towards fossil fuel projects, namely, combined heat and power (CHP) gas plants in Bulgaria and Czechia. Although limited in this round, these projects are expected to receive more than EUR 630 million from the Fund in the coming years.  

The Modernisation Fund, a flagship EU climate finance instrument, is designed to convert carbon market revenues into investments for the energy transition in 13 lower-income member states. However, by the end of 2024, the fund had already channelled over EUR 4 billion into unsustainable energy – of which more than half went to gas pipelines and gas-fired power plants, according to a Bankwatch report released in May. 

In Bulgaria, EU decarbonisation money is supposed to enable a full or partial conversion of CHP plants from coal to fossil gas by 2030. These investments are labelled ‘hydrogen ready’. For this purpose, the Bulgarian authorities have now received EUR 15 million via the Modernisation Fund and are expected to receive an additional EUR 65 million. 

In Czechia, support from the Modernisation Fund is meant to help build the Trmice gas plant project. With an initial investment of EUR 5 million, out of nearly EUR 183 million in total that will be requested from the Fund, this plant will have a capacity of 100 megawatts (MW) in heating and up to 150 MW of electricity. 

An additional EUR 5 million in fresh EU climate cash is destined for another new gas power station in place of the EME-1 lignite-fired plant. This large-scale project includes 300 MW in heating capacity and 500 MW in electric capacity, as well as a hot water accumulator and energy storage. The total investment via the Modernisation Fund is expected to reach more than EUR 360 million. 

Bankwatch and other civil society groups have been calling on national authorities and the Modernisation Fund’s governing bodies to end support for dirty energy. Several gas pipelines and waste incineration projects proposed by national authorities for financing from the Fund ahead of this disbursement round were not approved. 

Nevertheless, and despite international momentum for phasing out fossil fuels buildout, national authorities in six Member States are still seeking over EUR 3 billion in EU climate money for anything from waste incinerators to fossil gas pipelines to small nuclear reactors, a recent Bankwatch analysis has shown. 

Gligor Radečić, gas campaign lead with CEE Bankwatch Network: 

‘Once again, climate money is being used to create new emissions and lock the EU deeper into fossil fuel import dependency. Czechia has already shown how not to use the Modernisation Fund funding to decarbonise heating and industry, and is doing it again. Now Bulgaria is following suit, betting on so-called hydrogen-ready gas plants that will never realistically run on renewable hydrogen. It’s evident that for a transformation of our energy system we can’t rely solely on the Member States’ ambition without changes to the Fund’s eligibility rules.’ 

To learn more about the Modernisation Fund’s misguided investments see here: https://bankwatch.org/modernisation-fund 

For more information, please contact: 

Gligor Radečić
Gas campaign lead, CEE Bankwatch Network
gligor.radecic@bankwatch.org 

Latest EU hydrogen push prolongs gas industry hold over Europe’s energy transition – new report

The report, Hallucinating Hydrogen: Why the PCI/PMI Process Must Be Overhauled, is available here: https://bankwatch.org/publication/hallucinating-hydrogen-why-the-pci-pmi-process-must-be-overhauled 

The PCI/PMI list, some of whose electricity projects are truly high-priority, includes over a hundred hydrogen projects, with twice as many hydrogen pipelines as in the previous list. Alarmingly, 42 out of the 59 pipeline projects will most likely ship fossil gas-based hydrogen, according to the new analysis. 

Any transboundary energy infrastructure granted the lucrative status of ‘Project of Common Interest’ or ‘Project of Mutual Interest’ is eligible for EU subsidies via the Connecting Europe Facility and benefits from faster permitting. 

Yet, while the Commission boasts that PCI/PMI projects will catalyse decarbonisation, today’s report reveals that many of them will make no meaningful contribution to cutting emissions, and their necessity is little more than speculation. 

This is no coincidence. The vast majority of hydrogen projects on the list were originally proposed by the fossil fuel industry, and specifically members of ENTSOG, a gas transmission operators’ lobby group. 

In fact, as the report authors stress, the rules governing the PCI process – namely, the TEN-E Regulation – give ENTSOG a major role in the process from the early stages such as network development planning, to crafting the methodology for cost-benefit analyses and developing demand and supply scenarios. 

EU bodies – including the Agency for Cooperation of Energy Regulators and the European Advisory Board on Climate Change – and civil society have long been warning that the PCI exercise does not serve its purpose. 

Bankwatch and Food & Water Action Europe are therefore calling on Members of the European Parliament and the Council to reject the PCI/PMI list to prevent Europe being chained to fossil gas for decades to come. 

Gligor Radečić, Gas campaign leader at CEE Bankwatch Network: “While it is expected that some projects are promoted by transmission system operators, since they are often the only actors with the necessary know-how and capacity, it makes little sense that the very same companies – represented by ENTSOG – are also the ones responsible for assessing those projects.”  

Eliot Garnier-Karcenti, Senior Energy Advisor at Food & Water Action Europe: “Not voting against the PCI/PMI list would promote a carbon-intensive European Union dependent on fossil-based hydrogen. All European stakeholders are awaiting a review of the hydrogen strategy and the Trans-European Energy Networks (TEN-E) regulation. It makes no sense to support a list that will become obsolete within a few months.” 

The report’s warning is particularly timely given the new Grids Package released today by the Commission. As part of the legislative package, the proposed changes to the TEN-E Regulation could determine the future role of ENTSOG – and later also the European Network of Network Operators for Hydrogen (ENNOH) – in deciding on Europe’s transboundary energy infrastructure.  

However, the TEN-E regulation proposal, which was leaked to several media outlets last week, has so far failed to eliminate this conflict of interest in the PCI/PMI process. Aside from proposing that the Commission now develops the central scenario, all the other roles remain with ENNOH. Decision makers need to ensure that the revision of the TEN-E Regulation not only democratises the PCI/PMI process but also that it prioritises electrification to truly step up the energy transition. 

For additional information, please contact: 

Eliot Garnier-Karcenti
Senior Energy Advisor, Food & Water Action Europe
egarnierkarcenti@fweurope.org
+33 6 34 31 56 20
LinkedIn: https://linkedin.com/in/eltgk 

Gligor Radečić
Gas Campaign Leader, CEE Bankwatch Network
gligor.radecic@bankwatch.org 

Another needless threat to the ecosystems we all depend on: The Commission’s panicky, chaotic deregulation drive has to stop

It includes a Communication; a draft Directive on acceleration of permit-granting procedures for renewable energy, batteries and grid infrastructure,[1] and a draft Regulation on guidelines for trans-European energy infrastructure (TEN-E), also weakening environmental permitting.[2]

The decision to re-open the Renewable Energy Directive is surprising as it was changed in 2023, and already eroded environmental safeguards. The final transposition deadline was in May this year, yet by July only Denmark had fully transposed it. The Commission started infringement procedures against the other 26 Member States. Although the 2023 Directive is problematic, the rationale for re-opening it half way through transposition is unclear. Even industry has called for more stability: Solar Power Europe has asked the Commission to prioritise implementation of existing EU rules rather than pursuing deregulation.

Among the most controversial provisions in the Commission’s new proposals are:

  • A new paragraph that tries to prevent no-go zones for renewables but in fact undermines the whole concept of protected natural areas. Member States are to ‘endeavour not to designate large areas where the installation of renewable energy plants and their related infrastructure is legally or de facto restricted due to environmental reasons (…)’.[3]  But the whole point of protected areas is to restrict certain types of activities: why would hydropower plants be allowed in National Parks or wind parks in old-growth forests? Among others, this contradicts the principle that Member States may introduce stricter environmental protection measures than EU law requires.[4]
  • An existing assumption [5] that renewables and grids are of overriding public interest for when carrying out assessments under the Habitats, Birds and Water Framework Directives is set to be widened. This provision is already highly problematic as a declaration of overriding public interest is needed for only a few of the most damaging projects with significant impacts on protected natural areas. The new proposal would stop Member States being able to restrict the application of this provision in certain parts of their territory and would widen the assumption of overriding public interest to enable land expropriation and other areas of law, except cultural heritage.
  • If satisfactory alternative solutions exist, projects with severe impacts on protected natural areas are – appropriately – currently not allowed to proceed. But the new proposals would restrict the examination of alternatives to the same energy technology as the proposed project. This makes no sense, as it would mean a high-impact technology like hydropower or biomass would not have to be compared to a lower-impact one like solar.
  • The draft TEN-E allows many cross-border electricity transmission projects and storage facilities to be exempted from environmental impact assessments (EIAs) and appropriate assessments under the Habitats Directive if they are part of National Development Plans that have been subject to Strategic Environmental Assessments (SEAs). Similar provisions are already in place for renewable projects but SEAs are less detailed than EIAs and are unlikely to be an adequate substitute. Among others, this deprives the public of a major consultation opportunity during project development. While new obligations to designate and finance an independent facilitator to promote dialogue between the project developer and the general public may be a useful complement, they cannot replace structured and science-based processes like the EIA and appropriate assessments.

Quotes

Pippa Gallop, Southeast Europe energy policy officer, CEE Bankwatch Network: 

‘Sustainable renewables and grids are crucial, but re-opening the Renewable Energy Directive is not. The ink has barely dried on the 2023 changes, so revising them already is a tacit admission that they were poorly done. But rather than undoing the damage, the Grids Package digs an even deeper hole into the EU’s well-balanced environmental safeguards. The European Parliament and Council must finally say no and put a stop to this manic deregulation drive.’

Gligor Radečić, Gas campaign leader, CEE Bankwatch Network: 

‘Certain proposed amendments to the TEN-E Regulation concerning the acceleration of permitting raise serious concerns: they lack scientific grounding, conflict with EU environmental law as interpreted by the Court of Justice of the EU, and could prove legally problematic, as in the case of tacit approval mechanisms.’

Contacts

Pippa Gallop
Southeast Europe energy policy officer
CEE Bankwatch Network
pippa.gallop@bankwatch.org

Gligor Radečić
Gas campaign leader
CEE Bankwatch Network
gligor.radecic@bankwatch.org 

[1]  This would amend: 

  • the Renewable Energy Directive ((EU) 2018/2001); 
  • the Electricity Market Directive ((EU) 2019/944); 
  • the Directive on gas markets and hydrogen ((EU) 2024/1788) and 
  • the Energy Performance in Buildings Directive ((EU) 2024/1275).

[2] This would amend:

  • Regulation (EU) 2019/942, establishing a European Union Agency for the Cooperation of Energy Regulators;  
  • the Electricity Market Regulation (EU) 2019/943; 
  • the gas markets and hydrogen Regulation (EU) 2024/1789 
  • and would repeal the current Regulation on guidelines for trans-European energy infrastructure ((EU) 2022/869) on guidelines for trans-European energy infrastructure.

[3]  ‘(…), unless they can demonstrate that those types of plants and their related infrastructure would result in irreversible damage in the area which cannot be mitigated or compensated for during the environmental assessment pursuant to Directive 2011/92/EU and, where relevant, the appropriate assessment pursuant to Article 6(3) of Directive 92/43/EEC’.

[4] Article 193 of the Treaty on the Functioning of the EU.

[5] ‘rebuttable presumption’ i.e. it is presumed, but can be disproved during the assessment process. However, the burden of proof is on the public to prove likely harm instead of on the project promoter to prove a lack of harm.

EU Reform and Growth Facility not yet speeding up energy transition in Western Balkans – new report

The financing instrument is part of the European Commission’s Growth Plan for the Western Balkans, intended – among others – to accelerate the enlargement process. To access the funds, the Western Balkan countries prepared Reform Agendas – action plans covering six policy areas, including energy and green transition. The process was plagued with issues from the very beginning – the preparation of the Reform Agendas was rushed, there were no public consultations, and the resulting documents lacked ambition and focus. 

Bankwatch’s analysis finds that around one third of the 100 energy-related reforms in the Agendas are overdue obligations under the Energy Community Treaty that the countries should have implemented years ago. Now they could be awarded EUR 275 million for completing them. 

The report questions the decision to reward the countries for their late reforms, but finds that even this is not having the desired effect. 

With the complicated political situation in Serbia and Kosovo impeding progress in the energy sector, and Bosnia and Herzegovina only recently having completed its Reform Agenda, only Albania, Montenegro and North Macedonia are completing any reforms. Even they have completed only nine reforms, with a prospect of completing four or five more until the end of December 2025. This means that regionwide, less than 20 per cent of the 50 energy reforms due have been completed.  

As the overall deadline for implementing the measures is August 2027, each delay reduces the likelihood of the countries being able to access the full sums available. 

Davor Pehchevski, Balkan energy coordinator at Bankwatch – ‘These reforms will speed up the decarbonisation of the Western Balkan economies, mitigate the impacts of the Carbon Border Adjustment Mechanism, and provide benefits such as clean air, increased comfort and decentralised electricity generation for their citizens. However, the governments are obviously struggling to implement what is required of them. Whether it is lack of will or lack of capacity, the whole instrument is at risk of failing.’ 

Pippa Gallop, Southeast Europe energy policy officer at Bankwatch – ‘With such a tight timeline, the Commission needs to decide swiftly how to get the process on track. But our findings also raise fundamental questions, as the Commission’s proposal for the next EU budget relies almost entirely on similar funding instruments in the region. As the EU institutions decide on the budget in the coming months, they need to probe whether this makes sense. In any case, governments must not be rewarded for overdue legal obligations.’ 

Contacts 

Davor Pehchevski, Balkan Energy Coordinator, CEE Bankwatch Network 

davor.pehchevski@bankwatch.org, Tel: +389 71 264 087 

Pippa Gallop, Southeast Europe Energy policy officer, CEE Bankwatch Network  

pippa.gallop@bankwatch.org, Tel: +385 99 755 9787 

Notes for editors 

  1. The report is available here. 

European Commission fuels hydrogen fantasies – but MEPs can still halt the next array of fossil fuel follies

The Commission’s Delegated Regulation on Projects of Common Interest (PCIs) and Projects of Mutual Interest (PMIs), unveiled today, includes a list of European transboundary energy infrastructure projects that the Commission and Member States intend to prioritise and subsidise. Over a hundred of these are hydrogen infrastructure projects, the bulk of which are pipelines designed to carry fossil-gas-based hydrogen. 

Members of the European Parliament (MEPs) and the Council of the European Union now have two months to scrutinise the proposed regulation and raise any objections. If none are forthcoming, the regulation will enter into force. Though the PCI/PMI list itself cannot be amended at this stage, MEPs – recognising the urgency of raising the EU’s climate ambition – can and should reject the list for the misguided direction it takes. 

The PCI/PMI process is meant to facilitate the EU’s energy transition by identifying cross-border projects of strategic importance. Projects awarded this preferential status enjoy privileged access to EU public financing and expedited permitting. 

Worryingly, over 80 per cent of the hydrogen projects on the PCI/PMI list have been proposed by the fossil fuel industry, with more than 90 per cent of the hydrogen pipelines tabled by members of the European Network of Transmission System Operators for Gas (ENTSOG) – the lobby group for Europe’s gas transmission operators – according to an analysis by Food & Water Action Europe. 

The result is an important policy instrument that risks perpetuating Europe’s fossil gas habit and birthing an entire cohort of costly stranded assets. 

Civil society has repeatedly urged decision makers to limit hydrogen development to hard-to-abate sectors and to ensure it runs exclusively on renewable sources of energy. Several bogus projects proposed for PCI/PMI status have since been dropped following heavy scrutiny, not least from civil society, yet many others remain. 

‘Most of the hydrogen projects on the PCI/PMI list will transport, store or receive large quantities of fossil-based hydrogen. The proposed hydrogen network is disproportionate. The electrolysers included are not linked to any additional dedicated renewable sources of energy, which will vampirise the remaining energy needed for the transition. For these reasons, this list must be rejected,’ says Eliot Garnier-Karcenti, Senior Energy Advisor at Food & Water Action Europe. 

‘We join the EU’s own advisory bodies – the European Scientific Advisory Board on Climate Change (ESABCC) and the EU Agency for the Cooperation of Energy Regulators (ACER) – in questioning the credibility of the PCI and PMI selection process and its implications for the EU’s decarbonisation efforts. The process still grants a central role to ENTSOG, an industry body representing the very companies that stand to profit from PCI and PMI status. This inherent conflict of interest undermines trust in the system. The TEN-E Regulation – and the PCI/PMI process it governs – must shift decisively towards rapid electrification and demand-side flexibility, rather than keeping these solutions on an equal footing with fossil fuel interests,’ says Gligor Radečić, Gas Campaign Leader at CEE Bankwatch Network. 

For additional information, please contact: 

Eliot Garnier-Karcenti
Senior Energy Advisor, Food & Water Action Europe 
egarnierkarcenti@fweurope.org
+33 6 34 31 56 20
LinkedIn: https://linkedin.com/in/eltgk/ 

 

Gligor Radečić
Gas Campaign Leader, CEE Bankwatch Network
gligor.radecic@bankwatch.org 

CBAM: Western Balkan governments must act now to avoid ‘perfect storm’ – new report

Nevertheless, if they act fast to introduce their own carbon pricing on electricity and heat generation, the governments could mitigate the impact of CBAM and raise up to EUR 4.2 billion per year to fund a sustainable energy transition and support coal-dependent regions.

Under CBAM, EU importers of certain goods including electricity (2) from outside the bloc will need to pay for the carbon dioxide emissions associated with producing such goods in the exporting country. This will make imports to the EU from countries with high levels of coal, oil and gas use much more expensive than they have been so far. 

EU importers of electricity from the Western Balkans – Italy, Croatia, Hungary, Romania, Bulgaria and Greece – will have to find other suppliers or face high CBAM costs. Electricity imports to the EU will likely plummet overnight, slashing income for electricity utilities in the Western Balkans. 

Bosnia and Herzegovina, Montenegro, and North Macedonia will not pay CBAM fees themselves, but will be affected by a fall in income from electricity exports, as will Serbia to some extent. Kosovo has no EU border but will still feel some impacts. Albania’s hydropower-dependent power sector will only be affected if the country goes ahead with building gas power plants.

Until now, the EU has helped prop up heavily polluting coal power plants in the Western Balkans. Around 57 per cent of electricity imported by the EU from Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia is coal-based. CBAM is designed to ensure that the EU takes responsibility for carbon emissions from such imports. 

The income from CBAM will go to the EU budget. If electricity exports continue at recent levels, the EU’s annual income from these alone could reach almost EUR 965 million (3). 

Had the Western Balkan governments started preparing for CBAM earlier, instead of allowing the EU to generate income from their electricity exports, they could have generated revenue for their own energy transition by introducing national carbon pricing systems themselves. 

This could also have contributed to their electricity sectors being exempted from CBAM, which has built-in conditions allowing this if the countries substantially progress in applying EU energy and climate law. However, none of the countries are near to fulfilling these conditions.

Still, by introducing domestic carbon pricing, the countries could mitigate the impacts of CBAM (4) and generate significant revenue to spend on a just and sustainable energy transition.

Ioana Ciuta, CEE Bankwatch Network – ‘With just two months to go until CBAM takes full effect, we are still hearing wishful thinking from governments and utilities hoping for delays and exemptions. But there will be no postponement and none of the countries are anywhere near gaining the electricity sector exemptions allowed under the CBAM Regulation. They need to stop dreaming and start preparing.’

Pippa Gallop, CEE Bankwatch Network – ‘CBAM could finally force Western Balkan governments to tackle the elephant in the room and start closing their highly-polluting and increasingly uneconomic coal power plants. But coal dependent regions mustn’t be left behind – they need to plan for redevelopment. Western Balkan governments haven’t yet set aside funding for this, and nor has the EU. This has to change.’

Contacts

Pippa Gallop, Southeast Europe energy policy officer, CEE Bankwatch Network

pippa.gallop@bankwatch.org

+385 99 755 9787

Ioana Ciuta, Strategic Area Leader – Fossil Fuels, CEE Bankwatch Network

ioana.ciuta@bankwatch.org 

Tel.: +40 31 438 2489 

Notes for editors

  1. The report is available here.
  2. Electricity, iron and steel, cement, fertiliser, aluminium, and hydrogen
  3. The Energy Community Secretariat has recently put the figure even higher, at almost EUR 1.2 billion. Energy Community Secretariat, Energy Community CBAM readiness tracker 2025, 20 October 2025.
  4. CBAM fees for imports of goods from countries which apply a carbon price can be reduced to take account of the carbon price already paid in the exporting country. So this would reduce the CBAM costs for EU importers and make goods from the exporting country more attractive.