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