EU’s Modernisation Fund continues to fund fossil fuels and waste incineration projects, undermining climate and environmental goals

While some of the 39 announced projects approved by the Commission in this disbursement cycle are essential for the EU’s energy transition, such as investments in electricity grids, energy storage, building renovation and transport electrification, a significant share of the funding is again going to new gas power plants and waste incinerators, most notably in the Czech Republic and Romania.   

According to Bankwatch’s calculations, almost EUR 500 million from this disbursement cycle has been allocated to gas and waste incineration projects in the Czech Republic and Romania, and these projects may receive an additional EUR 776 million support in the later stage of their implementation. This raises concerns that the Modernisation Fund is being used to lock in fossil fuel and other unsustainable infrastructure rather than to supporting real modernisation of the region’s energy systems.  

Czech Republic: Over EUR 130 million for gas and waste incineration in this round, with more to come  

Several projects in the Czech Republic stand out for receiving substantial funding despite their climate and environmental impact: 

• Teplárna Power Plant (EUR 50 million): replacement of lignite burning with gas and biomass combustion. 

• ZEVO Vráto (EUR 5 million in this round, EUR 187 million in total from the Modernisation Fund): replacement of two lignite-fired boilers with waste incineration in a combined heat and power (CHP) plant. 

• ZEVO Opatovice (EUR 5 million in this round, EUR 161 million in total): replacement of lignite-based energy with waste incineration.  

• ‘Replacement of a coal block with a gas source – STAGE III’ (EUR 62 million): Replacement of a coal fired unit with a combined-cycle gas turbine (CCGT) system. 

• ‘Replacement of a coal block with a gas source – STAGE IV’ (EUR 5 million in this round, EUR 78 million total): Replacement of a coal fired unit with a combined-cycle gas turbine (CCGT) system. 

• Energetika Power Plant (EUR 5 million in this round, EUR 77 million total): replacement of a lignite-fired heat and power plant with a fossil gas-based one. 

Romania: EUR 362 million for gas power plants that will replace gas power plants 

•  ‘Support for development of high-efficiency cogeneration capacities – in the district heating sector’ (EUR 362 million): replacement of old fossil gas plants with new ones in Bucharest’s district heating sector.  

While the Modernisation Fund has disbursed significant amounts to much needed investments since 2021, at least EUR 1.45 billion have already been directed to fossil gas, at least EUR 584 million to waste incineration, at least EUR 228 million to biomass plants, mainly in its largest beneficiaries, such as Czechia, Poland and Romania. 

Gligor Radečić, CEE Bankwatch Network — ‘The never-ending push for fossil gas and waste incineration under the Modernisation Fund diverts funds away from truly sustainable solutions.  

‘Romania remains trapped in a heating model based on burning fossil fuels. Government programs fail to integrate renewable heating sources, even as our cities suffer from pollution’, adds Raluca Petcu, campaigner for Bankwatch Romania.  

Such investments risk locking countries into high-emission infrastructure for decades to come, and crowding out renewables, heat pumps, waste prevention, reduction, reuse and recycling. The Commission must ensure that the Modernisation Fund prioritises truly future-proof projects, such as sustainable renewable energy, energy efficiency, and grid investments, while rejecting proposals that rely on fossil fuels and burning waste.

Contact  

Gligor Radečić, Gas campaigner, CEE Bankwatch Network 

gligor.radecic@bankwatch.org