Modernisation Fund

The Modernisation Fund is a dedicated funding programme to support ten EU Member States in their transition to climate neutrality, by helping to modernise their energy systems and improve energy efficiency. The Beneficiary Member States (BMS) are Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia. The Modernisation Fund will run from 2021 to 2030, and the respective BMS are responsible for implementing the Modernisation Fund on their territory, as well as selecting and submitting investment proposals they would like to support from their Modernisation Fund share.

The Modernisation Fund was created to support investments in:

  • Generation and use of energy from renewable sources;
  • Energy efficiency;
  • Energy storage;
  • Modernisation of energy networks, including district heating, pipelines and grids;
  • Just transition in carbon-dependent regions: redeployment, re-skilling and upskilling of workers, education, job-seeking initiatives and start-ups.

The Modernisation Fund is funded from revenues from the auctioning of carbon allowances under the EU Emission Trading Scheme. The number of allowances to be auctioned per beneficiary Member State are presented in the below table.


Member States Total Allowances
Bulgaria 16.095.825
Czechia 193.152.692
Estonia 7.662.054
Croatia 14.633.114
Latvia 3.968.834
Lithuania 15.780.083
Hungary 19.623.677
Poland 119.643.793
Romania 200.766.069
Slovakia 51.906.749
Total 643.232.890

The Modernisation Fund leaves the BMS the freedom to decide on the form of support: they can use grants, premium, guarantee instruments, loans or capital injections.

What is the relevance for Circular Cities?

The Modernisation Fund supports the transition to low-carbon energy systems by stimulating investments in e.g. renewable energy, energy efficiency, and interconnections. Although circular economy is not explicitly mentioned as a “priority investment” area, circular city initiatives can increase the efficiency of local energy systems. Circular city projects that are focusing on reductions in waste generation and transportation might be eligible for the Modernisation Fund. In addition, investments focusing on the modernisation of the energy network in line with circular economy principles could be relevant for this fund.

How to apply?

The selection and submission of investment proposals rests entirely with, and is the responsibility of, the Beneficiary Member States. Project promoters, who are active in these countries, are recommended to contact their national contact point. Further information is available at the Modernisation Fund website external link icon.