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The European Union has invested $2.38 billion from its Modernization Fund to support 19 clean energy infrastructure projects meant to help nine lower-income EU countries meet their 2030 climate targets.
Projects will be funded through revenues from auctioning emissions allowances under the EU Emissions Trading System, which has disbursed $10.63 billion in total to help countries with their clean energy transition since its launch in 2021. Supported projects include the modernization of electricity distribution for Bulgaria’s grid, the introduction of electric vehicles and charging infrastructure in Latvia, and renewable electricity production in Romania, to name a few.
The 19 supported projects will add to the 31 projects supported by the Modernization Fund that were announced by the EU in June of this year. Beneficiary countries of the fund include Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovakia. In 2024, Greece, Portugal, and Slovenia will also receive financial support from the fund.
“The model of making polluters pay for their emissions, and directing the revenues to investments that support climate action, is at the heart of the European Green Deal,” said Wopke Hoekstra, EU commissioner for climate action. “The Modernization Fund shows how driving down emissions via the ETS helps to speed up the energy transition. It is a fair, efficient, and effective instrument. We are committed to leaving no country behind in the EU’s green transition, and aim to ensure that every citizen can enjoy cleaner air, cheaper energy, and other benefits of the energy transition.”
EU Green Deal, Modernization Fund Promotes Just Energy Transition
During COP28, countries clashed over the future of fossil fuels, largely because many world economies depend on fossil fuel revenue while many low-income countries need energy to develop their economies. The Modernization Fund represents one of the EU’s attempts to remedy this conflict–much of the funding will go towards countries with such carbon-dependent economies.
COP28 also revealed major investment gaps that will need to be filled in order to achieve a just energy transition and to meet worldwide emissions reduction targets. The United Nations has estimated a $4 trillion gap in clean energy investment for developing countries specifically. During the conference, a loss and damage fund was established to help cover the inequitable climate change-related hardships faced by developing countries, but financial commitments currently fall well below estimated needs.
Carbon credits and green bonds are becoming an increasingly common tool for emerging countries. These allow countries to make financial gains from sequestering carbon through land conservation and other carbon-absorbing activities and present one way for carbon-reliant countries to make a profit without harming the environment.