Modernisation Fund

Modernisation Fund – a new EU instrument supporting the transformation towards climate neutrality.

The aim of the Modernisation Fund is to help 13 EU member states become climate-neutral by supporting the modernisation of energy systems and improving energy efficiency.

The funds will mainly come from the sale of carbon dioxide emission allowances for the period 2021-2030 under the EU Emissions Trading System (EU ETS).

Poland currently accounts for 34.2% of the available pool of funds. The value of the final MF pool of funds will depend on the current price of emission allowances.

• energy producers/generators,
• managers of large industrial infrastructure,
• large companies generating energy for their own needs/processes,
• local government units,
• individuals.

The final list of beneficiaries will be determined during specific calls for applications.

The Modernisation Fund (MF) was created as a new instrument to finance the modernisation of the energy system and improve energy efficiency, as part of supporting the implementation of energy and climate policy objectives in EU countries.

This instrument will be available from 2021 to 2030 and is financed by the sale of 4.5% of the total pool of CO₂ emission allowances under the EU Emissions Trading System (EU ETS). These allowances will be sold in six-monthly tranches by the European Investment Bank (EIB).

The MF funds will be distributed among 13 member states, including Poland.

The final pool of MF funds will depend on the current price of emission allowances.

The mechanism of MF functioning in Poland has been implemented under the Act on the Greenhouse Gas Emission Allowance Trading Scheme. According to the act, the National Modernisation Fund Operator is the National Fund for Environmental Protection and Water Management, and the funds from the Modernisation Fund will constitute the National Fund's income. Investments will be financed from the Modernisation Fund as part of the NFEPWM's priority programmes. Co-financing is expected in both repayable and non-repayable forms.

Within the framework of the National Implementation System of the Modernisation Fund, the funds obtained from the Modernisation Fund will be used to subsidise investments aimed at modernising the national energy system and improving energy efficiency in the territory of the Republic of Poland.

Currently, at least 80% of the funds within the 2% basic pool and 90% within the additional pool of 2.5% of the funds from the Modernisation Fund are used to support investments in:

a) the production and use of electricity from renewable sources, including renewable hydrogen;

b) heating and cooling with the use of renewable energy sources;

c) reduction of overall energy consumption through energy efficiency, including in industry, the transport sector, the construction sector, the agricultural sector and the waste management sector;

d) energy storage and the modernisation of energy networks, including demand management, pipelines for district heating, electricity transmission networks and increasing cross-border interconnections between Member States and infrastructure for decarbonised mobility;

e) support for low-income households, including in rural and remote areas, to address energy poverty and to modernise their heating systems; and

f) a just transition in coal-dependent regions in beneficiary Member States, so as to promote, in dialogue with civil society and the social partners, redeployment, re-skilling and up-skilling of workers, education, employment initiatives and start-ups, in a manner consistent with the relevant actions included by the Member States in their territorial just transition plans.

Advisory/expert groups are appointed to support the development of support areas and priority schemes under the Modernisation Fund. NFEPWM implements the lines of support indicated by the Ministry of Climate and Environment, agreed by the ministries in accordance with the identified needs. The Advisory Council expresses its position on draft priority programmes submitted to the minister responsible for climate issues, which are earmarked for funding from the Modernisation Fund.

The topic, scope and selection of the areas of support submitted in subsequent tranches to the European Investment Bank are always discussed and agreed upon primarily with representatives of the Ministry of Climate and Environment (MC&E) and other ministries.

The Member States are also obliged to submit annual proposals for investment projects for the next two calendar years to the European Investment Bank and the European Commission, together with a forecast for the period up to 2030. These proposals are consulted with relevant stakeholders, who can express their opinions before the review is submitted to the Commission.

Therefore, the proposals for priority schemes are the result of current needs identified and reported by industry associations and communities involved in research and analysis of monitoring needs in the areas of: modernisation of enterprises and the energy system, improvement of energy efficiency and the needs of prosumers.

In addition, the schedule for submitting schemes depends on the identified priorities agreed with the Ministry of Climate and Environment and the degree of progress in the preparation of documents.