Bulgaria and other Eastern and Central European EU member states are calling for stronger financial support for the clean energy transition, as Brussels prepares to revise the EU Emissions Trading System and set the next rules for Europe’s carbon market beyond 2030.
The request, reported by Reuters, was made in a letter dated 19 June and signed by 12 governments, including Bulgaria, Poland, Romania, Estonia, Greece, the Czech Republic, Croatia, Hungary, Latvia, Lithuania, Slovakia and Slovenia. The European Commission is expected to present its ETS revision proposal on 15 July.
The demand is not only about access to EU money. It reflects a wider question facing Europe’s climate policy: whether lower-income member states can modernise their power systems quickly enough while managing industrial costs, ageing infrastructure and a continuing dependence on fossil fuels.
Why do Eastern and Central European countries want a stronger EU Modernisation Fund?
The governments behind the letter are asking for a significant increase in the scale of the EU Modernisation Fund. Their argument is that the financial pressure of decarbonisation is rising faster than existing support mechanisms.
The fund has already become one of the EU’s main tools for helping lower-income member states finance cleaner energy systems. Since 2021, it has supported projects in areas such as renewable electricity generation, grid modernisation, energy efficiency, energy storage, district heating, industrial emissions reduction and just transition measures in carbon-dependent regions.
According to the Modernisation Fund, total support had reached €20.7 billion for 294 investments by December 2025. In 2025 alone, €5.46 billion was disbursed across 79 investments in all beneficiary member states. Bulgaria received €50 million that year, while Poland received €1.44 billion and Romania €1.24 billion, reflecting the different scale of national allocations and project pipelines.
Those numbers show that the mechanism is already substantial. They also explain why the debate around its future has become politically sensitive. If the EU raises its climate ambition but does not expand financing in parallel, poorer member states may struggle to keep pace with infrastructure demands.
How carbon market revenues finance the clean energy transition?
The EU Modernisation Fund is financed by carbon market revenues from the auctioning of allowances under the EU Emissions Trading System. In practical terms, part of the cost paid by emitters is redirected into investments that help member states reduce future emissions.
The fund is built on three sources: revenues from auctioning 2% of total EU ETS allowances between 2021 and 2030, revenues from an additional 2.5% of allowances between 2024 and 2030, and voluntary transfers of allowances by member states. Assuming a carbon price of €75 per tonne of CO₂, the total revenues of the fund are estimated at €57 billion for the 2021–2030 period.
Bulgaria’s share is also clearly defined. Under the Modernisation Fund allocation table, the country is associated with 23,771,707 allowances for the 2021–2030 period. This includes 14,344,600 allowances from the first revenue category and 9,427,107 from the second.
For energy infrastructure planning, these details matter. The fund is not a general subsidy line. It is directly connected to the carbon price, the volume of allowances and the political decision to maintain a strong ETS framework.
The EU Emissions Trading System revision creates a difficult trade-off
The ETS is the EU’s central policy instrument for pricing emissions from power plants, heavy industry and other covered sectors. Reuters reported that the scheme covers about 40% of EU emissions. Carbon prices have risen sharply over the past decade, from below €10 per tonne in the 2010s to around €80 per tonne in mid-2026.
That price signal is important because it encourages companies to invest in lower-emission technologies. At the same time, it has become a growing source of concern for energy-intensive industries exposed to international competition.
This is the policy tension behind the July revision. Some governments and industrial groups want ETS changes that would reduce short-term costs for European manufacturers. Others warn that weakening the carbon price could damage investment certainty and reduce the revenues available for transition financing.
The Eastern and Central European request sits directly inside this conflict. A softer ETS may ease pressure on industry in the near term, but it could also weaken one of the funding channels that helps lower-income member states build cleaner and more resilient energy systems.
What does the debate mean for Bulgaria’s energy transition?
For Bulgaria, the issue is practical rather than abstract. The country faces several overlapping tasks: integrating more renewable energy, upgrading electricity networks, reducing reliance on high-emission generation, improving energy efficiency and giving industrial consumers access to more predictable power costs.
The Bulgaria energy transition will depend on much more than adding new renewable capacity. Solar and wind projects require grid capacity, balancing mechanisms and storage. Industrial decarbonisation requires electricity systems able to support electrification, heat pumps, cleaner process heat and, in some sectors, future hydrogen or carbon management solutions.
Funding from the Modernisation Fund can support precisely these areas. The European Commission lists energy storage, energy networks, demand-side management, transmission and distribution grids, interconnections, renewable energy, energy efficiency and just transition measures among the fund’s priority investment categories.
This is why the current debate matters for businesses as well as governments. A factory, logistics operator, data centre, property developer or utility cannot plan long-term energy investments on unstable policy signals. If financing is predictable, companies can build strategies around lower-carbon electricity, on-site generation, storage, efficiency and more flexible procurement. If it is uncertain, capital becomes more expensive and projects are delayed.
Grid modernisation is becoming a regional investment priority
Across Eastern and Central Europe, the next phase of decarbonisation is likely to be more capital-intensive than the first. The early phase was driven largely by renewable deployment. The next stage requires the infrastructure that allows renewable electricity to be used efficiently.
That means stronger transmission and distribution networks, more digital control systems, storage assets, district heating upgrades, interconnectors and demand-side flexibility. It also means permitting capacity, skilled engineering teams and regulatory models that give investors confidence over multi-year timeframes.
The Modernisation Fund’s 2025 disbursements show this direction clearly. Supported projects included modernising electricity networks in Greece, increasing grid capacity in Latvia, investing in large-scale energy storage in Lithuania, improving energy efficiency in Romania, and renewable heating and cooling schemes in Bulgaria.
The pattern is important. Europe’s climate goals are no longer only about replacing fossil generation with renewable energy investment. They are increasingly about whether electricity systems can absorb, transport, store and balance clean power at scale.
Industrial competitiveness and climate policy are now inseparable
The broader European argument is framed around competitiveness. Heavy industry is under pressure from high energy costs, global competition and the capital requirements of decarbonisation. The EU’s 2040 climate target adds another layer: in March 2026, the Council adopted a legally binding target to reduce net greenhouse gas emissions by 90% by 2040 compared with 1990 levels.
That target cannot be reached through ambition alone. It requires investment in grids, storage, energy efficiency, clean industrial processes and lower-emission power. It also requires a framework that does not push the cost of adjustment disproportionately onto countries with older infrastructure and lower fiscal capacity.
For Power Loop, the debate points to a wider question in European energy policy: whether the clean energy transition can remain both credible and investable across different regions of the EU. Eastern and Central Europe are not asking to slow down the direction of travel. They are asking whether the financing model is strong enough to support it.
The outcome of the ETS revision will therefore matter beyond Brussels. It will influence carbon market revenues, industrial investment decisions, public funding for power infrastructure and the pace at which countries such as Bulgaria can modernise their energy systems.
Europe’s transition is entering a stage where policy credibility, financing and infrastructure delivery must work together. Strengthening the Modernisation Fund would not resolve every challenge, but it would send a clear signal that the EU recognises where the cost of transformation is greatest — and where stable support may be most important.
Sources of information:
- Reuters, “Eastern and central European countries demand EU strengthens carbon fund for poorer members”
- European Commission, “Modernisation Fund”
- Modernisation Fund, “How it works”
- Modernisation Fund, “Modernisation Fund announces €1.8 billion in new clean energy investments, bringing 5-year total to over €20 billion”
- Modernisation Fund, “Investment of €3.66 billion from EU emissions trading revenues in cleaner energy systems”
- Council of the European Union, “2040 climate target: Council gives final green light”
- Reuters, “Industrial firms warn EU carbon overhaul could benefit polluters”
