Eastern and central European countries demand EU strengthens carbon fund for poorer members

Eastern and central European countries have demanded the European Union strengthen a fund to help poorer nations transition to clean energy ahead of a major climate policy overhaul.

Eastern and central European countries including Poland, Bulgaria, ​Romania and Estonia have demanded the European Union strengthen ​a fund that helps poorer EU nations ‌transition ​to clean energy, a letter seen by Reuters showed, as Brussels prepares to overhaul the bloc's biggest climate change policy.

The European Commission is preparing a revision of ‌the EU emissions trading system (ETS), and is fielding competing demands from governments and industries over how to amend the huge scheme. The Commission proposal is due on July 15. In a letter to the European Commission dated June 19, the 12 governments urged ‌the EU to strengthen the "modernisation fund" - a pot of revenues from carbon market permit sales, which has invested ‌more than 20 billion euros ($22.85 billion) since 2021 to help the EU's poorest member states wean themselves off fossil fuels.

"In the current political and economic context, characterised by increased geopolitical risks and uncertainty, predictable financing mechanisms remain an essential condition for the success of the energy transition in the ⁠EU," ​said the letter. "We call for a ⁠significant increase in the scale of financing, aligned with the growing challenges of the transition."

The letter was also signed by Greece, the Czech Republic, Croatia, ⁠Hungary, Latvia, Lithuania, Slovakia and Slovenia. The EU's review of its ETS was planned to revamp the carbon market for the long ​term, beyond 2030, to align it with the EU's overall 2040 climate goal to cut emissions by 90%.

But ⁠the plan has become embroiled in political debate about how to urgently reverse Europe's declining industrial competitiveness. Governments including Italy and the Czech Republic have ⁠urged ​Brussels to weaken the ETS to reduce short-term costs for local industries - but which could also mean the scheme generates less funding that can be channelled into the transition to clean energy. The modernisation fund supports the 12 countries ⁠behind the letter, plus Portugal, aiming to ensure the EU's poorer members can keep up with the bloc's targets to ⁠reduce emissions.

In recent years, ⁠the scheme has backed investments including energy-saving renovations of public thermal baths in Hungary, and Poland's “Clean Air” financing programme which helps families replace polluting heating systems and insulate their homes. The letter ‌was reported by ‌Bloomberg News earlier on Monday. ($1 = 0.8751 euros)