EU Funds for Decarbonization in Hungary

Author: Reka Sulyok

EU Delayed RRF Funds to Hungary.

• The European Parliament is set to discuss yet again misuse of EU funds and breaches of the rule of law in Hungary. What is at stakes is Hungary’s share of the EU grant and credit line also dubbed as the Recovery and Resilience Facility (RRF). The Hungarian RRF plans have not been endorsed yet.
• The overarching objective of the RRF is to future proof the European economies; 37% of the fund needs to be streamlined for climate friendly investment. All in, this facility could provide cheaper funding for large-scale decarbonization plans.
• Industry decarbonization is not featured in the Hungarian RRF plans. But amid fiscal consolidation, Hungary needs to lean into EU transfers more than ever.

Key vulnerabilities linger that policymakers need to consider.

• While energy efficiency improved by a mile in the services sector, it worsened in both the industrial and the transport sectors since 2009. The government’s scenario analysis underpinning the climate strategy (National Energy and Climate Plan, NECP) admits so much: Energy consumption in the industry sector will significantly increase by 2030 in a no-change scenario.
• Since the financial crisis both energy intensity and material intensity increased in line with the real GDP growth. Decoupling growth from material consumption stalled since 2012.
• NECP has some loopholes. Hungary was one of the few member states whose disclosure on policy pipeline lacked detail across the board and skipped the non-ETS emissions. The European Commission also found that the Hungarian NECP could have done more to study interlinkages and potential synergies between the competing climate objectives.

Read more about industrial decarbonization and Hungarian public finance in our flash report.