Greece and EU Set Up €1.6 Billion Island Decarbonisation Fund

2025-02-05
Greece, the EU, and the European Investment Bank have launched a €1.6 billion Island Decarbonisation Fund to finance renewable energy, energy storage, and infrastructure projects on Greek islands, aiming to reduce emissions and support green energy transitions.

The Greek government, the European Commission and the European Investment Bank (EIB) have signed an agreement in Naxos, Greece, to establish an Island Decarbonisation Fund to finance decarbonisation projects on Greek islands.

 

The Hellenic Asset Development Fund (ADF), a state-owned asset management enterprise, will manage the island decarbonisation fund. Normally, the Greek government puts several state-owned companies under the management of the Asset Development Fund, which oversees their privatization.

 

For the Island Decarbonisation Fund, the ADF will manage financing projects, initiate tenders if necessary, and report to the Greek Ministry of Environment and Energy and the European Investment Bank, which is also responsible for disbursing funds to approved projects.

 

Resources and objectives

 

The EU's Emissions Trading Scheme (ETS) will provide funding for the archipelago's decarbonisation fund. The cap for the EU emissions trading scheme is based on a cap-and-trade approach and is set in the form of emission allowances, which are sold by auction and can be traded.

 

"Revenues from the EU emissions trading scheme mainly go to national budgets, which Member States must use to support investment in renewable energy, energy efficiency and low-carbon technologies that help reduce emissions," the Commission said.

 

The New Deal allows Greece to bid for 25 million CO2 emission allowances under the EU emissions trading scheme and use the revenues to finance the decarbonisation of its islands.

 

The price of allowances fluctuates with the EU carbon market, but the Greek government recently said the initial budget for the island decarbonisation fund under the EU Emissions Trading scheme's basic price scheme would be around €1.6 billion, with the potential to rise to €3.8 billion by 2032.

 

The tripartite agreement Outlines three categories of projects to be funded: renewable energy and energy storage, to which at least half of the budget will be allocated; A new grid connection between the island and mainland Greece; And infrastructure projects such as electric car chargers, port cold-ironing equipment and water treatment plants.

 

The Island Decarbonization Fund should not be confused with the Gr-Eco Island Initiative launched by the Greek government in 2021. The main purpose of the Gr-Eco program is to promote small-scale renewable energy and energy storage systems on small Greek islands that are not connected to the mainland grid. While the two are separate, an Energy Ministry spokesperson recently told PV magazine that the Island Decarbonization Fund will be the main source of funding for Gr-Eco's island program.

 

The Greek Electricity Transmission Operator (IPTO) recently launched a tender for a new grid line connecting Corinth on the mainland and Kos Island in the Dodecanese Islands. The link will feature a 380km-long high-voltage direct current (HVDC) cable with a capacity of 1 gigawatt. The project will mark the first time that the Dodecanese Islands' independent power grid has been connected to the mainland network.

 

"The project will phase out polluting oil-fired power plants, strengthen the security of energy supply and support the green transition of the Greek islands," IPTO said.

 

The Greek government has said it aims to raise money for the project from the island decarbonisation fund.

 

IPTO also signed a new agreement to sell a 20 percent stake in its subsidiary responsible for the interconnection line between Attica and Crete to State Grid International Development Co., LTD., a wholly owned subsidiary of State Grid Corporation of China.

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