9. Financing the circular economy transition

The transition to a circular economy needs resources to drive the uptake of new business models, support the development of innovative technologies and motivate behavioural change within society. Governments can support the transition to a circular economy by using specific economic instruments.

Economic instruments provide important market signals, which can influence the behaviour of producers and consumers. Implemented across different life cycle stages, they help internalise environmental costs in decisions made by firms and households, and help establish incentives to change behaviour. They may also stimulate greater innovation in technologies and can generate revenues for specific environmental objectives and funds. The economic instruments that can facilitate the circular economy transition in Hungary include taxes on construction aggregates and primary plastics packaging, PAYT-based charges for municipal waste, landfill taxes, as well as EPR schemes and GPP, as presented in chapters 5, 6 and 7.

An additional way for governments to help reorient market forces towards a circular economy is through the use of incentive subsidies. Financing circular economy projects and initiatives through grants and loans helps decrease the cost of capital for circular investments and helps overcome financial and information barriers. Public funding can thereby stimulate the development of new circular business models, innovative technologies and strategic partnerships. This chapter provides an overview of the public funding available to stakeholders in Hungary to hasten the uptake of circular economy practices.

The EU is providing several funding programmes covering a wide range of areas including the circular economy.1 The three principal funding instruments for the transition to a circular economy include: shared management funds, the Horizon Europe programme, and the LIFE programme.

Shared management funds are EU funds that are shared with Member States and regions. These include the European Structural and Investment Funds (ESI funds), in particular, the European Regional Development fund (ERDF), the European Social Fund Plus (ESF+), the Cohesion Fund (CF), and the Just Transition Fund (JTF) (European Commission, n.d.[1]). The operational programmes, co-funded through shared management funds and by the Hungarian Government, target a number of circular economy topics (Government of Hungary, 2022[2]; Government of Hungary, 2022[3]) (see Box 9.1 for more details) such as:

  • The Environmental and Energy Efficiency Operational Programme Plus (EEEOP Plus) aims at reducing environmental pollution and the excessive use of resources, and protecting biological diversity and prioritising the circular economy.

  • The Economic Development and Innovation Operational Programme Plus (EDIOP Plus) aims at increasing the competitiveness of the domestic economy by making the SME sector more resilient, developing the R&D&I ecosystem, improving the adaptability of domestic workers, and ensuring a high quality workforce.

  • The Digital Renewal Operational Programme Plus (DROP Plus) aims at improving the country’s digital readiness and competitiveness, among others, through a green and hi-tech transition promoting the uptake of digital solutions and the shift to a climate-neutral, circular and more resilient economy.

  • The Territorial and Settlement Development Operational Program Plus (TSDOP Plus) aims at improving the development of regions and counties, with a focus on climate awareness and adaptation to climate change, liveable settlements, and sustainable urban development strategies, among others.

Horizon Europe is the EU’s Research and Innovation programme with a budget of nearly EUR 100 billion, running until 2027. This includes almost EUR 5.5 billion from the NextGenerationEU (NGEU) instrument to support greener, digitalised and more resilient societies and economic recovery from the COVID crisis. The budget is divided among 4 pillars and 15 components to support several areas of research and innovation (R&I). The “Global challenges and European industrial competitiveness” (pillar 2) comprises a cluster that also targets the circular economy (European Commission, n.d.[4]):

  • Cluster 6 “Food, bioeconomy, natural resources, agriculture and environment” covers the following areas of intervention: environmental observation, biodiversity and natural resources, agriculture, forestry and rural areas, seas, oceans and inland waters, food systems, bio-based innovation systems in the EU’s bioeconomy, and circular systems.

Additionally, several partnerships have been established under Horizon Europe to address some of Europe’s pressing challenges. One of these partnerships relates to the circular economy:

  • The Circular Bio-based Europe Joint Undertaking (CBE JU) is a public-private partnership between the EU and the Bio-based Industries Consortium, which funds projects to strengthen competitive, circular bio-based industries in Europe (Circular Bio-based Europe Joint Undertaking, n.d.[5]).

The LIFE programme is the EU’s funding instrument for the environment and climate action with a budget of EUR 5.4 billion for the funding period 2021-2027. It has four sub-programmes, one of which covers the circular economy (European Commission, n.d.[6]).

  • The “Circular economy and quality of life” sub-programme co-finances projects in the area of circular economy, including the recovery of resources from waste, as well as projects concerning water, air, noise, soil and chemical management, and environmental governance.

Hungarian stakeholders could benefit from a number of other funding opportunities for the circular economy transition.

  • Interreg is a funding instrument to support cross-border, trans-national and interregional co-operation, as well as for outermost regions. It seeks to tackle common challenges and find common solutions in several areas (European Commission, n.d.[8]). “Interreg Europe” strives for better regional governance through capacity building in a number of topics, including for a smarter and greener Europe (total budget of EUR 379 million). “Interreg Central Europe” aims to improve capacities for regional development in innovation, carbon dioxide reduction, protection of natural and cultural resources, and transport and mobility (total budget of EUR 246 million).

  • Single Market Programme (SMP) has been designed to help the single European market reach its full potential and ensure Europe’s recovery from the COVID-19 pandemic. With a budget of EUR 4.2 billion over the period of 2021-2027, and an additional EUR 2 billion allocated under the InvestEU Fund, the objectives of the programme include food safety (40% of total budget allocation), support to SMEs (24% of budget allocation), strengthening the single market (13% of total budget), and high quality European statistics (also 13% of total budget) (European Commission, n.d.[9]).2

  • The New European Bauhaus (NEB) is a creative and interdisciplinary initiative connecting the European Green Deal to living spaces and experiences. With a budget of EUR 85 million funded by different EU programmes (such as Horizon Europe, LIFE and ERDF), it aims to provide citizens with access to goods that are circular, less carbon-intensive, support the regeneration of nature and protect biodiversity (European Commission, 2021[10]).

  • The Digital Europe Programme (DIGITAL) is a new EU funding programme. It aims to accelerate economic recovery and shape the digital transformation with its focus on businesses (especially SMEs), citizens and public administrations. Although the scope of this programme is much broader, it also supports the goals of the Green Deal and the Circular Economy Action Plan (European Commission, n.d.[11]).

  • The Innovation Fund (IF) targets the commercial demonstration of innovative low-carbon technologies. It also funds projects that bring about other environmental benefits within the framework of the European Green Deal, among others, related to the circular economy (European Commission, 2022[12]).

  • The Recovery and Resilience Facility (RRF) is a temporary recovery instrument that helps finance reforms and investments in Member States (from February 2020 to December 2026). Hungary’s Recovery and Resilience Plan foresees the implementation of reforms and investments to drive the transition to a circular economy (component G). These include an investment of HUF 120 billion (EUR 335 million) to develop the waste management infrastructure and an investment of HUF 86 billion net (EUR 240 million) to strengthen intelligent, innovative and sustainable industry and the secondary raw materials market. Altogether HUF 103 billion (EUR 287.7 million) of circular economy-related investments in Hungary will be financed through the RRF (Government of Hungary, 2021[13]).3

  • The Technical Support Instrument (TSI) managed by the EC DG REFORM provides tailor-made technical expertise for designing and implementing reforms at the national, regional and multi-country levels. This instrument covers a wide range of reform areas. More than one-third of all requests in 2022 were related to various “green transition” topics, including the circular economy (European Commission, n.d.[14]).

Additional funding opportunities for circular economy projects are provided by the European Investment Bank (EIB) (European Investment Bank, 2021[15]; 2020[16]). The instruments for climate finance supporting the European Green Deal include:

  • InnovFin - EU Finance for Innovators is an initiative launched by the European Investment Bank Group (EIB and EIF) jointly with the EC under Horizon 2020 with the aim to expedite access to finance for innovative businesses. The initiative provides loans, guarantees and equity-type funding. This funding targets small and early stage enterprises (including small tech start-ups, large research facilities and circular economy companies) with R&I projects that are riskier and harder to access than traditional investments (European Investment Bank, n.d.[17]). For the circular bioeconomy thematic area, financing is managed through the European Circular Bioeconomy Fund. This venture capital impact fund aims to fill the funding gap in the European bioeconomy landscape, targeting industry sectors such as agriculture and food, forestry, the blue economy (related to the marine environment), industrial biotech, bio-based chemicals and materials, packaging, construction and textiles. The individual investment size ranges between EUR 2.5 million to EUR 10 million (ECBF, n.d.[18]).4

  • The InvestEU Fund combines the European Fund for Strategic Investments (EFSI) and 13 other financial instruments. Operational since 2022 and implemented in partnership with the EC, the fund is expected to stimulate more than EUR 372 billion of public and private investment. The fund provides direct and intermediate financing solutions for private and public entities, public-private partnerships and non-profit organisations. It supports financing and investment operations across four priorities: i) sustainable infrastructure (including the circular economy); ii) R&I and digitalisation; iii) SMEs; and iv) social investments and skills (European Investment Bank, n.d.[19]).5 The European Investment Fund is an InvestEU implementing partner, providing guarantees and equity risk-sharing instruments to MSMEs through selected financial intermediaries (European Investment Fund, n.d.[20]).

On the national level, Hungary does not have a specific environmental fund in place to help it achieve its national environmental goals and to provide state support for green and circular economy projects. On the city level, several municipalities have established independent environmental funds to promote environmental protection and nature conservation (City of Budapest, 2009[21]). However, their financial resources remain limited. The country’s National Research, Development and Innovation Fund provides state support for research on environmental topics and for business innovation targeting SMEs and start-ups (with funding worth EUR 220 million) and market-oriented R&D (with funding worth EUR 200 million) (Ministry for Innovation and Technology, 2022[22]).

Due to the lack of dedicated national funds, stakeholders have to rely almost entirely on European grant and loan programmes in order to receive financial support for implementing circular economy practices. Accessing these types of instruments might pose challenges to MSMEs as the funds tend to only provide co-financing (i.e. requiring beneficiaries’ own resources) and the applicants must go through merit-based application procedures.

The overview of public funding mechanisms for financing the circular economy transition in Hungary is provided in Annex Table 9.A.1.


[5] Circular Bio-based Europe Joint Undertaking (n.d.), The organisation, https://www.cbe.europa.eu/organisation (accessed on 16 January 2023).

[29] Circular City Funding Guide (n.d.), About Circular City Funding Guide, https://www.circularcityfundingguide.eu/ (accessed on 14 October 2022).

[21] City of Budapest (2009), Fövárosi környezetvédelmi alap, https://budapest.hu/Lapok/2020/fovarosi-kornyezetvedelmi-alap.aspx (accessed on 14 October 2022).

[18] ECBF (n.d.), “European Circular Bioeconomy Fund”, https://www.ecbf.vc/investment-focus (accessed on 14 October 2022).

[24] European Climate Infrastructure and Environment Executive Agency (2023), LIFE - Calls for proposals, https://cinea.ec.europa.eu/programmes/life/life-calls-proposals_en (accessed on 16 January 2023).

[23] European Commission (2023), Funding & tender opportunities - Single Electronic Data Interchange Area (SEDIA), https://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/home (accessed on 16 January 2023).

[12] European Commission (2022), Innovation fund progress report, https://op.europa.eu/en/publication-detail/-/publication/126a0d43-2745-11ed-8fa0-01aa75ed71a1/language-en (accessed on 14 October 2022).

[10] European Commission (2021), New European Bauhaus - Beautiful, Sustainable, Together, https://eur-lex.europa.eu/resource.html?uri=cellar:fdc74aae-1625-11ec-b4fe-01aa75ed71a1.0001.02/DOC_1&format=PDF (accessed on 16 January 2023).

[1] European Commission (n.d.), Common Provisions Regulation, https://ec.europa.eu/info/funding-tenders/find-funding/funding-management-mode/common-provisions-regulation_en#:~:text=A%20common%20provisions%20regulation%20is,third%20of%20the%20EU%20budget. (accessed on 14 October 2022).

[28] European Commission (n.d.), EU funding programmes, https://europa.eu/youreurope/business/finance-funding/getting-funding/eu-funding-programmes/index_en.htm (accessed on 14 October 2022).

[4] European Commission (n.d.), Horizon Europe, https://research-and-innovation.ec.europa.eu/funding/funding-opportunities/funding-programmes-and-open-calls/horizon-europe_en (accessed on 14 October 2022).

[8] European Commission (n.d.), Interreg : European Territorial Co-operation, https://ec.europa.eu/regional_policy/fr/policy/cooperation/european-territorial/ (accessed on 14 October 2022).

[6] European Commission (n.d.), LIFE Programme, https://cinea.ec.europa.eu/programmes/life_en (accessed on 14 October 2022).

[14] European Commission (n.d.), Technical Support Instrument (TSI), https://commission.europa.eu/funding-tenders/find-funding/eu-funding-programmes/technical-support-instrument/technical-support-instrument-tsi_en (accessed on 16 January 2023).

[11] European Commission (n.d.), The Digital Europe Programme, https://digital-strategy.ec.europa.eu/en/activities/digital-programme (accessed on 14 October 2022).

[9] European Commission (n.d.), The Single Market Programme, https://ec.europa.eu/info/funding-tenders/find-funding/eu-funding-programmes/single-market-programme/overview_en (accessed on 14 October 2022).

[15] European Investment Bank (2021), Circular Economy Overview 2021, https://www.eib.org/attachments/thematic/circular_economy_overview_2021_en.pdf (accessed on 14 October 2022).

[16] European Investment Bank (2020), The EIB Group Climate Bank Roadmap 2021-2025, https://op.europa.eu/en/publication-detail/-/publication/98cc83ef-4f06-11eb-b59f-01aa75ed71a1/language-en (accessed on 14 October 2022).

[17] European Investment Bank (n.d.), InnovFin - EU Finance for Innovators, https://www.eib.org/en/products/mandates-partnerships/innovfin/index.htm (accessed on 14 October 2022).

[19] European Investment Bank (n.d.), InvestEU, https://www.eib.org/en/products/mandates-partnerships/investeu/index.htm (accessed on 14 October 2022).

[20] European Investment Fund (n.d.), EIF intermediaries in Hungary, https://www.eif.org/what_we_do/where/hu/index.htm (accessed on 14 October 2022).

[3] Government of Hungary (2022), Gazdaságfejlesztési és innovációs operatív program plusz (GINOP PLUSZ), https://www.palyazat.gov.hu/gazdasagfejlesztesi_es_innovacios_operativ_program_plusz (accessed on 14 October 2022).

[7] Government of Hungary (2022), GINOP_PLUSZ-1.3.1-21 „Zöld nemzeti bajnokok” – A zöldgazdaság területén müködö mikro-, kis- és középvállalkozások technológiafejlesztésének támogatása, https://www.palyazat.gov.hu/ginop-plusz-131-21-zld-nemzeti-bajnokok-a-zldgazdasg-terletn-mkd-mikro-kis-s-kzpvllalkozsok-technolgiafejlesztsnek-tmogatsa-1# (accessed on 14 October 2022).

[2] Government of Hungary (2022), Környezeti és energiahatékonysági operatív program plusz (KEHOP PLUSZ), https://www.palyazat.gov.hu/kornyezeti_es_energiahatekonysagi_operativ_program_plusz (accessed on 14 October 2022).

[13] Government of Hungary (2021), Helyreállítási és Ellenállóképességi Eszköz (RRF), https://www.palyazat.gov.hu/helyreallitasi-es-ellenallokepessegi-eszkoz-rrf.

[26] Interreg Central Europe (2023), Second Call for Proposals Opens in March 2023, https://www.interreg-central.eu/Content.Node/apply/Second-call.html (accessed on 16 January 2023).

[25] Interreg Europe (2023), Next call for projects, https://www.interregeurope.eu/next-call-for-projects (accessed on 16 January 2023).

[22] Ministry for Innovation and Technology (2022), Hungarian Research and Innovation Ecosystem, https://www.v4transfer.com/outcomes/Koranyi_governmental_initiatives%20Hungary.pdf (accessed on 14 October 2022).

[27] New European Bauhaus (n.d.), Funding opportunities, https://new-european-bauhaus.europa.eu/get-involved/funding-opportunities_en (accessed on 16 January 2023).


← 1. There are two different types of EU funding: direct and indirect. Direct funding represents funds that are directly managed by the European Commission. This comprises tenders and grants to specific projects related to EU policies, including Horizon Europe, LIFE and the Single Market Programme (SMP). Indirect funding are funds managed by national and regional authorities. These are mainly disbursed through shared management funds (European Commission, n.d.[28]).

← 2. The Programme for Competitiveness of Small and Medium-Sized Enterprises (COSME), which existed as a stand-alone programme, has now been integrated within the SMP.

← 3. Using an average conversion rate of HUF 358  to EUR 1 in 2021 reported by the Hungarian National Bank.

← 4. In addition to financing, the InnovFin Advisory provides guidance on how to structure R&I projects in order to improve their access to finance.

← 5. Additionally, the InvestEU Advisory Hub assists promoters and intermediaries with financial, advisory and technical assistance for the identification, preparation and development of investment projects. For instance, the Circular City Funding Guide supports municipalities and businesses in creating circular cities through providing information on financing and funding sources, as well as guidelines for setting up funding programmes to support the transition to a circular economy (Circular City Funding Guide, n.d.[29]).

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