EUROPEAN COMMISSION

Brussels, 7.4.2022

COM(2022) 172 final

2022/0112(NLE)

Proposal for a

COUNCIL IMPLEMENTING DECISION

on the approval of the assessment of the recovery and resilience plan for Bulgaria

{SWD(2022) 106 final}

2022/0112 (NLE)

Proposal for a

COUNCIL IMPLEMENTING DECISION

on the approval of the assessment of the recovery and resilience plan for Bulgaria

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility 1 and in particular Article 20 thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1)The COVID-19 outbreak has had a disruptive impact on the economy of Bulgaria. In 2019, the gross domestic product (GDP) per capita of Bulgaria was 28% of the Union average. The real GDP of Bulgaria declined by 4.4% in 2020 and by 0.4% cumulatively in 2020 and 2021. Bulgaria has one of the highest levels of poverty and income inequality in the EU and its health system remains weak and characterised by limited access to healthcare services. Bulgaria is the most carbon- and energy-intensive economy in the Union. It is highly reliant on coal and lignite, despite having a vast potential for renewable energy and increasing energy efficiency, especially for the building stock. Improving the quality of institutions and fighting corruption remain key challenges for fostering a favourable business environment. Labour and skills shortages as well as skills mismatches relative to the labour market needs represent a significant barrier to business investment and limit productivity gains. The uptake of digital technologies is slow in both public and private sectors. Bulgaria ranks last in the Union in digital skills.

(2)On 9 July 2019 and on 20 July 2020, the Council addressed recommendations to Bulgaria in the context of the European Semester. In particular, the Council recommended Bulgaria to take all necessary measures to effectively address the pandemic, sustain the economy and support the ensuing recovery and pursue fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability, while enhancing investment. Also in relation to public finances, the Council recommended improving tax collection through targeted measures in areas such as fuel and labour taxes and upgrading the corporate governance of state-owned enterprises. The Council further recommended Bulgaria to ensure the stability of the banking sector by reinforcing supervision and promoting adequate valuation of assets. In relation to the non-banking sector, it was recommended to ensure effective supervision and the enforcement of the anti-money laundering framework and the effective functioning of the insolvency framework. Furthermore, it was recommended to improve the quality and effectiveness of public administration, minimise the administrative burden and reinforce digital government. In addition, the Council recommended Bulgaria to strengthen the resilience, accessibility and capacity of the health system, ensure a balanced geographical distribution of health workers, and improve access to health services, including by reducing out-of-pocket payments and addressing shortages of health professionals. Particularly relevant to social challenges were the recommendations to improve the quality, inclusiveness and labour market relevance of education and training, in particular for Roma and other disadvantaged groups, strengthen active labour market policies, strengthen employability by reinforcing skills, including digital skills, and to address social inclusion through improved access to integrated employment and social services and via more effective minimum income support. To tackle the COVID-19 crisis, Bulgaria was recommended to improve access to distance working, promote digital skills and equal access to education. Moreover, the Council recommended Bulgaria to provide effective support to small and medium-sized enterprises (SMEs) and the self-employed, also ensuring their continued access to finance and flexible payment arrangements and to front-load mature public investment projects and promote private investment to foster the economic recovery. It was recommended to focus investments on the green and digital transition, in particular on clean and efficient production and use of energy and resources, environmental infrastructure and sustainable transport, contributing to a progressive decarbonisation of the economy, including in the coal regions. The Council also recommended to focus investment-related economic policy on research and innovation, transport, notably on its sustainability, water, waste and energy infrastructure and energy efficiency, taking into account regional disparities, and improving the business environment. Having assessed progress in the implementation of these country-specific recommendations at the time of submission of the recovery and resilience plan ('RRP'), the Commission finds that substantial progress has been achieved with respect to the recommendations on ensuring the stability of the banking sector by reinforcing supervision, strengthening the non-banking financial sector by effectively enforcing risk-based supervision, providing an immediate fiscal policy response to effectively address the pandemic, sustain the economy and support the ensuing recovery, and the recommendation to streamline and accelerate the procedures to provide effective support to SMEs and the self-employed. Some progress has been made with the recommendation on the improvement of the tax collection system and there are several projects planned under the Technical Support Instrument to support further progress in this area.

(3)On 15 October 2021, Bulgaria submitted its national RRP to the Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. That submission followed a consultation process, conducted in accordance with the national legal framework, involving local and regional authorities, social partners, civil society organisations, youth organisations and other relevant stakeholders. National ownership of the RRPs underpins their successful implementation and lasting impact at national level and credibility at European level. Pursuant to Article 19 of Regulation (EU) 2021/241, the Commission has assessed the relevance, effectiveness, efficiency and coherence of RRP, in accordance with the assessment guidelines set out in Annex V to that Regulation.

(4)The RRPs should pursue the general objectives of the Recovery and Resilience Facility established by Regulation (EU) 2021/241 (the 'Facility') and of the European Union Recovery Instrument set up by Council Regulation (EU) 2020/2094 in order to support the recovery in the aftermath of the COVID-19 crisis. They should promote the Union's economic, social and territorial cohesion by contributing to the six pillars referred to in Article 3 of Regulation (EU) 2021/241.

(5)The implementation of the Member States' RRPs will constitute a coordinated effort involving reforms and investments across the Union. Through coordinated and simultaneous implementation and the implementation of cross-border and multi-country projects, such reforms and investments will mutually reinforce each other and generate positive spillovers across the Union. Therefore, about one third of the impact of the Facility on Member States' growth and job creation will come from spillovers from other Member States.

Balanced response contributing to the six pillars

(6)In accordance with Article 19(3), point (a), of and Annex V, criterion 2.1, to Regulation (EU) 2021/241, the RRP represents to a large extent (Rating A) a comprehensive and adequately balanced response to the economic and social situation, thereby contributing appropriately to all of the six pillars referred to in Article 3 of that Regulation, taking into account the specific challenges faced by and the financial allocation for Bulgaria.

(7)The RRP includes measures that contribute towards all six pillars, with almost all of its components addressing multiple pillars. Such an approach contributes to ensuring that each pillar is addressed comprehensively and in a coherent manner.

(8)The RRP includes important measures to accelerate the twin transition. In the area of climate action and energy transition, significant efforts are dedicated to accelerating and facilitating the deployment of renewable energy generation and storage, cutting the greenhouse gas emissions in the power sector by almost half, liberalising the wholesale and retail electricity markets, and boosting renovations of the building stock with a view to improving energy efficiency. Significant investments and reforms also aim at promoting low-emission mobility and use of less polluting modes of transport, notably rail transport. There is also a strong focus on the digital transformation of Bulgaria’s economy and society, with measures to support the acquisition of digital skills across the whole population, the digitalisation of businesses, public administration, including the judiciary, as well as enhancing the connectivity and broadband deployment in remote and sparsely populated areas. Investments in areas like power storage capacities, digitalisation and sustainability of rail transport, and smart water management make an important contribution both to the green and digital objectives.

(9)Several components in the RRP are expected to contribute to the pillar on smart, sustainable, and inclusive growth, with a wide array of measures aiming to strengthen competitiveness and enhance research and development. The RRP contains investments to support businesses, especially SMEs via grants and financial instruments aimed at promoting digitalisation, circular economy, and use of renewables for own consumption to allow businesses to deal with the energy transition. Measures in the plan also contribute to creating favourable conditions for investments in industrial parks and zones and to support the cultural and creative sectors. Moreover, reforms and investments should support the improvement of the research and innovation ecosystem thus increasing the innovation output of Bulgaria, fostering technology transfer and commercialisation of research results, which should lastingly spur its economic growth. The RRP strongly focuses on the decarbonisation of the energy sector, sustainable agriculture, sustainable mobility (rail and public transport), modernisation of the educational system and infrastructure, modernisation of healthcare provision and support for the deinstitutionalisation of care. The RRP also aims to reinforce the business environment and the rule of law with measures addressing corruption issues such as reformed anti-corruption institutions, new legislation on lobbying and on the protection of whistle-blowers, reforms of the judicial system to ensure effectiveness of criminal investigations, including the accountability and criminal liability of the Prosecutor General, reforms to improve the legislative process, reforms on public procurement to reduce the use of non-transparent procedures, reform of the governance framework of state-owned enterprises and a reform on improving the insolvency and restructuring proceedings.

(10)The pillar on health, economic, social, and institutional resilience includes measures that are expected to contribute to improving access to education, lifelong learning and healthcare, and promoting social inclusion. Relevant measures in the field of education and training include measures enhancing the relevance of higher education, with the aim of addressing labour market shortages and promoting research, and the development of a platform for lifelong learning. The relevant measures in the field of healthcare also include the adoption of a new national strategy on health, the implementation of the National Health Information System, and the establishment of a network of outpatient units, supported by a reform targeting the unbalanced distribution of medical professionals. To foster social inclusion, the RRP covers a reform to enhance the coverage and adequacy of the minimum income scheme and measures in the area of social services, including long-term care. With respect to social and territorial cohesion, the support of broadband roll-out in rural and remote areas is expected to help ensure that all citizens have access to high-speed connectivity, while social cohesion is expected to be fostered through the reform of the minimum income scheme benefitting adults and children, investment in the social economy, the modernisation of the social and employment services and the provision of telemedicine and e-government services in remote areas through a repurposing of the country’s postal network. The Bulgarian RRP is expected to contribute to policies for the next generation with measures such as the mandatory inclusion of four-year olds in pre-school education and the modernisation and construction of educational infrastructures, including kindergartens and school laboratories, and the establishment of youth centres across the country.

Addressing all or a significant subset of challenges identified in country-specific recommendations

(11)In accordance with Article 19(3), point (b), of and Annex V, criterion 2.2, to Regulation (EU) 2021/241, the RRP is expected to contribute to effectively addressing all or a significant subset of challenges (Rating A) identified in the relevant country-specific recommendations addressed to Bulgaria, including fiscal aspects thereof or challenges identified in other relevant documents officially adopted by the Commission in the context of the European Semester.

(12)The RRP includes an extensive set of mutually reinforcing reforms and investments that contribute to effectively addressing all or a significant subset of the economic and social challenges outlined in the country-specific recommendations addressed to Bulgaria by the Council in the European Semester in 2019 and in 2020, notably in the areas of social inclusion, education and skills, healthcare, decarbonisation and digital transition and business environment. 

(13)The RRP includes key structural reforms and investments that address long-standing recommendations in relation to the business environment and improving the institutional framework. In particular, the reform of the insolvency framework is expected to contribute to a more effective and flexible system for the restructuring of businesses, the improvement of the governance of state-owned enterprises and the reform of the public procurement procedures should contribute to more transparent and efficient allocation of public resources. Reforms included in the RRP support a stronger institutional framework, including through improvements in the capacity and functioning of the anti-corruption framework, judicial reforms to ensure the effectiveness of criminal investigations, including the accountability and criminal liability of the Prosecutor General, as well as improved implementation of the anti-money laundering framework. Further measures supporting the improvement of the business environment include a reform of the legislative process aimed at increasing its quality and predictability and regulation of lobbying activities in the context of public decision-making. The RRP also includes a set of reforms and investments aimed at minimising administrative burden to companies by improving the effectiveness of public administration and reinforcing eGovernment, including through the digitalisation of the justice system and the increased provision of digital public services also in rural and remote areas.

(14)The comprehensive package of reforms and investments in the RRP contributes to addressing the main challenges of the Bulgarian energy and transport sectors as identified in the Council recommendations. In particular, measures included in the RRP are expected to accelerate the deployment of renewable energy sources and storage and to significantly reduce greenhouse gas emissions from power production, thus contributing to the progressive decarbonisation of the economy, including in the coal regions. The RRP also includes key reforms aiming at establishing a competitive wholesale and retail markets, thereby improving the access of renewable energy to the market, and at improving corporate governance in the energy sector. With regard to fostering sustainable transport, the RRP includes an e-mobility reform, aimed at promoting the use of zero-emission vehicles, such as increasing public charging points, and the introduction of the low-emission zones in some of the biggest and most polluted district cities. The RRP also includes a reform of the public transport system and the introduction of a single ticket system for public transport, and investments in the digitalisation and modernisation of railways, including the acquisition of zero-emission rolling stock.

(15)A reform of the minimum income scheme aimed at increasing its adequacy and coverage is expected to contribute to addressing challenges identified in relation to social inclusion. In addition, the RRP is also expected to improve access to education and adult learning and to promote social inclusion through reforms and investments including mandatory pre-school education as of the age of four, the construction and renovation of educational facilities and the development of an online platform for adult learning linked to the public employment services. With regard to healthcare, the measures in the RRP are expected to contribute to addressing the shortages in the number of healthcare professionals, including their unbalanced geographical distribution, increasing the availability of healthcare services across the territory of the country through outpatient units, enhancing telemedicine services and establishing an air ambulance service, thus strengthening the accessibility and resilience of the healthcare system. However, the plan does not address the high level of out-of-pocket payments.

(16)The RRP includes measures focused on increasing the availability of digital infrastructures, access to distance working and the enhancement of digital skills, which support the digital transition, in particular through measures on the large-scale deployment of digital infrastructure, the digitalisation of administrative services and a revised regulation on remote working. The RRP also promotes skills relevance and adult learning, with a focus on digital skills. Moreover, the RRP addresses the recommendation to foster investments in the green and digital transition through an extensive package of reforms and investments. In addition to the measures focused on the transition to green, circular and digital-oriented business practices for SMEs, the RRP includes measures targeting the restructuring and further development of the research and innovation ecosystem and enhancing the innovation output of Bulgaria, with a particular focus on the field of green and digital technologies. The RRP is expected to contribute to the competitiveness and sustainable development of the regions of the country and to local development. This includes a reform of the management of the water and agricultural sectors as well as the construction or renovation of the water supply and sewage system. Moreover, local development should be promoted through a new regional policy approach and through dedicated reforms expected to foster the direct involvement of local communities in the management of Union funds.

(17)The recommendations related to the immediate fiscal policy response to the pandemic can be considered to fall outside the scope of Bulgaria’s RRP, notwithstanding the fact that Bulgaria has generally responded adequately and sufficiently to the immediate need to support the economy through fiscal means in 2020 and 2021, in line with the general escape clause of the Stability and Growth Pact.

Contribution to growth potential, job creation and economic, social and institutional resilience

(18)In accordance with Article 19(3), point (c), of and Annex V, criterion 2.3, to Regulation (EU) 2021/241, the RRP is expected to have a high impact (Rating A) on strengthening the growth potential, job creation, and economic, social and institutional resilience of Bulgaria, contributing to the implementation of the European Pillar of Social Rights, including through the promotion of policies for children and youth, and on mitigating the economic and social impact of the COVID-19 crisis, thereby enhancing the economic, social and territorial cohesion and convergence within the Union.

(19)Simulations by the Commission services show that the RRP, together with the rest of measures of the European Union Recovery Instrument, has the potential to increase the GDP of Bulgaria by 1.9% to 3% by 2026, not including the possible positive impact of structural reforms, which can be substantial. The most significant persistent positive effects on growth and productivity over the medium to long run are expected to stem from investments in decarbonisation of the economy, including the deployment of renewable energy generation and storage and increased energy efficiency, as well as from investments supporting businesses and measures expected to attract industrial investment and develop industrial ecosystems.

(20)The set of reforms and investments presented by Bulgaria is expected to stimulate growth and increase the resilience of the economy by addressing important structural deficiencies and long-standing vulnerabilities. The measures included in the RRP to improve the business environment, including by strengthening the institutional framework and digitalisation of the public administration, judiciary and the construction sector, are expected to create significantly more favourable conditions for private investments in the country. In addition, reforms and investments in education and skills, research and innovation, decarbonisation and digitalisation as well as support for businesses, especially for SMEs in their twin transition are expected to make a significant contribution to sustainable long-term economic growth and job creation. 

(21)The RRP features significant reforms and investments to support economic, social and territorial cohesion, which contribute to the European Pillar of Social Rights. Social vulnerabilities should be mitigated through the improvement of the social support system, notably the reform of the minimum income scheme and the modernisation of long-term care for older people and people with disabilities. The envisaged measures are expected to contribute to increasing social resilience to shocks, reducing social inequalities, and creating opportunities for the most vulnerable groups to enter the labour market. Measures related to education and skills, including digital skills, should increase socioeconomic resilience by addressing the persistent and significant skills gaps and strengthening the employability and productivity of the workforce.  Measures in the area of education are expected to support equal access to quality education and training and reduce drop-out rates. In addition, the measures in the area of health are expected to strengthen the responsiveness and accessibility of healthcare and contribute to improving the geographical distribution of health workers. The RRP should further contribute to reducing territorial disparities through reforms supporting a territorial, bottom-up approach as well as dedicated infrastructure investments in the water sector in regions outside of the capital city, and investments to secure better transport connections in the north of the country. Other investments in transport and digital connectivity across the country and increased availability of e-government and other administrative services in remote and sparsely populated areas are also expected to enhance territorial cohesion. Finally the reforms and investments towards decarbonisation of the economy should set the ground for investments under the Just Transition Fund to ensure that the coal regions are supported through the transition and that no one is left behind.  

(22)The RRP includes various interventions to contribute to the implementation of the European Pillar of Social Rights through the promotion of policies for children and youth. Reforms and investments are expected to improve equal access to quality education and promote participation in early childhood education, through the mandatory inclusion of four-year olds in pre-school education and promoting the personal development of young people, via the establishment of youth centres. In addition, the RRP focuses on the modernisation of schools, including by setting up science, technology, engineering, and mathematics (STEM) laboratories, which ensures continuous adaptation to current learning challenges, in particular digitalisation.

Do no significant harm

(23)In accordance with Article 19(3), point (d), of and Annex V, criterion 2.4, to Regulation (EU) 2021/241, the RRP is expected to ensure that no measure (Rating A) for the implementation of reforms and investments projects included in the RRP does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852 of the European Parliament and of the Council 2 (the principle of 'do no significant harm').

(24)In line with Regulation (EU) 2021/241 and the ‘do no significant harm’ Technical Guidance adopted by the Commission (2021/C 58/01), Bulgaria has provided evidence and assurances that the measures for the implementation of reforms and investment projects included in the RRP should not lead to significant harm to any of the six environmental objectives, namely climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. Particular attention has been paid to measures with impact on environmental objectives that warrant close scrutiny.

(25)The RRP is expected to ensure that no significant harm is done to environmental objectives by selecting measures that either contribute substantially to an environmental objective or have no or an insignificant foreseeable impact on environmental objectives. Other measures, including broad support schemes, are designed to ensure compliance with this principle. Milestones or targets should ensure that the requirements for compliance with the principle of ‘do no significant harm’ are enshrined in the design of the schemes and of all stages of implementation, including during the tendering process, where applicable, and in all cases in the final outputs. For measures requiring a substantive assessment in accordance with the Commission’s technical guidance, such as renewables power production, sustainable mobility and building renovations, specific milestones and targets should be established to ensure that no significant harm is done to any of the six environmental objectives. As such, ‘do no significant harm’ criteria should be integrated into the milestones related to the selection process for relevant projects and, where applicable, references to an exclusion list in the relevant milestones and targets.

Contribution to the green transition including biodiversity

(26)In accordance with Article 19(3), point (e), of and Annex V, criterion 2.5, to Regulation (EU) 2021/241, the RRP contains measures that contribute to a large extent (Rating A) to the green transition, including biodiversity, or to addressing the challenges resulting therefrom. The measures supporting climate objectives account for an amount which represents 58.9% of the RRP's total allocation calculated in accordance with the methodology set out in Annex VI to that Regulation. In accordance with Article 17 of that Regulation, the RRP is consistent with the information included in the National Energy and Climate Plan 2021-2030.

(27)In terms of contribution to the Union 2030-2050 climate and energy-related targets and the objective of climate neutrality by 2050, the RRP addresses some of the key policy challenges and contributes to attaining these objectives, while remaining effort will be needed to fully attain such objectives, in particular as Bulgaria has the highest carbon intensity in the EU, four times the EU average. The measures in the Bulgarian RRP include long-lasting reforms and investments that are expected to effectively contribute to the green transition. This includes reforms and investments to support the deployment of renewable energy generation and large-scale electricity storage and a clear commitment to phase out coal and lignite power generation as soon as possible and at the latest by 2038.

(28)In addition, an investment in the electricity network infrastructure with the aim to modernise the electricity grid through the inclusion of digital tools and methods is expected to lay the basis for increased penetration of electricity from renewable sources and greater integration with neighbouring countries. The combination of reforms and investments included in the RRP are expected to deliver an additional 3.5 GW of renewable power generation and new storage facilities with 6000 MWh of usable energy. The RRP also includes measures to support the development of pilot projects enabling the introduction of green hydrogen and biogas for industrial applications and for future use in transport and for the production of electricity and heat. Substantial investments in energy renovation of public and private buildings, and street lightning are expected to increase energy efficiency. Reforms and investments are expected to make a significant contribution to advancing the decarbonisation and climate objectives as set out in the Bulgarian National Energy and Climate Plan and long-term strategy for decarbonisation. This includes binding targets for the reduction of the carbon dioxide emissions associated with electricity generation by 40% below 2019 levels, to be achieved at the latest in 2025, and legislation on decarbonisation, including a calendar for the phase-out of coal and lignite power plants and a regulatory cap on their carbon dioxide emissions applicable as of 1 January 2026. In addition, the RRP supports the shift to sustainable mobility with a reform on promoting electric mobility and with numerous investments aimed at the modernisation and digitalisation of public transport through the acquisition of a zero-emission rolling stock, the deployment of the European Rail Traffic Management System and the construction of a new segment of the metro in Sofia, which are expected to contribute to the decarbonisation of the transport sector. Road safety measures included in the RRP should contribute to making transport more sustainable by addressing transport safety and attractiveness also through reduction by half of road safety blackspots/hotspots.

(29)The RRP also contributes to the Union’s environmental policy objectives such as improving water management, promoting sustainable agriculture, and preserving biodiversity. The RRP features reforms and investments in the water supply and sewerage services, including the modernisation and digitalisation of water management and improving control of water use. The measures dedicated to protecting and restoring ecosystems and natural habitats are expected to contribute to building effective Natura 2000 management structures in the country as well as to restoring climate-related ecosystems and protecting biodiversity. Reforms and investments, including targeting the management and protection of environmental and natural resources in the area of sustainable agriculture and promoting the technological and ecological transition of the Bulgarian agricultural sector, aim to enhance the sustainable management and competitiveness of the sector in the context of the green transition. These measures should ensure a lasting impact of the Bulgarian RRP on the green transition, including on biodiversity and environmental protection.

Contribution to the digital transition

(30)In accordance with Article 19(3), point (f), of and Annex V, criterion 2.6, to Regulation (EU) 2021/241, the RRP contains measures that contribute to a large extent (Rating А) to the digital transition or to addressing the challenges resulting from it. The measures supporting digital objectives account for an amount which represents 25.8% of the RRP’s total allocation calculated in accordance with the methodology set out in Annex VII to that Regulation.

(31)The RRP has a strong focus on the digital transition, with measures included throughout the components, which reflects the broad and crosscutting nature of the envisaged digitalisation efforts. Significant investments and reforms in digital connectivity should increase the coverage of very high capacity networks in rural and sparsely populated areas that are lagging behind in terms of digital inclusion and create a favourable environment for the deployment of 5G networks and digital infrastructure. The RRP also includes a comprehensive package of reforms and investments aimed at supporting the development of e-government and digitalisation of the public administration and judiciary, which contributes to reducing the administrative burden on citizens and businesses and increasing the quality and effectiveness of public services in areas such as justice, health, agriculture and environment, culture, employment and social protection. The RRP also supports the digitalisation of the transport and energy sectors thus contributing to their progressive decarbonisation. As regards the private sector, the investments in the digital transformation of business processes and increased cybersecurity capabilities should contribute to improving their efficiency and productivity. Moreover, digital technologies and infrastructure are expected to enhance Bulgaria’s innovation capacity, with a particular focus on green and digital technologies. In addition, several universities and research organisations should have access to ultra-fast connectivity needed to participate in European research networks.

(32)Increasing the level of digital skills of the population is another priority supported by the RRP, including through targeted reforms and investments in the education system, such as setting up STEM laboratories in schools, and investment for upskilling and reskilling to increase employability of the workforce by enhancing digital skills.

Lasting impact

(33)In accordance with Article 19(3), point (g), of and Annex V, criterion 2.7, to Regulation (EU) 2021/241, the RRP is expected to have a lasting impact on Bulgaria to a large extent (Rating A).

(34)The reforms proposed in the RRP are expected to deliver long-term results and bring about lasting structural changes. In particular, the envisaged reforms that aim at fostering the green and digital transition, the comprehensive reforms in the education and training systems, and the reform of the research and innovation ecosystem are expected to have a lasting impact on Bulgaria’s economy by strengthening skills for the labour market and fostering productivity and sustainable long-term growth. The reforms of healthcare, social services, including long-term care, and of the minimum income scheme are expected to lastingly improve the health care and social protection systems of Bulgaria in terms of inclusiveness, adequacy and effectiveness.

(35)The implementation of the reforms envisaged in the RRP, notably of the reforms of the institutional framework and the rule of law, is expected to bring about structural changes to the public administration and institutions, contributing to a lasting improvement of their functioning and administrative capacity. The RRP includes key reforms of the judicial system to ensure the effectiveness of criminal investigations, including the accountability and criminal liability of the Prosecutor General, increasing the capacity to fight corruption in the judiciary as well as improvements in the capacity of anti-corruption bodies, the integrity of public servants and the efficiency of the anti-money laundering supervisory authorities. Reform efforts should also focus on improving the governance of state-owned enterprises, increasing transparency and competition in the public procurement process, enhancing the quality of the legislative process, and strengthening audit and control mechanisms. Moreover, the RRP features reforms and investments expected to unlock the potential of e-government and digital public services and thus lastingly increasing the efficiency of the public administration. The RRP aims at enhancing the administrative capacity for strategic planning and implementation of priority policies.

(36)The RRP contains numerous reforms and investments expected to have a lasting impact by supporting the green and digital transition, with a focus on smart and sustainable economy. Significant reforms and investments included in the RRP have the potential to contribute to the decarbonisation of the economy by supporting the increased deployment of renewable energy generation and storage, increasing energy efficiency, contributing to sustainable road and rail mobility as well as sustainable agriculture and water resources management. Investments fostering the acquisition of digital skills, the digitalisation of the public sector, businesses and research organisations and investments in digital connectivity are expected to lastingly increase the efficiency in those sectors. In addition, the plan includes investments to support businesses in the twin transition and to stimulate the smart and sustainable growth.

(37)The lasting impact of the plan can also be enhanced through synergies between the plan and other programmes, including those financed by cohesion policy funds, in particular by addressing in a substantive manner the deeply rooted territorial challenges and by promoting a balanced development.

Monitoring and implementation

(38)In accordance with Article 19(3), point (h), of and Annex V, criterion 2.8, to Regulation (EU) 2021/241, the arrangements proposed in the RRP are adequate (Rating A) to ensure effective monitoring and implementation of the RRP, including the envisaged timetable, milestones and targets, and the related indicators.

(39)The National Fund Directorate of the Ministry of Finance is the body responsible for collecting and reporting data on progress and for preparing and submitting payment requests and receiving payments from the Commission. It will also act as the focal point at the national level regarding the preparation of common rules and procedures for the implementation of the Facility, for carrying out the checks and controls on the implementation of investments and reforms, including active monitoring of the progress in implementing the measures on the basis of the milestones and targets. The Central Coordination Unit Directorate of the Ministry of Finance will be responsible for monitoring the implementation of the milestones and targets of the plan, including progress on common indicators, green and digital contribution of investments etc. It is also tasked with establishing a strategic framework for information and communication activities in relation to the implementation of the plan and for administration, maintenance and upgrade of the IT systems for programmes under shared management with the EU and under the Facility. The Economic and Financial Policy Directorate of the Ministry of Finance is the authority responsible for reporting on the progress in the implementation of the milestones and targets of the plan within the European Semester cycle. The Executive Agency for the Audit of EU Funds, attached to the Ministry of Finance, is responsible for the implementation of audit and control under the Facility. The following responsibilities also fall within the remit of the body: verification of the reliability of the data on the implementation of the milestones and the way in which they are collected; providing assurances that double funding, fraud, corruption and conflict of interest are prevented in the implementation of the plan and that the principle of sound financial management is respected.

(40)The RRP defines milestones and targets for all reforms and investments and is consistent with the long-term objectives pursued in the plan. The proposed qualitative and quantitative indicators used for milestones and targets are sufficiently clear, robust and comprehensive to ensure that their completion can be verified and traced. The number of milestones and targets reflects the large number of measures and sub-measures to ensure the efficient monitoring and implementation of the plan. Milestones and targets are also relevant for measures already completed which are eligible pursuant to Article 17(2) of Regulation (EU) 2021/241. The satisfactory fulfillment of these milestones and targets over time is required to justify a disbursement request.

(41)Member States should ensure that financial support under the Facility is communicated and acknowledged in line with Article 34 of Regulation (EU) 2021/241. Technical support may be requested under the Technical Support Instrument established by Regulation (EU) 2021/240 of the European Parliament and of the Council 3  to assist Member States in the implementation of their RRPs.

Costing

(42)In accordance with Article 19(3), point (i), of and Annex V, criterion 2.9, to Regulation (EU) 2021/241, the justification provided in the RRP on the amount of the estimated total costs of the RRP is to a medium extent (Rating B) reasonable and plausible, is in line with the principle of cost efficiency and is commensurate to the expected national economic and social impact.

(43)Bulgaria has provided individual estimated costs for all the measures in the RRP that will generate expenditure. Bulgaria has provided generally clear and sufficient information to justify the cost estimates associated with each of the reforms and investments in the plan, where necessary at the sub-investment level.  The evidence provided by Bulgaria is sufficient to conclude that the amount of the estimated total cost of the plan is reasonable and plausible, as the amounts are appropriate and in line with the nature and type of the envisaged reforms and investments. For the majority of measures, calculations behind the cost estimates are provided, and these are for a large degree clear and understandable. For certain measures, more details could have been provided to explain how the final budget was computed. For demand-driven measures (such as investments in energy efficiency in buildings, or support programmes for businesses), a reference to the full budgetary execution, and, where appropriate, to the expected number of beneficiaries, have been included. For the majority of measures, Bulgaria has provided information on the cost of similar measures carried out in the past whenever these were available. Where this was not available, as for instance for novel projects, Bulgaria has provided price quotes or, in some cases, pricing information from publicly available sources. The estimated cost of measures included in the plan is generally consistent with similar measures, including investments funded by other Union programmes if available. The cost estimates of the Bulgarian RRP have been reviewed by the Bulgarian Executive Agency for European Funds Audit, which stated that the cost estimates are complete, reasonable and plausible within the meaning of Regulation (EU) 2021/241, and that they do not have any other source of funding. Bulgaria provided sufficient information and evidence that the amount of the estimated total costs of the RRP to be financed under the Facility is not covered by existing or planned Union financing. Finally, the estimated total costs of the RRP is in line with the principle of cost-efficiency and is commensurate with the expected national economic and social impact.

Protection of the financial interests of the Union

(44)In accordance with Article 19(3), point (j), of and Annex V, criterion 2.10, to Regulation (EU) 2021/241, the arrangements proposed in the RRP are adequate (Rating A) to prevent, detect and correct corruption, fraud and conflicts of interests when using the funds provided under that Regulation, and the arrangements are expected to effectively avoid double funding under that Regulation and other Union programmes. This is without prejudice to the application of other instruments and tools to promote and enforce compliance with Union law, including for preventing, detecting and correcting corruption, fraud and conflicts of interest, and for protecting the Union budget in line with Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council 4 .

(45)The internal control system described in the RRP is based on robust processes and structures and clearly identifies actors and their roles and responsibilities for the performance of the internal control tasks. The internal control system and other relevant arrangements, including the collection and publication of data on final recipients are expected to prevent, detect and correct corruption, fraud and conflicts of interest when using the funds under Regulation (EU) 2021/241 and to avoid double funding under that Regulation and other Union programmes. A repository system for monitoring of the implementation of the RRP is to be put in place and operational by the time of the first payment request. A milestone should ensure that the system includes, as a minimum, the following functionalities: (a) collection of data and monitoring of the achievement of milestones and targets and (b) collection, storing and ensuring access to the data required by Article 22(2) point (d)(i) to (iii) of that Regulation.

(46)Specific measures should be implemented to ensure compliance with the rules relating to the prevention, detection and correction of fraud, conflict of interest, corruption and double financing. The RRP provides information on the administrative capacity of the bodies which will monitor, control and implement the RRP in Bulgaria, as well as those bodies that will perform audit activities. It also gives information on the legal mandate of the various bodies. In accordance with Article 20(5), point (e) of Regulation (EU) 2021/241 a milestone on the assessment of the administrative capacity of the responsible authorities and capacity needs constitutes a measure necessary for complying with Article 22 of that Regulation and should be fulfilled before the first payment request as a precondition for any disbursement under the Facility. In addition, a milestone should require the entry into force of the Act approving the Management and Control system and that milestone should also be fulfilled before the submission of the first payment request as a precondition for any disbursement under the Facility.

Coherence of the RRP

(47)In accordance with Article 19(3), point (k), of and Annex V, criterion 2.11, to Regulation (EU) 2021/241, the RRP includes to a high extent (Rating A) measures for the implementation of reforms and public investment projects that represent coherent actions.

(48)The RRP is structured around four coherent pillars supporting the recovery of the Bulgarian economy, the contribution to the green and digital transition, and the enhanced resilience towards more sustainable and inclusive growth. Each pillar is built around components including consistent packages of mutually reinforcing and complementary reforms and investments. The entry into force of reforms early in the timeline of the plan ensures a supportive environment for the realisation of investments, which in turn contributes to the objectives of the reforms. At the level of the RRP, all pillars pursue complementary objectives and represent coherent actions. The RRP does not present inconsistencies or contradictions between pillars or components. All pillars under the plan foresee measures that reinforce the effects on the green transition. Digital solutions included across the RRP, in particular, those in the transport and energy sectors, are also expected to contribute to the decarbonisation of the economy, and to promote smart, sustainable and inclusive growth. Measures to support businesses are expected to contribute to fostering the twin transition. In addition, measures contributing to an improved business environment support all investments included in the RRP, while investments and reforms in education and skills are also expected to foster the digital transition as well as research and innovation.

(49)The need for establishing systematic complementarities with cohesion policy funding is acknowledged and examples are presented in the components. Demarcation lines are sufficiently developed and should also be taken into account for the finalisation of the partnership agreement and cohesion policy programmes.

Equality

(50)The RRP contains measures that are expected to help Bulgaria address the challenges in the area of gender equality and equal opportunities for all, including measures targeting the personal development of young people from vulnerable groups, including Roma, the mobility and opportunities for the independent living of people with disabilities and the quality of life of older people. The RRP also includes measures aimed at promoting equal access to healthcare and education, including investments in kindergartens, with implications for the labour market participation of women. In the plan, Bulgaria commits to ensure that respect for gender equality and equality for all is safeguarded at all stages of preparation and implementation of the envisaged reforms and investments. 

Security self-assessment

(51)Bulgaria has provided a security self-assessment for investments in digital capacities and connectivity, in accordance with Article 18(4), point (g), of Regulation (EU) 2021/241. Throughout the RRP, several components include a section that explains the adherence of the measures to the Union’s open strategic autonomy and security issues. 

Consultation process

(52)The RRP describes that Bulgaria has consulted a wide range of stakeholders, including social partners, regional and local authorities, civil society organisations, business community and other relevant stakeholders at the initial stages of the RRP preparation. The first draft of the RRP was subject to a public consultation which gathered over 90 positions from interested parties, which served as basis for the subsequent revisions of the RRP. Consultation at the later stages has been more targeted, involving mostly the social partners and specific sectoral representatives. To ensure ownership by the relevant actors, it is crucial to involve all local authorities and stakeholders concerned, including social partners, throughout the implementation of the investments and reforms included in the RRP.

Positive assessment

(53)Following the positive assessment of the Commission concerning the Bulgarian RRP with the finding that the RRP satisfactorily complies with the criteria for assessment set out in Regulation (EU) 2021/241, in accordance with Article 20(2) of and Annex V to that Regulation, this Decision should set out the reforms and investment projects necessary for the implementation of the RRP, the relevant milestones, targets and indicators, and the amount made available from the Union for the implementation of the RRP in the form of non-repayable financial support.

Financial contribution

(54)The estimated total cost of the RRP of Bulgaria is BGN 13 491 125 932, which equals EUR 6 897 903 157 on the basis of the EUR BGN ECB reference rate of 15 October 2021. As the RRP satisfactorily complies with the criteria for assessment set out in Regulation (EU) 2021/241 and, furthermore, as the amount of the estimated total costs of the RRP is higher than the maximum financial contribution available for Bulgaria, the financial contribution allocated for Bulgaria's RRP should be equal to the total amount of the financial contribution available for Bulgaria.

(55)In accordance with Article 11(2) of Regulation (EU) 2021/241, the calculation of the maximum financial contribution for Bulgaria is to be updated by 30 June 2022. As such, in accordance with Article 23(1) of that Regulation, an amount for Bulgaria not exceeding the maximum financial contribution referred to in Article 11(1), point (a) of that Regulation should be made available now for a legal commitment by 31 December 2022. Where necessary following the update of the maximum financial contribution, the Council, on a proposal from the Commission, should amend this Decision to include the updated maximum financial contribution, calculated in accordance with Article 11(2) of that Regulation, without undue delay.

(56)The support to be provided is to be financed from the borrowing by the Commission on behalf of the Union on the basis of Article 5 of Council Decision (EU, Euratom) 2020/2053 5 . The support should be paid in instalments once Bulgaria has satisfactorily fulfilled the relevant milestones and targets identified in relation to the implementation of the RRP.

(57)This Decision should be without prejudice to the outcome of any procedures relating to the award of Union funds under any Union programme other than the Facility or to procedures relating to distortions of the operation of the internal market that may be undertaken, in particular under Articles 107 and 108 of the Treaty. It does not override the requirement for Member States to notify instances of potential State aid to the Commission under Article 108 of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1
Approval of the assessment of the RRP

The assessment of the RRP of Bulgaria on the basis of the criteria provided for in Article 19(3) of Regulation (EU) 2021/241 is approved. The reforms and investment projects under the RRP, the arrangements and timetable for the monitoring and implementation of the RRP, including the relevant milestones and targets, the relevant indicators relating to the fulfilment of the envisaged milestones and targets, and the arrangements for providing full access by the Commission to the underlying relevant data are set out in the Annex to this Decision.

Article 2
Financial contribution

1.The Union shall make available to Bulgaria a financial contribution in the form of non-repayable support amounting to EUR 6 267 312 124. 6 An amount of EUR 4 636 043 337 shall be available to be legally committed by 31 December 2022. If the update provided for in Article 11(2) of Regulation (EU) 2021/241 results in an updated maximum financial contribution for Bulgaria that is equal to or more than EUR 6 267 312 124, a further amount of EUR 1631268787 shall be available to be legally committed from 1 January 2023 until 31 December 2023. If the update provided for in Article 11(2) of Regulation (EU) 2021/241 results in an updated maximum financial contribution for Bulgaria that is less than EUR 6 267 312 124, the difference between the updated maximum financial contribution and the amount of 4 636 0433 37 shall be available to be legally committed in accordance with the procedure set out in Article 20(8) of Regulation (EU) 2021/241 from 1 January 2023 until 31 December 2023.

2.The Union financial contribution shall be made available by the Commission to Bulgaria in instalments in accordance with the Annex to this Decision.

3.The release of instalments in accordance with the financing agreement shall be conditional on available funding and a decision by the Commission, taken in accordance with Article 24 of Regulation (EU) 2021/241, that Bulgaria has satisfactorily fulfilled the relevant milestones and targets identified in relation to the implementation of the RRP. In order to be eligible for payment, Bulgaria shall complete the milestones and targets no later than 31 August 2026, subject to the entry into force of the legal commitments referred to in paragraph 1.

Article 3
Addressee

This Decision is addressed to the Republic of Bulgaria.

Done at Brussels,

(1)    OJ L 57, 18.2.2021, p. 17-75.

(2)    Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13).

(3)    Regulation (EU) 2021/240 of the European Parliament and of the Council of 10 February 2021 establishing a Technical Support Instrument (OJ L 57, 18.2.2021, p. 1).

(4)    Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a general regime of conditionality for the protection of the Union budget (OJ L 433 I, 22.12.2020, p. 1).

(5)    Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European Union and repealing Decision 2014/335/EU, Euratom (OJ L 424, 15.12.2020, p. 1).

(6)    This amount corresponds to the financial allocation after deduction of the Republic of Bulgaria’s proportional share of the expenses of Article 6(2) of Regulation (EU) 2021/241, calculated in accordance with the methodology of Article 11 of that Regulation.

EUROPEAN COMMISSION

Brussels, 7.4.2022

COM(2022) 172 final

ANNEX

to the

Proposal for a COUNCIL IMPLEMENTING DECISION

on the approval of the assessment of the recovery and resilience plan for Bulgaria

{SWD(2022) 106 final}

ANNEX

SECTION 1: REFORMS AND INVESTMENTS UNDER THE RECOVERY AND RESILIENCE PLAN

1.Description of Reforms and Investments

   A. COMPONENT 1: Education and skills

This component of the Bulgarian recovery and resilience plan aims to improve the quality and effectiveness of the education and training systems. It encompasses two reforms and four investments, covering the following areas:

-access to education: construction and renovation of educational infrastructures and youth centres across the territory, implementation of distance and hybrid forms of learning, and the progressive inclusion of four-year-olds in the educational system;

-development of digital skills and promotion of science, technology, engineering and mathematics (STEM) fields in Bulgarian schools: update of curricula and construction of STEM centres, including school laboratories;

-skills relevance and adult learning: reform of the regulatory frameworks for higher and vocational education and training and development of an online platform for adult learning linked to the public employment services.

The component contributes to addressing the challenges identified in the country-specific recommendations to improve employability by enhancing skills, including digital skills and to improve equal access and increase the quality, labour market relevance and inclusiveness of education and training (country-specific recommendation 4 from 2019 and 2 from 2020).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

A.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C1.R1): Reform in preschool and school education and lifelong learning

The objective of this reform is to increase quality and access to education and training. The reform consists of the entry into force of a legislative package, which shall include:

1.amendments to the Preschool and School Education Act, including secondary legislation. The amendments shall introduce: revisions to curricula, with a focus on science, technology, engineering and mathematics (STEM) subjects; additional hybrid forms of learning, combining in-presence and distance options; as well as the mandatory inclusion of four-years-old in preschool education, which shall be implemented progressively and completed by the school year 2023/2024;

2.amendments to the Employment Promotion Act, which shall expand eligibility for trainings participation and introduce new options for trainings and for the validation of competencies;

3.amendments to the regulatory framework for vocational education and training (VET), which shall introduce changes to the list of professions for VET and their programmes, in accordance with the needs of professional competences, including in the green and digital sectors.

The reform shall also include the adoption of an action plan containing the measures addressing the recommendations of the Strategic Framework for the Development of Education, Training and Learning in the Republic of Bulgaria (2021-2030). This Strategic Framework shall set out the priorities for the development of the Bulgarian education system until 2030 and provide recommendations, with a particular focus on access to quality education for vulnerable groups, including Roma;

The implementation of the reform shall be completed by 30 September 2023.

Reform 2 (C1.R2): Higher education reform

The objective of the reform is to enhance the effectiveness of higher education across the territory of Bulgaria.

The reform includes:

1.the entry into force of the amendments to the Higher Education Act. The amendments shall include the introduction of fees exemption for students who sign a traineeship agreement with an employer; new programmes targeting sectors with expected labour market shortages; as well as an updated system of accreditation of higher education institutions;

2.the adoption of the National Map of Higher Education, which shall provide an analysis of the offer of higher education and resources available across the territory;

3.the adoption of an action plan containing the measures addressing the recommendations of the Strategy for the Development of Higher Education in the Republic of Bulgaria 2021-2030. The Strategy shall set key objectives and make recommendations to foster access to quality higher education, increase the labour market relevance of higher education and promote research, including via the development of international research networks.

The implementation of the reform shall be completed by 31 December 2022.

Investment 1 (C1.I1): STEM centres and innovation in education

This investment complements reform 1 ‘Reform in preschool and school education and lifelong learning’. The objective of the investment is to modernise teaching tools and enhance the learning in the fields of science, technology, engineering and math (STEM) subjects in Bulgarian schools, via the construction and/or refurbishment of a national and three regional STEM centres, as well as the establishment of more STEM laboratories in schools, including high-tech classrooms, which are expected to complement the measures of the national programme “Construction of School STEM environment”.

STEM laboratories in schools, including high-tech classrooms are expected to promote digital literacy and enhance teaching methods of STEM subjects. The national STEM centre is expected to act as a centralised unit that develops content, tools and methodologies to support the trainings of both teachers and students. The three regional centers are expected to support the trainings of the teachers and the students, as well as organise conferences, congresses and seminars.

The implementation of the investment shall be completed by 30 June 2026.

Investment 2 (C1.I2): Modernisation of educational infrastructures

This investment complements reform 1 ‘Reform in preschool and school education and lifelong learning’. The investment shall consist of the construction and renovation of educational facilities. These educational facilities shall encompass kindergartens, schools, including vocational upper secondary schools, student dormitories and university campuses.

The locations of the newly built educational infrastructures and the existing educational infrastructures to be renovated shall be selected on the basis of objective criteria, notably national priorities stated in National Strategies, and, where relevant, analysis of the educational needs across the territory and other relevant documents, such as Maps and Methodologies adopted by the Ministry of Education and Science.

The implementation of the investment shall be completed by 30 June 2026.

Investment 3 (C1.I3): Provision of digital skills trainings and set-up of a platform for adult learning

This investment complements reform 1 ‘Reform in preschool and school education and lifelong learning’. The objective of the investment is to improve the up- and re-skilling of the workforce, with a focus on digital skills. This shall be achieved by establishing a digital platform and electronic resources, to promote the uptake of distance learning for adults. The investment shall consist of two parts:

1.    Sub-investment 1: platform for e-learning for adults

The platform for e-learning for adults shall offer access to online courses and learning resources. To cover the needs of the population with low digital skills and the lack of internet connection, this sub-investment shall also include the establishment of a network of digital clubs throughout the country and equipped with laptops and staffed, thus enabling users to access the digital platform for adult learning free of charge. Digital clubs shall be located in existing infrastructures, such as administrative buildings, regional information centers, libraries, and Labour Office Directorates.

2.    Sub-investment 2: Training on digital skills

The second sub-investment shall cover the provision of trainings for digital skills. The trainings shall be free of charge and cover basic and medium digital skills, consistent with the European Digital Competences Framework DigComp2.1, for unemployed and for employed people. The successful completion of the training shall be testified by a certificate.

The implementation of the investment shall be completed by 30 June 2026.

Investment 4 (C1.I4): Youth centres

The objective of the investment is to foster young people’s skills, encompassing digital, entrepreneurial and financial literacy, in order to promote social inclusion and employability of young people, encompassing those from vulnerable groups, including Roma. This investment shall include:

-the construction of youth centres across the territory. The locations of the youth centres shall encompass district and non-district cities and shall be selected on the basis of relevant criteria, in particular, youth unemployment and share of young people from vulnerable groups, including Roma;

-the establishment and construction of a national focus centre, which is expected to coordinate the activities and set out the objectives of the youth centres.

The implementation of the investment shall be completed by 30 June 2026.

A.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

   B. COMPONENT 2: Research and Innovation

The Research and Innovation component of the Bulgarian RRP contains measures aimed at improving the innovation output of Bulgaria, thus spurring its economic growth in the medium and long term. The component contains a reform that aims to highlight research and innovation as a clear priority of the country’s future development and pooling national and EU resources in order to overcome the current fragmentation of the ecosystem. The key elements of the reform are: the establishment of a new Ministry for Innovation and Growth, replacing the State Agency for Research and Innovation, as well as the adoption of a Research and Innovation Act. The component further includes investments to foster the research and innovation performance of public research institutions and innovative business. The investments introduce new financing channels to support research and innovation activities and enhance the innovation capacity of the Bulgarian Academy of Sciences. 

The measures included in the component contribute to addressing country-specific recommendation 3 of 2019 (‘Focus investment-related economic policy on research and innovation’) and country-specific recommendation 3 of 2020 (‘Streamline and accelerate the procedures to provide effective support to small and medium-sized enterprises and self-employed’).

B.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C2.R1): Common policy for the development of research and innovation.

The objective of the reform is to foster an efficient policy coordination in all phases of research and innovation and to spur the Bulgarian innovation outcome. This will be done through the creation of a research and innovation ecosystem that ensures close links between academia and the business sectors. 

The reform shall include the following elements:

oEntry into force of the Research and Innovation Act and related legislative acts;

The Research and Innovation Act shall:

-define the legislative parameters of the national policy for the development and financing of research and innovation; 

-regulate the role and responsibilities of each of the institutions involved in the process of policy design, implementation, monitoring and evaluation in the field of research and innovation;

-regulate technology transfer activities;

-amend the legislation on intellectual property rights, building on the recommendations of the World Bank received in the country report on knowledge transfer, 1 as well as on the recommendations of the Joint Research Centre. 2

The preparation of the Act shall be carried out with the involvement of the relevant ministries, agencies, and stakeholders, including higher education institutions and representatives of the private sector. 

oEstablishment of the Innovation Board;

The Innovation Board shall be an advisory body to the Ministry of Education and Science and the Ministry of Innovation and Growth, co-chaired by the two ministers.

The members of the Innovation Board shall be selected among Bulgarian and international scientists and business representatives. The Board shall include at least 17 representatives of the business sector. They shall be selected based on a transparent procedure and appointed for a period of at least 5 years.

The Innovation Board shall be permanent and meet at least 6 times a year. It shall advise the Ministry of Education and Science and the Ministry of Innovation and Growth on all the matters related to the research and innovation policy.

The implementation of this reform shall be completed by 30 September 2023.

Investment 1 (C2.I1): Programme to accelerate economic recovery and transformation through research and innovation 

The investment’s objective is to enhance Bulgaria’s research and innovation performance and the effectiveness of technology transfer and foster information-sharing among research universities in Bulgaria; the investment consists of putting in place an effective financing system of research and innovation activities that rewards project proposals by innovative small and medium enterprises and higher education institutions.

The investment shall include the following activities:

-Financing of 38 projects by Bulgarian small and medium enterprises which have been awarded the quality label "Seal of Excellence" under Horizon Europe; 

-Financing of 10 projects by Bulgarian higher education institutions which were given a high "above the threshold" evaluation (i.e. above 10 points) by the European Commission, but did not receive European budget funding in the area "Widening Participation and Spreading Excellence" of FP Horizon Europe; 

-Financing for two European Research Area (ERA) Chairs; 

-Funding the implementation of innovation programmes by nine research higher education institutions in Bulgaria. 

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall

-exclude the following list of activities and assets: (i) activities and assets related to fossil fuels, including downstream use 3 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 4 ; (iii) activities and assets related to waste landfills, incinerators 5 and mechanical biological treatment plants 6 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and

-require that only activities and assets that comply with relevant EU and national environmental legislation may be selected.

The implementation of this investment shall be completed by 30 June 2026. 

Investment 2 (C2.I2): Enhancing the innovation capacity of the Bulgarian Academy of Sciences

The investment aims to enhance the innovation capacity of the Bulgarian Academy of Sciences (BAS). The investment includes projects to:

-modernise the physical and digital infrastructure of BAS and in particular to renovate two buildings;

-restore the infrastructure at 14 BAS locations, upgrade the Joint Innovation Centre;

-install fibre connectivity and deploy a Euro Quantum Communication Infrastructure (QCI) network.

Furthermore, it includes the financing of research projects to enhance the innovation output of BAS, with a particular focus in the field of green and digital technologies.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall

-exclude the following list of activities and assets: (i) activities and assets related to fossil fuels, including downstream use 7 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 8 ; (iii) activities and assets related to waste landfills, incinerators 9 and mechanical biological treatment plants 10 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and

-require that only activities and assets that comply with relevant EU and national environmental legislation may be selected.

The implementation of this investment shall be completed by 30 June 2026. 

B.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

   C. COMPONENT 3: Smart industry

The Smart Industry component of the recovery and resilience plan of Bulgaria aims to create favorable conditions and providing incentives for private investment in Bulgaria. In particular, the component aims to attract industrial investments and developing industrial ecosystems and supporting small and medium-sized enterprises (SMEs) and mid-capitalisation companies (mid-caps) in modernising their technology and in transitioning to green, circular and digital-oriented business practices.

The measures included in the component contribute towards addressing country-specific recommendation 3 of 2019 (‘Focus investment-related economic policy on research and innovation, […] and improving the business environment’) and country-specific recommendation 3 of 2020 (‘Streamline and accelerate the procedures to provide effective support to small and medium-sized enterprises and self-employed, also ensuring their continued access to finance and flexible payment arrangements’ […] Focus investment on the green and digital transition, in particular on clean and efficient production and use of energy and resource).

It is expected that no measure in this component does significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the DNSH Technical Guidance (2021/C58/01).

C.1.    Description of the reforms and investments for non-repayable financial support

oReform 1 (C3.R1): A legal framework to attract industrial investment and develop industrial ecosystems

The objective of the reform is to create favourable conditions for entrepreneurs, investors and research institutions in industrial parks by establishing a framework for the development of industrial ecosystems.

This shall be achieved by the entry into force of the Industrial Parks Act, which shall regulate possible state support and incentives to attract investment in industrial parks; provide for a reduction of the procedures required for industrial investment; and set the minimum standards for industrial park investments to benefit from state support.

The implementation of this reform shall be completed by 31 March 2021.

oInvestment 1 (C3.I1): Public support programme for the development of industrial districts, parks and similar territories and attracting investments (“AttractInvestBG”) 

The objective of this investment is to to boost economic growth, create new jobs and increase the country’s export capacity by creating favourable conditions for the investors in the industrial parks. The investment is building on Reform 1.

The investment shall consist of a grant scheme for the provision of the physical, research and digital infrastructure in the industrial parks.

The Ministry of Innovation and Growth shall select a minimum of five industrial parks or zones (new, under construction or existing) and their operators for support through grants. The selection shall be carried out on the basis of a public, open and competitive process, on the basis of clear criteria for selection established beforehand. The expected economic and employment impact of each park/zone (based on an analysis) shall be included among the main criteria for the selection.

Potential operators that apply for the grants shall include in their applications a development strategy and business plan for the industrial park/zone, including among the selection criteria analyses on:

-    The expected economic and employment impact of each park/zone, including the direct impact and the impact at regional or national level;

-    the businesses already established or expected to establish themselves in the park/zone, based on clear analysis;

-    the infrastructural works envisaged for each park/zone, both internal and external, with a provisional budget.

In the preparation of their applications, the potential operators are expected to consult the responsible authority of the area where the industrial park/zone is located (municipality, region, other).

The grant shall support infrastructure that shall be made available to all the park/zone tenants and comprises technical infrastructure (such as roads, water and sewage), as well as green and innovative common internal infrastructure (such as solar stations or buildings for laboratories to be refurbished by the industrial park/zone tenants).

The eligibility criteria shall require the operators carrying out the construction to ensure that at least 70 % (by weight) of the non-hazardous construction and demolition waste from the construction (excluding naturally occurring material defined in category 17 05 04 in the European List of Waste established by Commission Decision 2000/532/EC) generated on the construction site will be prepared for re-use, recycling and other material recovery, including backfilling operations using waste to substitute other materials, in accordance with the waste hierarchy and the EU Construction and Demolition Waste Management Protocol. The potential operator shall limit waste generation during construction, in accordance with the EU Construction and Demolition Waste Management Protocol and taking into account best available techniques and facilitate re-use and high-quality recycling by selective removal of materials, using available sorting systems for construction waste.

 In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall

-exclude the following list of activities and assets: (i) activities and assets related to fossil fuels, including downstream use 11 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 12 ; (iii) activities and assets related to waste landfills, incinerators 13 and mechanical biological treatment plants 14 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and

-require that only activities and assets that comply with relevant EU and national environmental legislation may be selected.

The implementation of this investment shall be completed by 30 June 2026.

Investment 2 (C3.I2): Economic Transformation Programme

The objective of the Economic Transformation Programme is to support the innovation and growth of Bulgarian businesses, in particular by fostering their green and digital transition.

The programme shall support Bulgarian small and medium-sized enterprises and mid-caps through financial instruments and grants. The programme shall consist of three funds:

Fund 1 - Growth and Innovation;

Fund 2 - Green Transition and Circular Economy;

Fund 3 - Climate Neutrality and Digital Transformation.

Fund 1 shall be composed of the following instruments:

oInvestment 2.1.a - Guarantee instrument for growth

The guarantee instrument shall be implemented as a contribution to InvestEU with the European Investment Fund (EIF) as an implementing partner. By providing a portfolio guarantee, the instrument aims to alleviate the challenges faced by businesses in obtaining credit finance to quickly recover from the COVID-19 crisis and create opportunities for business expansion to achieve growth and sustainable development. The guarantee instrument shall target SMEs and small mid-caps and shall cover various financial products, including working capital funds, including revolving credit lines, investment loans, and leasing.

To ensure that the investment complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the contribution agreement between the European Commission and the Bulgarian Government shall

-require the application of the Commission’s technical guidance on sustainability proofing for the InvestEU Fund; and

-exclude the following list of activities and assets from eligibility: (i) activities and assets related to fossil fuels, including downstream use 15 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 16 . 

The implementation of this investment shall be completed by 31 December 2024 when the InvestEU Investment Committee approves finance or investment operations amounting to 100% of the total amount of finance or investment targeted.

oInvestment 2.1.b - Equity instruments for growth

The objective of this measure is to alleviate the long-lasting economic negative impact of the COVID-19 crisis on Bulgarian undertakings. Equity growth instruments, including venture capital funds, growth funds, mezzanine funds, redemption funds and private debt funds, will be provided to SMEs and mid-caps.

The equity instruments shall be implemented by the EIF as a financial partner (implementing partner) through a direct award to the EIF by a dedicated RRF funding agreement to be signed between the Republic of Bulgaria and the EIF for the management of the RRF supported equity operations.

For general purpose corporate finance instruments, the investment policy shall:

-be adopted by the governing bodies of the financial instrument;

-be in line with the Commission’s Guidance Note of 22 January 2021 (SWD(2021) 12 final) related to financial instruments;

-include selection criteria to ensure compliance with the “Do no significant harm” Technical Guidance (2021/C58/01) of supported transactions under this measure

othrough the use of sustainability proofing;

oby requiring that beneficiaries that derived more than 50% of their direct revenues during the preceding financial year from activities or assets on the following list of activities to adopt and publish green transition plans: (i) activities related to fossil fuels, including downstream use 17 ; (ii) activities under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 18 ; (iii) activities related to waste landfills, incinerators 19 and mechanical biological treatment plants 20 ; and (iv) activities where the long-term disposal of waste may cause harm to the environment. This requirement could be implemented, for example, by relying on the EIF’s new restricted sectors (non-infra equity Funds – Paris alignment framework), adjusted by certain additional restrictions on ETS sectors and certain transport activities; and

oby requiring the verification of legal compliance with the relevant EU and national environmental legislation of the beneficiary by the EIF for all transactions, including those exempted from sustainability proofing.

The implementation of this investment shall be completed by 30 June 2026 (approval of operations by the responsible Investment Committee amounting to 100% of the overall amount of financing allocated to equity instruments for Growth).

oInvestment 2.1.c - Grant scheme for technological modernisation

The objective of this measure is to increase the efficiency of production processes, achieve higher productivity, reduce production costs and optimise the production chain by providing grants to SMEs.

The Ministry of Innovation and Growth shall ensure that an effective management and control system is implemented at administrator level and shall be able to take corrective action whenever necessary, including by performing sample checks at company level, while the administrator shall monitor and report regularly on the progress of the project implementation in accordance with all the respective conditions.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall

-exclude the following list of activities and assets: (i) activities and assets related to fossil fuels, including downstream use 21 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 22 ; (iii) activities and assets related to waste landfills, incinerators 23 and mechanical biological treatment plants 24 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and

- require that only activities and assets that comply with relevant EU and national environmental legislation may be selected.

The implementation of this investment shall be completed by 30 September 2024.

oInvestment 2.1.d - Grant scheme for information and communication technology solutions and cybersecurity in small and medium enterprises

The investment consists of a grant scheme that aims to support the deployment of digital technologies in SMEs, reaching the first level “computerisation” and the second level “connectivity” of digitalisation to ensure they satisfy the basic requirements, including with respect to cybersecurity measures, for the uptake of Industry 4.0 and the transition to higher levels of digital transformation.

The Ministry of Innovation and Growth shall ensure that an effective management and control system is implemented at administrator level and shall be able to take corrective action whenever necessary, including by performing sample checks at SME level, while the administrator shall monitor and report regularly on the progress of the project implementation in accordance with all the respective conditions.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall

-exclude the following list of activities and assets: activities and assets related to fossil fuels, including downstream use 25 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 26 ; (iii) activities and assets related to waste landfills, incinerators 27 and mechanical biological treatment plants 28 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and  

- require that only activities and assets that comply with relevant EU and national environmental legislation may be selected.

The implementation of this investment shall be completed by 31 December 2024.

oInvestment 2.1.e - Innovation pool (equity instruments for innovation)

The investment consists of setting up a Fund to implement equity instruments for innovation with the objective to increase the innovation capacity of companies, accelerate their productivity improvements and the transition to a knowledge economy. The equity instruments shall include venture capital funds, technology transfer funds, seed and social impact funds.

The equity instruments shall be implemented by the EIF as a financial partner (implementing partner) through a direct award to the EIF by a dedicated RRF funding agreement to be signed between the Republic of Bulgaria and the EIF for the management of the RRF supported equity operations.

For general purpose corporate finance instruments, the investment policy shall:

-be  adopted  by  the  governing  bodies  of the financial instrument;

-be in line with the Commission’s Guidance Note  of  22  January  2021  (SWD(2021) 12 final) related to financial instruments;

-include  selection criteria to ensure compliance with the “Do no significant harm” Technical Guidance (2021/C58/01)  of  supported  transactions under  this  measure 

othrough  the  use  of sustainability proofing; 

oby requiring that beneficiaries that derived more than 50% of their direct revenues during the preceding financial year from activities or assets on the following list of activities to adopt and publish green transition plans: (i) activities related to fossil fuels, including downstream use 29 ; (ii) activities under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 30 ; (iii) activities related to waste landfills, incinerators 31 and mechanical biological treatment plants 32 ; and (iv) activities where the long-term disposal of waste may cause harm to the environment. This requirement could be implemented, for example, by relying on the EIF’s new restricted sectors (non-infra equity Funds – Paris alignment framework), adjusted by certain additional restrictions on ETS sectors and certain transport activities; and

oby requiring the verification of legal compliance with the relevant EU and national environmental legislation of the beneficiary by the EIF for all transactions, including those exempted from sustainability proofing.

The implementation of this investment shall be completed by 30 June 2026 (approval of operations by the responsible Investment Committee amounting to 100% of the overall amount of financing allocated to equity instruments for Innovation).

Fund 2 is composed of the following instruments:

oInvestment 2.2.a. - Grant scheme for investments in renewable electricity sources for own use with local storage facilities

This scheme aims at promoting the green transition in the private sector. The scheme shall provide grants for investments for combining renewable electricity sources for own use with local storage facilities. Projects shall be in compliance with intervention field 033 of Annex VII to the RRF Regulation. At least 50% of the value of the project shall be co-financed by the beneficiary.

The Ministry of Innovation and Growth shall ensure that an effective management and control system is implemented at administrator level and shall be able to take corrective action whenever necessary, including by performing sample checks at company level, while the administrator shall monitor and report regularly on the progress of the project implementation in accordance with all the respective conditions.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall

-exclude the following list of activities and assets: activities and assets related to fossil fuels, including downstream use 33 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 34 ; (iii) activities and assets related to waste landfills, incinerators 35 and mechanical biological treatment plants 36 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and 

- require that only activities and assets that comply with relevant EU and national environmental legislation may be selected.

The implementation of this investment shall be completed by 30 March 2026.

oInvestment 2.2.b. - Guarantee instrument for energy efficiency and renewable energy

The guarantee instrument shall be implemented as a contribution to InvestEU with the EIF as an implementing partner. The instrument aims to address Bulgaria’s challenges in providing support for investments in energy efficiency and renewable energy. The guarantee instrument shall target SMEs, small mid-cap companies and individuals. It is intended to cover a wide range of financial products (e.g. working funds, including revolving credit lines, investment loans, leasing). The sectors to be supported shall be in line with the Regulation (EU) 2021/241 and the eligibility criteria of InvestEU and will be defined following a detailed market assessment.

To ensure that the sub-investment complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the contribution agreement between the European Commission and the Bulgarian Government shall

-require the application of the Commission’s technical guidance on sustainability proofing for the InvestEU Fund; and

-exclude the following list of activities and assets from eligibility: (i) activities and assets related to fossil fuels, including downstream use 37 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 38 .

The implementation of this investment shall be completed by 30 June 2024, when the InvestEU Investment Committee approves finance or investment operations amounting to 100% of the total amount of finance or investment targeted.

oInvestment 2.2.c - grant scheme for the support of businesses in the transition to a circular economy

The main objective of this scheme is to support manufacturing businesses in the transition to a circular economy by introducing circular production and consumption patterns, environmental standardisation and promotion of waste recycling and reuse technologies, repair and the use of bio-based products.

Projects shall be in compliance with intervention fields 047 and 047bis of Annex VII to the Regulation (EU) 2021/241. At least 50% of the value of the project shall be co-financed by the beneficiary.

The Ministry of Innovation and Growth shall ensure that an effective management and control system is implemented at administrator level and shall be able to take corrective action whenever necessary, including by performing sample checks at company level, while the administrator shall monitor and report regularly on the progress of the project implementation in accordance with all the respective conditions.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall

-exclude the following list of activities and assets: activities and assets related to fossil fuels, including downstream use 39 ; (ii) activities and assets under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 40 ; (iii) activities and assets related to waste landfills, incinerators 41 and mechanical biological treatment plants 42 ; and (iv) activities and assets where the long-term disposal of waste may cause harm to the environment; and 

- require that only activities and assets that comply with relevant EU and national environmental legislation may be selected.

The implementation of this investment shall be completed by 31 December 2025.

Fund 3 is composed of the following instrument:

oInvestment 2.3.a Equity instruments for climate neutrality and digital transformation investments

The instruments aim at investing in assets that contribute to climate neutrality and accelerate the green and digital transition in priority sectors in Bulgaria. This shall be carried out by supporting the creation of infrastructure assets (renewables, biomass, storage, recharging infrastructure for electric vehicles, hydrogen), digital infrastructure (ICT, optical infrastructure, data centres, 5G), urban regeneration, energy efficiency and social infrastructure.

The equity instruments shall be implemented by the European Investment Fund (EIF) as a financial partner (implementing partner) through a direct award to the EIF by a dedicated RRF funding agreement to be signed between the Republic of Bulgaria and the EIF for the RRF supported equity operation.

For general purpose corporate finance instruments, the investment policy shall:

-be adopted by the governing bodies of the financial instrument;

-be in line with the Commission’s Guidance Note of 22 January 2021 (SWD(2021) 12 final) related to financial instruments;

-include selection criteria to ensure compliance with the “Do no significant harm” Technical Guidance (2021/C58/01) of supported transactions under this measure through the use of sustainability proofing; 

-require that beneficiaries that derived more than 50% of their direct revenues during the preceding financial year from activities or assets on the following list of activities to adopt and publish green transition plans: (i) activities related to fossil fuels, including downstream use 43 ; (ii) activities under the EU Emission Trading System (ETS) achieving projected greenhouse gas emissions that are not lower than the relevant benchmarks 44 ; (iii) activities related to waste landfills, incinerators 45 and mechanical biological treatment plants 46 ; and (iv) activities where the long-term disposal of waste may cause harm to the environment. This requirement could be implemented, for example, by relying on the EIF’s new restricted sectors (non-infra equity Funds – Paris alignment framework), adjusted by certain additional restrictions on ETS sectors and certain transport activities; and

-Require the verification of legal compliance with the relevant EU and national environmental legislation of the beneficiary by the EIF for all transactions, including those exempted from sustainability proofing.

The implementation of this investment shall be completed by 30 June 2026 (approval of operations by the responsible Investment Committee amounting to 100% of the overall amount of financing allocated to equity instruments for climate neutrality and digital transformation investments).

C.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support

   D. COMPONENT 4: Low-carbon economy

This component of the recovery and resilience plan of Bulgaria addresses the challenge of decarbonising the energy sector. The Bulgarian economy is the most resource- and carbon-intensive in the EU. The intensity of greenhouse gas emissions is more than four times higher than the EU average. The energy sector is the largest emitter of greenhouse gases in Bulgaria, accounting for more than 70 % of the country’s total emissions.

The objective of the component is to decarbonise the economy through a sharp increase in the use of renewables and in energy savings, investments in smart grids, interconnections and storage infrastructure, market reforms and better governance of the energy sector. In particular, the component aims to accelerate the decarbonisation of the energy sector by cutting the carbon dioxide emmisions from lignite and coal fired-power plants and by facilitating the deployment of renewables and alternative energy sources (such as green hydrogen and biogas). It also aims to reduce both primary and final energy consumption with renovation of the national stock of residential and non-residential buildings, both public and private. Measures on flexibility and digitalisation of the electricity grid and increase of the crossborder interconnections capacities with the neigbouring Member states shall improve market integration. The component also aims to establish a competitive wholesale and retail markets through a gradual deregulation of electricity prices by 2025. The component includes measures improving the corporate governance of state-owned enterprises in the energy sector, in particular the Bulgarian Energy Holding (‘BEH’), by separating from its structure the transmission system operators.

These investments and reforms shall support address Bulgaria’s country-specific recommendations of 2019 and 2020 to “focus investment-related economic policy on […] energy infrastructure and energy efficiency” (country-specific recommendation 3, 2019) and to “focus investment on the green and digital transition, in particular on clean and efficient production and use of energy and resources, environmental infrastructure […], contributing to a progressive decarbonisation of the economy, including in the coal regions” (country-specific recommendation 3, 2020).

No measure in this component is expected to do significant harm to environmental objectives within the meaning of Article 17 of Regulation (EU) 2020/852, taking into account the description of the measures and the mitigating steps set out in the recovery and resilience plan in accordance with the ‘Do no significant harm’ Technical Guidance (2021/C58/01).

D.1.    Description of the reforms and investments for non-repayable financial support

Reform 1 (C4.R1): Establishment of a National Fund for Decarbonisation

The reform aims at establishment of the National Decarbonisation Fund and its sub-funds.

The measure consists of assessing the national energy efficiency regulatory framework by an independent expert panel to: (i) identify barriers to energy efficiency investments and provide recommendations for changes to the national regulatory framework; (ii) identify options on the structure of the National Fund for Decarbonisation in particular on governance and operating rules; and (iii) identify potential sources for the capitalisation of the National Fund for Decarbonisation, including for technical assistance and mechanisms to use the National Fund for Decarbonisation’s capital to transform from grants to financial instruments.

The law and related secondary legislation establishing the National Decarbonisation Fund and its sub-funds shall define the precise structure, governance and operating rules of the Fund.

The National Fund for Decarbonisation shall be used to offer grants and technical assistance combined with financial instruments including credit lines and guarantees and/or a combination of them. The Fund shall provide for the creation of a single point for technical assistance to applicants through one-stop-shops or similar mechanisms.

The implementation of the reform shall be completed by 30 September 2024.

Reform 2 (C4.R2): Facilitate investments in energy efficiency renovations in residential buildings 

The objective of the reform is to tackle barriers to energy efficiency investments by amending the Condominium Ownership Management Act to facilitate the decision-making by owners of multi-apartment buildings; to regulate the professional management of condominium property in multi-apartment buildings; and to facilitate the application for collective loans to different financial institutions. 

The amendments shall be coordinated with related changes to other pieces of primary and secondary legislation. The implementation of the measure is expected to contribute to the efficiency of energy efficiency investments in building renovation.

The implementation of the reform shall be completed by 30 September 2022.

Reform 3 (C4.R3): Definition and criteria for “energy poverty” for households

The objective of this reform is to contribute to tackle energy poverty and protect vulnerable consumers by introducing in the Energy Act and secondary legislation a definition of “energy poverty” and criteria for identifying households in energy poverty and vulnerable consumers. The reform shall take into account the criteria listed in the Directive (EU) 2019/944: low income, high expenditure of disposable income on energy and poor energy efficiency.

The implementation of the reform shall be completed by 31 December 2022.

Investment 1 (C4.I1): Support for the renovation of building stock 

The objective of the measure is to improve the energy efficiency of the building stock by reducing on average by at least 30% of primary energy consumption.

The measure consists of building renovation investments split into three sub-measures: i) energy efficiency renovation of residential buildings; ii) energy efficiency renovation of non-residential buildings, including public buildings and iii) energy efficiency renovation of non-residential buildings in manufacturing, trade and services, as well as buildings in the tourism sector.

The sub-measures under this investment are expected to be implemented in complementarity with cohesion policy investments. The demarcation shall be made at project level and a monitoring mechanism shall be in place to avoid double-funding, notably with Programme Development of Regions 2021-2027 and Programme Environment 2021-2027.

The implementation of the investment shall be completed by 30 June 2026.

Sub-measure 1: Renovation of residential buildings

The sub-measure shall consist in energy efficiency renovation in multi-apartment buildings. These type of buildings are managed in co-ownership mode in accordance with the Condominium Ownership Management Act tackled by Reform 2 in this component (C4R2). The sub-measure shall lead to the renovation of residential buildings with a total gross floor area of at least 3.6 million m2. 

The scheme under the sub-measure shall stipulate that renovations are, on average, expected to achieve a minimum of 30% primary energy demand savings.

Sub-measure 2: Renovation of non-residential, public buildings

The sub-measure shall consist in the financing of measures for the sustainable energy renovation of state and municipal buildings (including administrative services buildings, public service buildings in the field of culture and art and sports buildings, as well as buildings owned by the Bulgarian Academy of Sciences). The sub-measure shall lead to the renovation of non-residential buildings with a total surface area of at least 1.4 million m2.

The scheme under the sub-measure shall stipulate that renovations are, on average, expected to achieve a minimum of 30% primary energy demand savings.

Sub-measure 3: Renovation of non-residential buildings in manufacturing, trade and services, as well as buildings from the tourism sector

The sub-measure shall consist in financing of measures for sustainable energy efficient renovation of buildings in the fields of manufacturing, trade and services.

The scheme under the sub-measure shall stipulate that renovations are, on average, expected to achieve a minimum of 30% primary energy demand savings.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the financing of installations covered by the European Union Emissions Trading System (EU ETS).

Investment 2 (C4.I2): Support for renewable energy for households

The objective of the measure is to increase the use of renewable energy in final energy consumption in the household sector by financing the purchase of new ‘best in class’ solar systems for domestic hot water and photovoltaic systems.

The measure consists of the financing of two types of measures for the use of renewable energy by households: i) installation of solar systems for domestic hot water supply and ii) installation of photovoltaic systems of up to 10 kWp, including electricity storage.

The investment shall support at least 10 000 households with inefficient solid fuel heat sources for their replacement by ‘best in class’ solar domestic hot water (DHW) or photovoltaic systems.

The investment shall finance the purchase of ‘best in class’ solar domestic hot water (DHW) or photovoltaic systems in compliance with the “do no significant harm” Technical Guidance (2021/C58/01).

The implementation of the investment shall be completed by 30 June 2025.

Investment 3 (C4.I3): Support for energy-efficient street lighting systems 

The objective of the measure is to increase energy efficiency, reduce energy costs for outdoor artificial lighting and improve living conditions for the population in the country through technological renewal and modernisation of outdoor artificial lighting systems.

The measure consists of the reconstruction and modernisation of municipal outdoor artificial lighting systems. The investment shall aim at achieving on average at least a 30% primary energy demand reduction when comparing before and after implementation of the measure.

The implementation of the reform shall be completed by 30 June 2025.

Reform 4 (C4.R4): Boosting energy efficiency and renewable energy projects through the energy bills

The objective of the reform is to broaden the scope for implementing measures and projects to improve energy efficiency and the use of renewable energy in a context of limited financial resources.

The measure consists of amendments to the Energy Act and secondary legislation to enable the use of Energy Service Companies (ESCO) models for covering the financing for energy efficiency renovations and renewable energy installations through the energy bills.

The implementation of the reform shall be completed by 31 December 2022.

Reform 5 (C4.R5): One-stop shop for renovations

The objective of the reform is to reduce administrative burden linked to the renovation process by assisting citizens and businesses with information, technical assistance and advice on regulatory, technical and financial issues related to their energy efficiency improvement projects.

The measure consists of the initial piloting and subsequent deployment of operational one-stop-shops in all NUTS-3 regions in the country. The one stop-shops shall integrate all the necessary information and services needed for energy renovation.

The implementation of the reform shall be completed by 31 December 2023.

Reform 6 (C4.R6): Boosting electricity generation from renewable sources

The objective of this reform is reducing the administrative burden for investments from renewable sources concerning installation, connection and operation.

Amendments to the relevant primary and/or secondary legislation, including the acts by the national regulator shall: (i) simplify licensing and permitting procedures for RES (i.e., solar and onshore wind), including energy storage facilities, ensure short and binding administrative response times and accountability procedures for unnecessary delays, reducing the grid connection timeline (for both solar and onshore wind); (ii) enable dedicated ‘go-to’ areas where onshore wind parks would be compliant with environmental legislation; (iii) simplify the procedure for renewables installations for own use up to 1 MW (e.g. rooftop PV installations for households and SMEs) by excluding from the procedure the technical approval by the distribution system operator and phase out the obligation to declare excise duty for self-generation.

In addition, amendments to the relevant primary and/or secondary legislation shall eliminate barriers, introduce a specific regulatory, and support framework for the construction, connection and operation of electricity storage facilities. This element of the reform is expected to support the implementation of investment 8 on storage.

As a result of these actions, at least 3 500 MW of additional renewable capacity (wind and solar) compared to existing installed capacity (wind and solar) shall be brought into operation and connected to the grid by 30 June 2026.

The implementation of the reform shall be completed by 30 June 2026.

Reform 7 (C4.R7): Unleashing the potential of hydrogen technologies and hydrogen production and supply

The objective of this reform is to remove key impediments identified in the roadmap for the development of the hydrogen technology and implement measures needed for the development of the whole hydrogen value chain.

The implementation of the reform shall be completed by 31 March 2023.

Investment 4 (C4.I4): Digital transformation of the electricity transmission grid 

The objective of this investment is to increase the penetration of renewable energy sources, to increase flexibility in the operational management and monitoring of the electricity system and the net cross-border transmission capacity at borders with Member States (i.e., Romania and Greece).

The investment includes a comprehensive programme for the overall digital transformation of systems and processes of the Electricity System Operator covering the automated management of substations, upgrade of the supervisory control and data acquisition system (SCADA) with the introduction of remote back-up, extension and upgrade of telecommunication network, including comprehensive cybersecurity system and upgrade of the electricity markets administration systems.

As a result of those actions, the conditions and requirements for the technical feasibility of the electricity transmission system shall be met to integrate a cumulative new 4 500 MW of production capacity from renewable sources into the electricity system by 31 March 2026. Also, a cumulative 1 200 MW of additional net interconnection capacity with Romania and Greece compared to the existing available capacity shall be made available to the market by 30 June 2025.

The implementation of the investment shall be completed by 31 March 2026.

Investment 5 (C4.I6): Pilot projects for the production of green hydrogen and biogas 

The objective of the investment is to contribute to decarbonising the Bulgarian energy market by providing support for the development of pilot projects to enable the production of green hydrogen and biogas. The investment shall consist of grants for the installation of: (i) green hydrogen production capacities of at least 55 MW in electrolysers, producing at least 7 800 tonnes of hydrogen per year from renewable sources and (ii) biogas production facilities of at least 9 MW, producing at least 7 ktoe per year of biogas.

The implementation of the investment shall be completed by 31 December 2025.

Reform 8 (C4.R8): Liberalisation of the electricity market 

The objective of this reform is to complete the liberalisation of the electricity markets, including wholesale and retail markets. This reform shall consist of the following elements:

-The first element aims to fully liberalise the wholesale electricity market by 2022. This element shall be implemented through amendments to the Energy Act and to the secondary legislation, which shall terminate the public supplier role for the Natsionalna Elektricheska Kompania EAD (NEK) and abolish the quotas for the regulated market. It shall also forbid long-term contracts, such as power purchase agreements, or any similar measures having the same or equivalent object or effect with the exception of those for electricity from renewable sources or concluded on the power exchange. The long term electricity purchase contracts for Maritsa East 1 and Maritsa East 3 which expire in 2024 and 2026, respectively shall not be extended and/or benefit of any new State support.

-The second element shall improve the electricity balancing market by ensuring that: (i) the balancing capacity shall be purchased on market terms; (ii) the price of balancing energy suppliers shall be published within 30 minutes after intraday market closure; (iii) a single balancing price shall be introduced for periods without balancing energy activation; (iv) a 15-minute imbalance settlement period shall be introduced; and (v) no price caps for balancing electricity shall be set.

-The third element shall liberalise the electricity retail market by providing a progressive full retail price deregulation for households, in parallel with the full ability to switch supplier. The phasing out of regulated prices for household customers shall take place in two successive stages in 2023 and 2025, respectively covering a significant share of the household market.

The amendments to the Energy Act shall be adopted by 30 September 2022, with entry in force on the same day for the measure concerning electricity wholesale market, 31 December 2022 for the measures concerning the electricity balancing market and 31 December 2023 for the measure concerning the electricity retail market.

The market coupling on the day-ahead market at the border with Romania as well as with Greece on the intraday market shall be completed by 31 December 2021 and 31 December 2022, respectively.

Investment 6 (C4.I7): Support for new capacities for electricity generation from renewable sources and electricity storage

The objective of the investment is to contribute to Bulgaria’s goal to increase the share of clean energy in its energy mix towards climate neutrality by supporting the installation of new renewable power production capacity together with electricity storage through a technologically neutral competitive tender between different technologies. In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in the terms of reference for upcoming calls for projects shall refer only to solar and wind technologies.

The investment shall consist of grants for the construction of the selected installations, for installing and putting into operation of at least 1 425 MW of renewables power production capacity co-located with at least 350 MW of energy storage systems.

The implementation of the investment shall be completed by 30 June 2026.

Reform 9 (C4.R9): Roadmap to Climate Neutrality

The objective of the reform is to provide an updated strategic framework for the decarbonisation of the economy. The reform covers two main measures: the establishment of an ‘Energy Transition Commission to prepare scenarios and recommendations for a roadmap to Climate Neutrality and the adoption of a parliamentary resolution.

The Commission shall be set up at expert level with broad involvement of stakeholders to ensure expertise, independence and pluralism. The Commission shall assess different scenarios for the coal/lignite phase out, including for an accelerated phase-out, in line with comparable neighbouring Member States. The scenario report and the recommendations shall be addressed to the Government and made public. The scenarios and recommendations developed shall include steps for completing the phase out of coal/lignite as soon as possible and at the latest by 2038.

The implementation of the reform shall be completed by 30 September 2022.

Reform 10 (C4.R10): Decarbonisation of the energy sector

The objective of the reform is the decarbonisation of the energy sector, with a focus on power generation. The reform covers two main measures: binding targets for the reduction of the carbon dioxide emissions associated with electricity generation by 40% below 2019 levels to be achieved in 2025, and legislation on decarbonisation, including a calendar for the phase-out of coal and lignite power plants and a regulatory cap on their carbon dioxide emissions applicable as of 1 January 2026.

Total verified emissions in 2019 for the power sector amounted to 21 182 433 tons of carbon dioxide emissions, among which the lignite and coal-fired power plants amounted to 19 437 716 tons of carbon dioxide emissions. The measure is expected to reduce the carbon dioxide emissions related to electricity generation from coal and lignite-fired power plants by at least 8 455 406 tons.

The reduction of the carbon dioxide emissions shall cover: TPP Maritsa 3 EAD, TPP Maritsa East 2 EAD, TPP Bobov dol EAD, AES-3C Maritza East 1, TPP Contour Global Maritsa East 3, TEC BRIKEL EAD, TEC Republika, TPP Russe East, and Toplofikacia Sliven.

In the implementation of the decarbonisation targets set under milestones 54-57, the authorities shall take due account of the overarching environmental performance of concerned installations, notably with regards to emissions of air pollutants such as dust and sulphur dioxide, as well as compliance with EU standards for ambient air quality in all air quality zones where the installations are located

The implementation of the reform shall be completed by 30 June 2026.

Investment 7 (C4.I9): Pilot project on combined heat and power from geothermal sources 

The objective of the investment is to promote the production of renewable energy from geothermal sources by putting into operation a pilot geothermal power plant for the production of electricity and heat.

The investment shall consist in grants for the construction of the selected installations, with the objective of installing at least 10 MW of electricity and 30 MW of heat. The investment shall also provide 3D seismic mapping of deep geothermal reservoirs providing conditions for production and electricity and build a specialised laboratory at university level for research and training on combined geothermal energy system. Amendments to the regulatory framework shall remove key impediments identified in the roadmap for the development of geothermal energy as a renewable energy source, and regulate the use of geothermal energy.

In order to ensure that the measure complies with the ‘Do no significant harm’ Technical Guidance (2021/C58/01), the eligibility criteria contained in terms of reference for upcoming calls for projects shall exclude the following list of activities: any exploration or extraction of either oil or gas and no equipment purchased or used for such purposes; support to district heating systems using fossil energy sources nor any investments in installations falling within the scope of the EU Emission Trading System (ETS). It shall be ensured, that there is no methane releases. It shall also be ensured, that the geothermal drilling would have no harmful impact on water scarcity and water quality. The terms of reference shall additionally require that only activities that comply with relevant EU and national environmental legislation can be selected.

The implementation of the investment shall be completed by 30 June 2026.

Investment 8 (C4.I8): National infrastructure for storage of electricity from renewables (RESTORE)

The objective of the investment is to enable a significant increase the share of renewable energy (wind and solar) in the energy mix and ensure the security, stability and readiness of the Bulgarian electricity system.

The investment shall consist of support to install and commission a national infrastructure of grid-scale electricity storage facilities with 6000 MWh of usable energy capacity. The facilities (consisting of batteries, inverters, transformers, power electronics/intelligent electronic devices and control automation) will be distributed around the territory of Bulgaria and located near renewable generating capacity. The implementation shall be carried out through open and competitive bidding processes on the basis of clear, transparent and non-discriminatory criteria. It will also contribute to the implementation of smart grids, ensuring a high degree of balancing and congestion management of the grids, which is necessary to integrate electricity generated from renewable energy.

The implementation of the investment shall be completed by 30 June 2026.

Reform 11 (C4.R11). Improving corporate governance of state-owned companies in the energy sector

The objective of the reform is to improve the transparency and competitiveness of state-owned companies in the energy sector. The measure shall consist in separation of ownership and control within the State of the two transmission systems operators for natural gas and electricity (i.e. Bulgartransaz EAD and ESO EAD) from the corporate structure of the Bulgarian Energy Holding EAD. In addition, an independent audit report shall be submitted to the European Commission, presenting a detailed assessment on market compliance of cross subsidisation between state-owned or state-controlled energy undertakings in relation to power production from coal, if any occurred, including any transfers of capital among separate activities and among undertakings of the same group in relation to power production from coal. The report shall be submitted annually, in relation to the previous calendar year.

The implementation of the reform shall be completed by 31 March 2024.

D.2.    Milestones, targets, indicators, and timetable for monitoring and implementation for non-repayable financial support