How policy capacities shape the green transition: explaining the use of EU sustainable finance in the EU's Central and Eastern European member states

This article investigates how policy capacities influence governments' decisions on allocating funding for the green transition. Our theoretical framework outlines how political, analytical and operational capacities can be expected to affect green transition funding. We probe the plausibility of these linkages by examining how EU member states from Central and Eastern Europe are using the European Recovery and Resilience Facility - the EU's main 'green recovery' financial instrument, which runs parallel to regulatory attempts of aligning private financial flows with climate mitigation and adaptation. In a comparative case study of Bulgaria and Estonia, we analyse how different configurations of policy capacities have influenced the allocation of green transition funding in the countries' Resilience and Recovery Plans (RRPs). We show that the distinct configurations of policy capacities contributed to significant differences between Estonia and Bulgaria. Political capacities affected the prioritisation of the green transition agenda in the RRPs, while analytical and operational capacities shaped the private-public mix, legacy v. future-orientedness, and technological v. behavioural focus in the selected projects and investments.