Budapest, the capital city of Hungary, is home to more than 1.7 million inhabitants. It is not only the largest capital city and metropolitan area in Central and Eastern Europe, but also a trendsetter in Hungary and beyond. As an EU Mission City, Budapest aspires to become one of Europe’s leading cities for net-zero urban development, while promoting a liveable and healthy urban environment.
Budapest’s Climate City Contract sets out a comprehensive roadmap for achieving climate neutrality and defines the actions necessary to achieve an 80% emission reduction and 20% emission offsetting in Budapest by 2030. More than a third of GHG emissions in Budapest can be attributed to residential buildings, making it both the most challenging and the most promising area for interventions. Therefore, Budapest launched a Pilot Activity, Budapest CARES - Climate Agency for Renovation of homES, to develop and deploy strategic, institutional, and financial support mechanisms and initiatives for building retrofit, with the ambition of accelerating the transition.
Budapest Climate Agency
One of the key objectives of the Budapest CARES Pilot was to establish the Budapest Climate Agency (BCA), a one-stop shop for expertise, fundraising, and coordination of future climate-related programmes. The BCA, officially established on May 2, 2024, has a multi-faceted mission. It aims to promote sustainable energy use, build bridges between different sectors and establish partnerships while informing the public and developing support programmes for building retrofit. The Agency also strives to provide examples of emission reduction practices and develop technical solutions that are also accessible to vulnerable social groups.
Setting up the Agency provided the city with valuable insights into how to establish a new municipal organisation with a cohesive and well-functioning team in a politically and financially challenging environment. It required building trust among stakeholders, clarifying roles within the municipal ecosystem, and ensuring that the Agency could effectively coordinate building renovation programmes while maintaining flexibility to adapt to changing political conditions. The process highlighted the importance of transparent communication, early stakeholder engagement, and establishing a strong professional reputation to gain credibility quickly after launch.
Budapest Green Panel Program
With over one-third of the population living in outdated multi-apartment buildings, the BCA set up a novel pilot tendering model tailored for the renovation of prefabricated panel buildings, called the Budapest Green Panel Program. The Program introduces systemic innovation in municipal grant design and delivery. By considering bankability and providing pre-application consultations and technical review support throughout implementation, it increases both access and effectiveness — essential in scaling deep renovation.
The Budapest Green Panel Program is the first city-level scheme in Hungary that integrates loan accessibility criteria into its tendering process, an innovation that moves towards a quasi one-stop shop model. Equally important, a grant component of the Program is co-financed jointly by the Municipality of Budapest and the participating district municipalities (50–50%). It not only alleviates pressure on the city’s constrained budget but also creates strong local ownership. The result was significant: by mid-2025, 10 out of 23 of Budapest’s districts had already committed to participating, far exceeding expectations.
The pilot developed and tested the integrated support model in collaboration with banks and social actors. The BCA offered advisory services to prospective applicants, reviewed technical content, and ensured better alignment with financial institutions. The renovation pilot was successfully prepared for launching, albeit under the coordination of the Budapest Utility Company. It is important to note that the BCA remains active regardless of the transferred responsibility for program implementation. If the pilot proves successful and scales up, this role, along with associated funding, may return to the BCA in the future.
What were the key drivers of the initiative?
Strategy: As part of the Budapest CARES pilot, the city also prepared a comprehensive strategic planning document, the MASTERPLAN, to support the energy renovation of Budapest’s entire residential building stock. The MASTERPLAN provides a data-driven, city-level framework for identifying building typologies, assessing energy performance baselines, and mapping out renovation pathways across all types of housing. It supports Budapest’s 2030 and 2050 climate targets, helps prioritise actions, and increases the city’s preparedness to mobilise national and EU funding.
Collaboration: The Pilot was implemented in partnership with Central European Investment Services Ltd. (CEIS), responsible for design and adaptation of the financing mechanisms and the development of the BCA’s business plan and vision, Future 4 Sustainable Transport and Energy Research Institute Ltd. (F4STER), the lead technical partner with expertise in technical and socio-economic typology of Budapest’s residential building stock, and Metropolitan Research Institute (MRI), leading the socio-economic research.
Stakeholder engagement: The successful implementation of the pilot relied on early involvement of both internal and external stakeholders. The city strengthened cooperation frameworks with the Mayor’s Office and other municipal stakeholders while engaging with financial institutions, housing associations, and civil society organisations to design the support mechanisms.
Peer learning: When it comes to technical knowledge about retrofits, collaborating with and learning from other cities with similar challenges, such as Paris, has provided an opportunity to deepen knowledge and explore similar initiatives.
Communication & visibility: Consistent communication resulted in strong visibility of the pilot and media attention, which, together with district-level political incentives, generated a self-reinforcing dynamic. It allowed for a broader impact, exceeding initial expectations.
What were the challenges and barriers?
Political shifts: A mid-term political shift significantly altered the administrative and governance landscape in Budapest. This unexpected change forced the pilot team to quickly identify alternative institutional pathways when previously agreed roles and responsibilities could no longer be maintained. In practice, it meant that the implementation of the Budapest Green Panel Program was reassigned to the Budapest Utility Company. It required internal restructuring as well as additional legal and coordination efforts.
Absence of national leadership: The institutional framework for energy renovation in Hungary is fragmented and lacks coordination between state and municipal actors. Moreover, the national government has not meaningfully engaged with the topic. As a result, state manipulation of energy prices, the delayed and unpredictable rollout of the Energy Efficiency Obligation Scheme, and the fragmented, unreliable nature of national programmes have made it impossible for market actors to operate with confidence.
Access to EU funding: Despite having a well-prepared delivery model, a second BCA pilot initiative designed to tackle energy poverty by replacing inefficient and improperly used solid-fuel heating appliances with modern heating systems in energy-poor households could not be launched due to delays in the disbursement of EU funding. Its implementation was postponed because the national call could not be opened as long as the EU funds remained withheld. It highlighted the fragility of local implementation in the face of national-level political constraints, underlining the importance of direct municipal access to EU climate funds.
Data availability: Lack of data on the energy renovation status of Budapest’s residential buildings made it impossible to represent this information spatially. Therefore, the originally planned digital map was replaced by a comprehensive, text-based decision-support document.
Potential for Replication and Upscaling
Building retrofit is a major challenge for many cities across Europe. Budapest’s experience could be particularly replicable in other Central and Eastern European cities that are also struggling with the renovation of prefabricated panel buildings, which make up a significant proportion of their residential housing stock. The Budapest Green Panel Program, as a city-led, scalable initiative supporting the energy renovation of multi-apartment buildings, is particularly applicable to large housing estates. Its significance lies not only in its technical framework but also in its innovative, resident-focused delivery model, which integrates outreach, technical assistance, and financing. The hybrid financing model provides a strong basis for replication in cities where public funding alone is insufficient and market involvement is needed to scale residential renovations.
Budapest also developed a mutually beneficial working relationship with Eskişehir, its Twin City. The knowledge exchange between the cities helped Eskişehir to design a roadmap for collecting socio-economic and technical building data, developing vulnerability maps, and establishing an inclusive financial model for large-scale renovations, demonstrating the transferability of Budapest’s pilot initiatives.
There’s also great potential for upscaling and replicating the pilot in Budapest and other Hungarian cities. However, replication is currently constrained due to national-level institutional and financial conditions. Nevertheless, if the enabling conditions are improved, the pilot’s model of combining grant elements with mobilised private capital holds strong potential for uptake across Hungary.