Hungary and the Czech Republic on Wednesday won approval from the European Union regulators for their plans to modernize their electricity sector, which involves the allocation of carbon-emission-trading allowances free of charge.

The funds amount to 1.88 billion euros ($2.48 billion) for the Czech Republic and EUR56 million for Hungary and will be used to modernize production infrastructure, diversify the energy mix or build new installations. The European Commission said the funds were in line with EU state aid rules.

"The investments foreseen in the Czech and Hungarian plans will allow both member states to diversify their sources for the production of electricity and to contribute to the expansion of national energy markets," Joaquin Almunia, Competition Commissioner said in a statement. "At the same time, the schemes contribute to reaching Europe 's 2020 objectives by reducing greenhouse gas emissions."

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