Croatia's government has proposed new legislation aimed at simplifying the management of energy resources, including geothermal waters, as it seeks to attract investment in underground energy projects and expand the use of geothermal energy, a government statement said.

Croatia has identified geothermal energy as a potential contributor to its energy transition, particularly for district heating, agriculture and electricity generation. The country has a number of geothermal resources linked to its geological characteristics, with significant potential in the Pannonian basin in eastern Croatia, where underground waters have already been used for heating, spas and other purposes.

The draft Law on the Exploration and Exploitation of Energy Georesources, sent to parliament on Thursday, would establish a single legal framework covering oil, gas, geothermal resources, carbon dioxide storage and other underground fluids.

Economy Minister Ante Šušnjar said the legislation would create clearer procedures and improve predictability for investors, replacing what he described as a fragmented approach to managing energy resources.

"Special emphasis is placed on geothermal energy with the aim of increasing investments and facilitating the development of local heating and energy production projects," Šušnjar said.

The government said the new framework would allow existing wells and infrastructure previously used for hydrocarbons to be repurposed for geothermal projects, carbon capture and storage, or other energy applications.

"A large number of existing wells and facilities are given the opportunity to be used for new purposes for geothermal projects, CO2 storage and other energy applications," Šušnjar said, adding that the law would enable the combined use of underground resources.

Croatia's geothermal sector remains relatively underdeveloped compared with some European countries, despite the availability of geothermal resources. Existing projects include geothermal heating systems and plans for geothermal power plants, but regulatory complexity, exploration costs and limited investment have slowed wider development.

The proposed law would also introduce additional licensing models for energy projects and allow greater state participation through the Hydrocarbons Agency or state-owned companies.

Alongside the georesources legislation, the government approved a plan for using revenue from emissions allowance auctions between 2026 and 2030. Croatia expects to generate about €649mn from the sale of emission units, with around €643mn allocated for climate mitigation and adaptation measures.