The Just Transition Mechanism explained

The Just Transition Mechanism explained

On January 14th, 2020 the Communication on the Sustainable Europe Investment Plan and the European Green Deal Investment Plan was published. With the Sustainable Europe Investment Plan the EU aims to accomplish three types of actions: 1) funding, 2) enabling and 3) supporting.

The funding part (1) is supposed to make up at least EUR 1 trillion for sustainable investment over the next decade and it will be a mix of different sources: the EU budget, InvestEU, National co-financing, EIB, national banks, private investment, EU ETS Funds and the Just Transition Mechanism, which is also partly funded by some of the others.

From 2021 to 2030 the EU budget will provide EUR 503 bn for climate and environment. Projects within the 2021-2027 multiannual financial framework (European Agricultural Fund for Rural Development, European Agricultural Guarantee Fund, European Regional Development Fund, Cohesion Fund, Horizon Europe and Life funds) will spend 25% on climate and environment. This is expected to trigger additional national co-financing of EUR 114 bn. InvestEU will be equipped with EUR 279 bn (private and public) and EU budget guarantee, which reduces risks for investments. From the auctioning of carbon allowances within the EU ETS the Innovation and Modernisation Funds will deliver EUR 25 bn meet the transition goals.

Finally the Just Transition Mechanism (worth EUR 100 bn of investments for 2021-27) breaks down into the following (see Figure):

  1. the Just Transition Fund,
  2. the InvestEU scheme and
  3. the EIB loans.

The Just Transition Mechanism has the purpose of helping those regions and people who are exposed to more risks or have disadvantageous starting points in the energy transition.

Just Transition Mechanism

Figure 1: Just Transition Mechanism

The Just Transition Fund (JTF) is the first of the pillars of the Just Transition Mechanism to be implemented under cohesion policy. The aim of the JTF is to mitigate the adverse effects of the climate transition by supporting the most affected territories and workers concerned.’ The Proposal for a Regulation establishing the Just Transition Fund was also published on January 14th.

The Just Transition Fund is the most debated element of the Green Deal, as it will include dedicated “fresh” funding. In the end it will be EUR 7.5 bn, so not an overwhelming amount in the perspective of one trillion. Nevertheless, there will be extra money from the cohesion funds, the Proposal is very explicit about it:

Just Transition Fund – allocation by Member State (in M EUR)

Figure 2: Just Transition Fund – allocation by Member State (in M EUR)

The objectives of the Fund is to support territories facing economic and social transformation in their transition to a climate-neutral economy (art. 2). Each Member State will receive resources from the JTF and on top can co-finance investment between 1,5 to 3 times the amount from the JTF.

Art. 4 - JTF shall exclusively support the following activities:

  • (a) productive investments in SMEs, including start-ups, leading to economic diversification and reconversion;
  • (b) investments in the creation of new firms, including through business incubators and consulting services;
  • (c) investments in research and innovation activities and fostering the transfer of advanced technologies;
  • (d) investments in the deployment of technology and infrastructures for affordable clean energy, in greenhouse gas emission reduction, energy efficiency and renewable energy;
  • (e) investments in digitalisation and digital connectivity;
  • (f) investments in regeneration and decontamination of sites, land restoration and repurposing projects;
  • (g) investments in enhancing the circular economy, including through waste prevention, reduction, resource efficiency, reuse, repair and recycling;
  • (h) upskilling and reskilling of workers;
  • (i) job-search assistance to jobseekers;
  • (j) active inclusion of jobseekers;
  • (k) technical assistance.

There are some exemptions, however, since art. 5 is mentioning ‘fossil fuels’ and nuclear energy, tobacco and additional broadband infrastructure as not-supportable.

Just Transition funding in Central Europe

Figure 3: Just Transition funding in Central Europe

What can be said for sure now, is that the Territorial Just Transition Plans will play a key role in the assessment for the JTM. Only after their approval a Member State will be eligible to receive any kind of aid under the Sustainable Europe Investment Plan. Most importantly the Plans will have to be in line with the NECPs. ‘Those territories should be precisely defined and correspond to NUTS level 3 regions or should be parts thereof’.

 

Sources:
  • COM(2019) 640 final, COMMUNICATION on The European Green Deal.
  • COM(2020) 21 final, COMMUNICATION on the Sustainable Europe Investment Plan and European Green Deal Investment Plan.
  • COM(2020) 22 final, 2020/0006 (COD), Proposal for a REGULATION establishing the Just Transition Fund.
  • www.politico.eu

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