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EC proposes investment plan and mechanism to support and finance European green transition

Friday, January 17, 2020


On 14 January 2020, the European Commission presented the European Green Deal Just Transition Mechanism (JTM) and the Sustainable Europe Investment Plan, which should contribute to achieving the objectives of the European Green Deal, namely to foster the emergence of new clean energy and circular economy industries and the creation of high quality jobs, for a competitive European economy adapted to the 21st century.

The Investment Plan will complement other initiatives announced under the Green Deal and revolves around three key dimensions:

  • Financing – Mobilising at least €1 trillion in sustainable investments over the next decade. A larger share of the EU budget spending will be devoted to climate and environmental action and will involve private financing in which the European Investment Bank (EIB) will play a key role.
  • Incentives – To unblock and redirect public and private investment, the EU will facilitate sustainable public investments and encourage green budgeting and green public procurement, while devising ways to facilitate state aid approval procedures for regions in just transition.
  • Practical Support – The EU will help different actors by providing support to public authorities and project promoters in terms of planning, designing and implementing sustainable projects.

The JTM should be composed of three pillars, which, combined, should amount to approximately €100 billion.

The first pillar is a Just Transition Fund (JTF) under shared management, with €7,5 billion of fresh EU funds, in addition to the EC’s proposal for the next long-term EU budget. The EC’s proposal also includes allocation of these funds, which cause some controversies amongst observers and stakeholders. According to the proposal, from the €7,5 billion JTF, Poland is set to receive €2 billion, Germany €877 million, followed by Romania with €757 million. The EU Member States will “also have to commit to match each euro from the Just Transition Fund with money from the European Regional Development Fund and the European Social Fund Plus and provide additional national resources”. This will result in total funding between €30 and €50 billion.

According to the second pillar, the JTM will have a specific facility under InvestEU, which will mobilise up to €45 billion of investments. The third pillar foresees a proactive role of the EIB through a Public Sector Lending Facility, which is expected to mobilise additional investment between €25 and €30 billion for the regions concerned.

According to the EC proposal, the total estimated investments to be mobilised under the three pillars is a little bit over €104 billion with the top five contributors being: Poland (€27,3 billion), Germany (€13,3 billion), Romania (€10,1 billion), Czechia (€7,7 billion) and Bulgaria (€6,2 billion). Together these coal dependent regions will receive more than half of the funding.

The JTM also goes beyond financing: through a Just Transition Platform, the EC will provide technical assistance to relevant stakeholders (Member States, regions and investors) to ensure the that relevant communities, local authorities, social partners and non-governmental organisations are involved. In addition, the distribution of the financial means from the Just Transition Fund will reflect the capacity of Member States to finance the investments needed to address the transition to climate neutrality. The distribution method takes into account:

  • The scale of the challenge of transition from more carbon-intensive regions emitting greenhouse gases;
  • Social challenges given the potential job losses in industry, oil shale, coal and lignite mining and peat production and the need to retrain workers for employment at a later stage; and
  • The level of economic development of the Member States and the corresponding investment capacity.

According to the EC, the effectiveness of the European Green Deal investment plan will depend on the commitment of all actors involved. Hopefully they will take full advantage of favourable regulatory conditions and authorities will play an active role in identifying and promoting investments. To ensure the sustainability of these measures, the EC will assess stakeholders’ progress, continue to work to promote and finance the transition, and organise an annual Sustainable Investment Summit involving all relevant stakeholders.