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EU’s Just Transition Fund risks rewarding inaction?

The transition from fossil fuels to cleaner energy sources is a cornerstone of the European Green Deal. The European Union agreed to establish the Just Transition Fund to reduce the socio-economic costs for those communities and regions that are less equipped to meet the challenges of this transition.

The European Commission initially proposed a fund size of 40 billion euros in May, however, the European leaders slashed it to 17.5 billion euros under an EU budget deal in July.

Apart from the size of the fund, there is also much debate about how to spend this money. Yesterday the European Parliament voted in favour of financing gas projects through the mechanism, even though EU member states’ managed to reach consensus to exclude fossil fuels from the Just Transition Fund.

The European Parliament’s decision came just at the same time when the Commission has announced a new target of 55 per cent for greenhouse gas (GHG) emissions reduction by 2030.

Since its announcement in January, the Just Transition Fund has seen both its size and ambition level decrease. However, it also worth looking at how Member States would spend the financial support of the Just Transition Fund based on their long-term energy strategies.

The recently released report of Ember and Climate Action Network (CAN) Europe analyses the final National Energy and Climate Plans (NECPs) of 18 EU Member States that are still using coal for electricity generation. The report assesses whether the plans for coal phase-out are in line with the EU’s climate commitments and whether the Just Transition Fund would be used to support a real transition in these coal-dependent economies.

The analysis finds that 11 out of 18 EU coal-countries do not have a Paris-compatible plan to phase-out coal. Seven countries (Bulgaria, Croatia, Czechia, Germany, Poland, Romania and Slovenia) do not plan to abandon coal by 2030. Total installed coal capacity across all seven countries is expected to fall by 42 per cent in the next decade and 52 gigawatts (GW) of coal is expected to be operational after 2030, nearly all (around 90 per cent) of which is in Czechia, Germany and Poland.

Source: Ember

There also some Member States (Greece, Hungary, Ireland and Italy) that pledged to phase out coal in the next decade, but with a significant increase in fossil gas. According to the report, an expansion of gas projects would only prolong fossil-fuel dependency in these coal regions and risk leaving the same communities behind again as climate action accelerates in the next decades.

“Transition means a change to clean, renewable energy, not fossil gas,” pointed out Elif Gündüzyeli, Senior Coal Policy Coordinator at CAN Europe. “Coal regions need future-proof investments in the new economy, not further entrenchment in fossil-fuel dependency.”

In the long-term gas is planned to play a significant role in the electricity transition for both Poland and Bulgaria. In Poland, nearly half (42 per cent) of the expected reductions in electricity generation from coal by 2040 will be offset by the increased gas burn, with the addition of around 6 GW of new gas capacity in the next twenty years. The Bulgarian NECP also envisages replacing coal generation with increased gas use, by 2035 offsetting nearly half (46 per cent) of all coal declines.

The report concludes that without reform the Just Transition Fund risks rewarding climate laggards at the expense of countries with ambitious and Paris compatible plans for their coal regions as under the current allocation methodology nearly two-thirds of the Fund will be distributed between the seven countries which do not plan to phase-out coal by 2030 and more than 10 per cent would go to the 4 countries which plan switch from coal to gas.

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