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EU pledges 40 bn euros to just transition, CEE could significantly boost its share

The European Commission proposed to create a new recovery instrument named Next Generation EU, embedded within the block’s long-term EU budget with the aim of accelerating a sustainable, even, inclusive and fair post-coronavirus recovery.

The Commission’s new instrument set out a five-fold increase of the allocations to the Just Transition Fund (JTF), established to guarantee the fairness of Europe’s energy transition by supporting the most affected regions and alleviating social and economic fallouts.

The JTF is a crucial support mechanism for Central and Eastern European Member States given the comparatively high carbon intensity of their economies and therefore the high costs of complying with the climate objectives. Earlier in May, the Commission has approved the requests of 18 Member States to access funding from the Just Transition Mechanism. Twelve out of the 18 countries are from Central and South-Eastern Europe.

Initially, the Commission envisaged a 7.5 billion euros budget for the Just Transition Fund, to be complemented with resources from cohesion policy funds and national co-financing (up to a total of 30-50 billion euros). However, numerous criticism emerged that the planned budget will not be able to effectively tackle the challenges as it constitutes only a small part of the total needs.

A comprehensive analysis prepared by the Bruegel institute highlighted that the 7.5 billion euros budget is a very small amount of money compared to what is being negotiated for the overall size of the next multiannual financial framework and this way cannot realistically fulfil its mission of social support, economic revitalisation and land restoration.

Therefore, the Commission proposed to provide substantial additional funding for the Just Transition Fund, made up of 30 billion euros from the Next Generation EU recovery fund and 10 billion euros from the bloc’s budget for 2021-27, bringing the total to 40 billion euros.

EU climate chief Frans Timmermans told at a press conference that the Commission decided to make the Fund one of its landmark proposals for recovery so that with more resources Europe can move towards a green transition.

As the grand total of the JTF increased significantly, media outlets and Commissioners started to cite preliminary and indicative numbers on social media, showing the allocation of the Just Transition Fund for each Member States. Using the same metric as previously deployed by the Commission, Central and Eastern Europe could be eligible to more than 24 billion euros of funding.

Poland, who was the biggest winner from the previous proposal as well with 2 billion euros, could be eligible of 8 billion euros funding, followed by Romania with almost 4.5 billion euros, the Czech Republic with 3.4 billion euros and Bulgaria with 2.7 billion euros.

Just Transition Fund allocation in the CEE region (indicative)
Data: Euractiv/EU Commission. Table: CEENERGYNEWS

Besides the Just Transition Fund, the Just Transition Mechanism has another two pillars: a special scheme under InvestEU to crowd in private investment and the new public sector loan facility just presented.

According to the Commission’s proposal, the facility will include 1.5 billion euros in grants from the EU budget and up to 10 billion euros in loans from the European Investment Bank’s own sources. It will eventually mobilise up to between 25 and 30 billion euros of investments for helping territories and regions most affected by the transition to a climate-neutral economy.

Taken together, all three pillars of the Just Transition Mechanism are expected to mobilise up to 150 billion euros of investments to ensure that no one is left behind during the green transition.

“While we are focused on steering us through the crisis provoked by the coronavirus pandemic, we must not forget the damage that climate change is inflicting on our planet. […] There is no vaccine against climate change. But we need to make sure the transition towards a climate-neutral economy happens in a fair way,” said Commissioner for Cohesion and Reforms, Elisa Ferreira adding that the Commission’s proposal is “an essential tool in ensuring this fairness, complementing the efforts of Cohesion policy in supporting regions and citizens most vulnerable to adjustments towards a climate-neutral Union.”

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