Poland may have balked at the last minute at supporting an EU plan to completely decarbonize by 2050 last month, but the European Commission is still honoring its end of a deal meant to get Warsaw and other reluctant Eastern European capitals on board.
Today the Commission unveiled a Just Transition Mechanism designed, among other things, to help those regions dependent on coal to find new areas of economic activity to replace mining. It will mobilize at least €1 trillion ($1.1 trillion)
Such funding was demanded by Poland, Hungary, Estonia and the Czech Republic in order to support an EU proposal to reduce greenhouse gas emissions to net zero by 2050. This would mean the EU almost completely phases out emissions, with the small amount left to be made up for with projects that keep carbon out of the air, like planting forests or storing carbon underground.
Ursula von der Leyen, the EU’s new commission president, promised the fund shortly before taking office on December 1st. This was enough to convince all EU countries except Poland, which still refused to vote for a resolution supporting the target at an EU summit last month. The move was, however, largely futile and for domestic political consumption. Von der Leyen has said the Commission will still put forward implementing legislation in March, which Warsaw cannot veto.
Ordinarily, the European Commission prefers not to put forward such far-reaching legislative proposals without unanimous support for the headline goal from the European Council of 28 national leaders – even though this unanimous support is not required. It is hoped that having the specifics of the fund down on paper will be enough to get Poland’s support for the target at the Council’s next summit in March. Given that all other countries now support the 2050 target, Warsaw’s approval is not needed but it is desired.
The Sustainable Europe Investment Plan – the financial mechanism of Von der Leyen’s European Green Deal unveiled last month, will lead to at least €1 trillion of green investment according to the European Commission. It is designed to spread the burden of meeting climate targets across geographies and socioeconomic groups – meant not only to respond to Eastern European concerns but also populist movements like the yellow vests in France.
“The transformation ahead of us is unprecedented, and it will only work if it is just – and if it works for all,” said Von der Leyen. “We will support our people and our regions that need to make bigger efforts in this transformation, to make sure that we leave no one behind.”
Commission vice president Frans Timmermans, who has been put in charge of the green deal, said meeting the 2050 target “will require more efforts from citizens, sectors and regions that rely more on fossil fuels than others.”
“The Just Transition Mechanism will help support those most affected by making investments more attractive and proposing a package of financial and practical support worth at least €100 billion. This is our pledge of solidarity and fairness.”
Leveraging private funds
The idea of the fund is not just to hand out cash, but to create an “enabling framework” to stimulate public and private investments, said Valdis Dombrovskis, commission vice president for the economy. “First, we will use the EU budget to leverage private funds for green projects across Europe and support the regions and people most affected by transition. Second, we will create the right regulatory incentives for green investments to thrive.”
“The European Union was not built in a day. A Green Europe will not happen overnight. Putting sustainability at the heart of how we invest requires a change of mindset.”
The plan will also involve a greater share of spending on climate and environmental action from the EU budget than ever before.
The Just Transition Mechanism, a part of the overall sustainable investment plan, will provide targeted support for regions that will require a bigger transition effort over the period 2021-2027, to alleviate the socio-economic impact of the transition. It will consist of three main sources of financing: the fund itself, which will receive €7.5 billion of fresh EU funds in the EU’s next long-term budget; a dedicated just transition scheme under the InvestEU program to mobilize up to €45 billion of investments; and a public sector loan facility with the European Investment Bank backed by the EU budget to mobilise between €25 and €30 billion of investments. It will be used for loans to the public sector, for instance for investments in district heating networks and renovation of buildings. The Commission will put forward a legislative proposal to set this up in March.
National EU governments will be responsible for identifying the eligible territories through dedicated territorial just transition plans. They 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. Together this will provide between €30 and €50 billion of funding. The fund will primarily provide grants to regions, for example, to support workers to develop skills and competences for the job market of the future and help small businesses create new economic opportunities in these regions. It will also support investments in the clean energy transition, for example in energy efficiency.
National governments will have some time to assess the details of today’s plan before reacting to it at the next summit of national EU leaders in March. The Commission is expected to put forward its legislative proposal for the 2050 target shortly before that summit. The goal is to have both the fund and the target approved by a qualified majority vote of national governments – weighted by each country’s population size – by the end of the year.