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24th Oct 2021

EU Commission: Five-fold aid increase for fossil-fuel regions

The European Commission's recovery package increases five-fold the resources of the Just Transition Fund, part of the Green Deal that aims to support fossil fuel-dependent regions to green their economies.

"This is our firm commitment to make every region and every European part of our green recovery," said on Thursday (28 May) the commission vice-president in charge of the Green Deal, Frans Timmermans.

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On top of the initial €7.5bn Just Transition Fund, the commission proposed €32.5bn additional funding - made up of €2.5bn under the next long-term EU budget and €30bn from the new EU recovery fund - bringing the total to €40bn.

So far, 18 member states prepared strategies to cut down coal sector and other carbon-heavy industries, skill up workers and create new jobs to apply for a slice of the Just Transition Fund.

The commissioner for cohesion, Elisa Ferreira, ensured that the regions already identified as beneficiaries of the fund are still considered as such, although the extra funding could allow a certain enlargement to other territories.

"We need to make sure the transition towards a climate-neutral economy happens in a fair way," said Ferreira.

"We still have a problem [climate change] and we have a target that we want to reach, so let's concentrate the funds in the way that we minimise the cost of the [green] transition," she added.

The executive director of the think tank Institute for European Environmental Policy, Céline Charveriat, warned that "in addition to the usual controls for EU funding, it would be essential to ensure genuine social dialogue and meaningful involvement of local authorities".

Conditions attached

According to a previous proposal sent by the European Commission to member states in January, Poland and Germany would receive the largest funding slice of the Just Transition Fund - allocating the upper limit of the fund (€2bn) to Poland, despite Warsaw's refusal to commit to the 2050 emissions-neutrality goal.

Under the new reinforced Just Transition Fund, Polish climate Minister Michal Kurtyka claimed that the country's coal-dependent regions would receive an extra 6 billion euros.

However, Timmermans warned that the allocation of funds under the Just Transition Fund might be anchored to certain criteria, such as the commitment to the Green Deal targets.

"If a country does not commit to the EU's 2030 or 2050 targets, there should be consequences for the allocations as well," he said.

Meanwhile, environmental activists urged the commission to explicitly exclude any support to fossil fuels under this fund.

Timmermans has said that, in some areas, natural gas will still need to play a role to swift from coal to renewable energies.

Earlier this month, eight member states - Bulgaria, Czech Republic, Greece, Hungary, Lithuania, Poland, Romania and Slovakia - defended the role of natural gas in the transition towards climate neutrality.

The breakdown

This fund is only one of the dimensions of the proposed Just Transition Mechanism, which has also been reinforced by the recovery package and the European Investment Bank (EIB) to mobilise at least €150bn of investments over the period 2021 to 2027.

The commission upgraded the second pillar, InvestEU, to €15.3bn to mobilise private investment.

Likewise, the EU executive adopted on Wednesday (27 May) a public sector loan facility - made up of €1.5bn in grants from the EU budget and up to €10bn in loans from the EIB - to mobilise about €30bn to support regions most affected by the green transition.

"The proposed Just Transition Mechanism, which the EIB plans to support with its financing, will be key to ensuring that transforming our economies to carbon neutrality will happen with shared benefits and no disproportionate costs among regions," said EIB vice-president, Lilyana Pavlova.

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