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13th Aug 2022

EU poised to begin handing out €17.5bn green transition fund

  • The Just Transition Fund will not support investments connected to nuclear power stations or fossil fuels, including natural gas (Photo: Nikon Ranger)

EU member states gave the final approval on Monday (7 June) to the €17.5bn Just Transition Fund, intended to support currently fossil fuel-dependent regions to green their economies.

This initiative is part of the efforts the EU is taking towards achieving climate-neutrality by 2050.

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"The success of the European Green Deal rests on us mitigating the consequences for those most affected by the decarbonisation of the economy," said Portuguese planning minister Nelson de Souza, whose country currently holds the rotating EU Council presidency.

"The Just Transition Fund will provide much-needed support to companies and workers at local level," he added.

The Just Transition Fund is one of the three pillars of the so-called Just Transition Mechanism, designed to overcome the socioeconomic consequences of the green transition in territories which need to phase out the production and use of coal, lignite, peat and oil shale.

The other two pillars are a dedicated scheme under InvestEU and a public sector loan facility.

Both public and private projects supporting the decarbonisation of a fossil fuel-dependent region, including the retraining of affected workers, will be eligible for funding.

This fund will not support investment related to nuclear power stations or fossil fuels, including natural gas.

Monday's final approval paves the way for EU countries to start receiving the money - which is subjected to EU Commission approval of their transition plans. There is no deadline for such approval.

Poland, one of the most coal-dependent countries in the EU, is expected to receive the largest slice of the fund (€3.5bn), followed by Germany (€2.2m), Romania (€1.9m) and the Czech Republic (€1.4m).

However, the commission recently warned that the Polish region of Bogatynia risks not receiving any funding if the Polish authorities extend the life of a controversial open-pit coal mine in Turów until 2044.

'Too small'

In May 2020, the commission proposed increasing the Just Transition Fund from the initial budget of €7.5bn to €40bn. But then EU countries reduce it back to €17.5bn.

MEPs, for their part, advocated allocating €25bn for this programme.

However, the final agreement between MEPs and member states confirmed the budget of €17.5bn, made up by €7.5bn from the EU's budget for the period 2021-2027 and €10bn from the post-pandemic recovery fund.

The cuts have triggered concerns among EU lawmakers and environmental activists who considered the agreed amount "too small" for current needs.

"The Just Transition Fund is too small to finance the whole upfront cost of transition to climate neutrality. Luckily, it is not alone: all EU funds can and must pull in the same direction," said Katie Treadwell from the WWF Europe.

"The challenge is ensuring the money is spent well, [but] early signs are not showing much promise on that front," she added, calling on the EU executive to ensure that member states' plans are aligned with EU climate goals.

The commission will review the implementation of the Just Transition Fund by June 2025.

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