Europe

EU Parliament approves €17.5 billon transition fund for greener economy

The €17.5 billion Just Transition Fund (JTF), which will help EU countries address the social and economic impact of the transition to climate neutrality, has just gotten the final approval from the European Parliament. The proposal was adopted on May 18 by 615 votes in favour, 35 against and 46 abstentions.

The package comprises €7.5 billion from the 2021-2027 Multiannual Financial Framework and an additional €10 billion from the EU Recovery Instrument. To be eligible, projects must focus on economic diversification, reconversion or job creation, or they must contribute to a transition to a sustainable, climate-neutral and circular European economy.

The Just Transition Fund will finance job seeking assistance, up-skilling and re-skilling, as well as the active inclusion of workers and jobseekers as Europe’s economy shifts towards becoming climate neutral, the European Parliament said, adding that it will also support micro-enterprises, business incubators, universities and public research institutions, as well as investments in new energy technologies, energy efficiency, and sustainable local mobility.

Waste incineration will not receive support through the JTF. Neither will the decommissioning nor construction of nuclear power stations, activities linked to tobacco products and investments related to fossil fuels.

In their just transition plans, member States have to identify their territories worst affected by the energy transition, and concentrate the JTF resources they receive there. Particular attention should be given to the specificities of islands, insular areas and outermost regions.

At the initiative of Parliament, a “Green Rewarding Mechanism” will be introduced to the JTF if the fund’s resources are increased after 31 December 2024. These additional resources would be distributed among member states, with those that succeed in reducing industrial greenhouse gas emissions receiving more funding.

Access to the JTF for member states will be conditional on their adoption of national-level commitments to achieve climate neutrality by 2050. Before the adoption of this target, member states will be entitled to only 50% of their national allocation, businesses in financial difficulty may receive support in compliance with temporary EU state aid rules established to address exceptional circumstances, resources may be transferred from other cohesion funds on a voluntary basis, and the proportion of the investments provided by EU funding (co-financing) is set at a maximum of 85% for less developed regions, 70% for transitional regions and 50% for more developed regions.

Once the Council has formally adopted the deal, the regulation will enter into force on the twentieth day following that of its publication in the Official Journal of the EU.

German MEP Henrike Hahn, rapporteur on the Just Transition Fund, said the JTF can make a huge difference in contributing to the transition to a climate-neutral society which is both an urgent challenge and an opportunity to build a better future for all.

“Today’s vote is an important success. The Just Transition Fund is the first instrument of the European Green Deal. Endowed with 17.5 billion euros, the fund is intended to ensure that the transition to a climate-neutral economy is socially fair. The Fund will provide European coal regions with a possibility for a new future,” she said. “I am particularly happy that fossil fuels will no longer receive financial support from the Just Transition Fund and no exemptions will be allowed. Coal and oil will not receive any funding and decommissioning or constructing nuclear power stations will not be supported by the Just Transition Fund,” she added.

“Another important to me point was the conditionality on commitment to the EU’s climate neutrality objectives. It foresees that only 50% of resources allocated to the Member State concerned can be used for programming and implementation as long as commitment to implement a climate-neutral EU by 2050 in line with the objectives of the Paris Agreement, is not given. I hope this will be an important incentive for the Member States concerned,” Hahn said.

She stressed that supporting not only working people in transition but also job seekers is of utmost importance for the effectiveness of the JTF. The transition is the promise of a better and inclusive future. Everyone must benefit from it and our support must also help the most vulnerable among us, whether they are young people without access to training or the job market, persons with disabilities, isolated women, for example. The JTF will allow support to companies in difficulties under the temporary framework, due to exceptional circumstances, for investments reducing energy costs in the context of the energy transition process.

As the JTF falls under the Common Provisions Regulation, funding must be in line with the Biodiversity and ‘Do no significant harm,” Hahn said, adding, thus, projects funded by the JTF must not harm the environment as defined in the provisions of EU-taxonomy.

 

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