Explanatory Memorandum to COM(2020)22 - Just Transition Fund - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2020)22 - Just Transition Fund. |
|---|---|
| source | COM(2020)22  |
| date | 14-01-2020 |
1. CONTEXT OF THE PROPOSAL
On 2 May 2018, the European Commission adopted its proposal for the next multi-annual financial framework covering the period 2021-2027 1 . The proposal demonstrated the Commission’s increased ambition concerning climate-related activities and proposed to spend 25% of expenditure on such activities, amounting to EUR 320 billion, to be mobilised through the EU budget.
The Commission later adopted, on 29 and 30 May 2018, its legislative proposals governing the use of cohesion policy funding for the same period. One of the main objectives which will drive EU investments in 2021-2027 will be a “Greener, low-carbon Europe, by promoting clean and fair energy transition, green and blue investment, the circular economy, climate adaptation and risk prevention and management” 2 implementing the Paris Agreement. According to the Commission’s proposal, a significant share of cohesion funding will focus on this priority. It will be essential to confirm that share in the ongoing legislative process.
On 11 December 2019, the Commission adopted a Communication on the European Green Deal, setting out its roadmap towards a new growth policy for Europe. This growth policy is based on ambitious climate and environmental objectives and on participatory processes bringing citizens, cities and regions together in the fight against climate change and for environmental protection. In line with the objective of achieving EU climate neutrality by 2050 in an effective and fair manner, the European Green Deal proposed a Just Transition Mechanism, including a Just Transition Fund, to leave no one behind. The most vulnerable are the most exposed to the harmful effects of climate change and environmental degradation. At the same time, managing the transition will lead to significant structural changes. Citizens and workers will be affected in different ways and not all Member States, regions and cities start the transition from the same point or have the same capacity to respond.
As further detailed in the Communication on the Sustainable Europe Investment Plan 3 , the Just Transition Mechanism will focus on those regions and sectors that are most affected by the transition given their dependence on fossil fuels, including coal, peat and oil shale or greenhouse gas-intensive industrial processes. Some sectors will be declining, with an irreversible decline in economic output and employment levels for economic activities with high greenhouse gas emission intensity levels, or based on the production and use of fossil fuels, in particular coal, lignite, peat and oil shale, Other sectors with high greenhouse gas emission intensity levels, for which technological alternatives to carbon-intensive processes can be found in order to maintain economic output and enhance employment, will instead need to transform. Overall, coal infrastructure is present in 108 European regions and close to 237 000 people are employed in coal-related activities, whereas almost 10 000 people are employed in peat extraction activities and around 6 000 are employed in the oil shale industry. The oil shale industry requires particular attention given the very high carbon-dioxide emissions related to this fuel. Numerous additional indirect jobs also depend on the fossil fuel value chain and greenhouse gas-intensive industrial processes.
The Just Transition Mechanism will come in addition to the substantial contribution of the EU’s budget through all instruments directly relevant to the transition, notably the European Regional Development Fund (‘ERDF’) and the European Social Fund Plus (‘ESF+’).
The Mechanism will consist of three pillars: (1) a Just Transition Fund implemented under shared management, (2) a dedicated scheme under InvestEU, and (3) a public sector loan facility with the EIB Group to mobilise additional investments to regions concerned. The Just Transition Fund will be used primarily to provide grants; the dedicated transition scheme under InvestEU will crowd in private investments, and the partnership with the EIB will leverage public financing.
The focus of the Just Transition Fund will be on the economic diversification of the territories most affected by the climate transition and the reskilling and active inclusion of their workers and jobseekers. The eligibility of investments under the other two pillars of the Just Transition Mechanism will be broader to support activities related to the energy transition. The dedicated Invest EU scheme will cover projects for energy and transport infrastructure, including gas infrastructure and district heating, as well as decarbonisation projects. Under the public loan facility with the EIB, public authorities will be enabled to implement measures to facilitate the transition to climate neutrality. Projects will range from energy and transport infrastructure, to district heating networks, and energy efficiency measures including renovation of buildings.
Additional public and private resources will be unlocked through a consistent regulatory framework, in particular sectoral State aid rules, which will create opportunities to facilitate the use of national funds for projects consistent with just transition goals. Advisory support and technical assistance for regions will also be an integral part of the Just Transition Mechanism.
In the light of the latest available science and of the need to step up global climate action, the European Council of 12 December 2019 endorsed the objective of achieving a climate-neutral Union by 2050, in line with the objectives of the Paris Agreement and welcomed the Commission’s announcement proposing EUR 100 billion of investment through the Just Transition Mechanism to facilitate the achievement of these objectives. Resources of the Mechanism including the Just Transition Fund will be provided to support Member States’ commitments to achieve the objective of a climate-neutral Union by 2050.
Contents
The Just Transition Fund will be a key tool to support the territories most affected by the transition towards climate neutrality and avoid regional disparities growing. It will therefore be established within the framework of cohesion policy, which is the main EU policy instrument to reduce regional disparities and to address structural change in Europe’s regions – sharing cohesion policy’s objectives in the specific context of the transition towards climate neutrality. It will be implemented through shared management in close cooperation with national, regional and local authorities and stakeholders. This will ensure ownership of the transition strategy and provides the tools and structures for an efficient management framework.
The Just Transition Fund will provide support to all Member States. The distribution of its financial means will reflect the capacity of Member States to finance the necessary investments to cope with the transition towards climate neutrality.
The allocation method will consider therefore the scale of the transition challenge of the highest greenhouse gas intensive regions (through the corresponding industrial CO2emissions), the social challenges in the light of potential job losses in industry, coal and lignite mining and the production of peat and oil shale. The method will also take into account Member States’ level of economic development and related investment capacity.
Member States will complement their Just Transition Fund allocation from their resources under the ERDF and the ESF+ through a specific and definitive transfer mechanism. Member States will also provide national resources to complement the Union resources. The level of Union co-financing will be set according to the category of region in which the identified territories are located. Given that the transfers of resources from the ERDF and the ESF+ taken together will correspond to at least 1.5 and at most 3 times the Just Transition Fund allocation and taking into account the national co-financing the overall financing capacity of this fund will exceed EUR 30 billion and may reach EUR 50 billion. In order to ensure the continued impact of cohesion policy as such, no Member State should provide more than 20% of its initial ERDF and of its initial ESF+ allocation (calculated per Fund) as complementary support transferred to the Just Transition Fund.
The programming process, including the identification of the territories for intervention and corresponding actions will be agreed in a dialogue between the Commission and each Member State. It will be steered by the European Semester process. Those territories need to be those that are most negatively affected based on the economic and social impacts resulting from the transition, in particular with regard to expected job losses and the transformation of the production processes of industrial facilities with the highest greenhouse gas intensity.
Taking into account the Commission’s analysis in that exercise, Member States will prepare one or more territorial just transition plans, providing an outline of the transition process until 2030, consistent with the National Energy and Climate Plans and the transition to a climate-neutral economy and identifying subsequently the most impacted territories that should be supported. For each of these territories, the territorial just transition plans will set out the social, economic and environmental challenges and give details on needs for economic diversification, reskilling and environmental rehabilitation as appropriate.
In order to ensure the effectiveness of the Just Transition Fund, the support provided needs to be concentrated. The territories identified will therefore correspond to NUTS level 3 regions or could be parts thereof.
The support from the Just Transition Fund will be based on the territorial just transition plans and programmed under one or more priorities, either in programmes supported also from the ERDF, the ESF+ or the Cohesion Fund or in a dedicated Just Transition Fund programme. The territorial just transition plans will be part of the programmes and will be adopted by the same Commission decision as the programme. Support from the Just Transition Fund will be conditional on the approval of the territorial just transition plans, which need to include, in particular, a description of the Member State’s commitment as regards the transition process consistent with their National Energy and Climate Plans and the EU objective of climate neutrality by 2050. The territorial just transition plans should also provide a justification for the ERDF and ESF+ complementary resources transferred as well as any support to productive investments in enterprises other than SMEs if deemed necessary. The approval of the territorial just transition plans will enable support not only from the Just Transition Fund, but also from the dedicated just transition scheme under InvestEU (second pillar of the Just Transition Mechanism) and the public sector loan facility, implemented in partnership with the EIB (third pillar), which will support investment for the concerned territories. The territorial just transition plans should be updated and re-adopted when necessary, notably in case of an update of the National Energy and Climate Plans. As for all cohesion policy programmes, programmes supported by the Just Transition Fund will be subject to the mid-term review. Based on results, Just Transition Fund resources could be re-allocated within the Member State in 2025 as part of the mid-term review. The mid-term review will also provide the opportunity to allocate the funding for the years 2026 and 2027, which will be set aside at the start of the next period.
Territories receiving support from the Just Transition Fund will also benefit from a dedicated technical assistance facility. The purpose of this facility will be to design a tailored package of measures across the range of available support from the Commission, the EIB and other international organisations in a simple and integrated manner. Already in 2020, the Commission will assist Member States with the preparation of their territorial just transition plans. In addition, the InvestEU Advisory Hub, including Jaspers (a joint Commission - EIB initiative for project development under the Structural Funds) will provide support for the preparation of the project pipeline. Finally, the Commission will set up a Just Transition Platform to enable bilateral and multilateral exchanges of experience on lessons learnt and best practices across all affected sectors building on the existing platform for coal regions in transition.
Complementarity with InvestEU just transition scheme and the public sector loan facility with the EIB
The Just Transition Mechanism will include a strong governance framework centred on territorial transition plans.
In this context, the support provided through the Just Transition Fund will be complemented by a dedicated just transition scheme under Invest EU. It will support a wider scope of investments, notably by contributing to the transition through support to low-carbon and climate-resilient activities, such as renewable investments and energy efficiency schemes. This scheme will also be able to deploy financing for energy and transport infrastructure, including gas infrastructure and district heating, but also decarbonisation projects, economic diversification of the regions and social infrastructure. Additionally, a new public sector loan facility set up together with the EIB will provide subsidised financing to the local authorities for the benefit of the regions concerned. The EU support could take the form of inter alia an interest rate subsidy or an investment grant, financed from the EU budget, which will be blended together with loans extended by the EIB to municipal, regional and other public authorities.
The two other pillars of the Just Transition Mechanism will have a wider geographical scope than the Just Transition Fund itself, supporting not only investment in projects in just transition territories, but also outside those territories, provided that these projects are key to the transition within the just transition territories.
This proposal provides for a date of application as of 1 January 2021 and is presented for a Union of 27 Member States, in line with the notification by the United Kingdom of its intention to withdraw from the European Union and Euratom based on Article 50 of the Treaty on European Union received by the European Council on 29 March 2017.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
EU action is justified by Article 174, paragraph 1, TFEU: The Union shall develop and pursue its actions leading to the strengthening of its economic, social and territorial cohesion. In particular, the Union shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions.
To provide for the setup of the Just Transition Fund, it is necessary to base the proposal on Article 175 TFEU, which explicitly calls on the Union to support the achievement of the objectives set out in Article 174 by the action it takes through the Structural Funds, the EIB and the other existing Financial Instruments.
Article 175, paragraph 3, TFEU also provides that ‘if specific actions prove necessary outside the Funds and without prejudice to the measures decided upon within the framework of the other Union policies, such actions may be adopted by the European Parliament and the Council acting in accordance with the ordinary legislative procedure and after consulting the European Economic and Social Committee and the Committee of the Regions’.
• Subsidiarity and proportionality
In accordance with Article 4(2) TFEU, the Union has shared competence with Member States in the area of economic, social and territorial cohesion as well as of certain aspects of social policy. It also has competence to carry out actions to support, coordinate or supplement the actions of the Member States in the area of education and vocational training as well as industry (Article 6 TFEU).
The implementation of the Just Transition Fund under shared management is underpinned by the subsidiarity principle. Under shared management, the Commission delegates strategic programming and implementation tasks to Member States and regions. Thus Union action is limited to what is necessary to achieve the Union objectives as laid down in the Treaties.
Shared management aims to ensure that decisions are taken as closely as possible to the citizens and that EU-level action is justified in light of the possibilities and specificities at national, regional or local level. Shared management brings Europe closer to its citizens and connects local needs with European objectives. Moreover, it increases ownership of EU objectives, as Member States and the Commission share decision-making power and responsibility and jointly co-finance the programmes.
• Choice of the instrument
Cohesion policy is the appropriate framework for the Just Transition Fund, as it is the main EU policy to address structural changes in Europe’s regions. It provides financial support for investments in a wide range of areas that contribute to jobs and growth, working in partnership with actors on the ground.
It also provides for an integrated place-based approach, which ensures synergies and coherence between investments supported under the Just Transition Fund and those supported under the mainstream cohesion policy programmes. This will accelerate the economic development and reconversion of the concerned regions.
In addition, it ensures ownership by Member States and regions. This is critical in the context of the Just Transition Fund, which needs to be anchored in tailor-made territorial transition strategies, encompassing in a comprehensive manner the numerous social, environmental and economic challenges raised by the transition.
Under cohesion policy, the choice of instrument is a Regulation of the European Parliament and of the Council in accordance with the ordinary legislative procedure as set out in Article 175, paragraph 3, of the Treaty.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSEMENT
• Stakeholder consultations
In May and June 2018, the Commission adopted its proposals for the post-2020 long-term budget and the next generation of programmes and funds. As an integral part of this process, the Commission conducted a series of public consultations covering major spending areas to gather views from all interested parties on how to make the most of every euro of the EU budget.
The public consultation on the EU long-term budget in the area of cohesion took place from 10 January 2018 to 9 March 2018 and received 4 395 replies. 85% of the respondents considered the transition to a low carbon and circular economy, ensuring environmental protection and resilience to climate change to be an important challenge. However, only 42% of the respondents considered this challenge to be adequately addressed by the current programmes/funds 4 .
In the context of the negotiations on the post-2020 long-term budget, the European Parliament in its interim report of 7 November 2018 called for the introduction of a specific allocation (EUR 4.8 billion) for a new ‘Just Energy Transition Fund’ to address societal, socio-economic and environmental impacts on workers and communities adversely affected by the transition from coal and carbon dependence.
This call has been echoed by the Committee of Regions, which has issued an opinion 5 on the socio-economic structural change in Europe's coal regions, calling for the provision of additional funds helping address the specific needs of coal regions. The opinion suggested in this regard to allocate EUR 4.8 billion to a new ‘Fair Energy Transition Fund’, designed to mitigate the social, socio-economic and environmental impact of transition in these regions.
In its conclusions of 18 October 2019, the European Council stressed its determination that the EU continues to lead the way in a socially fair and just green transition in the implementation of the Paris Agreement. The European Council also endorsed, through its conclusions of 12 December 2019, the objective of achieving a climate neutral EU by 2050, in line with the objectives of the Paris Agreement. In addition, it endorsed the principle of providing tailored support for regions and sectors most affected by the transition through a Just Transition Mechanism.
• Impact assessment
The Proposal for a Regulation of the European Parliament and of the Council on the European Regional Development Fund and on the Cohesion Fund 6 has been accompanied by an impact assessment 7 . The impact assessment validated the delivery system proposed for these Funds, which are regulated in the Proposal for Regulation of the European Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund and the European Maritime and Fisheries Fund and financial rules for those and for the Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument 8 and which will also govern the programming and implementation of the Just Transition Fund (see Chapter 4).
The impact assessment also examined the challenges to be addressed by the next multiannual financial framework and cohesion policy. It confirmed the need, consistent with the outcome of the public consultation, to support a clean and fair energy transition, through a dedicated policy objective and a corresponding thematic concentration mechanism (see Chapters 2.2 and 3.2).
Therefore, the objective of the Just Transition Fund is justified, as it aims to ensure a fair energy transition through alleviating the economic and social costs the transition towards a climate neutral economy implies. The Just Transition Fund will, to this end, support the transformation of industrial processes necessary for a successful energy transition, promote economic diversification of the most affected territories, consistent with the conclusions of the impact assessment on the need to support smart industrial transformation (see Chapter 2.2).
The unevenly dispersed effects of the energy transition had also been pointed out in the impact assessment (see Chapter 3.3). In particular, it highlighted the challenges regions most affected face due to their reliance on solid fuel production and the high share of solid fuels in their electricity generation mix. This assessment justifies the proposed concentration of the Just Transition Fund in the most negatively impacted territories and the proposed distribution of the national allocations.
The above analyses and impact assessment elements support the objectives and the main features of the Just Transition Fund. A self-standing impact assessment was not carried out, as it would have delayed the adoption of this legislative proposal with the risk of slowing down the ongoing negotiations on the next multiannual financial framework.
• Lessons from the implementation of selected transition initiatives
The scope and objective of the Just Transition Fund address the impact of transition towards climate neutrality and therefore tackles the situation of solid fossil fuel extraction activities (coal, lignite, peat and oil shale) but also the transformation of energy intensive industrial processes required by this transition, as regards their social and economic impacts, in the concerned territories.
In this regard, actions have already been undertaken under the coal regions in transition initiatives and the pilot action for regions in industrial transition. Although the Just Transition Fund will pursue larger objectives and will provide for a more integrated approach, it will also draw lessons from these initiatives and build on existing working methods and structures when relevant, for the programming and implementation of the Just Transition Fund.
Firstly, under the coal regions in transition initiative, cohesion policy is supporting the transition in 21 pilot regions (as of January 2020) with economies that are highly dependent on coal. Structural changes are addressed through a holistic approach encompassing the economic, industrial, technological and social dimensions of the transformation process, with the involvement of, and in close partnership with, local actors, including social partners, industry and non-governmental organisations.
Multi-stakeholder dialogue and knowledge sharing proved to be essential to ensure collective progress, transparency and mobilisation of the most effective means for addressing the socio-economic impacts of the transition.
Support is focused on economic transformation in line with smart specialisation strategies (e.g. support to SMEs, business incubators, innovation and cooperation of industry and researchers), the reskilling of workers traditionally employed in coal-related sectors and the promotion of energy efficiency and alternative, renewable energy sources.
The success of the initiative relies on the ownership of the concerned Member States, regions and local actors, including social partners. This is leveraged by national co-financing requirements under shared management as well as the involvement of partners in the development strategy.
Secondly, in a similar vein, to help EU regions manage the transition to a more sustainable low-carbon economy, and industrial change triggered by the energy and climate change transition specific support has been offered for boosting innovation, removing investment barriers, and equipping citizens with the right skills. The pilot action for regions in industrial transition provides support from Commission experts as well as technical assistance from the ERDF. 12 regions have been selected for EU support.
4. BUDGETARY IMPLICATIONS
The Commission seeks to pursue its priorities as set out in the political guidelines as part of the broader ambition for the EU budget. An ambitious Just Transition Fund is a priority in that context. This is the reason why the Commission has tabled this legislative proposal very early in its mandate which is complementary to and comes on top of existing proposals for the next Multiannual Financial Framework (MFF). The proposal will feed into the negotiation on the next MFF and expectedly will be integrated into the framework of an overall agreement on the next MFF.
The budgetary resources for the JTF should be EUR 7.5 billion (in 2018 prices) with the possibility to increase this level of ambition, if appropriate, at a later point in time.
5. OTHER ELEMENTS
• Detailed explanation of the specific provisions of the proposal
The legal framework consists of a dedicated proposal for a Regulation establishing the Just Transition Fund and the necessary consequential amendments to the Commission’s proposal for the Common Provisions Regulation to embed the Just Transition Fund as a new Fund under the Regulation, along with the ERDF, the Cohesion Fund and the ESF+. The delivery and implementation of the Just Transition Fund will be governed by the Common Provisions Regulation.
The proposal for a Regulation establishing the Just Transition Fund focuses on the following features:
·setting out the subject matter of the Just Transition Fund,;
·establishing a definition of the corresponding specific objective to be used for programming the resources of the Just Transition Fund under a dedicated priority or programme within the Investment for jobs and growth goal of cohesion policy;
·setting out its geographical coverage and methodology on the allocation of financial resources for the JTF;
·defining the scope of support of the JTF;
·specifying the content of the territorial just transition plans, including the need for Member States to identify those territories that are the most impacted by the transition towards a climate neutral economy and where support from the Just Transition Fund will be concentrated;
·establishing a framework for measuring its achievements through corresponding indicators and a mechanism to adjust support in case targets are not met.