Download publication

External Publication

A Just Transition Fund – How the EU budget can help with the transition

On 14 January 2020, the European Commission published its proposal for a Just Transition Mechanism, intended to provide support to territories facing serious socioeconomic challenges related to the transition towards climate neutrality. This report provides a comprehensive analysis of how the EU can best ensure a ‘just transition’ in all its territories and for all its citizens with the tools at its disposal. It provides an overview and a critical assessment of the Commission's proposal, and suggests possible amendments based on best practices from other just-transition initiatives.

By: , , and Date: May 26, 2020 Topic: Energy & Climate

This study was prepared for the European Parliament’s Committee on Budgets. The original paper is available on the European Parliament’s webpage.
© European Union, 2020

EXECUTIVE SUMMARY

Background

President von der Leyen’s Commission has made the ambitious commitment of making Europe the first climate-neutral continent while ensuring that the transition to this new green growth model is just and fair for all European Union citizens and territories. The climate policies enacted by the EU will have an uneven impact on European regions, communities, sectors and workers, which is why they need to be accompanied by social and economic policies to ensure no one is left behind.
On 14 January 2020, the Commission published its proposal for a Just Transition Mechanism (JTM), in the framework of the European Green Deal policy package. The aim of the JTM is to provide support to territories facing serious socio-economic challenges related to the transition to climate neutrality. This initiative is composed of three pillars: a new Just Transition Fund (JTF), the use of a fraction of InvestEU financing for climate objectives and the creation of a public sector loan facility at the European Investment Bank, partly guaranteed by the EU budget.
The JTF will be funded with EUR 7.5 billion of ‘fresh money’ from the EU budget, to be complemented by transfers from Member States’ European Social Fund Plus (ESF+) and European Regional Development Fund (ERDF) envelopes, and by national co-financing. All Member States are eligible for the JTF, following the approval of their Territorial Just Transition Plans by the Commission. Following approval, funds are pre-allocated at the national level. Projects eligible for financing include projects aimed at social support/retraining, economic revitalisation and land restoration.

Aim

The aim of this study is to give a comprehensive analysis of how the EU can best ensure a ‘just transition’ in all its territories and for all its citizens with the tools at its disposal. We first describe what an EU just transition instrument should ideally do, looking into the challenges it should address, best practices from other just-transition initiatives around the world and the key policy instruments it should include. Second, we present the tools the EU currently has at its disposal to support transitioning territories and describe the Commission’s proposal for a JTF. Finally, we assess this proposal based on the key policy objectives identified in our first section and suggest amendments for it to better meet its targets.

Main takeaways

  • Based on best practices from other just-transition initiatives, we identify four key characteristics that are most important for a just transition: it must be locally driven, include targeted welfare and labour policies, be included in a long-term strategy for the decarbonisation and development of local economies, and allow for regular assessments and modifications.
  • In the context of the EU, this translates into three key objectives for a just-transition instrument:
  1. Strong mechanisms to ensure social dialogue and the involvement of communities throughout the whole transition process
  2. Consistency with other EU programmes and policies
  3. The whole process should be structured based on clear phaseout goals and decarbonisation pathways consistent with the objective of climate neutrality by 2050
  • The Commission’s proposed regulation for a JTF is generally seen as a positive step towards ensuring a just transition for all. We analyse the following points in the JTF regulation in our fourth section, and suggest changes that might be considered by policymakers:
  1. Scope and size of the JTF. Given its small size, the JTF will not realistically be able to tackle all the objectives of a just-transition initiative. As such, it might be worth considering reducing the scope of its eligible activities to focus on social support and retraining.
  2. Consistency with cohesion funds. We discuss the possibility of removing mandatory transfers from the ERDF and modifying the regulation so transition objectives are included more broadly in cohesion funds.
  3. Pre-allocation methodology. We reproduce the Commission’s pre-allocation calculations and discuss some elements which could be improved to ensure the transparency of this process and that real needs are accounted for.
  4. Granularity of data. Currently, the pre-allocation of funds is based on NUTS2-level data, but it might be worth considering using NUTS3-level data to better capture territorial needs and ensure consistency with Territorial Just Transition Plans.
Appalachian Regional Commission (APC) Assistance to Coal Communities (ACC) Coal Regions in Transition (CRiT) Common Provision Regulation (CPR) Conference of the Parties (COP) Connecting Europe Facility (CFC) European Agricultural Fund for Rural Development (EAFRD) European Agricultural Guarantee Fund (EAGF) European Automobile Manufacturers' Association (ACEA) European Commission European Fund for Strategic Investments (EFSI) European Globalisation Adjustment Fund (EGF) European Green Deal European Investment Bank (EIB) European Parliament European Parliamentary Research Service (EPRS) European Regional Development Fund (ERDF) European Social Fund Plus (ESF+) European Structural and Investment Funds (ESIF) European Union Emissions Trading Scheme (EU ETS) Global Warming Potential (GWP) Green New Deal (GND) Greenhouse Gases (GHG) Gross Domestic Product (GDP) Gross National Product (GNI) Gross Value Added (GVA) Hotel Restauration and Catering (HORECA) Institute for Sustainable Development and International Relations (IDDRI) Intergovernmental Panel on Climate Change (IPCC) Internal Combustion Engine (ICE) International Labour Organisation (ILO) International Renewable Energy Agency (IRENA) Joint Assistance to Support Projects in European Regions (JASPERS) Joint Research Centre (JRC) Just Transition Fund Just Transition Mechanism (JTM) Multiannual Financial Framework (MFF) National Energy and Climate Plan (NECP) Nomenclature of Territorial Units for Statistics (NUTS) Non-Governmental Organisation (NGO) Organisation for Economic Cooperation and Development (OECD) Partnerships for Opportunity and Workforce and Economic Revitalisation (POWER) Small and Medium Enterprises (SME) Structural Reform Support Programme (SRSP)
Read article More on this topic More by this author
 

Blog Post

Common eurobonds should become Europe’s safe asset – but they don’t need to be green

The plan to fund the European Union’s recovery programme via debt issuance has raised hopes that a new type of euro-denominated safe asset could emerge. As a priority, the European Commission needs a strategy to create a liquid and transparent market in EU bonds. For now, funding through EU green bonds would complicate that effort.

By: Alexander Lehmann Topic: Finance & Financial Regulation Date: September 28, 2020
Read article Download PDF
 

External Publication

How Can the European Parliament Better Oversee the European Central Bank?

This paper, written at the request of the Committee on Economic and Monetary Affairs, assesses how the European Parliament holds the European Central Bank accountable. The same exercise is done for the Bank of Japan, in order to identify possible lessons for the ECB and the European Parliament.

By: Grégory Claeys and Marta Domínguez-Jiménez Topic: European Macroeconomics & Governance, Global Economics & Governance Date: September 23, 2020
Read article More on this topic More by this author
 

Blog Post

Redefining European Union green bonds: from greening projects to greening policies

European Union green bonds, as promised by European Commission president Ursula von der Leyen, might be better linked to the bloc's achievement of its climate goals, rather than project-by-project green criteria.

By: Georg Zachmann Topic: Energy & Climate Date: September 21, 2020
Read article More by this author
 

Blog Post

Unpacking President von der Leyen’s new climate plan

European Commission President Ursula von der Leyen has set a new destination for EU climate policy: a 55% emissions reduction by 2030. This is a good and necessary step on the way to climate neutrality by 2050, but getting there will not be easy, and Europe should prepare for a bumpy road ahead.

By: Simone Tagliapietra Topic: Energy & Climate, European Macroeconomics & Governance Date: September 16, 2020
Read about event
 

Past Event

Past Event

The Sound of Economics Live: The State of the Union going forward

In the first Sound of Economics Live episode after summer we look at the State of the Union address delivered by Ursula von der Leyen.

Speakers: Giuseppe Porcaro, André Sapir, Guntram B. Wolff and Alicia García-Herrero Topic: Energy & Climate, European Macroeconomics & Governance, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: September 16, 2020
Read about event
 

Past Event

Past Event

Bruegel Annual Meetings 2020 - Day 1

The Annual Meetings are Bruegel's flagship event which gathers high-level speakers to discuss the economic topics that affect Europe and the world.

Topic: Energy & Climate, European Macroeconomics & Governance, Finance & Financial Regulation, Global Economics & Governance, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: September 1, 2020
Read article
 

Blog Post

Is the EU Council agreement aligned with the Green Deal ambitions?

On 21 July, EU leaders agreed on a €1.8 trillion package that should boost the recovery after the COVID-19 crisis, but also contribute to the advancement of key EU societal objectives, starting with the climate transition. In this blog post we assess the green ambitions of the package and evaluate its consistency with the European Green Deal.

By: Grégory Claeys and Simone Tagliapietra Topic: Energy & Climate, European Macroeconomics & Governance Date: July 23, 2020
Read about event More on this topic
 

Past Event

Past Event

An EU budget for Europe's future with Johannes Hahn

How do we make the EU fit for future?

Speakers: Zsolt Darvas, Johannes Hahn and Mehreen Khan Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: July 7, 2020
Read about event More on this topic
 

Past Event

Past Event

Impact and additionality assessment in the time of COVID-19

Understanding the impact and additionality of policy interventions.

Speakers: Ugo Albertazzi, Benoit Campagne, Andrea Conte, Zsolt Darvas, Maria Demertzis, Francesco Di Comite, John Earle, Matteo Falagiarda, Áron Gereben, Helmut Kraemer-Eis, Hans Peter Lankes, Iana Liadze, Andrew McDowell, Nicola Pochettino, Debora Revoltella, Mattia Romani, Simone Signore, Natacha Valla, Georg Weiers and Marcin Wolski Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 30, 2020
Read article More on this topic More by this author
 

Podcast

Podcast

Redefining Europe’s role after the Covid-19 Pandemic

How will the Covid 19 crisis change the role of the EU in Europe and the world?

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: June 25, 2020
Read article More on this topic More by this author
 

Opinion

A tale of two pandemics

The two narratives briefly examined here cast light on different aspects of the EU in the times of Covid-19. Euroskeptic nationalists typically propagate claims of EU failure but have been rather subdued during the pandemic as mainstream governments have taken over their trademark policy of closing borders to foreigners. Nonetheless, the grip on power of several pro-EU mainstream leaders, including President Emmanuel Macron in France, Prime Minister Conte in Italy and Prime Minister Pedro Sanchez in Spain, remains tenuous.

By: Michael Leigh Topic: European Macroeconomics & Governance Date: June 23, 2020
Read article Download PDF
 

External Publication

European Parliament

Political Assessment of Possible Reactions of EU Main Trading Partners to EU Border Carbon Measures

This briefing was prepared for the European Parliament’s Committee on International Trade (INTA).

By: Henrik Horn and André Sapir Topic: Energy & Climate, European Macroeconomics & Governance, European Parliament, Global Economics & Governance Date: June 23, 2020
Load more posts