EU boosts ‘just transition fund’, pledging €40 billion to exit fossil fuels

European Commission President Ursula Von Der Leyen wears a mask during a plenary session of the European Parliament in Brussels, Belgium, 27 May 2020. [EPA-EFE/OLIVIER HOSLET]

The European Commission has increased five-fold its proposed EU fund to wean carbon-intensive regions off fossil fuels, with fresh cash from a new recovery fund to help Europe’s ailing economies rebound after the new coronavirus pandemic.

Countries are already clamouring for a slice of the EU’s just transition fund, with 18 member states preparing to apply for support to wind down coal sectors, retrain workers and help carbon-heavy businesses pivot to greener activities.

The Commission on Wednesday (27 May) confirmed how much money will be on offer – €40 billion, made up of €30 billion from an EU coronavirus recovery fund and €10 billion from the bloc’s budget for 2021-27.

This is in 2018 prices, the Commission said, and would be worth roughly €44 billion in current prices. Its proposal needs approval from member states and EU lawmakers.

The proposal is more than five times bigger than the €7.5 billion just transition fund the EU executive proposed in January before it overhauled its budget proposals amid the pandemic.

Environmentalists welcomed the move. “The Commission gives an important political signal by raising the budget for the Just Transition Fund: supporting Central and Eastern Europe in catching up on climate ambition remains a priority,” said Rebekka Popp, a researcher at climate think-tank E3G.

When combined with €10 billion in loans from the European Investment Bank, the fund aims to trigger a total of at least €150 billion in just transition investments over 2021-27, including private capital, the Commission said.

The EU executive did not specify how the cash will be split between countries. The Commission’s previous proposal prioritised regions whose economies and jobs depend on polluting industries.

Under those criteria, Poland was set to get the largest slice of the fund, with €2 billion, followed by Germany with €877 million.

Poland, Germany get largest slices of Just Transition Fund

The European Commission’s €7.5-billion-strong Just Transition Fund (JTF) is set to allocate €2 billion to Poland and €877 million to Germany under a proposal sent to national governments on Wednesday (15 January).

Polish Prime Minister Mateusz Morawiecki called the new proposal “very good news”.

“Modern Europe must be ready for the challenges it faces and thus needs new resources,” Morawiecki reacted on Twitter, saying extra funding for agriculture, regional cohesion and the Just Transition Fund “are all steps in the right direction”.

The increased just transition fund would mean an extra €6 billion for Poland’s coal-dependent regions, said the country’s Climate Minister Michal Kurtyka.

The fund aims to convince coal-heavy countries that the Commission’s target to decarbonise the EU economy by 2050 is achievable and can be managed from a social and economic perspective.

Poland, which employs roughly a third of the 237,000 people working in the EU coal industry, and generates most of its electricty from coal, has not yet committed to the 2050 climate goal, citing the economic and social hardship this would entail.

But campaigners suggested the extra cash could persuade Poland to sign up.

“Countries in Central and Eastern Europe should now return this positive signal by committing to an increased EU climate goal for 2030,” Popp said. “More money in the pot makes it even more essential that the fund is not used to prop up an uncompetitive and dirty industry,” she insisted.

Commission lists regions ripe for just transition cash

The European Commission revealed on Wednesday (26 February) which specific parts of the EU are eligible to split a €7.5 billion-strong climate fund, earmarked for spending on cleaning up heavy industry and supporting workers in the fossil fuel industry.

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