Will a watered down EU Just Transition Fund still be effective?

In a Covid-19-free Europe, a decision by the leaders of European Union member states this summer to allocate €7.5 billion to the Just Transition Fund (JTF) for fossil fuel-dependent regions might have been cheered by environmentalists as unequivocal backing of the ambitious plans of the European Commission for the bloc’s energy transition.

After all, that was exactly the figure suggested by the commission in January when it announced the fund, which is intended chiefly to help coal-dependent EU regions mitigate the social impacts of the switch to renewable energy generation.

However, the subsequent impact of Covid-19 in Europe prompted the Brussels policymakers in May, at the behest of member states, to suggest raising the stakes by increasing the JTF contribution made directly from the EU budget for 2021-27 from €7.5 billion to €10 billion. The commission also proposed beefing up the JTF with a further €30 billion from a new cash pile it was proposing to help the continent recover from the coronavirus – the €750 billion Next Generation EU fund.

With expectations duly raised, the national leaders who make up the European Council in July approved creation of the Covid recovery fund but stipulated it would supply €10 billion, rather than €30 billion towards the JTF, and that the direct contribution from the bloc’s 2021-27 budget would revert to the €7.5 billion originally mooted by the commission.

Slimmer budget, slimmer transition hopes?

The dilution of the Just Transition Fund, from the €40 billion suggested in May to €17.5 billion, has raised questions about how effective the money will be in persuading coal-dependent regions to embrace renewables.

The JTF itself is part of a wider ‘Just Transition Mechanism’ which also includes a program to attract private investment into renewables, under the bloc’s InvestEU platform, and a public sector loan facility, although both those measures are also likely to have slimmer budgets than those suggested by the commission in May.

Nikos Mantzaris, a senior policy analyst at Athens-based thinktank The Green Tank, criticized the Just Transition plans as overly favoring energy transition laggards such as Poland ahead of nations like Greece and Hungary, which have already progressed much further down the path to a renewables-based energy mix.

EU member states applying for Just Transition support have to draw up territorial transition plans identifying regions most heavily impacted by the switch to renewables and also outline their planned green recoveries to 2030.

With those plans requiring approval by the commission, Mantzaris told pv magazine: “The criteria proposed by the European Commission for the allocation of funds are unfair and do not take into account key considerations. Specifically, the speed of transition away from coal and lignite is not accounted for and the same is true for the extent of dependence of the local economies on coal and lignite. As a result, member states which have not yet committed to phase out coal, such as Romania, Czechia or Bulgaria, or have not even yet accepted the climate neutrality objective, such as Poland, receive very large sums, leaving countries like Greece, Slovakia, Portugal or Hungary – which have made far more ambitious commitments regarding the dirtiest fuel on the planet – with utterly insufficient funds to implement the transition.”

The standard of national and regional governance could also be key to the success of a slimmed down Just Transition program. Member states which engage communities in the most impacted regions and draw green transition plans in an open and transparent manner may have more success than those which do not and may also attract more private-sector finance for clean energy too.