At the end of 2019, the EU announced the Just Transition Mechanism (JTM) as part of its historic European Green Deal. The JTM is expected to mobilize around €55 billion from 2021 to 2027 in order to alleviate the socio-economic impacts of the transition towards a climate-neutral economy. The JTM is structured around 3 pillars: (i) a Just Transition Fund; (ii) InvestEU “Just Transition Scheme” and (iii) a new public sector loan facility.

Key elements

• The Just Transition Fund is a fundamental pillar of the JTM. Initially equipped with €17.5 billion financed out of the EU’s 2021-2027 budget, the European Recovery Instrument, or via national country allocations, the fund is expected to mobilize between €25-30 billion in investments towards the transformation of existing carbon-intensive installations, up- and reskilling for workers impacted by the transition, environmental rehabilitation, R&D activities or the creation of new firms.

• The InvestEU "Just Transition" scheme will provide a budgetary guarantee to project promoters located in just transition territories with an approved Territorial Just Transition Plan. It is expected to mobilise €10-15 billion in mostly private sector investments.

• A new Public Sector Loan Facility will combine €1.5 billion of grants financed from the EU budget with €10 billion of loans from the European Investment Bank, to mobilise €18.5 billion of public investment. This instrument will exclusively target public entities, providing support to projects that do not generate a sufficient stream of own resources to be financed commercially. 

Benefits

• The programme addresses 3 absolute critical elements in the transition towards a climate-neutral economy: securing the professional transition of people likely to lose their jobs, revitalising and diversifying local economies, as well as restoring land. 

• To ensure intentional and impactful use of funding, countries/regions first have to submit a Territorial Just Transition Plan, before they can be eligible for funding. The Plan must set out the social, economic, and environmental challenges stemming from the phasing out of fossil fuel-related activities and include an outline of the transition process until 2030, including development, reskilling and environmental rehabilitation needs.

Enabling conditions 

• The EU established a Just Transition Platform providing technical assistance and support to draft Territorial Just Transition Plans. 

• An allocation key prioritizing countries most affected by the transition and with the least resources, will ensure resources are concentrated in regions facing the biggest challenges.