European Union unveils trillion-euro ‘Green Deal’ financial plan
The European Commission has unveiled how the European Union can pay for shifting the region’s economy to net-zero carbon dioxide (CO2) emissions by 2050 while protecting coal-dependent regions from taking the brunt of changes aimed at fighting climate change.
The EC detailed its €1 trillion investment plan to put Europe on track to reach the 2050 emissions-neutrality goal.
The EU aims to mobilise that investment, of public and private money, over the next 10 years to finance the “new growth strategy” of the EU commission, the European Green Deal, and meet the climate objectives.
However, the commission also estimates that an extra €260bn in investment will be needed each year just to reach the current 2030 goal, namely, a 50 to 55 per cent emission-cut (higher than the 40 per cent previously envisaged).
In December last year, all member states agreed to green their economies over the next 30 years to tackle the effects of climate change, but Poland held out, wanting to see financial incentives.
Besides Poland, the regions with the highest number of jobs in the coal sector (mines and power plants) are located in Bulgaria, Czech Republic, Germany, Greece, and Romania, according to figures from the European Parliament.
“People are at the core of the European Green Deal, our vision to make Europe climate-neutral by 2050.
“The transformation ahead of us is unprecedented, and it will only work if it is just, and if it works for all,” President of the European Commission, Ursula von der Leyen, said.
The long-awaited Just Transition Mechanism (JTM) will be a part of the Sustainable Europe Investment Plan (SEIP), which will cover the social dimension of the Green Deal, supporting fossil fuel-dependent regions, especially those depending on coal, lignite, peat or oil shale.
To a significant degree the JTM will work mostly as cohesion policy, since it will require territorial plans to be developed and approved by the EC, and national co-financing.
“The JTM will focus on three dimensions: economic diversification, re-skilling and environmental transition,” senior commission sources told journalists.
A portion of the budget for cohesion policy will be transferred to the JTM, a plan that has recently received strong criticism from the Committee of the Regions, and some member states.
The JTM will lean on three pillars: a Just Transition Fund, the Invest EU program and loans from the European Investment Bank (EIB).
The Just Transition Fund will comprise €7.5bn of “fresh money” from the upcoming EU long-term budget to support projects that are low-carbon and climate-resilient, including re-skilling programs for miners, jobs in new economic sectors and energy-efficient housing.
This fund, which aims to then generate between €30bn to €50bn over the next seven years, explicitly excludes any support for fossil fuels.
However, the ongoing negotiations on the Multiannual Financial Network (MFF) might not give the green light to the numbers presented by the EC, since this will require member states to raise their national contributions.
“Everyone wants climate-neutrality by 2050, but the budget must support this transition,” senior commission sources said.
“The Just Transition Fund resources of €7.5bn should be for all member states because all of them will face challenges, but we want to make sure that there is a concentration of resources in those places where is more needed,” they added.
Other critics consider the amount estimated by the EC as “a drop in the ocean” for what many regions in Europe might need for the transition towards clean energy.
According to commission sources, “this is an offer for the private sector to invest” in sustainability and attract private money with public seed funding.
The second major contribution to the JTM would come from Invest EU, which aims to mobilise up to €45bn in investments.
Although the Invest EU scheme does also leave the door open for the financing of gas infrastructure.
Finally, the EIB will work closely with the commission to mobilise between €25bn to €30bn additional investment for the JTM.
“By 2025, at least half of EIB financing will be dedicated to climate action projects – double what it is today,” European Commission vice president Valdis Dombrovskis said.
Additionally, transition fund money will not finance the construction of nuclear plants.
The commission wants to provide member states with an assessment every February to let them know which regions and areas could fall under the JTM.
After that, member states will be required to draw up “just transition plans”, which need to be consistent with the EU’s climate goals and the National Energy and Climate Plans (NECPs), to receive funding to support fossil-fuel dependent regions.
Additionally, the EC wants state-aid guidelines to be revised by 2021 “to reflect the policy objectives of the European Green Deal, supporting a cost-effective transition to climate neutrality by 2050”.