Just Transition Mechanism

The EU Commission has proposed the establishment of a new loan facility under the Just Transition Mechanism.

The aim is to mobilise between €25bn ($27.8bn) and €30bn ($33.4bn) in investments to help territories and regions most affected by the transition to a climate-neutral economy, prioritising those that have less capacity to deal with the costs of the transition.

The facility will be implemented in partnership with the European Investment Bank (EIB) to encourage investments that support the transition towards a climate-neutral economy by public sector authorities.

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The EU Commission plans to direct €1.5bn ($1.6bn) from its budget towards grants, whilst EIB will provide up to €10bn ($11.1bn) in loans from its own sources.

The proposal will be negotiated with the European Parliament and the Council in view of its rapid adoption.

The loan facility will be accessible to all member states, initially based on national envelopes, through calls for proposals that meet the following criteria:

  • projects benefit territories identified in an approved territorial just transition plan;
  • projects receive an EIB loan under the facility; and
  • projects do not generate sufficient market revenue streams.

Projects must also comply with the lending policy of the EIB. Investment areas will include energy and transport infrastructure, district heating networks, public transport, energy efficiency measures and social infrastructure, and other projects that can directly benefit the communities in the affected regions and reduce the socio-economic costs of the transition towards a climate-neutral Europe by 2050.

Lilyana Pavlova, the vice-president of EIB, said: “While confronting the great socio-economic challenge posed by Covid-19, we should not forget the long-term fundamental threat of climate change. As the EU climate bank, the European Investment Bank pledged to dedicate at least 50% of its lending to climate action and environmental sustainability by 2025 and to align all its financing with the goals of the Paris Agreement by the end of the year.

“The proposed Just Transition Mechanism, which the EIB plans to support with its financing, will be key to ensuring that transforming our economies to carbon neutrality will happen with shared benefits and no disproportionate costs among regions. It is the reflection of European solidarity and in line with the aims of Cohesion Policy to help each region achieve its full potential, to bring about a convergence of living standards and prosperity across the European Union.”