An Inclusive Future: Introducing the EU Just Transition Mechanism

02 August 2023 


A global green transition will be no easy feat and requires intricate planning at multiple levels with collaboration between people, governments, and companies. So many of our livelihoods, communities and careers are linked to activities and processes that can be considered unsustainable. Not only does a global climate plan need to meet goals such as net zero carbon and increased biodiversity, but it is also crucial that people are able to live safe and secure lives as we navigate the extremely complex socio-economic context, we find ourselves in.

For this reason, there have been major efforts to create frameworks and policy aimed at firstly protecting those that may experience negative economic and social externalities and secondly guiding corporations on how they best achieve this, you can read more here. This puts sustainable financing at the forefront of requirements needed to achieve this. The Just Transition Mechanism (JTM) is the EU’s contribution to this issue. It constitutes a support package including monetary assistance in the form of the Just Transition Fund (JTF), and an assistance service named the Just Transition Platform. It also includes Invest EU, and the Public Sector Loan Facility, providing further funds and loans for reskilling, job creation and sustainable investment in the private sector and public sector respectively.

Just Transition Fund – €17.5 billion fund for 2021-2027 which aims to generate at least €30-50 billion of investments to support industries and regions that are most vulnerable as a result of green transition.

InvestEU – aims to mobilise €372 billion of sustainable investments from 2021-2027 through grants to the private sector.

Public Sector Loan Facility – Public sector grants (€1.5 billion) from the EU budget and loans (€10 billion) from the European Investment Bank (EIB). creating viable lending conditions for sustainable public sector projects that do not generate sufficient revenue.

The Mechanism offers assistance across a range of areas and aims to provide comprehensive support aimed at citizens, corporations, industries, EU member states and wider regions, thus covering all levels in which economic activity takes place. Several policy areas and objectives are outlined as key to ensuring a just transition that protects jobs and livelihoods.

Creating Green Jobs

The green transition aims to promote sustainable industries such as Solar, Wind and Hydrogen whilst phasing out industries that are damaging to the planet, such as fossil fuel industries. There is a contradiction in this transition, as policies that curb growth in carbon-intensive industries will lead to unavoidable job losses in unsustainable sectors. The key challenge for the EU and other organisations is to create opportunities for job changes instead of job losses, through reskilling and job creation in new and existing green industries such as solar and wind.

The JTM will attempt to support this job creation through subsidies and easier access to funds for companies operating in green industries, exercised through InvestEU, the Public Sector Loan Facility and the JTF. The fund targets areas that will be disproportionately affected by climate-related transitions; €179 million from the JTF has been approved for Croatia to support the counties of Istria and Sisak-Moslavina, to assist in diversifying the economy and creating greener jobs. The funds will contribute to sustainable development including reskilling and training workers in carbon-intensive chemical and refining industries that are prominent in the Sisak-Moslavina county.

Economic Diversification

Without solid economic planning, curbing growth in carbon-intensive industries may lead to economic stagnation, with national and regional economies risking becoming uncompetitive in the global economy. The key objective related to this is economic resilience. Intertwining health crises, financial crises and natural crises since 2008 have damaged economies across the world, some of which have struggled more than others to bounce back. Climate change is likely to play a part in further unpredictable crises in the future. With better long-term economic planning and coordination between regions, the JTM aims to create stronger industries that are climate-resilient and adaptable to changing global conditions. €2.5 billion in JTM funds have been awarded to the coal-heavy German states of North Rhine-Westphalia, Brandenburg, Saxony and Saxony Anhalt, in order to support emerging industries and businesses that are more resilient to global changes.

Sustainable Transport

Huge investments into transport will be required to transition towards public transport and reduce emissions across Aviation, Rail, Road and other transport methods. Innovative technologies, discouraging carbon intensive transport methods and increasing access to affordable and green transport will all play a part.

The EU recognises the need for a transition towards more sustainable forms of transport such as rail, with €5.4 billion worth of grants going towards sustainable infrastructure projects across the continent. More affordable and greener public transport may help to link rural areas to financial hubs, contribute to job creation, reduce net emissions, noise and pollution in cities, improve access to services and help to encourage the transition away from carbon-intensive transport methods such as cars.

EU policy also targets rapid decarbonisation of carbon-heavy industries such as aviation, in order to keep these industries viable and protect jobs. EU regulations in the form of the ReFuelEU Aviation initiative require airlines to limit uptake of jet fuel and to move towards using sustainable aviation fuel (SAF) blends, when departing from EU airports. It also requires fuel suppliers to use increasing percentages of SAF-blended fuel from 2025 to 2050.

Green & Affordable Energy

The energy crisis that has taken place in 2022 and 2023 across Europe has demonstrated the fragility of the energy system. With multiple world events being commonly blamed for the huge increases in energy costs, it is clear that European economies must be more resilient to external shocks. Not only must we transition to greener energy sources around the world, we must do so in a way which keeps energy prices stable and affordable for households and businesses. The EU claims that the JTM will fight energy poverty with a combination of funding for member states, research and collaboration with consumers and public authorities.

More time and research is needed to tell whether the JTM will meet its lofty objectives. Some climate experts and organisations have criticised the project for underestimating how much funding and structural change will be required to provide widespread protection to people amidst a rapidly changing global economy. Further research we undertake will delve deeper into the projects and developments the JTM is funding, and measure their impacts.

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