The Council presidency and the European Parliament’s negotiators today reached a provisional agreement on a new public sector loan facility that will support the transition towards a climate-neutral economy in the EU in an inclusive manner.
The facility will benefit the regions most affected by the transition towards the EU’s 2030 climate targets and the objective of EU climate neutrality by 2050, such as coal- and carbon-intensive regions. It will support a wide range of sustainable investment projects that address the development needs of these regions resulting from the climate transition. This includes projects in areas such as energy and transport infrastructure, district heating networks, energy efficiency measures and social infrastructure.
The Just Transition Mechanism will help vulnerable communities make the leap to clean energy
The facility will provide €1.5 billion in grants from the EU budget combined with up to €10 billion in loans provided by the European Investment Bank (EIB). Together, these are expected to mobilise up to €25–30 billion in investments for the benefit of the regions concerned. The facility may also be extended to finance partners other than the EIB under certain conditions.
To ensure the mobilisation of additional investments, only those projects that do not generate a sufficient stream of own revenues will be eligible.
The main additional elements agreed by the Council presidency and the European Parliament’s negotiators include the following:
- To ensure that all member states are able to benefit from the grant component, national envelopes will be earmarked until the end of 2025. After that date, the remaining resources available for the grant component will be provided on a competitive basis at EU level.
- In the event that there are not enough resources to support eligible projects, award criteria should give priority to projects located in less developed regions, projects contributing directly to the EU’s climate targets and projects promoted by public entities having endorsed decarbonisation plans.
- The envelope for advisory support for the preparation, development and implementation of eligible projects has been increased to €35 million. At least €10 million of these resources will support the administrative capacity of beneficiaries, notably in the less developed regions, through the advisory hub set up under InvestEU.
- For less developed regions, the maximum amount of the grant provided under the facility will be increased to 25% of the amount of the loan.
- The facility will not support activities excluded from the scope of support under the Just Transition Fund. This includes investments related to nuclear power stations, tobacco products and fossil fuels.
- Throughout the preparation, implementation and evaluation of eligible projects, a set of horizontal principles will need to be respected. This includes respect for fundamental rights, in particular gender equality and non-discrimination. The objectives of the facility will also be pursued in line with the UN Sustainable Development Goals, the European Pillar of Social Rights, the polluter pays principle, the Paris climate agreement and the ‘do no significant harm’ principle.
The provisional agreement reached today now needs to be confirmed by both institutions. Once it has been confirmed, the regulation establishing the facility is expected to be adopted and enter into force in the coming weeks.
For the implementation of the facility, the Commission and the EIB will need to sign an administrative agreement and member states’ just transition plans will need to be approved. The first calls for projects are expected to be launched in the autumn.
The public sector loan facility is the third pillar of the Just Transition Mechanism, which was created to address the social and economic consequences of the objective of reaching EU climate neutrality by 2050 and the EU’s 2030 climate targets. The other two pillars of the mechanism are the Just Transition Fund and a dedicated just transition scheme under InvestEU.
All investments under the Just Transition Mechanism, including the public sector loan facility, are implemented on the basis of member states’ territorial just transition plans, approved by the Commission. The territorial just transition plans identify the most affected territories that should be supported in each member state and the priority policy areas for each region.